Negotiating a Business Contract? Consider the Other Party’s Interests

People in business are constantly engaged in negotiating: with existing and prospective customers; with suppliers and other vendors; and, with others within their own organizations. Those who are successful in business are quite often those who have developed the skill set necessary to become effective negotiators. Good negotiators recognize that a successful negotiation is about more than just making a deal – it is about making a good deal. Good deals are more apt to result when the parties are able to agree to a contractual arrangement that satisfies one or more of the interests of each of the parties.

Interests are the underlying needs and concerns which the business negotiator seeks to satisfy by means of a contractual relationship with another party. Interests are the underlying reasons why a business engages in a negotiation at all. Successful business negotiators approach a negotiation as a problem solving exercise in which the basic problem is devising a solution that satisfies one or more of the underlying interests of each of the parties. By contrast, less effective negotiators tend to approach business negotiations by focusing on the positions they intend to present for the other side’s consideration. The difference between positional and interest based bargaining is illustrated by the following example:

“Consider the story of two men quarreling in a library. One wants the window open and the other wants it shut. They bicker back and forth about how much to leave it open: a crack, halfway, three quarters of the way. No solution satisfies them both.

Enter the librarian. She asks one why he wants the window open: ‘To get some fresh air.’ She asks the other why he wants it closed: ‘To avoid the draft.’ After thinking a minute, she opens wide a window in the next room, bringing in fresh air without a draft.” Roger Fisher and William Ury, Getting to Yes: Negotiating Agreement Without Giving In (1991), p. 40.

Each of the two men focused on their own positions, and entirely missed a solution that effectively reconciled their underlying interests. As the above example suggests, negotiating over positions tends to lock the negotiator into defending or advancing his/her position to the point that his/her own ego becomes identified with the position. As more attention is devoted to the position less attention is given to the parties’ underlying interests. Agreement becomes less likely and any agreement which results may be merely “splitting the difference” between the parties’ final positions instead of exploring a solution which might have achieved more for each side. That makes for an inefficient process in that both sides tend to begin with extreme positions and give ground slowly and reluctantly increasing the time and costs of reaching an agreement as well as the risk that no agreement is reached at all.

The ability to identify the other party’s interests in the course of the negotiation process can be critical to reaching a mutually beneficial contract relationship. The reality is that if the party with whom you are negotiating cannot satisfy its own interests in a deal with you, then it will either do a deal with someone else or go without. Knowing the other party’s interests will help you to determine what you have or what you can offer that is of value to that other party. That will enable you to craft a proposal that both meets the interests of the other side and makes good business sense for your side as well.

© 11/17/2015 Hunt & Associates, P.C. All rights reserved.

Charles A. Ford is an Associate Attorney with the law firm Hunt & Associates, PC in Portland, Oregon. He is licensed in Oregon and Washington and maintains a general practice including estate planning, business law, real estate law, family law, and personal injury. For additional information, please check out the company’s website: http://www.huntpc.com

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