Dispute Resolution: Informal Negotiation

There are four forms of resolution of a dispute in, for instance, a contract dispute. First, there is an informal negotiation between you and the other contracting party. Second, there is negotiation after a demand letter has been sent by your lawyer. Third, there is litigation, followed by a settlement, achieved informally between the lawyers or through mediation. Fourth, there is a trial of the dispute.

Informal Negotiation

In this blog entry, I discuss the first form of resolution: informal negotiation. Let’s say that the contract is executory—neither side has fully performed all of his/her’s side of the contract. When neither of you has fully performed what you were supposed to do, there is an opportunity to negotiate informally. There may be two different forms of dispute: what a default in performance should cause to happen, and what a term of the contract means. Frequently these two forms are merged into one dispute: one party does not perform due to a difference in opinion about what a term of the contract means. One party’s performance or non-performance is, in the eyes of the other party a default.

Everyone knows the advantage of negotiating informally. You may be able to resolve a dispute without lawyers getting involved. Common opinion is that lawyers create more of a dispute than is necessary, and make resolution more difficult. And they cost money. Regardless, I support informal resolution when it is possible.

However, informal resolution works better when you have a lawyer advising you. You do not want to “give away the farm.” The lawyer’s purpose is to inform you of the strength of your legal position, so that you know how far you can push the other party. The lawyer, being a very experienced negotiator, can advise you on what you should do next in your negotiation with the other party. And your next step, after the other party has reacted. Let’s hope that you can reach an agreement with the other party. How do you document your agreement, and what should be in the document? Once again, your lawyer advises you, and may even give you a rough draft of a very informal document.

I have plenty of successful experience advising clients with respect to this informal negotiation to resolve a dispute. If you are unsuccessful at this step of dispute resolution, we can take the next step together. I’ll discuss the second step of dispute resolution in my next blog entry.