Asking a business partner to revise a contract: there is an order to it

“If we ask for this many changes, won't the other company be unhappy?” That is what clients add most often when they bring us a contract to review. The side that receives the other party's form always feels like the weaker party. But when deals actually fall through, the problem was often not the request for revisions itself but the way it was made.

Sort clauses into three columns

When you receive a contract, sort the clauses into those you must fix, those worth negotiating and those you can accept. Clauses with no cap on damages or that require compensation for ‘all losses’, clauses that let only the other side terminate, and clauses with vague payment timing usually go in the first column. Clauses such as the competent court or the method of notice often go in the second.

The trick is to narrow the first column down to no more than two or three. If you send back a contract with red lines in twenty places, the other side's contact person will pass it straight to their legal team, and from then on the schedule gets longer.

If it is a form the other side uses unchanged with many business partners, it may be regarded as standard terms and conditions. The Act on the Regulation of Terms and Conditions treats contract terms prepared in advance for contracting with multiple parties as standard terms regardless of their name or form (Article 2 of that Act), and makes unfair clauses void. Some companies carefully add this point as grounds for their revision request.

Send the revised wording together with the reason

If you only send “This clause is a problem,” the other side won't know what to accept. Instead, write the replacement sentence yourself and add a line or two on why it is needed, and you will get a faster reply. For example, if you propose capping damages at the contract price while excepting intent or gross negligence, the other side also has a reason to accept it.

Look at penalties in terms of numbers. A penalty is presumed to be liquidated damages and can be reduced by the court if excessive (Article 398 of the Civil Act), but things may be different if the contract describes it as a contractual penalty (위약벌). The direction of the revision is also reversed depending on whether your company is the paying side or the receiving side.

Reading only the main text and skipping the attachments is another common mistake. If a specification or quotation says something different from the main text, you need to settle which one prevails, and also check whether delivery dates or unit prices agreed verbally in meetings made it into the final version.

If some clauses could not be changed in the end

Some clauses cannot be changed even through negotiation. In that case, set out by email how you understand the clause as you sign, and send it to the other side once. Record in the same way anything the other side's contact person said verbally, such as “we don't actually use that clause.”

If a dispute arises later, records like these are what gets looked at after the contract. A few emails exchanged in the days before signing can protect the company's position years later.

Finally, check the authority of the person signing. If someone other than the CEO is signing for the other side, check whether that person has authority to contract on the company's behalf, and whether the deal requires board approval within your own company.