When Is It a Bad Deal? Is Today’s Quick Settlement a Bad Deal for Tomorrow? How Can You Know?

The Problem

You are being pressured to quickly agree to a settlement. You see short-term negative consequences if you don’t agree to the proposed settlement.

For example, you are embroiled in an expensive lawsuit, or an expensive lawsuit is imminent if you don’t agree to a settlement? You are offered settlement terms as a way out. Should you agree? Is it really a good deal? Or maybe better stated, is it a good enough deal that you should agree?

Some Indicators of a bad deal:

1. The other party is putting you under time pressure.

A. You are asked to review and agree in just an hour or two.

B. There appear to be inconsistencies in the agreement, but you are told they can be sorted out later; that there is no time to do that now.

C. The agreement looks OK to you, overall, but you are told:

a. You don’t have time to clarify terms or elements of the agreement that you do not understand.

b. You don’t have time to edit vague or confusing language.

c. You don’t have time to consider the long-term business implications of one or more of the terms.

d. You don’t have time for a review by someone who is in a position to assess the full impact on your organization.

e. You don’t have time to consider implications relating to governmental laws, rules or regulations.

f. You don’t have time for a reasoned legal review.

2. There seems to be no definite end date when you can effectively walk away from the agreement and consider it “done.”

3. The agreement creates long term ties to your opponent.

4. The agreement effectively transfers, away from you, ownership in certain technical developments or improvements you may make in the future.

5. The agreement puts you at a significant pricing disadvantage for a substantial period of time.

6. The agreement does not allow you to compete with your opponent’s projects but does allow your opponent to compete with your projects.

The Summary

The above are typical of the indicators we see, after the fact, when a client accepts an agreement without fully considering the consequences – later decides it was not such a good deal, and wishes they had taken the time to give it a reasonable review.

There will always be situations when agreements must be reached under pressure. It is quite common for some negotiators to use “time” as a pressure tool to try to force a one-sided agreement on an opponent. However, most time demands are not based on substance, but are no more than a positioning tool used in the negotiation process. However, it is rare that you really need to accept “time” as the controlling factor – that you simply cannot put the time pressure on “hold”, perhaps with short-term pain, while you give the agreement a reasoned review with all elements of your organization who will be affected, including review by your legal team.

While you do need to consider the “timing” demand, most offered “deals” that are good for both parties will last long enough, without serious long-term consequences, that a reasoned review can be done before a decision is made.

By all means, seek outside third-party counsel that is not substantively affected by the outcome of the decision.

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