HOW DID YOU REACH A SETTLEMENT AGREEMENT? Negotiation Mingchao Fan Lecturer of Law, SHUPL Fulbright Visiting Scholar, Duke University.

HOW DID YOU REACH A SETTLEMENT AGREEMENT?

NegotiationMingchao Fan

Lecturer of Law, SHUPLFulbright Visiting Scholar, Duke University

Why Negotiate for Settlement?

• What is a settlement agreement?• An agreement reflecting the parties’ consent on how a

dispute will be settlement, i.e. the share of the responsibilities, etc.

• Why is negotiation important?• A dispute usually will not go to court unless the negotiation

fails; negotiation succeeds, settlement reached. • A settlement agreement is made based on the result of the

negotiation; the main clauses in the settlement agreement are agreed during the negotiation.

Negotiation Exercise: Little v. Jenks

• Fact:

• Little bought a second-handed car from Jenks at the price of $900;

• The car cannot pass inspection unless the exhaust system is replaced, which will cost $250;

• Little wanted the money back;

• Jenks agreed first but changed his mind soon;

• Little sued Jenks.

Negotiation Exercise: Little v. Jenks (continued)

• “Emotional Facts”:

• Little: • -- desperately in need of a car• -- heard that Jenks said to his father: “all my headaches are

gone”• -- very surprised and angry

Negotiation Exercise: Little v. Jenks (continued)

• “Emotional Facts”:

• Jenks:• -- used to take the friendship seriously• -- sold the car unwillingly when Little repeatedly express how

much the car was needed• -- it is Little’s problem not Jenks’

How Did You Start?

• Were you polite & professional…• To make self-introduction… • To shake hands…• To exchange business cards…• Not to yell at the opposing party…• Not to be impatient…

• Who made opening offer…• To set a reasonable goal…• Not to begin with an unrealistic offer…

• Did you pay attention to the face expressions and body languages?

• Mostly importantly: were Little, Jenks or the representatives of them?

Keep In Mind!!

• Rule 1:• A successful negotiation does not necessarily lead to

a settlement.• Rule 2:• An unsuccessful negotiation usually does not lead to

a settlement.• Conclusion:• A successful negotiation increases the chance to

reach a settlement.

Video: A Failed Negotiation

Alpine Laseroptics Technologies (ALT) v.

Nederlands Transcontinental N.V. (NedTrans)

ATL v. NedTrans

• Facts:

• 1. ATL, located in Zurich, Switzerland, the seller

• 2. NedTrans, located in Hague（海牙） , Netherlands（荷兰） , the buyer

ATL v. NedTrans (continued)• Facts: (continued)

• 3. ATL and NedTrans entered into a sales contract (the Contract) that ATL would sell its products, some crucial parts of which were manufactured by a Korean company, to NedTrans.

• 4. Due to economic crisis, the Korean company was unable to provide ATL with the crucial parts any longer which causes the latter to be unable to manufacture its products for NedTrans.

• 5. NedTrans, however, has already made a down payment of 40% of the Contract price.

ATL v. NedTrans (continued)

• Ask the following questions when watching the video:

• 1. Did they reach an agreement?• 2. What wrong did they do during the negotiation?• 3. Why did they fail in the negotiation?

Alpine Laseroptics Technologies (ALT)

v.

Nederlands Transcontinental N.V. (NedTrans)

Question

1. Did they reach an agreement?

2. What wrong did they do during the negotiation?

3. Why did they fail in the negotiation?

4. Did they take a win-win approach or a win-lose approach?

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Sneer （冷笑）

USUALLY MEANS

Disdain （轻蔑）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Flinch （惊惶）

USUALLY MEANS

Shock （震惊）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Frown （皱眉）

USUALLY MEANS

Sadness/Pessimism （悲观）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Smile

USUALLY MEANS

Pleasure/Optimism （乐观）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Relaxed Features （轻松的容貌）

USUALLY MEANS

Relief （放松） /Optimism

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Gnashing of Teeth （磨牙）

USUALLY MEANS

Frustration/Anxiety （焦虑）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Scratching （挠）

Head/Brushing （轻触） Cheek （脸颊）

USUALLY MEANS

Puzzlement （迷惑，苦思）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Warm Eye Contact

USUALLY MEANS

Sincerity/Openness

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Raised Eyebrow （眉毛）

USUALLY MEANS

Skepticism （怀疑） /Surprise

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Head Nodding

USUALLY MEANS

Active Listening and Comprehension

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Wringing （拧） /Twisting （使缠绕） of Hands

USUALLY MEANS

Frustration/Anxiety

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Gripping （紧握） Arm Rests （靠手） /Drumming（敲击） on Table

USUALLY MEANS

Frustration/Impatience

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Hands Neatly （利索地）

Folded （交叉） in Lap （一圈）

USUALLY MEANS

Submissiveness （恭谨）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Leaning Forward in Chair

USUALLY MEANS

Interest/Eagerness

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Hands Touching Face/Playing With Glasses/ Meditation/Disguising Looking at Notes

USUALLY MEANS

Contemplative （沉思）

Pause

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Hands Extended Toward Opponent With Defensive/Fending （挡开） Palms Facing Out （对应）

USUALLY MEANS

Off Verbal Onslaught （猛攻）

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Open/Uplifted Hands

USUALLY MEANS

Sincerity/Honesty

Common Forms of Nonverbal Communication

NON-VERBAL ACT

Turning Back/Looking Away After Making Offer

USUALLY MEANS

Disdain （轻蔑，不愿意做）

for Compromise （妥协）

Negotiation StylesCOMPETITIVE: ADVERSARIAL: WIN-LOSE

• Move Psychologically （心理上）

Against Opponents• Try to Maximize Own Return• Seek Extreme Results• Adversarial and Disingenuous （不真诚的，不坦率的）

• Unrealistic Opening Positions• Focus on Positions Rather Than

Neutral （中立的） Standards• Frequently Use Threats• Minimize Information Disclosure• Closed and Untrusting• Manipulate （操纵） Opponents

COOPERATIVEPROBLEM-SOLVING: WIN-WIN

• Move Psychologically Toward Opponents

• Try to Maximize Joint Return• Seek Reasonable Results• Courteous （客气的） and Sincere（真诚的）

• Realistic Opening Positions• Rely on Objective Standards to Guide

Discussions• Rarely Use Threats （威胁）• Maximize Information Disclosure• Open and Trusting• Reason With Opponents

Conducting Negotiations…

• Entry

• 1. Start on a positive note• Establish your good faith by a gesture of goodwill or a positive speech• Define the common conflict as a mutual problem and stress the interests

you share with the other side

• 2. Establish control of the meeting without talking all the time, for instance, by hosting the meeting, suggesting an agenda, knowing the facts or being silent

• 3. Agree with the other side on ground-rules before proceeding (e.g., no talking to the press)

Conducting Negotiations…(continued)

• Dealing with people

• 1. Listen

• Listen carefully• Don’t interrupt• Allow them to let off steam• Demonstrate that you understand what they are saying

Conducting Negotiations…(continued)

• Dealing with people (continued)

• 2. Be courteous

• Be personable: use their names• Express appreciation for their time and effort• Respectfully request for confidentiality• Phrase negative comments in terms of your experience, not

their attributes. For instance, don’t say “You are racists” but rather “Your actions have caused many of us to believe you discriminate against our people”

Conducting Negotiations…(continued)

• Dealing with people (continued)

• 3. Present a good show

• Be calm and cool; don’t respond in kind to the other side’s display of anger or emotion

• Be confident in your case and in the process• Don’t among yourselves. If you need to discuss points or

positions, request a recess and do so in private• Think before you speak

Conducting Negotiations…(continued)

• Exploration

• 1. Educate them and yourself• Identify the important issues and underlying interests• Present your arguments and reasons before disclosing your

position• Start with high demands to show the depth of your concern• Ask the other side questions such as: “Why do you want this?”

“Why can’t you do this?”• Identify and build mutual understanding about external facts or

influences that shape or constrain the negotiation process, or that direct or limit possible settlements.

Conducting Negotiations…(continued)

• Exploration (continued)

• 2. Explore possible areas of resolution• Launch some trial balloons (suggestions for approaching or

resolving at least some of the points under discussion)• Make sure you have a clear understanding of the other side’s

position, and that they have a clear understanding of yours• Study their responses, verbal and non-verbal, to your

suggestions• Periodically sum up areas of agreement and disagreement

Conducting Negotiations…(continued)

• Exploration (continued)

• 3. Get them into the habit of saying “Yes”, for instance, by getting their agreement on procedural issues (such as meeting times, ground rules for discussion, etc.)

• 4. Keep the meeting on track, and on the issues at hand.

Conducting Negotiations…(continued)

• Bargaining

• 1. Bargain for mutual adjustment or adaptation rather than complete victory

• 2. Use reason• Use objective reasons and clear, comprehensible standards• Push your ideas persistently• Don’t concede to quickly. Yield only to principle, not to

pressure

Conducting Negotiations…(continued)

• Bargaining (continued)

• 3. Never give up something for nothing. Even if you have to make a small offer or concession to get the ball rolling, do so with expectation that they will reciprocate in some way

• 4. Make it easier for them to decide what you’d like them to decide• Make your request smaller, i.e. ask for less• Make your request rational, routine, legitimate and personally rewarding for them• Make your offer credible to them• Consider having your offer expire after a fixed deadline• Don’t threaten; use warnings of events you cannot control• Continue to think about their problem, their interests, their choice

Conducting Negotiations…(continued)

• Bargaining (continued)• 5. Use carefully chosen tactics• Start with high demands• Let them make the first realistic offer except when there is going to be very little

bargaining• Ask for precise quantities like $227.50, not $200• Center your requests around clear focal points, like sharing something 50-50• Make increasingly smaller concession over time, as in going from 10 to 8 to 6.5 to 6• Use a hard-hearted partner, to allow you to present a relatively more approachable,

reasonable attitude• Arrange for your authority to be limited, for instance, say “I’ll have this get approved

by the boss…“

• 6. Listen. Watch out for offers and hints of offers: follow them up