Negotiation

Negotiation is the resolution of a dispute by direct communication between the parties or their representatives, without a neutral and without a statute. It is the method by which the overwhelming majority of disputes are in fact resolved, and it is available at every stage: before a claim is made, during an arbitration, after an award and even during execution. Its study repays attention because the skills it requires are the same skills a lawyer uses in mediation and in settling a suit, and because the enforceability of what is agreed depends entirely on how the agreement is recorded.

1. Meaning and Essentials

Negotiation may be described as a process of communication between two or more parties with differing interests, directed at reaching an agreement acceptable to all of them. Four elements are always present.

1. Two or more parties with a difference, whether a dispute that has arisen or a bargain yet to be struck.
2. Interdependence. Neither party can obtain what it wants without some act or forbearance by the other; if one could simply take it, there would be nothing to negotiate.
3. Communication, direct or through representatives, which distinguishes negotiation from unilateral action.
4. The possibility of agreement. There must be a range within which both parties are better off settling than not; where no such range exists, the negotiation can only fail.

Two features distinguish it from every other process in this subject. There is no third person at all, so no question of impartiality, appointment or fees arises. And there is no governing statute, so the process is regulated only by the general law: the Indian Contract Act, 1872 governs the resulting agreement, the law of evidence governs what may later be proved, and the rules of professional conduct govern the lawyer's part in it.

2. Types of Negotiation

3. Principled Negotiation

The stages of a negotiation, the four principles, and the alternative that fixes the reservation point

The approach associated with the Harvard Negotiation Project, and set out in Getting to Yes by Roger Fisher and William Ury, rests on four propositions. They are worth stating in an answer because they explain why interest-based negotiation is more than a preference for pleasantness.

• Separate the people from the problem. Positions harden when a concession on the merits feels like a personal defeat. Dealing with the relationship separately from the substance allows movement on the substance.
• Focus on interests, not positions. A position is what a party says it wants; an interest is why it wants it. Interests are often compatible where positions are not, and the question to ask is why rather than what.
• Generate options for mutual gain. Inventing before deciding, and looking for terms that cost one side little and are worth much to the other, expands what is available before it is divided.
• Insist on objective criteria. Market rates, valuation, precedent, industry practice or an expert opinion give a standard against which a proposal can be tested, so that the outcome does not turn on who is more stubborn.

To these is added the concept of the best alternative to a negotiated agreement, which is what a party will do if the negotiation fails. It fixes the point below which settlement is irrational, and improving it, by preparing the claim or securing another supplier, does more for a party's position than any tactic at the table.

4. The Process and Its Stages

1. Preparation. The most important stage and the one most often skipped. Establish the facts and the documents, identify interests on both sides, assess the alternative to settlement, fix an opening position and a reservation point, and confirm that the person negotiating has authority to bind.
2. Opening. Positions are stated, the agenda and any ground rules are settled, and each side learns how the other proposes to proceed.
3. Exploration. Information is exchanged and the interests behind the positions are identified. This is where an interest-based negotiation is won or lost.
4. Bargaining. Options are generated, offers are made and movement is traded. Concessions should be made against something, and the reason for each should be stated so that it is not read as weakness.
5. Closing. The terms are recorded, checked for completeness, signed, and put into a form that can be enforced.
6. Implementation. Provision must be made for what happens if a term is not performed, since a settlement that fails in performance merely converts one dispute into another.

5. The Role of Advocates

• Advising on the alternative. The client's reservation point depends on an honest assessment of the claim, the costs and the time. A lawyer who overstates the case makes settlement impossible.
• Authority. The advocate must know the limits of his instructions, and a settlement reached beyond them binds the client only if the client ratifies it or the other side was entitled to rely on ostensible authority.
• Drafting. Most of the value a lawyer adds is at the closing stage: terms that are complete, certain, and capable of enforcement.
• Candour and good faith. A negotiator may withhold his reservation point, but he may not misstate a material fact. Professional conduct rules and the law of misrepresentation both apply, and a settlement obtained by a false statement of fact is voidable.
• Protecting the position. Correspondence should be marked without prejudice where it contains concessions, and the limitation position should be watched, since time spent negotiating is not excluded.

6. The Negotiated Settlement Agreement

The outcome of a negotiation is a contract, and it must satisfy the ordinary requirements of the Indian Contract Act, 1872: offer and acceptance, consideration, capacity, free consent and a lawful object. Where it settles an existing obligation it may operate as an accord and satisfaction, or as a novation under Section 62 of that Act, substituting a new agreement for the old.

7. Without Prejudice Negotiations

Offers and concessions made in an attempt to settle are ordinarily inadmissible in later proceedings. The rule has two bases in Indian law. The first is the provision of the Bharatiya Sakshya Adhiniyam, 2023 corresponding to Section 23 of the Indian Evidence Act, 1872, under which an admission in a civil case is not relevant if made on an express condition that evidence of it is not to be given, or in circumstances from which the court can infer that the parties agreed that evidence of it should not be given. The second is the general principle that the law encourages settlement, and that candour is impossible if every concession can be produced as an admission.

• The label is evidence, not magic. Marking a letter without prejudice shows the intention, but the protection depends on the letter being a genuine attempt to settle an existing dispute; a letter marked without prejudice that merely asserts a claim is not protected.
• An unmarked letter may still be protected, where the circumstances show that the parties were negotiating on that footing.
• The protection is not absolute. It does not cover a communication relied on to show that a settlement was concluded, nor one used to establish a fact independent of the concession, nor a threat or an admission of criminal conduct.
• Contrast the statutory regimes. Sections 22 and 23 of the Mediation Act, 2023 and Sections 75 and 81 of the Arbitration and Conciliation Act, 1996 as they stood give the same protection in statutory form for mediation and conciliation. Negotiation relies on the general law.

8. Negotiation Distinguished

9. Related Topics and Provisions