Negotiations and Contracts

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The words Negotiations came from a Latin name called “negotiatus” which meant “to carry on business”. And its no surprise why the Spanish word means “to carry on business” is called “negotiatus”, it proves its meaning the importance of its act in the process of conduction once business (Daly, 2007). The process of Negotiations works by studying the issues revolving people involved and that includes their culture and its background. This helps in studying and preparing a good bargain.We use Negotiation to either to find a resolution to a dispute or to set on a course of action, Negotiations is also used in business in the terms of bargaining. Streaming lining helps in understanding both or individual parties on what best can be offered or how what best can be taken from them. Negotiation is the key aspect of human behavior, to get the best from the best and it works in all fields of life. From government to legal departments e.g.:- divorce, parenting to business and our day to day life. There is also a study called the negotiation theory and we have many Professional negotiators from all fields of life, such as peace and hostage negotiators, Professional to business negotiators and in other names they are called brokers and diplomats.

We use negotiations when there are two or more parties involved on an issue that needs mutual benefit or solution. Negotiations happen when both parties are looking for their interest and they would use their influence to take advantage of the situation. A negotiation is mostly like a trading business where both parties should benefit mutually like a win – win deal. However, Negotiations happens when one of the parties is trying to get a better deal. It is then that the parties try using tactical ploy in gaining an advantage, either by using the agreement or modify the situation.

It is very important once at the negotiation table, that both parties adjusts and readjusts their position during the process while trying to influence their demand and try changing they other position as well. It seems to have a settlement the process of taking advantage and giving leverage is a common practice. To have a two way discussion or settlement, both parties must have proposals that suit each other and counter proposals in case the former one fails, as it usually deemed necessary if there have to reach a final solution. Proposals are like adjustment and it is the key to negotiations. it is the key skill factor for a good negotiator to understand the other party’s stand on the situation and counter his offer with another proposal (Gini and Marcoux, 2008).

It is not advisable not having a comprise which is like counter proposal as it would grantee a fail in negotiations or rather it would not be called negotiating but a demand to the proposal. There would be a sense of mutually benefit if both parties takes into consideration each other’s needs, wants and hopefully come to a beneficially conclusions. Negotiations have a creative approach to it and no longer does it indicate, to Negotiate means both parties get half, but a creative approach means both parties get more then half. Eg: – two men needed to buy a truck load of apples and one of them needed the juice and the other needed the rind. Both parties could get more then they bargained for with a creative approach.

There can be many ways in which a negotiation process can be initiated and it always to go prepared which a devised plan. The best combination is first prepare and to do that is to know what you are looking for and how low can you go and when to stop. To do this one must understand his needs and how to go about through the negotiation table. The next thing is to go to the negotiation table and making your opening statement and what your demands are, however you will have to listen to the other party’s demands as well.

There will always be debate and discussion during this process however it’s important to support once case during this process and expose the party’s weakness. There is always scope for progress during the discussion when there can be a sense of understanding and looking at other possibility and avenues. This would prove that both parties are serious and are ready to work together. At the close of every negotiation, it’s important to have a final agreement and have it in writing on what has been agreed upon. However during the process of any negotiations, there is always scope for many meeting, if the situation demands and the overlapping process can and does happen.

However, from the point of ethics it can be stated that Business ethics is a form of applied ethics. It involves developing a sense of proper business conduct within an organization. Because this term is not easily adaptable to easy translation, it can be difficult to understand. It is taken to mean ‘integrity, ‘business practices or ‘responsible social conduct’ all of which manage to get close to the broad concept of business with a conscience. Business ethics is now included in the curriculum of management schools in some parts of the world and is aligned with the induction programs in corporate ethics in most multinational companies (Daly, 2007).

Corporate Social Responsibility (CSR) combined with business ethics forms part of corporate governance agenda meant to commit organizations to the service of the community. The commitment, with regard to environmental steward ship and benevolent activity, can be seen as a tacit agreement between an organization and its stakeholders. The business is allowed to be conducted within its jurisdiction, to provide jobs and taxation revenues. The business is also obliged to preserve the environment and to enable the qualities and opportunities for a good life. Corporate accountability to society develops responsible business practices. Europe seems to be leading other parts of the world in this respect. European companies have opened up offices concerned with corporate and social responsibility. Most American companies seem to have developed corporate social programs as a result of legislation, though few have had some form of corporate governance in place for quite some time. Those corporations developing corporate social responsibility procedures are under watch and penalized heavily if they deviate from these norms. According to guidelines, business ethics programs are supposed to put in place training in CSR, written and measurable standards of conduct and individuals assigned responsibility for managing the ethics function. In recent years more countries have set up business compliance measures especially with respect to corruption issues.

The prices of export rising faster then its import would mean the trade term index would rise. This always would mean there would be lesser exports, in exchange of it imports volumes to counter the balance. However if the import move up faster then the export then a larger volume of products have to be sold to arrange to finance the imports good and it services.There will be always any issue with trade terms and international contract, but this does not mean it does not go through, it only there will be negotiations every time.

Terms of trade also known as TOT is the pricing of a particular country’s export and its import. But it’s more like a barrier for the country social welfare. A Developing country can be the biggest loser in terms of export price dropping down. And it like mentioned before a greater volume has to be forsaken to fund for its imports goods. One of the known issues where was in 1998, when the oil prices collapsed the developing countries have an issues of exporting more oil to fund their imports, this impacted its economic and living standards of those countries. A developing country would depend on its oil and any fluctuations in pricing have a serous impact on its economy and the trade terms.

Negotiations and renegotiations happens when there is a large dip in the exchange rate and its effect show up on export prices and a steep rise in import pricing. This created issues with trade terms, and affected the producers on how they reacted to the lower exchange rate. International contracts came into being, when a body was formed governments that saw the need for a system set in place to govern international sale transactions and contracts and it implies to business or trade done to more then one country , it was after the second world war when trade was rising between countries. It’s more like a commercial law and brings about standardization on how business is conducted. There were key issues facing different manufacturer, individuals, exporters and importers. The agreement was drafted when a party entered into a foreign market. This looked into the cost and the risk involved dealing with that country. If the exporter did his exporter directly or using an agent in between. International contracts also dealt with foreign distributors dealing with local customer and if they needed to se up base in a foreign land. They took care of joint ventures or appointing a franchisee. When an individual does not have sufficient money he or she considers the possibility of having a partner who could invest in the business. In return of the money provided the partner becomes a stakeholder in the business and is thus, entitles a share of the profits generated. However, in a joint venture the partner is equally liable for the responsibilities of the business. A partnership should fulfill the interests of all the involved. Thus, a joint venture is a conglomerate or partnership designed not only to share profits but also risk and expertise (Gini and Marcoux, 2008).

In International contracts Emails and faxes etc. are binding if both or many parties have an agreement and a fax or a courier can be followed in terms of a hard copy. However different countries have different law concerning International contracts. This is a pre – arranged agreement prior to the actual deal between two parties which is has a significant role in the actual agreement. Anything that requires financial or development in the company must have the major share holder involved in the process and have an approval.

There a many paths and ways to Parties to the Transactions. however the maim principal meaning to Parties to the Transactions in a corporate company would be its Directors having its share holders of parties with interest to the company have a mutual approved internal guidelines with the sole purpose to maintain transparency and fair towards business ethics. Some of the important points are to have transactions with the board of directors and related parties involved in the discussion making process.

If there are independent directors then a Committee could be formed in engaging itself in the decision making process. Looking at all transactions irrespective of the people responsible of these decision-making powers in the way to show and have a deep sense of transparency through out the company.

This helps is Statutory Auditor to process a clear work flow and have it presented their finding to its share holders and people with financial interest towards the company. If one of the directors has a personal interest in the company or its parent or sister concern, then he should not be involved with the discussion making process and should also not be present during such meeting where he could influence the process without the approval of the committee. He has to inform the board of his interest in other companies from time to time and if there were any transactions made.

Today, business is not confined to local or national perspective; with globalization it has crossed all national boundaries to reach the international arena. Globalization needs more and more interaction among people from different countries, cultures and thoughts. The economical condition has also changed rapidly. In the threshold of world economy, every organization requires diversity to meet the challenges. Hardly any company is now confined with a stagnant working process or business strategy. For the sake of business diversity, management skill should be up-to-the mark. This is because the skills would help the organization to fulfill the demand of a multifaceted working environment.

Though businesses have a worldwide responsibility, it has obligations too. Government in this case works as a watchdog in ensuring that companies are prevented from harming the social good. There are a certain legal rules and regulations which can not be ignored by the corporations. But only regulation will not be able to handle the operation of an organization. Unnecessary troublesome legal matters can destroy the work culture and prevent smooth operation. The corporations pay taxes for so as to be able to conduct the business smoothly. Business cannot go beyond the laws and regulations to foster diverse workforce. So the legal matters have to be handled carefully so that there should not be any obligations that can hinder the diverse workforce. Organizations try to avoid interference in their business through taxation and laws and try to persuade government and public. But the government would measure the steps taken by these organizations. Thus, it is obligatory to maintain the process under strict rules transactions and execution of key elements (Daly, 2007).

When a business is been born and here are other parties involved in the process, then signing contracts and agreement help insure a transparency and security of the stake holders involved. And it’s important to study these contracts before signing them in your interest before committing to its terms and conditions. This shows that the business legal and binding to all stake holders, it is in good faith that a business man constantly have contract make in the interest of the company for any future disagreements of misunderstanding. This is a known fact in corporate companies to go to great length in having their contracts in all transaction they do dealing with other companies or vendors.

However on a wiser part it’s important to scrutinize these contracts before having signed them for any hidden clauses that may affect you and your line of business. When a contract is been drafted parties involved in the process must be clearly defined because it would clearly state the people involved in the business and the discussion making process. And it shows the stake holder share and their investments into the business. Another sort of contract that has a legal binding is when a company decides to out source its marketing campaign and then sign a MOU or an agreement with the advertising firm on its term and conditions.

It’s important to have contract drafted in these matter. In an unforeseen circumstances were the advertising firm backs out on its commitment, the contract will have a legal binding in suing the company for breach of trust. Offer for Sale is public invite for anyone interested in investments on shares or securities of a company and they would have a holding in the company directly.

Memorandum of sale is a document to create awareness or interest in your organizations or line of business and there are professionals who make these types of Memorandum of sale, which brings in buyers or investors. Memorandum of sale provides investor or potential buyers with the company and its dealings. Some of the key information a sale Memorandum must have is what business the company is involved in and he duration it’s been running. There should be a brief on its profits, its cash reserve its assets and if there are any liabilities. It would be a good practice on also showing how the company faired in its previous years and what has been its growth level and if not why was the growth not been achieved.

Details of the total staff strength and their wages as well as salaries. its important that the company has detail list of its uniqueness and its different between the rest of its competitors and have its highlighted in the draft. There should be the highlights on the company performance and its present and future opportunities for expansion. The key here would lie in how the company is been presented and have the utmost transparency keeping the good in good books. Once the company has prospective buyers in place, then a more detail information can be provided to its buyers on its customer base, its vendors and suppliers and it profit margin amounts (Daly, 2007).

Franchise Agreements Is a legal document that binds the franchisee/franchisor into agreement pre –discussed. There are at times standard by the franchisor to its franchisee partners unless modification by both parties to suit their business needs. But the basic clause that most Franchise Agreements should have is the franchisor responsibility of ongoing shore up in the areas of training and logistical support, whether it’s at the franchisee/franchisor location.

Franchise Agreements also secures the Franchise from having exclusivity rights over the said area in which the agreement was made and secures a certain business presence in the area. They call it Assigned territory this helps in a guaranteed amount of its customers for that area. There are some Franchisor who would state the duration in which they would allot the Franchise owner to operate and have the agreement renewed after the said period or else terminate the Franchise contract if they are not satisfied with his performance. We then have Franchise fee which is a one time payment that goes to the Franchisor and is normally no refundable unless previously agreed upon, this fee let the Franchise use the Franchisor’s trademark and line business.

Besides paying a one time fee Franchise owners also have to pay a monthly royalty from the business they generate using the Franchisor’s trademark and line business. The Franchisor’s in return for the one time fee and its monthly royalty, the Franchisor assure advertising support in promoting his business and brining new products and services. There are other clauses in the agreement on how the Franchise outlet must look and they way the operate their line of business. This clause maybe not mandatory, however in some cases the rights to sell the franchise to some else is added in the agreement, in case franchise owner decides to sell off.

Distribution agreement is unlike a franchise agreement but more to do with marketing and distribution; it is an agreement with the manufacturer and a distributor who decides to take up the distribution of the company’s product or products. There is an agreement which is made and at times the specify how much or how their products are sold in term of space coverage in a mall or how a distributor should advertise their products depending on different companies policies. The agreement normally has the distributor paying a fee and assuring the manufacturer a certain amount of monthly business, here unlike the franchise, the distributor does not pay the company or the manufacturer monthly royalty as the goods sold is a profitable to the manufacturer and does require any monthly fees.

In the context of Consignment Agreement, there is a specify format and has the agreement date and the shop in which the goods are sold , who is referred as the seller and assure the manufacturer a good display at his establishment which help boost revenue. Here is more of the seller who needs to do a lot of bargaining in the hope to get the cheapest price from the manufacturer and in turn make a good profit to the end customer. This pricing is also added into the Consignment Agreement and he is entitled to keep the profits after paying the manufacturer his cost. However, the Agreement also states that once the Consignment is delivered any loss accruing hence would be borne by the seller in terms of theft, fire or unforeseen calamities. This put the seller at a higher risk; however he does make a bigger profit in terms of the product sales compared to the manufacturer (Gini and Marcoux, 2008).


Daly, Alfrieda. (2007). Negotiations: issues and perspectives. NY: NASW Press.

Gini, A. and Marcoux, A. (2008). Case Studies in Business Ethics. Ed. 6, London: Pearson Prentice Hall.

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