Property and Casualty Insurance Practice Exam

The party that is empowered to draft a contract usually holds what type of advantage?

1. Greater understanding of contractual obligations

2. Power to enforce contract terms

3. Greater power in negotiating terms

4. More time to review the contract

The correct answer is: Greater power in negotiating terms

The party that is empowered to draft a contract typically possesses greater power in negotiating terms. This is largely due to the fact that the drafting party has the ability to establish the initial framework and language of the contract, which can significantly influence the direction of negotiations. By controlling the wording and structure, this party can create terms that favor their interests and anticipate potential areas of contention for the other party. Having this advantage allows the drafting party to effectively guide the discussion, highlight particular points that align with their goals, and potentially reduce the scope for negotiation on less favorable terms. While other factors, such as an understanding of contractual obligations and the ability to enforce them, are important in the context of contracts, the ability to set the tone and terms of the agreement from the outset provides a strategic edge in negotiations. This advantage is particularly impactful when there is a disparity in bargaining power or when one party is less experienced in contract matters.