Vendor Management: How to Negotiate Contracts

CIO — Businesses buy computer-related goods and services all the time. Just to name a few examples, they buy consultants and technicians' time, custom programming, software and hardware. The way the parties usually handle the paperwork is that the vendor gives the customer their form and the customer signs it. After all, the form is printed so it can't be changed. Wrong!

I have two comments about those forms. One, I represent vendors. Trust me when I tell you that if you're the customer, you never want to accept those form contracts without changes. They're designed to be one-sided in favor of the vendor. I write them. I know.

Secondly, they are almost always negotiable. The basic premise is that most customers won't read them carefully and even fewer will take the time to really negotiate them. A smart customer sees the form as nothing more than a one-sided first offer and goes from there.

Involve a Lawyer?

Clearly, you cannot involve a tech lawyer every time you buy something computer-related. So, how do you know when you need legal assistance?

I think that you make that judgment based on what's at stake. You have to look at the size of the contract and the importance of whatever it is that you're buying. Essentially, I'm suggesting a quick, down and dirty cost-benefit analysis.

I recommend that you start by assuming that the form contract you are seeing was written by a skilled lawyer whose marching orders were to write a contract that gives you as little protection as possible. Then, imagine that the deal goes badly. Finally, assume that if you are forced to sue under the contract that you will lose because the other side was well represented and you were not. How much would you lose? How bad would this scenario damage you? If the damage is more than what is an acceptable loss to you, then you need a lawyer on your side too.

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