March 5, 2022

A variety of conditions can affect the success or failure of negotiations. The following conditions make success in negotiations more likely. Identifiable parties who are willing to participate. The people or groups who have a stake in the outcome must be identifiable and willing to sit down at the bargaining table if productive negotiations are to occur. If a critical party is either absent or is not willing to commit to good faith bargaining, the potential for agreement will decline. Interdependence. For productive negotiations to occur, the participants must be dependent upon each other to have their needs met or interests satisfied. The participants need either each other’s assistance or restraint from negative action for their interests to be satisfied. If one party can get his/her needs met without the cooperation of the other, there will be little impetus to negotiate. Readiness to negotiate. People must be ready to negotiate for dialogue to begin. When participants are not psychologically prepared to talk with the other parties, when adequate information is not available, or when a negotiation strategy has not been prepared, people may be reluctant to begin the process. Means of influence or leverage. For people to reach an agreement over issues about which they disagree, they must have some means to influence the attitudes and/or behavior of other negotiators. Often influence is seen as the power to threaten or inflict pain or undesirable costs, but this is only one way to encourage another to change. Asking thought-provoking questions, providing needed information, seeking the advice of experts, appealing to influential associates of a party, exercising legitimate authority or providing rewards are all means of exerting influence in negotiations. Agreement on some issues and interests. People must be able to agree upon some common issues and interests for progress to be made in negotiations. Generally, participants will have some issues and interests in common and others that are of concern to only one party. The number and importance of the common issues and interests influence whether negotiations occur and whether they terminate in agreement. Parties must have enough issues and interests in common to commit themselves to a joint decision-making process. Will to settle. For negotiations to succeed, participants have to want to settle. If continuing a conflict is more important than settlement, then negotiations are doomed to failure. Often parties want to keep conflicts going to preserve a relationship (a negative one may be better than no relationship at all), to mobilize public opinion or support in their favor, or because the conflict relationship gives meaning to their life. These factors promote continued division and work against settlement. The negative consequences of not settling must be more significant and greater than those of settling for an agreement to be reached. Unpredictability of outcome. People negotiate because they need something from another person. They also negotiate because the outcome of not negotiating is unpredictable. For example: If, by going to court, a person has a 50/50 chance of winning, s/he may decide to negotiate rather than take the risk of losing as a result of a judicial decision. Negotiation is more predictable than court because if negotiation is successful, the party will at least win something. Chances for a decisive and one-sided victory need to be unpredictable for parties to enter into negotiations. A sense of urgency and deadline. Negotiations generally occur when there is pressure or it is urgent to reach a decision. Urgency may be imposed by either external or internal time constraints or by potential negative or positive consequences to a negotiation outcome. External constraints include: court dates, imminent executive or administrative decisions, or predictable changes in the environment. Internal constraints may be artificial deadlines selected by a negotiator to enhance the motivation of another to settle. For negotiations to be successful, the participants must jointly feel a sense of urgency and be aware that they are vulnerable to adverse action or loss of benefits if a timely decision is not reached. If procrastination is advantageous to one side, negotiations are less likely to occur, and, if they do, there is less impetus to settle. No major psychological barriers to settlement. Strong expressed or unexpressed feelings about another party can sharply affect a person’s psychological readiness to bargain. Psychological barriers to settlement must be lowered if successful negotiations are to occur. Issues must be negotiable. For successful negotiation to occur, negotiators must believe that there are acceptable settlement options that are possible as a result of participation in the process. If it appears that negotiations will have only win/lose settlement possibilities and that a party’s needs will not be met as a result of participation, parties will be reluctant to enter into dialogue. The people must have the authority to decide. For a successful outcome, participants must have the authority to make a decision. If they do not have a legitimate and recognized right to decide, or if a clear ratification process has not been established, negotiations will be limited to an information exchange between the parties. The agreement must be reasonable and implementable. Some settlements may be substantively acceptable but may be impossible to implement. Participants in negotiations must be able to establish a realistic and workable plan to carry out their agreement if the final settlement is to be acceptable and hold over time. External factors favorable to settlement. Often factors external to negotiations inhibit or encourage settlement. Views of associates or friends, the political climate of public opinion or economic conditions may foster agreement or continued turmoil. Some external conditions can be managed by negotiators while others cannot. Favorable external conditions for settlement should be developed whenever possible. Resources to negotiate. Participants in negotiations must have the interpersonal skills necessary for bargaining and, where appropriate, the money and time to engage fully in dialogue procedures. Inadequate or unequal resources may block the initiation of negotiations or hinder settlement

Purchasing staff should enter all negotiations with clearly defined objectives. Without having objectives the possibility for the purchasing professional to concede on price, quality or service is significantly raised. The negotiator should enter into discussions with the vendor with precise objectives that they wish to achieve for their company. The objective should not be absolute and should allow for some flexibility. However, the negotiator should also ensure that they do not deviate from the objectives and allow themselves to negotiate on areas that were not part of the discussion. For example, a negotiator may have worked with the vendor on their objectives on price and service, but not quality. When the vendor starts to discuss quality, the negotiator should refrain from any agreement where they are without a set objective. Negotiation is an important part of the role of the purchasing professional. It is a skill that is learnt and training can help purchasing staff in understanding what is needed when negotiating with vendors.

Negotiation in the purchasing process covers the period from when the first communication is made between the purchasing buyer and the supplier through to the final signing of the contract. Negotiation can be as simple as trying to obtain a discount on a case of safety gloves through to the complexities of major capital purchases. A purchasing professional must aim to be successful in their negotiations with suppliers to obtain the best price with the best conditions for every item that is purchased. Smaller Supplier Base and Long-Term Contracts The negotiation process has become a more important sector in the supply chain process as companies look to reduce their expenditure whilst increasing their purchasing power. This means that purchasing professionals have to negotiate increasingly better rates with suppliers whilst maintaining or increasing quality and service. In the past companies had a long list of suppliers who they would purchase different items from which required purchasing resources to spend limited time on negotiating the lowest prices. The best solution available was to compare list prices from catalogs and select the vendor based on that information. The trend over the last decade has been to rationalize the supplier base and enter into long-term agreements with single sourcing. This offers companies the ability to negotiate significantly lower prices for items that they were purchasing from a number of separate vendors. Vendors Are Partners The emphasis in negotiation moved away from lowest price scenario to negotiating with fewer vendors to obtain the lowest price with the best service, quality and conditions. The aim for companies were to reduce overall spends rather than negotiate lowest price with a large number of vendors, which did not give the best overall result. The negotiated long-term contracts with a smaller supplier base have produced more of a partner relationship between buyer and supplier. The relationship can become less adversary which benefits buyer and vendor. In a partner type or relationship the buyer will encourage the vendor to increase quality and service and the vendor knows that by doing this the partnership will continue with a renewed contract with guaranteed sales. Negotiation or RFQ Non-government purchasing departments continue to offer a range of prequalified vendors a request for quotation (RFQ) for items or services that it wishes to purchase. The competitive bid process can produce a range of bids and conditions that the purchasing department will evaluate and then award the business. This may or may not involve some form of negotiation. Most negotiated business will involve items or services that are not necessarily definable by an RFQ. The purchasing department and the vendor will negotiate more than a price. The negotiation will usually cover what is to be manufactured or what is the extent of the service to be provided, the warranty, the transportation services, technical assistance, packaging alternative, payment plans, etc. Purchasing items or services of significant cost will require extended negotiations to arrive at a final contract. Purchasing professionals are required to participate in these types of negotiation to ensure their companies obtain the best price with the most favorable terms, and staff may need to be trained in negotiation methods as it becomes more commonplace in a difficult economic climate.

The disadvantage is that if the viewpoints of the parties are too distant then progress is difficult to achieve. A particular negotiation may have a successful outcome. However, parties may be of unequal power and the weaker party/parties may be placed at a disadvantage. Where a party with an interest in the matter in dispute is excluded or inadequately represented in the negotiations, the agreement’s value is diminished, thereby making it subject to future challenge. In the absence of safeguards in the negotiating process, the agreement could be viewed by a participant or others outside the process as being inequitable, even though the substance of the agreement may be beyond reproach. A successful negotiation requires each party to have a clear understanding of its negotiating mandate. If uncertainty exists regarding the limits of a party’s negotiating authority and the party will not be able to participate effectively in the bargaining process. The absence of a neutral third party can result in parties being unable to reach agreement as they be may be incapable of defining the issues at stake, let alone making any progress towards a solution. The absence of a neutral third party may encourage one party to attempt to take advantage of the other. No party can be compelled to continue negotiating. Anyone who chooses to terminate negotiations may do so at any time in the process, notwithstanding the time, effort and money that may have been invested by the other party or parties. Some issues or questions are simply not amenable to negotiation. There will be virtually no chance of an agreement where the parties are divided by opposing ideologies or beliefs which leave little or no room for mutual concessions and there is no willingness to make any such concessions. The negotiation process cannot guarantee the good faith or trustworthiness of any of the parties. Negotiation may be used as a stalling tactic to prevent another party from asserting its rights (e.g., through litigation or arbitration). The disadvantage is there are often differences with regard to who the arbitrator will be and as a result it introduces a new set of conflicts. Additionally, the personal bias of the arbitrator may lead to a ruling which is not fair but none the less binding upon all parties.

The advantages of negotiation are that it limits the number of players to those involved in the dispute. This allows for a focused approach to problem solving. Arbitration allows a third party to resolve disputes between two or more parties. The advantage of this system is that it allows a neutral party to decide on a resolution to the matter presented which is binding upon all parties. Mediation has the advantage of allowing a neutral third party assist in helping find a resolution to conflicts. In short a mediator cannot force parties to accept a resolution but he or she can guide the parties to work from points of mutual agreement.

Several objectives are common to all procurement or sales negotiations: To obtain the quality specified To obtain a fair and reasonable price To get the supplier to perform the contract on time. To exert some control over the manner in which the contract is performed To persuade the supplier to give maximum cooperation to the purchasing company. To develop a sound and continuing relationship with competent suppliers. To create a long-term relationship with a highly qualified supplier.

Even when many of the preconditions for negotiation are present, parties often choose not to negotiate. Their reasons may include: Negotiating confers sense and legitimacy to an adversary, their goals and needs; Parties are fearful of being perceived as weak by a constituency, by their adversary or by the public; Discussions are premature. There may be other alternatives available–informal communications, small private meetings, policy revision, decree, elections; Meeting could provide false hope to an adversary or to one’s own constituency; Meeting could increase the visibility of the dispute; Negotiating could intensify the dispute; Parties lack confidence in the process; There is a lack of jurisdictional authority; Authoritative powers are unavailable or reluctant to meet; Meeting is too time-consuming; Parties need additional time to prepare; Parties want to avoid locking themselves into a position; there is still time to escalate demands and to intensify conflict to their advantage.

The list of reasons for choosing to negotiate is long. Some of the most common reasons are to: Gain recognition of either issues or parties; Test the strength of other parties; Obtain information about issues, interests and positions of other parties; Educate all sides about a particular view of an issue or concern; Ventilate emotions about issues or people; Change perceptions; Mobilize public support; Buy time; Bring about a desired change in a relationship; Develop new procedures for handling problems; Make substantive gains; Solve a problem.

Contract negotiation This is an action of two (or more) parties consulting about a possible arrangement of partnership. Their goal is to make an agreement that will be advantageous for all parties involved. Talks may go on between the parties till they come to a mutual agreement about all points. The final aim is an agreement which is impartial and fair to all parties. Negotiated contract Contract awarded on the basis of a direct agreement with a contractor, without going through the competitive bidding process. It is also called negotiated agreement.

Very rarely, a contract will provide that termination of the contract will cancel the contract as if it had never been entered into. However, for most contracts, termination results in all parties being relieved of performing future obligations under the contract. This means that the parties will still be liable for their breaches of contract before termination. Contracts sometimes stipulate that certain obligations are to continue even after termination of the contract (for example, confidentiality obligations or dispute resolution processes). General provisions in the contract (for example, a limitation of liability or an indemnity) will continue to apply in respect of what happened before termination. If a principal lawfully terminates a contract, it will usually be able to recover from a defaulting party the additional costs involved in having the contract completed by someone else. These costs usually flow from the breach of contract that led to the termination. If a contractor lawfully terminates the contract, it may, depending on the circumstances, be entitled to recover from a defaulting party the expenses it incurred in demobilizing or paying out subcontractors, as well as the loss of profit.

Definitions 1. General: Failure to do something required by an agreement, in the performance of a duty, or under a law. 2. Borrowing: Failure to meet the terms of a loan agreement. Its two types are: Fiscal: – Failure to make repayment on the due date. Generally, if a payment is 30 days overdue, the loan is in default. Covenantal: – Failure to live up to one or more covenants of the loan agreement such as exceeding the prescribed total borrowings. Events of Default The Events of Default clause explicitly enumerates the situations that will constitute an “Event of Default” under the agreement. In general, the clause includes defaulting on any Notes or Loan agreements, violating any representations and warranties, and failing to perform obligations. Many clause examples also include a catchall term that includes any breach or other default of any other term in the Agreement. 1. Defaults. The following events shall be Events of Default: 2. The occurrence of an Event of Default (as defined in the Notes) under the Notes; 3. Any representation or warranty of the Company in this Agreement or in the Loan Agreement shall prove to have been incorrect in any material respect when made; 4. The failure by the Company to observe or perform any of its obligations hereunder or in the Loan Agreement for ten (10) days after receipt by the Company of notice of such failure from the Secured Party; and 5. Any breach of, or default under the terms of this Agreement. “Events of default‖ are typically established between the parties and memorialized in the security agreement. Events of default could include, but are not limited to: Payment-related default Performance-related default  Failure to properly maintain (abandonment) or enforce (infringement) the IP rights

Penalty clause is a contractual provision that provides for payment of an amount as forfeiture on breach of the contractual provisions. Usually the amount will be unrelated to the actual harm suffered. These clauses are added so as to prevent future disputes in case of breach of the contractual provisions. Penalty clauses are generally unenforceable. However, courts will enforce a liquidated damage clause when the amount of actual damages is difficult to ascertain and the liquidated damages are a reasonable attempt to approximate the actual damages penalty clause Are There Any Limitations on the Award of Compensatory Damages? An important limitation on the award of damages is the duty to mitigate. The non-breaching party is obligated to mitigate, or minimize, the amount of damages to the extent reasonable. Damages cannot be recovered for losses that could have been reasonably avoided or substantially ameliorated after the breach occurred. The non-breaching party‘s failure to use reasonable diligence in mitigating the damages means that any award of damages will be reduced by the amount that could have been reasonably avoided. LIMITATION OF LIABILITY CLAUSE Limitations of liability attempt to limit, define or eliminate damages occasioned by a parties conduct or breach of contract A limitation of liability clause (sometimes referred to simply as a liability clause) is the section in a contracted agreement that specifies the damages that one party will be obligated to provide to the other under terms and conditions stipulated in the contract. In a legal context, a liability is generally a responsibility to compensate for some failure to perform according to an established or agreed-upon stipulation. Because there is an element of risk inherent in most business agreements, limitation of liability clauses are common in all areas of contract law. In IT, limits of liability clauses are typically written into contracts between any two parties, including distribution agreements, software license agreements and service-level agreements. In a software license agreement, for example, the limitation of liability is one of the most important clauses because it limits the amount and types of damages one party can recover from the other party. For example, if the software doesn’t work and the company suffers damages as a result, the limitation of liability will restrict the company’s ability to recoup its loss. Because a limitation of liability clause typically favors whichever party drafted the agreement — usually the vendor — it’s particularly important to negotiate that part of the contract after careful