contract-negotiation-playbook

# Contract Negotiation Playbook

## Overview

Most contract negotiation knowledge lives in senior people's heads. This skill provides a framework to document negotiation positions clause-by-clause, enabling consistent negotiation across the organization and reducing legal bottleneck.

## The Playbook Structure

```
FOR EACH CLAUSE TYPE:
┌─────────────────────────────────────────────────────────────────┐
│                     NEGOTIATION POSITIONS                       │
├─────────────────────────────────────────────────────────────────┤
│                                                                 │
│  PREFERRED        ACCEPTABLE       FALLBACK        RED LINE     │
│  ─────────        ──────────       ────────        ────────     │
│  What we          What we can      Last resort     Walk away    │
│  always ask       live with        position        point        │
│  for first                                                      │
│                                                                 │
│  Start here ───▶  Concede to ───▶  Only if ────▶  Never accept │
│                   if needed        necessary                    │
│                                                                 │
└─────────────────────────────────────────────────────────────────┘
```

## Core Clause Categories

### 1. Limitation of Liability

| Position | Language/Terms | Use When |
|----------|---------------|----------|
| **Preferred** | No cap on liability OR cap at [X]x contract value | Always start here |
| **Acceptable** | Cap at [1-2]x annual contract value | Standard negotiation |
| **Fallback** | Cap at 1x annual contract value | Reluctant concession |
| **Red Line** | Cap below contract value | Never accept |

**Carve-outs to Preserve:**
- Indemnification obligations
- Breach of confidentiality
- Willful misconduct / gross negligence
- IP infringement
- Data breach (if handling sensitive data)

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's liability cap positions:     │
│                                             │
│ Preferred: _______ x contract value         │
│ Acceptable: _______ x contract value        │
│ Fallback: _______ x contract value          │
│ Red Line: Below _______ x contract value    │
│                                             │
│ Required carve-outs: _____________________  │
└─────────────────────────────────────────────┘
```

### 2. Indemnification

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Mutual indemnification, limited to third-party claims | Always start here |
| **Acceptable** | Indemnification for IP claims + gross negligence | Standard |
| **Fallback** | Broad indemnification with cap | Reluctant concession |
| **Red Line** | Unlimited indemnification, first-party claims | Never accept |

**Key Protections:**

```
INDEMNIFICATION CHECKLIST:
□ Mutual (both parties indemnify) vs. one-way
□ Scope: Third-party claims only vs. all claims
□ Carve-out for IP infringement
□ Control of defense provisions
□ Notice requirements reasonable
□ Cap aligned with liability cap
```

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's indemnification positions:   │
│                                             │
│ Accept one-way indemnification: □ Yes □ No  │
│ Required IP indemnity from vendors: □ Yes   │
│ Maximum indemnity exposure: $____________   │
│ Defense control requirements: ____________  │
└─────────────────────────────────────────────┘
```

### 3. Intellectual Property

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Customer retains all IP; vendor gets no rights to customer data | Always |
| **Acceptable** | Vendor retains pre-existing IP; customer owns deliverables | Standard |
| **Fallback** | Joint ownership of co-developed materials | Reluctant |
| **Red Line** | Vendor owns customer-specific deliverables | Never |

**Key Issues:**

```
IP NEGOTIATION POINTS:
□ Pre-existing IP clearly defined
□ Work product ownership clear
□ License grants are non-exclusive
□ No rights to customer data beyond service delivery
□ Residuals clause limited/removed
□ Feedback clause acceptable
```

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's IP positions:                │
│                                             │
│ Accept residuals clause: □ Yes □ No         │
│ Accept feedback clause: □ Yes □ Limited □No │
│ Joint ownership acceptable: □ Yes □ No      │
│ Required IP ownership: ___________________  │
└─────────────────────────────────────────────┘
```

### 4. Data Protection & Privacy

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Full DPA with your terms, audit rights, breach notification <24hrs | Always |
| **Acceptable** | Standard DPA, breach notification <72hrs, annual audit | Standard |
| **Fallback** | Vendor DPA with key amendments | Reluctant |
| **Red Line** | No DPA, >72hr breach notification, no audit rights | Never |

**Data Protection Checklist:**

```
DATA TERMS TO ADDRESS:
□ Data Processing Agreement required
□ Sub-processor notification/approval
□ Data location restrictions
□ Breach notification timeline
□ Audit rights (frequency, scope)
□ Data deletion upon termination
□ Security certifications required
□ Insurance requirements
```

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's data requirements:           │
│                                             │
│ Breach notification: Within ____ hours      │
│ Acceptable data locations: _______________  │
│ Required certifications: _________________  │
│ Sub-processor approval: □ Required □ Notice │
│ Audit frequency: ________________________   │
└─────────────────────────────────────────────┘
```

### 5. Term & Termination

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Termination for convenience with 30-day notice, pro-rata refund | Always |
| **Acceptable** | Termination for convenience with 60-90 day notice | Standard |
| **Fallback** | Termination for material breach only, 30-day cure | Reluctant |
| **Red Line** | No termination rights, auto-renewal >1 year, penalties | Never |

**Termination Provisions:**

```
TERMINATION CHECKLIST:
□ Termination for convenience included
□ Notice period reasonable
□ Cure period for breach reasonable (30 days typical)
□ Auto-renewal notice period adequate
□ Transition assistance available
□ Data return/deletion upon termination
□ No excessive termination penalties
□ Wind-down period sufficient
```

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's termination requirements:    │
│                                             │
│ Max auto-renewal term: ____ months          │
│ Min notice for auto-renewal: ____ days      │
│ Acceptable cure period: ____ days           │
│ Required transition assistance: □ Yes □ No  │
└─────────────────────────────────────────────┘
```

### 6. Payment Terms

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Net 60, payment upon acceptance, no late fees | Always |
| **Acceptable** | Net 45, payment upon delivery, reasonable late fees | Standard |
| **Fallback** | Net 30, modest upfront payment | Reluctant |
| **Red Line** | Full upfront payment, excessive late fees, auto-debit | Never |

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's payment positions:           │
│                                             │
│ Standard payment terms: Net ____            │
│ Maximum upfront payment: _____%             │
│ Acceptable late fee: ____% per month        │
│ Require PO process: □ Yes □ No              │
└─────────────────────────────────────────────┘
```

### 7. Warranties

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Comprehensive warranties, 12+ month warranty period | Always |
| **Acceptable** | Standard warranties, 90-day warranty period | Standard |
| **Fallback** | Limited warranties with clear exclusions | Reluctant |
| **Red Line** | AS-IS, no warranties | Never for material contracts |

**Warranty Types to Address:**

```
WARRANTY CHECKLIST:
□ Performance warranty (meets specifications)
□ Non-infringement warranty
□ Authority warranty
□ Compliance warranty (laws, regulations)
□ Professional manner / workmanlike warranty
□ Warranty period adequate
□ Warranty remedies clear
```

### 8. Governing Law & Dispute Resolution

| Position | Terms | Use When |
|----------|-------|----------|
| **Preferred** | Your jurisdiction, your state law | Always |
| **Acceptable** | Neutral jurisdiction (Delaware, NY) | Standard |
| **Fallback** | Their jurisdiction if major vendor | Reluctant |
| **Red Line** | Foreign jurisdiction, mandatory arbitration with unfair terms | Case-by-case |

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's jurisdiction preferences:    │
│                                             │
│ Preferred state: _________________________  │
│ Acceptable states: _______________________  │
│ Arbitration acceptable: □ Yes □ No □ Depends│
│ Class action waiver acceptable: □ Yes □ No  │
└─────────────────────────────────────────────┘
```

## Negotiation Workflow

```
STEP 1: REVIEW CONTRACT
        │
        ▼
┌───────────────────────────┐
│ Identify key clauses      │
│ Note positions vs. ours   │
└───────────┬───────────────┘
            │
            ▼
STEP 2: ASSESS GAPS
        │
        ▼
┌───────────────────────────┐
│ For each clause:          │
│ □ At Preferred? → Accept  │
│ □ At Acceptable? → Accept │
│ □ At Fallback? → Counter  │
│ □ At Red Line? → Escalate │
└───────────┬───────────────┘
            │
            ▼
STEP 3: PREPARE RESPONSE
        │
        ▼
┌───────────────────────────┐
│ Counter with next-best    │
│ position language         │
│ Prioritize red lines      │
└───────────┬───────────────┘
            │
            ▼
STEP 4: NEGOTIATE OR ESCALATE
```

## Counter-Proposal Language Patterns

### For Liability Caps

```
THEIR POSITION: "Vendor's total liability shall not exceed fees paid 
in the 12 months preceding the claim."

YOUR COUNTER: "Vendor's total liability shall not exceed [2x] the 
total fees paid under this Agreement. The foregoing limitation 
shall not apply to (i) indemnification obligations, (ii) breach 
of confidentiality, (iii) gross negligence or willful misconduct."
```

### For Indemnification

```
THEIR POSITION: "Customer shall indemnify Vendor against all claims..."

YOUR COUNTER: "Each party shall indemnify the other against third-party 
claims arising from (i) the indemnifying party's gross negligence or 
willful misconduct, (ii) the indemnifying party's breach of its 
confidentiality obligations, (iii) for Vendor, claims that the 
Services infringe third-party intellectual property rights."
```

### For Termination

```
THEIR POSITION: "This Agreement auto-renews for successive 2-year 
terms unless terminated with 180 days notice."

YOUR COUNTER: "This Agreement auto-renews for successive 1-year 
terms unless either party provides written notice of non-renewal 
at least 60 days prior to the end of the then-current term. 
Either party may terminate for convenience upon 30 days written notice."
```

## Escalation Framework

### When to Escalate to Legal

| Situation | Action |
|-----------|--------|
| Red line clause present | Escalate immediately |
| Novel or unusual terms | Escalate for review |
| Contract value > $[X] | Escalate per policy |
| Strategic vendor/customer | Escalate for strategy |
| Position beyond Fallback | Escalate before accepting |
| Regulatory implications | Escalate always |

### Escalation Information

When escalating, provide:

```
ESCALATION BRIEF:
─────────────────
Contract: [Name]
Counterparty: [Company]
Value: $[Amount]
Term: [Length]

ISSUE REQUIRING ESCALATION:
[Describe the clause/issue]

THEIR POSITION:
[What they're asking for]

OUR PLAYBOOK POSITION:
[What our playbook says]

BUSINESS CONTEXT:
[Why this deal matters, relationship context]

RECOMMENDATION:
[What you think we should do]
```

```
CUSTOMIZATION REQUIRED:
┌─────────────────────────────────────────────┐
│ Your company's escalation thresholds:       │
│                                             │
│ Auto-approve up to: $_______________        │
│ Manager approval up to: $___________        │
│ Legal review required above: $______        │
│ Executive approval above: $_________        │
│                                             │
│ Legal contact for escalations: _________    │
└─────────────────────────────────────────────┘
```

## Documentation Requirements

### For Every Negotiation

```
DOCUMENTATION CHECKLIST:
□ Redline/markup of changes
□ Summary of negotiated positions
□ Any deviations from playbook (with rationale)
□ Approval documentation for deviations
□ Final executed version filed
□ Key terms summary for contract management
```

### Deviation Documentation

```
PLAYBOOK DEVIATION RECORD:
─────────────────────────
Contract: [Name]
Clause: [Clause type]
Playbook Position: [What we normally require]
Accepted Position: [What we agreed to]
Rationale: [Why we deviated]
Risk Assessment: [Impact of deviation]
Approved By: [Name/Title]
Date: [Date]
```

## Quick Reference Card

```
╔════════════════════════════════════════════════════════════════╗
║           NEGOTIATION QUICK REFERENCE                          ║
╠════════════════════════════════════════════════════════════════╣
║                                                                ║
║  ALWAYS PROTECT:              COMMONLY NEGOTIABLE:             ║
║  • Liability carve-outs       • Liability cap amount           ║
║  • IP ownership               • Payment terms                  ║
║  • Data protection            • Warranty period                ║
║  • Termination rights         • Notice periods                 ║
║  • Audit rights               • Governing law                  ║
║                                                                ║
║  RED LINE = STOP AND ESCALATE                                  ║
║  Never accept without legal approval:                          ║
║  • Unlimited liability                                         ║
║  • No termination rights                                       ║
║  • Customer IP transferred to vendor                           ║
║  • No data protection terms                                    ║
║                                                                ║
╚════════════════════════════════════════════════════════════════╝
```

## Resources

### references/
- **clause-language-library.md** — Pre-approved language by clause type
- **industry-specific-terms.md** — Terms for specific industries (SaaS, services, etc.)
- **counterparty-history.md** — Notes on negotiating with specific vendors/customers

### scripts/
- **position-checker.py** — Compares contract against playbook positions

### assets/
- **playbook-template.xlsx** — Customizable playbook spreadsheet
- **escalation-form.docx** — Escalation request template
- **deviation-log.xlsx** — Track playbook deviations