Renegotiation — Definition, Tips and Examples

What is Renegotiation?

Renegotiating means negotiating again, usually to adjust or completely change the terms of an existing agreement. It happens when one or more people involved feel that the current deal no longer works in their favor, maybe the situation has changed, or the benefits aren’t worth the effort or cost anymore.

Instead of ending the deal or walking away, the people involved come back to the table to talk it through. They each offer something, make compromises, and try to reach a new understanding that feels fair and workable for everyone. The goal is to fix the problems in the current deal and come up with terms that make more sense for the present situation.

7 Tips on How to Renegotiate a Contract

While there are many ways to renegotiate a contract, we will provide you with these lucky 7 strategies to help you not only renegotiate but also win the terms.

So, without further ado, here are our strategies for renegotiating a deal:

1. Give yourself a break

When negotiations do not succeed the first time, you have a lot of options. The first option would be to give yourself a break and seek out other interested parties. Weigh in their offers, speak to other negotiating parties, and decide if it is in your best interest to continue negotiations with them.

Sometimes, you have better luck negotiating with others rather than continuing to negotiate because you are too stubborn. Another option, of course, is to give yourself a break to improve your side of the team. Think of other offers, and do some research on the other negotiating party. All in all, a break is almost always beneficial in trying to renegotiate a deal.

2. Know what is right for your business

If you’re ready to renegotiate, then you must make sure that you know what is right for your business. Take some time to meet with your team. Discuss what the terms are that are beneficial for the company. Strive to get the best deal at the renegotiation table.

3. Prepare for disputes

Even during renegotiations, always expect disputes. Even with short-term contracts, disputes and differences of opinion inevitably arise. Add a clause to your contract that requires the chance to renegotiate, mediate, or arbitrate if parties end up disagreeing about the terms of the contract or how the partnership should unfold.

4. Give clear rules of engagement

Sometimes, a renegotiation happens because both parties misunderstood each other during their deliberation. Sometimes, it’s also due to the other party playing the ultimate hardball negotiator and not leaving the other side some time to gather their thoughts and think of a counter-offer.

Whatever the case may be, both parties should have clear rules of engagement during the renegotiation. Both parties should keep in mind that there is no need for any bad blood between the two parties during the negotiation. As one movie line goes, it’s only business, not personal.

5. Make sure that the renegotiation is worth everyone’s while

There is a reason why both parties may agree to a renegotiation. It’s because it could be a chance for both parties to present their offers, and you and the other party are hoping for a better deal. Renegotiation always takes two to talk, and it is always possible to get a win-win situation for both parties. The key here is to make sure that offers are more accommodating rather than just advantageous for one side only.

6. Bring the right people to the table

There are times when earlier negotiations break down because one or two people from either side are not the best people to talk to during negotiations. There will always be people who are either too emotional or too greedy to make concessions with the other.

Being the case, do you want to bring the same people during a renegotiation? You should already know the answer to that. So once a renegotiation is scheduled, it’ll be in your interest (and in the interest of the other party as well) to bring people who can bring something to the table.

7. Aim for success and plan for failure

While we did mention that a good goal for renegotiation is to make sure both parties get a win-win situation, it doesn’t automatically win that it should be your default stance. You should also aim for success. Try to get the best deal possible given the situation. But if you should fail, then you must have a backup plan. Always have an open mind for every situation before and after renegotiations.

5 Real-Life Examples of Contract Renegotiation

Contract renegotiation is a common business practice used to adapt existing agreements to changing market, operational, or strategic conditions. Real-life examples help illustrate how organizations successfully adjust contract terms to achieve improved outcomes while preserving long-term relationships.

1. Lease Renegotiation — Affordable Care Retail Location

Affordable Care, a national provider of denture and implant services, faced financial strain when rent and operating expenses at one mall location became significantly higher than current market rates. The company worked with a real estate advisory firm to benchmark local competitive lease rates and assess the financial viability of the existing lease. Faced with the risk of closure, the team decided to bring the landlord back to the negotiation table.

Through collaborative renegotiation, the landlord agreed to reduce rent by approximately 32% and adjust the cost structure to better reflect current market conditions. This new agreement lowered the monthly cost per square foot, allowing Affordable Care to save an estimated $309,000 over five years, stabilize operations, and continue serving patients without disruption.

2. Kraft Foods vs. Starbucks Distribution Agreement Dispute

Starbucks and Kraft Foods entered a long-term distribution deal in 1998, where Kraft handled Starbucks-branded packaged coffee in grocery stores. As single-serve coffee pods grew in popularity, Starbucks wanted more flexibility to pursue that market, something the existing agreement limited due to proprietary technology constraints. Disagreements escalated as Starbucks sought to terminate the agreement and regain control of the distribution strategy, leading to a protracted negotiation process.

The dispute eventually moved into arbitration after Starbucks attempted to exit the deal, and Kraft pursued compensation for the value it had built in the business. In 2013, an arbitrator ruled in favor of Kraft, awarding approximately $2.75 billion in damages to the company. This conflict highlights the importance of future-proofing contracts and specifying renegotiation or exit terms to adapt to changing market conditions.

3. SaaS Renewal Renegotiation — Cost and Service Adjustments

A business using a cloud-based software (SaaS) faced an unexpected 30–50% proposed price increase at contract renewal, driven by vendor pricing strategies rather than additional value delivered to the customer. The procurement team analyzed usage patterns, identified underutilized services, and assessed internal capabilities that could replace portions of the vendor’s offering.

By presenting this evidence and focusing on efficiency rather than acceptance of the price hike, the company successfully renegotiated the contract to reduce unnecessary services and secure a lower recurring cost aligned with actual business needs. This shows how service optimization can be a strong lever during renegotiation.

4. Supply Contract Flexibility — Academic Example of Renegotiation Benefits

In supply chain academic research, companies often renegotiate supply contracts when market demand information becomes available after the contract is signed. For example, buyers facing weaker demand may need to purchase less than originally agreed, while buyers with favorable conditions may want to increase orders. Allowing renegotiation creates flexibility for both sides.

Anticipating renegotiation in contract design can significantly influence investment decisions, capacity planning, and overall profitability. Firms that embed mechanisms for renegotiation tend to achieve higher overall system profits because they can adapt supply volumes and prices to real market conditions rather than rigid forecasts.

5. Furniture Import Case — Shipment Mistake and Future Order Terms

An Australian furniture importer received a significantly oversized shipment from a supplier in China, leading to unexpected storage and handling costs. Rather than reject the shipment or resort to costly disputes, the importer contacted the supplier immediately to discuss the situation openly.

Through collaborative renegotiation, the importer secured compensation on future orders as a practical solution that preserved the long-term relationship and addressed the financial impact of the error. This example shows how renegotiation can transform an operational mistake into a future commercial concession.

When and Why Should you Renegotiate a Deal?

The dream scenario for every negotiator out there would be to get that sweet deal every time negotiations conclude. Whether you end up hard balling the other party or you make some negotiation concessions at one point, most of us all want the same thing; we want to get the deal that we want. 

However, life is not perfect; there will always come a time where you either need to back out from negotiations. Yes, you can renegotiate even if you walked out from a deal. We’ve already discussed that in an article here. 

Apart from the ‘why,’ we also need to talk about the ‘when’. When exactly do you strike for a renegotiation? 

Some of the scenarios where you can possibly ask for renegotiation are the following:

• When the other party has to cut off negotiations due to an unexpected event
• When both parties have exhausted all possible outcomes but do not want to end the negotiations because it may affect the relationship between both parties.
• When you feel that you can renegotiate a better deal with the other side.

There are also times when you need to spend some time to cool off. You will have to talk with the other party again, but this time, it will be different. You will be more prepared than before since past negotiations have revealed the other party’s intentions, strengths, and weaknesses.

However, so is the other party. So how do you truly approach a renegotiation and still win?

When Not to Renegotiate a Deal?