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Michael L. Moffitt
Editors’ Note: What if you and the other side have very different views of the future? Should this make it harder to achieve an agreement? In fact, as Moffitt explains, these different views can provide exactly the lubricant needed for the gears to mesh. Contingent agreements can help negotiators move toward an overall agreement, even (or particularly) when they disagree. As one of several chapters discussing particular techniques for use when things get sticky, it should be read in conjunction with Wade’s chapter on the Final Gap and Honeyman’s on Ambiguity.
“That won’t happen.” “Yes, it will.” “No, it won’t.” “Will too.”
Negotiators generally find no shortage of things about which to disagree. For example, negotiators seeking to resolve a dispute often have sharply differing perceptions of the past. What happened? Whose decisions and actions caused the effects in question? How does their conduct compare with expectations or duties? In some circumstances, settlement is impossible without resolution of these backward-looking questions. Classical dispute resolution theory suggests that one might overcome impasse by shifting the focus of conversations toward the future (Stulberg 1987; Menkel-Meadow 2000; Alfini et al. 2001). Sometimes, however, the shift to a forward-looking exploration merely provides fertile, new grounds for disagreement. Rather than arguing about what happened, the negotiators argue about what will happen. A wholesaler asserts that demand for the product will skyrocket, and the retailer suspects otherwise. A defendant points to the relatively minor and temporary injuries caused in a car crash, but the victim fears that later on, new injuries may manifest themselves. Instinct may suggest that one negotiator will need to persuade the other about the likelihood of future uncertain events. Instead, genuinely held disagreements about the future present an important opportunity for negotiators to discover an attractive exchange. The vehicle for capturing this potential is the contingent agreement.
All contingent agreements share a basic structure: the parties identify the universe of possible future conditions and agree to take on different obligations in each of those conditions. The simplest contingent deals are those in which the future has only two possible relevant conditions. X will happen, or it will not. If X happens, the terms of our deal are ABC; if not, we will do DEF. If I think X is unlikely to happen, I will be happy to give you terms you prefer for ABC, in exchange for terms I favor for DEF. Believing that she will get the work finished on time, an author signs a lucrative book contract with a very harsh penalty for late completion. Buyer loves Seller’s house, but really wants a property with off-street parking. Seller firmly expects that the city council will approve a variance required for construction of a new garage, but Buyer is less confident about the likelihood of getting approval. Buyer agrees to purchase the property from Seller at a reduced price, with a substantial additional payment to Seller if the City Council grants a variance within the next twelve months. Negotiators can craft attractive trades by establishing obligations that are contingent on a future uncertain event that affects each side’s valuation of the agreement.
Contingent agreements can also include variable terms, pegged to some benchmark to be measured in the future. I think interest rates will increase over the next few months, and you think they will go down. If I am loaning you money today, we will each be happy to agree to a deal with a floating interest rate. Neither of us knows what the rate will be, but we can agree on the external measure to which we will look when the time comes. The plaintiff believes that he may suffer long-term negative health effects from exposure to the defendant’s product, while the defendant believes no significant health risk exists. The defendant agrees to pay for specified medical monitoring expenses for the plaintiff and to assume any future medical costs associated with exposure.1 A school board is nervous about the future levels of state funding available for school districts, while the teachers’ union is optimistic. The two sides agree to a contingent wage package that is tied to a particular line item in the upcoming state budget. Two businesses entering a complex joint venture agree to final, binding resolution of their intellectual property dispute by an appointed arbitrator.2 Without the possibility of contingent agreements, uncertainty regarding future conditions can make distributive decisions (for example, who gets how much money) difficult. By linking the allocation of resources to an externally measurable variable, negotiators can sometimes overcome otherwise paralyzing disagreements about the future....
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