In the context of international trade growing and transactions becoming more complex, negotiating commercial contracts becomes increasingly important.

Payment and deposit terms are a particularly important content. It not only affects the cash flow and profits of a business but also relates to the guarantee of performance of obligations of the parties in the contract.

1. Understand payment terms

Payment terms in a commercial contract stipulate the method and time of payment between the parties. To negotiate effectively, legal negotiators need to understand popular payment methods such as: prepayment, postpayment, progress payment, or payment by invoice. Each of these methods has its own advantages and disadvantages.

• Prepayment: This method helps the supplier minimize risks, but can put pressure on the buyer. The legal negotiator needs to discuss and understand why the other party is requesting this method, and then adjust to reach a consensus.
• Pay later: This method is often convenient for the buyer but can also be a big risk for the supplier if the buyer fails to pay on time. The legal negotiator needs to negotiate protections, such as penalty clauses for late payment.
• Pay by progress: This method is suitable for large transactions, helping both parties spread the financial fluctuations. However, determining payment milestones also requires careful consideration to avoid disputes.

2. Escrow – A protection tool

Escrow is often included in commercial contracts as a measure to ensure the performance of the parties’ obligations. It requires the buyer to deposit an amount before receiving the goods or services. The legal negotiator needs to discuss and negotiate a reasonable escrow term.

During the negotiation process, the legal negotiator may consider the following factors:

• Amount of deposit: The level of risk in the contract must be considered. If the value of the goods is large or the service is of a special nature, it is reasonable to require a higher deposit.
• Time and conditions for deposit release: This is an important point, because if the conditions are unclear, it can lead to misunderstandings. The legal negotiator should ensure that the deposit release is based on specific, understandable and verifiable criteria.
• Consequences of non-performance: It must be clearly defined that if either party fails to perform its contractual obligations, the deposit may be withheld, or deducted from compensation.

3. Negotiation skills

To conduct effective negotiations, the legal negotiator must equip himself with some essential skills:

• Communication skills: It is necessary to clearly express his point of view, as well as listen to the opinions of the other parties. This helps build relationships and create trust between the parties.
• Information quality: Before starting negotiations, legal negotiators need to have enough information about the other parties, the market and current trading conditions. Having solid knowledge will help them have convincing and accurate arguments.
• Negotiation skills: This is the most important skill. Legal negotiators need to know their strengths, the weaknesses of the parties and find common interests to be able to reach the best agreement for both parties.

Conclusion

In negotiating commercial contracts, discussing payment and deposit terms is very important. Legal negotiators play a key role in ensuring that these terms both protect the interests of their company and do not cause inhibition for the other parties, leading to the contract not being signed and the partners turning away. Be proactive in listening and boldly proposing ideas so that both parties see the benefits of implementing this agreement.