NEGOTIATING A SETTLEMENT
In the May 2007 issue of Negotiation (Vol. 10, No. 5), Michael Wheeler discusses What About The Fine Print? His thesis is that all too often, the resolution of a dispute hinges not on the amount of money that changes hands, but on the language used in the agreement. As Mr. Wheeler notes, “. . . choosing the wording is a negotiation in itself, one with its own unique pitfalls.” (Id.) He offers five guidelines: (1) define the deal before you set the price; (2) know the words’ worth; (3) balance precision and flexibility; (4) avoid doom and gloom; and (5) negotiate the relationship.
With respect to the first - define the deal before you set the price – Mr. Wheeler urges each party in a negotiation to understand what is the precise deal with all of its implied value. Understand exactly what is being “bought”, “sold”, or being “offered for purchase” or being “offered for sale”. Once this is understood, you will not short-change yourself in the negotiations.
In terms of knowing your words’ worth, the author reminds the reader to “remember that words are means to your goals, not ends. . . . Instead of battling over language that’s difficult or costly to enforce, look for other ways to achieve the same goal.” (Id.) For example, in California, non-competition clauses are contrary to public policy and thus, almost impossible to enforce. Rather than insisting on such a clause that in the end will probably be unenforceable, Mr. Wheeler suggests, put in other types of clauses such as offering an incentive bonus only after so many years of service or a clause requiring payment from the employer to the employee upon early voluntary departure by the employee. In sum, “ensure that compromises on one front are compensated by gains on another.”
The third guideline is to balance precision and flexibility. That is, sometimes less is more. Simpler, broader language may be better than detailed provisions that result in the parties getting mired in archaic legalese with no way out. Oftentimes, the simpler, the better or, in the words of an old adage, “keep it simple.”
In close connection with the above is the next guideline – avoid doom and gloom. Do not attempt to cover every contingency or every scenario in an agreement. Rather, “keep sight of the big picture.” (Id.) Do not quibble over moot details. As an example, Mr. Wheeler recites a negotiation where a bank wanted a $50 million guarantee. The developers would only agree to sign a guarantee for $20 million. Then on partner asked the other “Are we worth $20 million?” “Nowhere near it, came the reply.” “Fine said the other partner.” “If we are going bankrupt anyway, we might as well agree to $50 million.” Do not get stuck on the details once the broad points have been resolved.
Last but probably the most important is to negotiate the relationship. “Carefully choosen contract language fosters better deals and stronger relationships.” (Id.) Just as the substance of the contract is important, so is the process used to negotiate it. “When a long-term relationship is in the offing, the negotiation itself is a trial marriage.” (Id.) As Mr. Wheeler points out:
Ideally, the process of negotiating terms and conditions should be one of mutual learning in which parties anticipate problems before resources are wasted or tempers flare. . . . Candor, patience, and open-mindedness in the course of negotiation help foster such healthy working relationships. (Id.).
In sum, negotiation and reaching an agreement is about a lot more than just the money. In fact, the money plays only a very small part of it.
. . . Just something to think about.
