HOW DID YOU REACH A SETTLEMENT AGREEMENT?Negotiation

Mingchao FanLecturer of Law, SHUPLFulbright Visiting Scholar, Duke University

Why Negotiate for Settlement?What is a settlement agreement?An agreement reflecting the parties consent on how a dispute will be settlement, i.e. the share of the responsibilities, etc.

Why is negotiation important?A dispute usually will not go to court unless the negotiation fails; negotiation succeeds, settlement reached. A settlement agreement is made based on the result of the negotiation; the main clauses in the settlement agreement are agreed during the negotiation.

Negotiation Exercise: Little v. JenksFact:

Little bought a second-handed car from Jenks at the price of $900;

The car cannot pass inspection unless the exhaust system is replaced, which will cost $250;

Little wanted the money back;

Jenks agreed first but changed his mind soon;

Little sued Jenks.

Negotiation Exercise: Little v. Jenks (continued)Emotional Facts:

Little: -- desperately in need of a car-- heard that Jenks said to his father: all my headaches are gone-- very surprised and angry

Negotiation Exercise: Little v. Jenks (continued)Emotional Facts:

Jenks:-- used to take the friendship seriously-- sold the car unwillingly when Little repeatedly express how much the car was needed-- it is Littles problem not Jenks

How Did You Start?Were you polite & professionalTo make self-introduction To shake handsTo exchange business cardsNot to yell at the opposing partyNot to be impatientWho made opening offerTo set a reasonable goalNot to begin with an unrealistic offerDid you pay attention to the face expressions and body languages?Mostly importantly: were Little, Jenks or the representatives of them?

Keep In Mind!!Rule 1:A successful negotiation does not necessarily lead to a settlement.Rule 2:An unsuccessful negotiation usually does not lead to a settlement.Conclusion:A successful negotiation increases the chance to reach a settlement.

Video: A Failed Negotiation

Alpine Laseroptics Technologies (ALT) v. Nederlands Transcontinental N.V. (NedTrans)

ATL v. NedTransFacts:

1. ATL, located in Zurich, Switzerland, the seller

2. NedTrans, located in Hague, Netherlands, the buyer

ATL v. NedTrans (continued)Facts: (continued)

3. ATL and NedTrans entered into a sales contract (the Contract) that ATL would sell its products, some crucial parts of which were manufactured by a Korean company, to NedTrans.

4. Due to economic crisis, the Korean company was unable to provide ATL with the crucial parts any longer which causes the latter to be unable to manufacture its products for NedTrans.

5. NedTrans, however, has already made a down payment of 40% of the Contract price.

ATL v. NedTrans (continued)Ask the following questions when watching the video:

1. Did they reach an agreement?2. What wrong did they do during the negotiation?3. Why did they fail in the negotiation?

Alpine Laseroptics Technologies (ALT)

v.

Nederlands Transcontinental N.V. (NedTrans)

Question

1. Did they reach an agreement?

2. What wrong did they do during the negotiation?

3. Why did they fail in the negotiation?

4. Did they take a win-win approach or a win-lose approach?

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Sneer

USUALLY MEANS

Disdain

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Flinch

USUALLY MEANS

Shock

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Frown

USUALLY MEANS

Sadness/Pessimism

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Smile

USUALLY MEANS

Pleasure/Optimism

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Relaxed Features

USUALLY MEANS

Relief/Optimism

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Gnashing of Teeth

USUALLY MEANS

Frustration/Anxiety

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Scratching Head/Brushing Cheek

USUALLY MEANS

Puzzlement

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Warm Eye Contact

USUALLY MEANS

Sincerity/Openness

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Raised Eyebrow

USUALLY MEANS

Skepticism/Surprise

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Head Nodding

USUALLY MEANS

Active Listening and Comprehension

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Wringing/Twisting of Hands

USUALLY MEANS

Frustration/Anxiety

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Gripping Arm Rests/Drumming on Table

USUALLY MEANS

Frustration/Impatience

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Hands Neatly Folded in Lap

USUALLY MEANS

Submissiveness

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Leaning Forward in Chair

USUALLY MEANS

Interest/Eagerness

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Hands Touching Face/Playing With Glasses/ Meditation/Disguising Looking at Notes

USUALLY MEANS

Contemplative Pause

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Hands Extended Toward Opponent With Defensive/Fending Palms Facing Out

USUALLY MEANS

Off Verbal Onslaught

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Open/Uplifted Hands

USUALLY MEANS

Sincerity/Honesty

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Turning Back/Looking Away After Making Offer

USUALLY MEANS

Disdain for Compromise

Negotiation StylesCOMPETITIVE: ADVERSARIAL: WIN-LOSEMove Psychologically Against OpponentsTry to Maximize Own ReturnSeek Extreme ResultsAdversarial and DisingenuousUnrealistic Opening PositionsFocus on Positions Rather Than Neutral StandardsFrequently Use ThreatsMinimize Information DisclosureClosed and UntrustingManipulate Opponents

COOPERATIVEPROBLEM-SOLVING: WIN-WINMove Psychologically Toward OpponentsTry to Maximize Joint ReturnSeek Reasonable ResultsCourteous and SincereRealistic Opening PositionsRely on Objective Standards to Guide DiscussionsRarely Use ThreatsMaximize Information DisclosureOpen and TrustingReason With Opponents

Conducting NegotiationsEntry

1. Start on a positive noteEstablish your good faith by a gesture of goodwill or a positive speechDefine the common conflict as a mutual problem and stress the interests you share with the other side

2. Establish control of the meeting without talking all the time, for instance, by hosting the meeting, suggesting an agenda, knowing the facts or being silent

3. Agree with the other side on ground-rules before proceeding (e.g., no talking to the press)

Conducting Negotiations(continued)Dealing with people

1. Listen

Listen carefullyDont interruptAllow them to let off steamDemonstrate that you understand what they are saying

Conducting Negotiations(continued)Dealing with people (continued)

2. Be courteous

Be personable: use their namesExpress appreciation for their time and effortRespectfully request for confidentialityPhrase negative comments in terms of your experience, not their attributes. For instance, dont say You are racists but rather Your actions have caused many of us to believe you discriminate against our people

Conducting Negotiations(continued)Dealing with people (continued)

3. Present a good show

Be calm and cool; dont respond in kind to the other sides display of anger or emotionBe confident in your case and in the processDont among yourselves. If you need to discuss points or positions, request a recess and do so in privateThink before you speak

Conducting Negotiations(continued)Exploration

1. Educate them and yourselfIdentify the important issues and underlying interestsPresent your arguments and reasons before disclosing your positionStart with high demands to show the depth of your concernAsk the other side questions such as: Why do you want this? Why cant you do this?Identify and build mutual understanding about external facts or influences that shape or constrain the negotiation process, or that direct or limit possible settlements.

Conducting Negotiations(continued)Exploration (continued)

2. Explore possible areas of resolutionLaunch some trial balloons (suggestions for approaching or resolving at least some of the points under discussion)Make sure you have a clear understanding of the other sides position, and that they have a clear understanding of yoursStudy their responses, verbal and non-verbal, to your suggestionsPeriodically sum up areas of agreement and disagreement

Conducting Negotiations(continued)Exploration (continued)

3. Get them into the habit of saying Yes, for instance, by getting their agreement on procedural issues (such as meeting times, ground rules for discussion, etc.)

4. Keep the meeting on track, and on the issues at hand.

Conducting Negotiations(continued)Bargaining

1. Bargain for mutual adjustment or adaptation rather than complete victory

2. Use reasonUse objective reasons and clear, comprehensible standardsPush your ideas persistentlyDont concede to quickly. Yield only to principle, not to pressure

Conducting Negotiations(continued)Bargaining (continued)

3. Never give up something for nothing. Even if you have to make a small offer or concession to get the ball rolling, do so with expectation that they will reciprocate in some way

4. Make it easier for them to decide what youd like them to decideMake your request smaller, i.e. ask for lessMake your request rational, routine, legitimate and personally rewarding for themMake your offer credible to themConsider having your offer expire after a fixed deadlineDont threaten; use warnings of events you cannot controlContinue to think about their problem, their interests, their choice

Conducting Negotiations(continued)Bargaining (continued)

5. Use carefully chosen tacticsStart with high demandsLet them make the first realistic offer except when there is going to be very little bargainingAsk for precise quantities like $227.50, not $200Center your requests around clear focal points, like sharing something 50-50Make increasingly smaller concession over time, as in going from 10 to 8 to 6.5 to 6Use a hard-hearted partner, to allow you to present a relatively more approachable, reasonable attitudeArrange for your authority to be limited, for instance, say Ill have this get approved by the boss

6. Listen. Watch out for offers and hints of offers: follow them up