Accelerating business-to-business contract negotiations: Moving from one-sided to balanced standard contract terms. (December 2021)

• Record Type: Journal Article
• Authors: Bretan, Hal; Lando, Henrik
• Other Names: Praštalo Boris guest-editor.
• Is Part Of: Journal of strategic contracting and negotiation. Volume 5:Number 4(2021)
• Page Start: 199
• Page End: 213
• Publication Date: 2021-12
• Subjects: Transaction costs -- theoretical perspectives -- boilerplate terms -- commercial contracts -- negotiation strategy -- topics; Negotiation in business -- Periodicals; Management contracts -- Periodicals; Commercial documents -- Periodicals; 658.72305
• DOI: 10.1177/20555636211061612
• Languages: English
• ISSNs: 2055-5636

Abstract

Many businesses adopt one-sided boilerplate contract terms and conditions that lead to protracted negotiations. Often, the parties ultimately reach a compromise that could have been reached sooner if they had put forward more balanced contract terms at the outset. We ask why this seemingly irrational behavior persists and suggest a different approach. A dominant theory suggests that putting forward balanced terms may be seen as a sign of a weak bargaining position. We argue, however, that agency conflicts and cognitive biases often better explain such behavior. Moreover, we advocate a speed-to-contract strategy where the parties elect to use more balanced (value-maximizing) terms from the outset, and thereby avoid costly negotiations as well as delays in realizing the benefits of a transaction.