Tactic Group: Deal Structure

Explanation

The terms and way the deal is structure may seem beyond negotiation or pre-selected. Challenging terms to a contract is essential.

Analysis

Deal is structured in such a way as to favor one party or give leverage to another party. For example, Net 15 day v. Net 45 is a deal structure where 15 favors the seller of goods or services, net 45 favors the buyer.

Solution

Focus on needs (not wants, nice to haves, etc.); request different structure. Use “choice architecture.” For example; “Net 30 is standard, sooner is discounted discount, later will be at a premium.”

Examples

A “time is of the essence” clause (which makes failure to deliver on a specific date a material breach) is in a delivery contract for a highly complex custom goods contract. This greatly disfavors the manufacturer as if they miss a deadline, they will forfeit their investment in producing this one off. Parry: Mitigate impact by prepayment if time is of the essence is mandated.