#17 A Principled Approach

When I teach contract drafting and negotiation I have students focus on three main approaches to a deal: (1) identifying the incentives for each of the parties involved; (2) what will bridge the gap, and (3) taking a principled position when negotiating. Requiring a principled position resulted in situations where I would go back to my client and tell them “Hey, so I saw you wanted to ask for X, but I think we should go with asking for Y here because that’s what’s fair. Unless there’s some reason why we shouldn’t then we should go with that since our gain is nominal and their perceived loss is greater. We can ask for something else that benefits us elsewhere.” I wasn’t always right, but when I was the client appreciated it because they knew while I was trying to negotiate in their favor, I at least had the business sense for asking what is fair to get the deal done. Too often you hear about lawyers sitting on their chariots and demanding unfair positions just because it benefited their client.

Why is taking a principled approach important?

Because you can support your position based on facts and not just on some arbitrary concept. I always tell people to take a step back and think “But is that fair?” I’ll even do it live in negotiations. The other side will ask for something and I will (usually in the audience of both parties) ask if that sounds fair to them. The benefit of this is two fold: (1) it signals to all parties that you are being fair (and who can argue with that?); and (2) it shifts the burden of proof to the other side. Usually the fallback from the other side is “well it’s market” (meaning that’s what everyone else in the industry does). My response to that is usually “Who’s market? And also, does it matter if it is market if it leads to an unfair result?”

The problem with justifying a position based on “market” terms is that it’s difficult to prove up if that’s actually true. For 99 times out of 100 scenarios it’s usually just anecdotal evidence and even worse, it’s intellectually lazy. The other person responded with that because they couldn’t bother thinking through whether they could support their position, so they relied on anecdotes instead. On one occasion I had to call someone out for saying “In all the deals I’ve done in this industry vertical, this is the market standard.” That person didn’t know that I’d double checked, and there were only ever 5 deals in that particular industry, and I’d done 3 of them. So at the very least he was trying to base his position on a sample of size of 2 or 1, and the worst case scenario is he was lying.

As an attorney you’re supposed to be a zealous advocate for your client. That does not mean, however, trying to get one by on the other side. That’s just asking for litigation. That’s the confusion around negotiation that many folks don’t seem to understand. There needs to be a meeting of the minds in order for a contract to be effective, and the best way to ensure a good partnership for the parties going forward is to ensure that both sides understand expectations, and at the very least your positions are principled so that the judge will side with you if it ever goes to court. (Obviously the foregoing doesn’t apply to a number of scenarios such as litigation settlement agreements, which are zero sum games. More on that another time.)



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