Some negotiations end with a negotiated agreement that is a plan of action rather than a signed contract – for example, a plumber agrees to fix the tile damage caused by his work. Other negotiations wouldn’t be appropriate to commemorate in writing, such as how you and your spouse decide to discipline your young child. But in virtually all significant business negotiations, parties should put pen to paper after negotiating the terms of their deal. In fact, contract law requires certain types of deals to be in writing for them to be enforceable.
Sometimes you and your counterpart can draft the negotiated agreement on your own. In larger deals and dispute settlement, however, lawyers or other third-party professionals draft the terms for you. Unfortunately, the handoff from deal makers to deal drafters is error prone – and these errors can have real business consequences.
Three Examples of Writing Negotiated Agreements
Negotiating the Good Friday Agreement
U.S. Senator George Mitchell’s role in the Good Friday Agreement was pivotal in helping each side reach a negotiated agreement in one of the world’s longest running conflicts. In his interview with Program on Negotiation Managing Director Susan Hackley, George Mitchell describes the negotiating skills and negotiation techniques he employed, namely the “Mitchell Principles,” commitments to open communication, non-violence, and democracy, to bring each side to a negotiated agreement.
When Time Warner Cable reported a huge quarterly loss of television subscribers, the largest in its history, the bad news was attributed largely to an impasse with television network CBS over fees, which led to Time Warner blacking CBS out of millions of homes back in the summer of 2013. The parties’ ultimate agreement was viewed as a victory for CBS, which won a promise of significantly higher fees for its programming in the blacked-out cities, from about $1 per subscriber to $2, as well as the digital rights to sell its content to Web-based distributors such as Netflix.
Michael Bloomberg versus the New York teachers’ union
Back in 2012, New York City stood to gain about $250 million in aid and $200 million in grants if it reached agreement on a new evaluation system with its teachers’ union, a 4% overall increase in state aid. But as 2012 drew to a close, talks between New York’s United Federation of Teachers (UFT) and New York mayor Michael Bloomberg were deadlocked. On the deadline date of January 17, 2013, the two sides separately announced that a final, late-night negotiating session had collapsed. Ultimately, New York governor Andrew Cuomo imposed an evaluation system on the city.
In this article, some of the most common breakdowns on the path from handshake to deal document are described. We explain why they happen and propose steps to avoid them. These steps take time, effort, and sometimes, money. Yet to ensure that you’ve got the deal you intended, an ounce of prevention is worth a pound of cure.
What other case studies about perfecting a negotiated agreement do you often cite when teaching or trying to make a point?
Related Article: Dealmaking: Three Deal-Drafting Pitfalls – Learn about three dealmaking problems that business negotiators commonly encounter in the course of their negotiations.
In Business Negotiations, Talks With Competitors Carry Risks – Know the risks inherent in business negotiations with competitors and how to best deal with them in this business negotiation skills tips article.
Status Anxiety in Business Negotiations – Concerns about status and reputation affect many different types of negotiations. In this article, learn about how status anxiety can impact business negotiations and learn valuable negotiation skills to grapple with the issue.
How to Negotiate When You’re Literally Far Apart – Negotiations conducted at a distance present unique challenges and opportunities for business negotiators. Find out the business negotiation skills the skilled negotiator needs to employ when dealing with a counterpart who is not physically at the bargaining table.
The Deal Is Done – Now What? – Even though the deal is completed, there are still some areas that negotiators need to pay attention to in order to ensure success at the bargaining table. This article discusses the strategies business negotiators can employ after the negotiation is over to guarantee their agreement’s success.
Negotiation Skills – Three Sources of Power at the Bargaining Table – What sources of power does a negotiator have at her disposal while in negotiations at the bargaining table? Read this negotiation skills tips article to learn more about the three sources of power a negotiator has at her disposal during a negotiating session.
Dealmaking – The New Strategy of Negotiauctions – Bringing together auction theory and negotiation theory in a practical and accessible way, Negotiauctions is an authoritative guide to negotiating deals. Today’s increasingly competitive marketplace is filled with business transactions that include elements of both negotiations and auctions, yet the received wisdom on deal-making treats these two mechanisms separately. Leading dealmaking scholar Guhan Subramanian explores the ubiquitous situation in which negotiators are “fighting on two fronts”—across the table, of course, but also on the same side of the table with known, unknown, or possible competitors.
Adapted from “From Handshake to Contract” by Guhan Subramanian in the October 2006 issue of the Negotiation newsletter.
Originally posted August 10, 2013.