Contract Negotiation Tips for Japanese Corporations #1 Avoid Use Of Other Party’s Contract Terms as a Model or Base
American companies understand the importance of being proactive and providing draft contracts first. If possible, it is always better to provide the company’s basic agreement as a draft for negotiations than to await the other party’s draft. This action alone can provide great advantages to the proactive party throughout the negotiations as it allows you to structure the agreement based on your priorities and with terms most beneficial to you. It may even set a precedent for future negotiations since the party receiving the initial draft will assume henceforth that the initial drafts will be issued in the same manner.
If the company does not have template agreements drafted in English then it is advisable to do so immediately. This will allow the company to be proactive, flexible and responsive.
If forced to work from the other party’s draft, then there are several key issues that need to be addressed. Primary amongst these is the need to address ALL issues in the draft. While many Japanese negotiators may be tempted to just focus on the “main issues” and choose the top ten most objectionable clauses to negotiate, this is an error which plays into the hands of the American company’s lawyers.
Do not treat the other parties contract as standard with some revisions required. Forwarding a draft agreement with very aggressive terms (asking for much more than they think they can get in order for the final compromise to be more favorable to them) with the intention of frightening the other party off from negotiating all of them is a common negotiating tactic.
Do not be intimidated by such behavior. If the draft contract contains 55 unfair terms, the company should revise all of them. If it takes one hour or one year, no unreasonable term or issue should be allowed to pass by. If the company is intimidated, lazy or lacks commitment these unfair terms may become default language for future contracts and/or renewals.