The aim of this paper is to research a posh negotiation between Pat Olafson (Viking Investments) and Sandy Wooden (WoodCrafters), from the attitude of Sandy. Extra particularly, this paper is written from the attitude of Sandy’s authorized counsel. It’s supposed to offer Sandy with Help and steering for his negotiations with Pat.
This negotiation holds crucial significance for Sandy’s future, as a enterprise proprietor, a home-owner, and an employer. As Pat Olafson’s enterprise appears to be thriving, Sandy finds himself at a crucial deadlock in his skilled profession. His enterprise relationship with Pat has change into considered one of monetary dependence.
There are three main monetary points, which Sandy should resolve in a well timed style in an effort to keep away from having to file for chapter. These three points embrace a renegotiation of lease phrases, settlement on who’s liable for a lumber change order, and settlement on phrases for the fee of $200,000 price of mortgage precept.
Sandy’s legal professional will likely be addressing the next main subjects:
- Negotiation Preparation
- Curiosity-Based mostly Bargaining
- Assessment of Opposing Social gathering
- Negotiating Targets/Technique
Curiosity-Based mostly Bargaining Given the complicated and probably contentious nature of this negotiation, it appears to lend itself effectively to Curiosity-Based mostly Bargaining. Given the cruel details that Sandy is confronted with relating to his firm’s monetary place, it’s attainable that Sandy and Pat’s reservation factors lack constructive overlap or that this negotiation will contain no extra small quantity of bargaining surplus.
Moreover, though Sandy is dealing with some very contentious points, there are apparent advantages to sustaining a constructive long-term relationship with Pat and Viking Investments. Due to this fact, making use of a standard negotiating model or a distributive negotiating model to this negotiation would probably be an ineffective strategy for Sandy to take. In different phrases, with such a small quantity of pie on the desk, making an attempt to slice the pie isn’t more likely to go in Sandy’s favor. A greater strategy could be to concentrate on the underlying pursuits of each events and try and increase the pie.
If understood and practiced by each events, Curiosity-Based mostly Bargaining appears to be an applicable means to this finish. In Curiosity-Based mostly Bargaining, the next ideas are used to evaluate and analyze every negotiation:
- Pursuits
- Choices
- Requirements
- Folks
- Alternate options
- Closure Pursuits
Sandy’s primary underlying curiosity going into this negotiation is the monetary well being of each his firm and his household. He’s on the verge of chapter, which might trigger him to have to shut his firm’s doorways and sells his home.
He has 25 workers, which he wish to maintain employed. He has a house/funding property that he wish to maintain onto till the housing market rebounds. Choices- Sandy’s potential choices are very restricted at this level. Pat successfully holds the important thing to Sandy’s monetary future. If Pat refuses to barter cheap phrases to any of the main points on this negotiation, Sandy could have no alternative however to file for chapter. Folks- Pat Olafson is an area investor and actual property developer. Compared to Sandy, Pat has been very financially profitable.
Their relationship appears to be multi-layered. Pat performs the function of financial institution, landlord, and consumer to Sandy and WoodCrafters. Whereas not unlawful, and even immoral, permitting one particular person, or entity, to have a lot management over what you are promoting life isn’t the wisest choice. As well as, the mixture of Pat’s success and Sandy’s hardships appears to have prompted Sandy to be jealous of Pat’s success. It could be in Sandy’s finest curiosity to acknowledge that his notion of Pat bears no significance on this negotiation.
Sandy could be finest served by leaving his perceptions behind and conserving his feelings in verify. Alternate options- Sandy’s alternate options are have change into extraordinarily restricted. Due to the $200,000 mortgage he took from Pat a number of years, his present credit score standing with different potential lenders, and the quick time frame wherein he should pay for the lumber ($700,000), Sandy’s solely actual different to negotiating at this level could be to file for chapter. One extra issue to this different is Sandy’s home.
Fee for the lumber change order is due inside 15 days, and if fee to the lumber provider is even 1 day late, all of WoodCrafter’s belongings, plus Sandy’s private residence (and related fairness), will likely be seized. Successfully, Sandy’s different to negotiating some cheap settlement phrases relating to the primary three points at stake (mortgage, lease, and alter order) could be to file for chapter and begin over from scratch. His enterprise could be dissolved, workers laid off (probably by no means to return), his funding property could be misplaced, and his household could be with no house.
On this occasion, Sandy does not likely have an affordable BATNA (finest different to negotiating). If Sandy had been to stroll away from the negotiating desk with out having secured an settlement with Pat, he could be committing to start out his enterprise and private life over from scratch. Sadly, Pat holds nearly all of the facility on this negotiation. The contract language relating to the big change order is in Pat’s favor and Sandy legitimately owes Pat $200,000 price of mortgage precept, which Pat has the appropriate to demand at any time he sees match.
The one saving grace relating to Sandy’s BATNA (or lack thereof) is the truth that Sandy’s BATNA (chapter and lack of his house/fairness) would additionally negatively impression Pat as effectively. If Pat and Sandy can’t attain an settlement, Pat would additionally undergo together with Sandy. Pat wouldn’t obtain his mortgage precept, he would lose a tenant, and he would probably now not have the choice of hiring WoodCrafters for his future carpentry work. Closure It is a very precarious scenario for Sandy.
The stakes are extraordinarily excessive and almost everybody who Sandy cares about in his personal life will likely be affected by the result of this negotiation. It’s completely crucial that Sandy places himself within the applicable mindset for this negotiation. Sandy must clear his thoughts of the main points related to how the occasions main as much as this negotiation transpired. He should be capable of envision an amenable settlement settlement between Pat and himself previous to sitting all the way down to the negotiating desk. Pat might or might not wish to quibble over the main points relating to precisely what passed off to get each events up to now.
Sandy will must be ready to debate these particulars in a respectful method, but additionally redirect the dialog to an important problem, which is that if an settlement can’t be met, Sandy will likely be pressured to file for chapter. Sandy’s chapter would have numerous unfavorable penalties for each people and their respective firms. Pat is a businessman. He’ll probably perceive the results of Sandy’s potential chapter. Due to this, this is among the only a few conditions the place sharing your BATNA could be really helpful. Pat holds nearly all of the facility over Sandy.
The one incentive that Pat must comply with the phrases mandatory to permit Sandy the time he must pay his excellent payments is that the one different different is catastrophic for Pat as effectively. Due to this fact, in an effort to shut a cope with Pat, it’s endorsed that Sandy lay his playing cards on the desk. Assessment of the Opposing Social gathering (Pat Olafson) As beforehand said, Pat Olafson is a businessman. He appears to have a various portfolio of funding and growth initiatives. Essentially the most crucial idea that Sandy should remember is that Pat Olafson is motivated by revenue.
Pat’s underlying curiosity, and his primary choice making motivation, is pushed by his want to attain monetary success. Due to this reality, it is extremely probably that Pat will be capable of acknowledge the pitfalls of not reaching cheap phrases for the three primary points at stake. Though Pat is probably going not conscious of it at the moment, he too doesn’t have a good BATNA. As a result of not having the ability to attain settlement with Sandy would imply that Sandy would file chapter and Pat would probably not obtain the $200,000 price of mortgage precept that he’s owed, Pat is unlikely to have a greater different to negotiating some phrases of fee for the excellent stability.
It will be significant that Sandy doesn’t misconstrue the truth that Pat does unlikely have a possible BATNA for energy. Pat will likely be studying for the primary time that his $200,000 receivable is in jeopardy. Like most extremely profitable businessmen, Pat has the potential to permit his ego to information his choices. Whereas Sandy’s chapter would harm Pat’s backside line, the results wouldn’t be almost as important to Pat as they’re to Sandy.
Due to this fact, it will be significant that Sandy retains in thoughts who he’s coping with. If disrespected, Pat could also be able to permitting his narcicism to kick-in and opting to permit Sandy to expertise failure out of an odd/twisted sense of ethical precept. It’s strongly suggested that Sandy treads flippantly when discussing the problem of chapter, lack of his house/fairness, and so on. Relatively than threatening Pat with the potential for not having the ability to pay again the mortgage precept, it’s suggested that Sandy expresses his issues for each events in a sympathetic method.
Whereas Pat doesn’t essentially want Sandy to succeed, there are only a few high quality carpenters left within the space, because of the poor economic system. Pat could possibly discover one other tenant for his constructing. He might even be capable of discover one other contractor to offer his carpentry companies, however he won’t be able to recuperate his $200,000 in mortgage precept if he cuts ties with Sandy. As well as, given their historical past, Pat might look after Sandy as pal. He might consider Sandy as somebody whom he’d prefer to proceed to do enterprise with if attainable. Negotiation Preparation/Method
As a way to put together for the negotiation with Pat Olafson, Sandy Wooden should take the next steps:
- Put together a transparent and concise spreadsheet explaining his monetary scenario, and
- Undertake a respectful, non-jealous, and open-minded perspective.
There are a number of points to be mentioned between Pat and Sandy. Every scenario has its personal set of circumstances and a big quantity of historical past. Sandy can expedite the negotiations by bringing a well-crafted spreadsheet to the dialog, which outlines the particular numbers concerned with every of the three main points at stake.
It will be significant that this spreadsheet is drafted in a fashion that reveals each Pat’s numbers as wells Sandy’s numbers. Pat is not going to be receptive to any reveals that appear to be biased in direction of Sandy’s place. Under is an instance of a spreadsheet that, if ready previous to negotiations, and shared with Pat, might Help clarify Sandy’s place: It’s clear from Sandy Wooden’s characterization of his relationship with Pat Olafson that there’s a important quantity of historical past between the 2 events.
They’ve been doing enterprise with one another for numerous years, via good instances and unhealthy instances. Each events appear to have a mutual respect for each other, nevertheless, there additionally appears to be some resentment between the events because of their enterprise dealings. Sure disagreements exist between the events as a consequence of unlucky misunderstandings. It’s completely crucial for Sandy Wooden to strategy this negotiation as if these private disagreements didn’t exist. Who is true or flawed, ethical or immoral, is completely irrelevant at this level.
The primary components for Sandy to bear in mind are
- The contract says that change orders have to be accredited in writing, and
- Each events want to achieve an settlement relating to the lease, the mortgage, and alter order in an effort to keep away from severe monetary loss.
Sandy might help his trigger by treating Pat with respect and expressing appreciation for his generosity and continued enterprise. Specializing in a want to take care of a high quality enterprise relationship sooner or later is the most effective plan of action. Negotiation Technique
