Negotiations procedure: Overview, definition, and example
What is a negotiations procedure?
A negotiations procedure is a structured process that parties follow when discussing and resolving contractual terms, disputes, or business agreements. It sets clear steps for how negotiations should be conducted, including timelines, communication methods, and escalation procedures if an agreement isn’t reached.
For example, a contract might require that any disputes first go through direct negotiations between executives before moving to mediation or arbitration.
Why is a negotiations procedure important?
A negotiations procedure ensures that discussions are conducted in an orderly and fair manner, reducing the risk of misunderstandings and conflicts. By setting a clear process, businesses can avoid unnecessary legal battles and increase the likelihood of reaching mutually beneficial agreements.
For businesses, this procedure is particularly useful in dispute resolution, contract renegotiations, and deal-making. It helps maintain professional relationships by ensuring that negotiations follow a structured and predictable path.
Understanding a negotiations procedure through an example
Imagine two companies have a disagreement over pricing in a long-term supply contract. Instead of immediately going to court, their contract outlines a negotiations procedure:
- Step 1: Senior managers from both companies meet within 10 days to attempt resolution.
- Step 2: If unresolved, legal representatives from both sides engage in formal negotiations within 30 days.
- Step 3: If still unresolved, the matter moves to mediation before any legal action is taken.
This process ensures both parties try to resolve the dispute efficiently without resorting to costly litigation.
Another example is a business acquisition, where the negotiations procedure might outline key steps such as due diligence, proposal deadlines, and required approvals before finalizing a deal.
An example of a negotiations procedure clause
Here’s how a negotiations procedure clause might appear in a contract:
“In the event of a dispute, the parties shall first engage in good-faith negotiations to resolve the matter. If no resolution is reached within [X] days, the dispute shall proceed to mediation before any legal proceedings may be initiated.”
Conclusion
A negotiations procedure provides a clear and organized framework for resolving disputes or finalizing agreements. By outlining the steps parties must follow, it helps businesses avoid unnecessary conflicts, save time and costs, and maintain productive relationships. Understanding this procedure allows businesses to handle negotiations effectively and ensure smoother contract management.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.