Negotiations Can Be Creative

Two lifelong friends went into business together. They reasoned that because they were such good friends, they did not need a partnership agreement. Not the first time this has happened, and not the first time this has caused a problem. The failure to formalize agreements at the outset is a leading cause of partnership disputes.

One partner wanted to withdraw from the business. The question was how to evaluate it. The person who is leaving always wants more, while the person who is staying wants to pay less. I was representing the party that was staying. He wanted to pay his friend what seemed reasonable. He requested a proposal from his partner, who consulted a non-business lawyer in his family. Surprise: The lawyer recommended an absurdly high amount.

I suggested a 2 part response. The first was to prepare an offer that was absurdly low but arguable. That let the friend know that there was a downside to these negotiations. He told his friend that his lawyer had come up with the number.

The second part of the response was to suggest that they both get rid of the lawyers. I privately continued to consult with the client, but he presented the offer as his own idea. The parties then reached a realistic settlement. This was a creative way to let the friend break away from his family lawyer and settle the sale of his share of the business. It avoided a serious dispute that could have been very destructive to the business.

Creativity can be helpful.