Tag Archives: Negotiate

How Do You Respond to an Onerous Contract Clause? Five Options

Situation: A company just received an approved vendor renewal contract from their major customer. Upon review, they found language that potentially holds them liable to cover the customer’s legal costs of enforcing the agreement. If the company does not sign the contract, they potentially lose their major customer. How do you respond to an onerous contract clause?

Advice from the CEOs:

  • Corporate attorneys are paid to protect the corporation and purposely write vendor agreements to their favor. There are two issues here: whether they will negotiate this clause, and the likelihood of enforcement – which may be very small.
  • Double check your previous vendor contract and assure that this language want not present then. If the language is the same as in past agreements all you are doing in updating an expired agreement. Perhaps there is less of an issue than you anticipate.
  • If you find that this is new language, then call your primary contact in the customer company and ask about the new language. It may be something that their lawyers are trying to add to contracts but will forgo if called on the language. However, if your primary contact responds that this is new standard language in their contracts, you still have options.
    • Try pushing the issue to higher levels of the organization or through your advocates in the company and ask them them to modify the language.
    • Call your own company lawyer and ask how they advise you to respond. A letter from your lawyer to the customer’s lawyers may settle the issue.
    • Call other vendors of this customer and find out how they have responded to the new contract language. If several vendors call and complain about the fairness of the language, the customer may determine that the new language is not worth the hassle.

Key Words: Contract, Clause, Vendor, Customer, Liability, Enforcement, Negotiate, Lawyer, Fairness

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How Do You Work with Purchasing Agents? Three Approaches

Situation: A company has a long standing relationship providing an exclusive product to a major customer and has a negotiated price and volume contract for this product. The customer changes product design every few years, and the company is the favored supplier of certain components. The customer’s purchasing agent has asked to renegotiate price on the current contract. The company wants to maintain a good supplier relationship with the company, but doesn’t want to lower the price on its product. How should the CEO work with the purchasing agent?

Advice from the CEOs:

  • There are two distinct opinions from the group:
    • You have a contract in place for volume and price. If you yield on price now just to assure the remaining business on the current contract you are saying, in essence, that future pricing contracts are also negotiable even after the contract is negotiated and signed.
    • On the other hand, if you know that there is a model design change in process and want to assure a good ongoing relationship with the company you may choose to yield a bit on price for the remainder of the current contract.
    • The choice between these two will be a gut choice based on your relationship with the customer as well as your past history with the purchasing agent.
  • You might want to try a creative alternative. Check with your own component vendor and inquire about pricing if you place orders for your own remaining components on the current product today versus in several weeks. If there is a discount for placing the order today, call the purchasing agent and tell him that if he orders the remaining product on the current contract today, you will pass on the discount that you receive from your vendor. If you don’t get the order today, then you will lose the discount, and there may be a delay on your being able to deliver the remaining parts under the current contract.

Key Words: Component, Supplier, Vendor, Purchasing Agent, Contract, Relationship, Discount, Delivery, Negotiate

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