How to Negotiate a Contract Renewal: The Lawyer’s Role

1.1A renewal in one paragraph

A renewal is a new deal between two businesses that already work together. The old contract is ending, and each side wants something to change. So they make offers and trade points until both can agree. This workbook follows one renewal, from the first letter to the agreed terms.

It is autumn 2029, and you are a new trainee at Hennacott LLP, a law firm in Plymouth. You act for a bakery whose contract with its garage ends next spring. The client decides and speaks on figures. The partner advises and speaks on terms, and you prepare the papers and keep the notes.

1.2Why a bakery pays a garage, and why lawyers sit in

A bakery that delivers its own bread needs its vans on the road every day. Bread that misses its delivery round cannot be sold. Many bakeries pay a garage to keep the vans running, because:

• the bakery has no workshop or mechanics to keep
• it pays a set price for each van every month, so it can plan
• if a repair runs late, the garage lends it a van

The garage gains too. A whole fleet keeps its workshop busy and brings in money every month.

Most renewals are agreed by business people alone. This one has lawyers in the room for two reasons.

The first is money. The garage now asks £40 more for each van every month. On 80 vans, the van price alone goes up by £38,400 a year.

The second reason is words. In long talks, a loose line in an email can look like a promise. Words decide what binds, and when. A lawyer makes sure that the client is bound only when it means to be.

1.3The case: a bakery and its garage

Polgarrow Bakery Limited is a family bakery. It delivers bread across Devon and Cornwall in its own vans. Since 2027, Kestrow Fleet Services Limited has serviced and repaired them, for £100 a van a month and £60 an hour for labour. The current contract ends in March 2030.

The fleet has grown since Kestrow started. Polgarrow won a delivery round for a supermarket, and it now runs 80 vans. Twenty of them are electric, and every new van will be electric. These are the people in the case:

In September 2029, Kestrow wrote to Martyn. Its letter asks for higher prices and a contract of five years. It also asks for a yearly price review that follows its costs. This is the line that matters most:

The letter is marked subject to contract, so nothing in it binds Kestrow until a new contract is signed.

Each side has reasons to want a new deal. Kestrow says its costs have risen. When an electric van is late back from repair, Kestrow has to hire another one to lend Polgarrow. It wants higher prices and a longer contract to cover that.

Polgarrow wants its vans back fast, at prices it can plan around. It also needs a garage it can trust with electric vans.

Each side also has something to fear. Changing garage is a risk for Polgarrow, because a new garage is untested and late vans mean unsold bread. Polgarrow is Kestrow’s biggest customer. Losing it would leave Kestrow’s workshop empty. So each side needs the other, and the talks are about the terms.

1.4Who does what, and the road to heads of terms

Each person at the table has one part. The preparation sheet sets them out:

• Martyn speaks on figures. He decides, but only as far as Polgarrow’s board allows.
• Leonie speaks on terms, for Polgarrow only. Kestrow has no solicitors, but she never advises it.
• You take the notes and draft Martyn’s emails. You speak to nobody at Kestrow.

The client speaks on figures because it is the client’s money and the client’s garage. Martyn knows what Polgarrow can pay and what it can live without. A lawyer takes care over what is said and written. Anything you said to Kestrow could be taken as Polgarrow’s answer, so every contact goes through Leonie.

The talks run in stages. Each stage leaves papers in the Negotiation File, which holds every letter, note and offer.

The talks end with heads of terms: a one-page table of the agreed points. Later, the heads become the new contract. Chapter 2 starts the preparation, with what each side really needs.

1.5Your job

Before the first call, learn what the current contract already lets Polgarrow do. Then keep every contact with Kestrow in the right hands.

• Read clause 2.2: how Polgarrow may extend the current contract.
• Read clause 9.3: what Polgarrow may do after a price notice.
• Read clause 13.2: when else Polgarrow may end the contract.
• If Jory rings or emails you, take a message, say nothing about the deal, and tell Leonie the same day.

These clauses show what Polgarrow can do without Kestrow’s agreement, whatever the talks bring.