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How To Confirm An Agreement When The Negotiation Process Has Been Completed

T. Randolph Catanese, Esq. © 1999. All Rights Reserved.

Previous articles in this series on negotiation discussed how to prepare to negotiate, employing situational analysis in negotiation and the timing and use of communications to achieve a successful negotiation. In this last article in this series the issue of how to confirm the agreement once it is reached will be addressed.

In most situations, parties will begin to confirm their relative positions with one another by setting forth in writing ideas and concepts they want to make part of the agreement. The purpose of these writings is to move the process along, not necessarily to engage in a binding agreement. In most cases, it makes sense to forward to the other side a letter or a brief memorandum outlining the terms, conditions and points a party wishes to be made part of the agreement. Usually, the other side responds with what points they can agree to and points they cannot agree to. Then, the parties usually negotiate back and forth until they finally reach a point where they either have a deal or they do not have a deal.

As the parties reach closure on their agreement and the terms to be made part of it, they normally will issue to one another a Memorandum of Understanding (“MOU”) or a Letter of Intent. These documents may or may not amount to legally enforceable contracts. (See previous articles on Letters of Intent – DSM archives).

When the negotiation process has been completed, be diligent in presenting the other side with your term sheet or Memorandum of Understanding. If the other side will be preparing the Letter of Intent, try to be as detailed as possible in your Memorandum of Understanding so that the term sheet can track it precisely. The more specific you are in your Memorandum of Understanding (and the closer is tracks what the parties agree to in any negotiations) the faster your deal will come together. On the other hand, if you are sloppy in your presentation of the Memorandum of Understanding, then usually the deal will be delayed because the other side will disagree or object to what was presented. More importantly, the other side may become confused and the deal may be threatened because of a poorly presented Memorandum of Understanding.

Assuming that the parties get by the Memorandum of Understanding, the next method to confirm the agreement is through a Letter of Intent or an actual agreement itself. Again, because either the Letter of Intent or the actual contract itself may be legally enforceable, it is very important that they are specific and clear as to what the parties agree to. If they have ambiguity or uncertainty as to what was agreed upon, the potential for litigation exists and you most likely will have to deal with a Litigation Attorney California or any other state you may be located.

To summarize, use MOU’s throughout the negotiation process to move matters along and keep clear the relative positions of both parties. After MOU’s have been worked through and as the process continues, move towards the Letter of Intent. Thereafter, and assuming that the negotiation process continues and the details are refined, move into the Letter Agreement which should be immediately followed by a binding agreement between the parties. By employing this process, the entrepreneur has the best chance of securing a successful agreement without ambiguity and uncertainty.

In closing, the successful entrepreneur will prepare for the negotiation, employ good communication skills throughout the negotiation and adequately and timely document the negotiations until such time as an agreement is reached.