The Top Ten Most Negotiated Terms in 2007
Almost 800 organizations contributed to this year's Top Ten, with inputs representing thousands of negotiators from around the world.
This record input has allowed more detailed investigation of the results - for example, examining differences between geographies and legal systems. The charts show the variations - and the similarities. Perhaps the most notable point is how limited the differences are and how little has changed in the years we have been conducting the survey. There are temporary 'blips' as major events drive sudden interest in particular clauses or approaches - for example, Force Majeure in the aftermath of 9/11 or Payment Terms at the time of new revenue recognition legislation. But overall, the results indicate a continuing 'status quo', with the battle-lines firmly drawn and almost unchanging - despite the pace of change in other parts of the business.
So is this good news (indicating dependability and good risk management), or bad news (indicating a community that is failing to keep pace with the times and is thereby either out of touch, or perhaps failing to address the risks of today's market conditions)?
To some extent, our results will always be skewed towards companies and negotiators with global perspectives and influences, because that is the group most interested and also most represented in our membership. Because they are trading in higher-risk environments (large deals, often cross-borders and cross-cultures), this is likely to result in stronger focus on 'risk managing' terms such as liabilities, indemnities and IP. Differences in legal system may also make those legally-oriented discussions longer and more complex.
However, those same issues should be leading competent risk managers to recognize the need for better governance and relationship management systems and terms. Yet there is very little evidence of this. The only slight indicator is the continued rise of service level terms, this year reaching 7th place on the global chart (but separate research by IACCM indicates that many of these service level terms are also relatively negative in their impact, driving confrontation and blame, rather than supporting innovation and positive outcomes).
With relationships more complex, with regulation and governance high on the business agenda, with growing inter-dependency between companies, it seems long overdue for negotiations to increase their focus on the mechanisms that will drive successful outcomes. But the charts stubbornly refuse to move - it appears most negotiators remain fixated around protecting against failure, rather than defining the terms and structures that might incent and enable success. And that approach not only threatens the success of their business - it also means inevitable questions over their personal value and relevance.
What Next?
Many IACCM Corporate Members have taken advantage of the chance to have IACCM create a 'custom URL' that enables them to run an internal study of their negotiators and receive benchmarked information from IACCM, showing differences from wider industry trends or practices. They use this data to support an internal strategic planning meeting, to review both the variations that exist, and the variations that they might create moving forward. This is designed not only to ensure adequate protection, but importantly to investigate possible sources of competitive advantage or improved economic outcomes. For many, a key question is around the overall issue of 'ease of doing business' and making their company not only attractive as a trading partner, but also enhancing the brand image for integrity and trust. Anyone interested in understanding more about this approach should contact info@iaccm.com or call Katherine Kawamoto at 1+(203) 431-8741 ext. 623.
(The IACCM survey of negotiated terms was conducted in November - December 2007. Participants came from in-house legal, contract management and procurement groups, representing cross-industry, multi-country perspectives. The split of buy side versus sell side was approximately even. The input was weighted towards larger corporations, with around 80% coming from companies with annual sales revenues exceeding $1 billion.)
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|
Top 30 Terms in 2007 |
▲▼ |
2006 |
2005 |
2004 |
2003 |
2002 |
|
1 |
Limitation of Liability |
- |
1 |
1 |
1 |
1 |
1 |
|
2 |
Indemnification |
- |
2 |
2 |
4 |
10 |
3 |
|
3 |
Price / Charge / Price Changes |
▲ |
4 |
6 |
3 |
5 |
7 |
|
4 |
Intellectual Property |
▼ |
3 |
3 |
5 |
3 |
2 |
|
5 |
Termination (cause / convenience) |
- |
5 |
7 |
7 |
7 |
5 |
|
6 |
Warranty |
- |
6 |
5 |
2 |
2 |
6 |
|
7 |
Service Levels |
▲ |
11 |
10 |
13 |
- |
- |
|
8 |
Payment |
▲ |
9 |
4 |
6 |
4 |
11 |
|
9 |
Delivery / Acceptance |
▼ |
8 |
9 |
8 |
12 |
13 |
|
10 |
Confidential Information / Data Protection |
▼ |
7 |
8 |
10 |
14 |
15 |
|
11 |
Liquidated Damages |
▼ |
10 |
12 |
9 |
13 |
19 |
|
12 |
Insurance |
- |
12 |
15 |
11 |
|
|
|
13 |
Applicable law / Jurisdiction |
▲ |
14 |
14 |
12 |
|
|
|
14 |
Invoices / Late Payment |
▲ |
19 |
- |
- |
|
|
|
15 |
Performance Bonds / Guarantees / Undertakings |
▼ |
13 |
13 |
23 |
|
|
|
16 |
Dispute Resolution |
▲ |
17 |
- |
- |
|
|
|
17 |
Audits / Benchmarking |
▲ |
18 |
17 |
18 |
|
|
|
18 |
Rights of Use |
▼ |
15 |
- |
16 |
|
|
|
19 |
Assignment / Transfer |
▼ |
16 |
16 |
17 |
|
|
|
20 |
Most Favored Client |
- |
20 |
18 |
- |
|
|
|
21 |
Freight / Shipping |
- |
21 |
22 |
19 |
|
|
|
22 |
Force Majeure |
▲ |
27 |
20 |
24 |
|
|
|
23 |
Entirety of Agreement |
- |
23 |
21 |
|
|
|
|
24 |
Business Continuity / Disaster Recovery |
▼ |
22 |
19 |
|
|
|
|
25 |
Security |
▼ |
24 |
24 |
|
|
|
|
26 |
Enterprise Definition / Future Acquisitions / Divestiture |
▼ |
25 |
11 |
|
|
|
|
27 |
Non-Solicitation of Employees |
▼ |
26 |
- |
|
|
|
|
28 |
Export / Import Regulations |
- |
28 |
23 |
|
|
|
|
29 |
Product Substitution |
- |
29 |
25 |
|
|
|
|
30 |
Escrow |
- |
30 |
- |
|
|
|
|
|
▲ Up or ▼ Down indicates change from 2006 Rankings |
|
|
|
|
|
|
Comparison: Buyer’s vs. Seller’s
|
Buyer's Terms |
|
Seller's Terms |
||
|
1 |
Indemnification |
|
1 |
Limitation of Liability |
|
2 |
Limitation of Liability |
|
2 |
Indemnification |
|
3 |
Price / Charge / Price Changes |
|
3 |
Intellectual Property |
|
4 |
Termination (cause / convenience) |
|
4 |
Price / Charge / Price Changes |
|
5 |
Service Levels |
|
5 |
Warranty |
|
6 |
Intellectual Property |
|
6 |
Termination (cause / convenience) |
|
7 |
Payment |
|
7 |
Delivery / Acceptance |
|
8 |
Warranty |
|
8 |
Payment |
|
9 |
Confidential Information / Data Protection |
|
9 |
Service Levels |
|
10 |
Delivery / Acceptance |
|
10 |
Confidential Information / Data Protection |
|
11 |
Insurance |
|
11 |
Liquidated Damages |
|
12 |
Applicable law / Jurisdiction |
|
12 |
Applicable law / Jurisdiction |
|
13 |
Liquidated Damages |
|
13 |
Insurance |
|
14 |
Dispute Resolution |
|
14 |
Performance Bonds / Guarantees / Undertakings |
|
15 |
Invoices / Late Payment |
|
15 |
Audits / Benchmarking |
|
16 |
Assignment / Transfer |
|
16 |
Invoices / Late Payment |
|
17 |
Audits / Benchmarking |
|
17 |
Rights of Use |
|
18 |
Rights of Use |
|
18 |
Dispute Resolution |
|
19 |
Performance Bonds / Guarantees / Undertakings |
|
19 |
Assignment / Transfer |
|
20 |
Freight Shipping |
|
20 |
Most Favored Client |
|
21 |
Force Majeure |
|
21 |
Business Continuity / Disaster Recovery |
|
22 |
Entirety of Agreement |
|
22 |
Force Majeure |
|
23 |
Business Continuity / Disaster Recovery |
|
23 |
Entirety of Agreement |
|
24 |
Most Favored Client |
|
24 |
Enterprise Definition / Future Acquisitions / Divestiture |
|
25 |
Security |
|
25 |
Security |
|
26 |
Enterprise Definition / Future Acquisitions / Divestiture |
|
26 |
Freight / Shipping |
|
27 |
Non-Solicitation of Employees |
|
27 |
Export / Import Regulations |
|
28 |
Product Substitution |
|
28 |
Non-Solicitation of Employees |
|
29 |
Export / Import Regulations |
|
29 |
Product Substitution |
|
30 |
Escrow |
|
30 |
Escrow |
|
|
Comparison by Region
|
|
|
|
|
Asia/Pacific Terms |
|
Europe/ Middle East/ Africa Terms |
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|
1 |
Limitation of Liability |
|
||