Negotiating Better Contracts: Reciprocal Terms

A contract in its most basic form is an exchange between two parties, famously also known as quid pro quo. For example, your work as an employee is exchanged for a salary. The higher quality your work, the more you expect to be paid. A good contract to both parties is a fair contract, where an equal exchange exists. Our topic for this week is the idea of reciprocal terms and how individuals should view non-mutual terms as areas of negotiation.

What is a reciprocal term?

Reciprocity is a loaded term with different meanings depending on the application, but we will define it as “conditions that apply the same to both parties”. In other words, given a clause that can apply to both parties, if it requires one party to do something, the other party should also be required to do the same thing. Of course, not every clause type can be applied to both parties, so let’s cover some examples.

When do reciprocal terms matter?

While some clauses such as your compensation or your job description are specific to one party, many clauses do apply to both parties:

1. Termination: Contracts typically require prior notice to terminate for convenience or for a breach. The notice period should be the same for both parties (e.g. At-Will Employment), but often the employer or client has a shorter notice period than the employee or vendor.

2. Dispute Resolution: Employers prefer to limit employees to private arbitration even when they keep their own options open to other forms of dispute resolution. In states like California, this lack of reciprocity can be held to be unlawful.

3. Liability: Contracts can set an upper limit to the financial liability of a party to the contract value, but this limit may only be applied to the company on a freelancer, and not the other way around.

You’ll notice a trend in these examples where, typically, the employer that holds more power in a negotiation will seek non-mutual terms because it gives them an advantage.

How do you negotiate reciprocal terms?

It goes without saying that the more leverage you have, the more favorable you can negotiate your terms. However, in the case of reciprocated terms, you can negotiate on the basis of equal treatment for both parties: “I would like these conditions to apply the same for me as they do for you.” The other party may either agree to do so, or explain the other advantages you may be receiving that warrants non-mutual terms for a specific clause.

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The idea that both parties should be treated equally may seem obvious, but it’s not always apparent when some clauses are written with only one side in mind. Even if a non-mutual term is the industry norm, we invite everyone to question if that norm should be changed.

For advocacy and beyond,
The Ask Ginkgo Team