The offer: the beginning of the end

In legal terms, an offer is a declaration of intent which is subject to acceptance, that contains all the essential contractual elements, and by which the conclusion of a contract is offered to the counterparty in such a way that the conclusion of the contract depends solely on the counterparty’s consent.

In other words, if the counterparty does not accept the offer and amends it, this should be considered as a new offer that must be accepted by the party that made the original offer. The offer therefore always represents the end of the negotiations and cannot be amended, only replaced by a new offer.

This highlights the importance of the offer, particularly the initial offer, which is often referred to as the ‘anchor’ since it anchors the other party and creates a decisive negotiating advantage. Anchors are generally used when a party’s judgement is influenced by additional numerical information. The more ambitious the initial offer, the greater the resulting advantage (but be careful: if the offer is too extreme, you may scare off your counterparty).

The success of a contract negotiation depends on many factors and usually requires a great deal of tact and sensitivity. Here are three practical tips:

“Let them eat cake”: Increasing your piece of the negotiation pie

Although the price is usually the central focus in negotiations, for these to be successful, it makes sense to first look at options together with the counterparty in order to increase the “negotiation pie”. By including other elements in the negotiation, the parties have room to manoeuvre on different aspects. For example, the counterparty may be willing to accept a lower price if it secures concessions elsewhere.

The other side knows the anchor trick – what to do?

Keep calm and avoid making an immediate counteroffer. If the anchor that the counterparty has let drop is objectively unrealistic, it can help to discredit it. This is most likely to be successful if you can give good reasons for your stance. It’s worth repeating: don’t make a counteroffer! Let the counterparty lift and drop the anchor again.

P-p-p-poker face!

A party’s bargaining strength is measured primarily based on its best alternative to a negotiated agreement (BATNA). The better the alternatives, the stronger the negotiating position. These alternatives, usually offers from third parties, are therefore put forward in the negotiations in order to achieve a better result. If a genuinely better offer exists, it can be a convincing argument. However, caution is advised, as the other party may well be bluffing.

Now there’s only one thing left to say: let’s get ready to rumble and make an offer!