Groundhog Day – Renegotiating Terms

Notes on Negotiations
By Marty Latz, Latz Negotiation Institute

“We had a deal when we left the room. But after we flew home and sent them the agreement, they admittedly reneged and started renegotiating everything. What should we have done differently?”

Given that legal action on oral deals is notoriously difficult, likely not worth the cost, and will almost certainly prevent possible future deals with that party, this can be a serious problem.

How can you prevent this?

1: Identify “renegotiators” in advance
It’s highly unlikely your counterpart is using this tactic for the first time with you. In fact, he or she has almost certainly done this before multiple times. This means others have experienced this and will surely remember it.

Find them. Do your strategic due diligence by researching your counterparts’ reputations. Then put this information into a database (what I call a Counterpart Intelligence Bank) so you and your colleagues can access it in the future.

Of course, this is easy to recommend but difficult to accomplish. It’s much easier now than ever before, though, with search engines, social media and sites that allow you to mine your networks for this hugely valuable data.

2: Ensure someone in the room has actual authority
Sometimes renegotiators tell you when reneging that they didn’t have the authority to agree in the first place even though they seemingly had it.

You can prevent this problem or smoke it out early by explicitly insisting that your counterpart has someone in the room with authority to make concessions and do the deal. And if they don’t have the authority, then you should only send someone to the negotiation with equivalent limited authority.

Then any deal will be tentative from both sides, and you will substantially reduce the effectiveness of a renegotiation move.

3: Insist on immediately enforceable agreements
Years ago I represented a client in some contentious litigation involving a company and its former employee, who was accused of stealing trade secrets and working for a competitor in violation of his non-compete agreement. Needless to say, the relationship and trust between the parties was irreparably gone.

After a hard fought day long mediation in which we negotiated a resolution to all the issues, everyone was concerned someone would go home, sleep on it, feel like they could have gotten a better deal, and try to renegotiate it.

The mediator’s solution? He asked each lawyer and client to record a statement at the time describing the agreement. He then had this transcribed, while we waited, and had everyone sign the transcription. It was a final, binding legal agreement.

I am not suggesting you do this for every deal. But if you find your counterpart is a “renegotiator” by reputation, do this before you leave the room.

At the least, write down the major agreed upon terms and get everyone to initial them. Written commitments decrease the likelihood parties will renege later.

4: Ensure that renegotiation has a cost
Renegotiators count on their ability to renegotiate with no real negative consequences. Change this. Make sure their possible use of this tactic has negative consequences to their ability to achieve their goals.

How? The mediator above insisted on a provision that if there was any disagreement between the parties as to the terms, he would be the final decision-maker on that issue. And the losing party would pay the winner’s legal costs.

In short, it became super costly to even try to renegotiate – and you would lose anyway.

Another option is to let your counterparts know, before you leave the room, that you consider the agreement morally and legally binding. And tell them that any possible future effort to renegotiate it would be considered a fundamental breach of trust and would result in no deal.

Of course, only state this if it is true and you have strong leverage.

Latz’s Lesson: Renegotiators renege on agreements because it has worked for them in the past. Find this out in advance and protect yourself so it doesn’t work again – this time against you.

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Marty Latz is the founder of Latz Negotiation Institute, a national negotiation training and consulting company, and ExpertNegotiator, a Web-based software company that helps managers and negotiators more effectively negotiate and implement best practices based on the experts’ proven research.  He is also the author of Gain the Edge! Negotiating to Get What You Want (St. Martin’s Press 2004). He can be reached at 480-951-3222 or Latz@ExpertNegotiator.com

ICLEF • Indiana Continuing Legal Education Forum, Indianapolis, IN

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