Don’t Forget the Laws of Human Nature

It strikes me that both lawyers and clients get so wrapped up in the business, legal and technical issues of a deal or situation that they often forget what I will refer to as “the laws of human nature.” True, these are not the laws I studied in law school, but I can tell you this – failure to understand these laws can often result in the failure of a deal. And what’s so sad about that is it’s completely avoidable in most circumstances.

So what do I mean when I talk about the laws of human nature? Obviously, I’m not talking about statutes or regulations. Simply put, I mean those aspects of the deal-making process that have more to do with human behavior, values, interaction and communication than with the specific parameters of the deal. Failure to understand these “laws” and acknowledge the fact that they fundamentally affect business transactions is just as often the cause of a failed deal as the laws on the books.

So, here are 10 lessons I’ve learned as to these laws:

1. It’s important to know what you AND the other party to the negotiations need, what you want, and what you’ll accept – and how these may change during the course of negotiations.
2. Nobody needs to “win” a negotiation – the best deals are win-win.
3. It’s ok (and in fact, it’s often productive) for the other side to like you.
4. It is imperative that the other side respect and trust you.
5. Emotion is rarely productive in a business discussion.
6. Professionalism enhances the likelihood of success.
7. There’s no value in frustrating or embarrassing the other party or wasting their time.
8. It’s important to know when you’ve pushed far enough.
9. Miscommunication leads to failure just as often as disagreement.
10. The deal is never final until it’s signed.

Consider the laws of human nature the next time you negotiate a business deal, and I’m confident you will enhance your prospects for success.

Sign Your Deal NOW!

I’ve seen it happen a thousand times – in fact, I’ve seen it happen twice this week.  Parties to a negotiation reach a “deal” but don’t have documents ready for signature.  So one party takes responsibility for drafting them, but by the time drafts are circulated, one or both parties change their position, back up, get cold feet, reconsider, or whatever else you want to call it – and the deal falls apart.  While that’s not always a bad thing, it often is, and it is also frequently avoidable.

Now, I’m not suggesting that parties hastily enter into deals or sign incomplete or inaccurate agreements.  But, I am saying that well thought out and carefully considered deals are often at their best – that is, closest to the actual “meeting of the minds” that we lawyers talk about – right after negotiations are complete.  This is why it’s important to move quickly from negotiations to definitive documents, to execution. 

Remember, the name of this blog is BizB4Law – when negotiations are complete (and assuming they were well thought out and comprehensive), the “biz” portion is in most cases complete – all that is left is the “law” portion.  While the documents should spell out the business terms agreed to and fill in gaps, it is generally not productive to reconsider or reopen the negotiations – and doing so often means the parties lose the “benefit of the bargain” they had just made.

So all of this means we should follow a few simple guidelines, as follows:

• Make sure your negotiations are as comprehensive as possible.  Discuss and agree on all material terms.
• Include your lawyers as early as possible in the discussions.  If that’s not possible or productive, include them just prior to preparing definitive documents – so that any specific open issues or questions they may have get answered before the parties conclude negotiations.
• Draft definitive documents as soon as possible after negotiations are complete, and stick as closely as possible to the terms agreed to in negotiations.  The document stage is not the time to surprise your prospective business partner.
• If you feel you have to change something from what was agreed to or address something important that wasn’t previously discussed, let the other party know before you send them proposed documents.
• And finally, move from first draft to final draft to execution as soon as possible after negotiations are complete.

These are pretty simple guidelines, but they will help you to avoid disputes and get your deals done.

How to Respond to the “Deal Breaker” Issue – Part 2 of 2

So, now that you’re confronted with a deal breaker issue, how can or should you respond?  There are really only a few choices and strategies – here they are, along with some additional tips:

  • Before doing anything, keep in mind the basic premise of this blog – the business issues are more important than the legal ones.  From a business perspective, when you first considered the deal you wanted to do it – again remember, you make profits from doing (good) deals, not from walking away from them.  You walk away either because the risk became too great, or the upside became too small.  It’s the difference between prosperity and survival.  You want the former, but you need the latter.
  • Next, carefully consider – is this really a deal breaker, or is it just something that makes the deal more complicated, less appealing, etc.  If the latter, it’s really not much different than any other issue to be negotiated; if the former, it will decide whether the deal happens at all.
  • Assuming it really is a deal breaker, is it a business or a legal issue or a combination?  This may dictate who responds (client or attorney) and how.  Whenever possible, on issues of this importance I’d rather have the business person respond rather than the lawyer.
  • Consider whether compromise, restructuring, or further negotiation might lead to an acceptable resolution for both parties.  In doing so, analyze the issue from both your point of view and the other party’s point of view.  This may be a deal breaker for you but may not even be particularly important to the other party – you’ll want to know this before responding.
  • Next, make the other party aware of the issue, and (again, assuming it’s truly a deal breaker) be clear that, if the issue cannot be resolved to your satisfaction, you will (have no choice but to) walk away from the deal.
  • If at all possible, don’t just identify the issue, but rather, suggest a (or several alternative) solution(s) that you believe will work for both parties.
  • In discussions with the other party, be careful not to ascribe bad motives or intentions.  This can end discussions before the alternatives are even considered.

In the end, you may have a decision to make – is the deal worth the risk, or is it one you have to pass on?   But of course, you only want to make this decision after considering all possible alternatives.