Riddle Me This
Readers of my column send their dealmaking questions my way, and because many of you face similar situations every day, I've devoted this month's column to answering some of those questions. Here are three recent letters:
A speaker and attorney in Los Angeles, Marc Diener is the author of Deal Power: 6 Foolproof Steps to Making Deals of Any Size(Owl Books/Henry Holt). You can reach him at MarcDiener@aol.com.
I am about to go into negotiations with a major corporation
for the worldwide retail rights to my product. The company wants to
put my product in major retailers and certain specialty stores. Can
you offer me any advice on getting what I want from the
-Joseph Schulman, president, Mobility Solutions in Lakewood, New Jersey
Consider all your alternatives before settling on this one. And it's not just about talking to every other major corporation that might offer you a similar deal. Step back and ask the hard, big-picture questions. For example, are you sure you want a major corporation to do your selling and dis-tribution? Is there a better way to do all, or even part, of it yourself? What kind of business models have others used in similar situations?
If you do want to do business with this corporation, make sure to consider alternatives within the deal. Maybe it should be done in stages. Perhaps you should limit the rights you're licensing. Maybe you should include controls or an escape clause. I would suggest hiring a good transactional attorney; he or she will help you ask the right questions.
Although I enjoyed the article "The Mighty Pen"
(March), I feel it's important that I make one point: While it
can certainly be advantageous to be the one to draft a contract,
one must keep in mind that courts will generally rule vague points
in favor of the party who did not draft the document. So, while one
gets more control by drafting a document or contract, he or she
also takes on more risks.
-Seth Koster, owner, Perfect Promotionals and Wholesaling in Ann Arbor, Michigan
True. When courts have to make sense of unclear contract provisions, they sometimes turn to so-called rules of construction, such as the one you cited. But remember, this is only one of many such technical rules (applications of which can be contradictory). Regardless, there is a tremendous advantage to preparing your own document, even if you're not an attorney. Your wording gives you the upper hand. Sometimes (but not often) you'll shoot yourself in the foot, but in the beginning at least, you're better off if you're holding the gun.
When entering into important negotiations, how do you tell if
you or your opponent has the upper hand? Also, how can you use your
position to your advantage?
Theory aside, success in negotiation has more to do with leverage than principles. Assessing how you stack up against your opponent will help you choose your best strategy. Part of this is about power: Which side is bigger, has more resources, has more outside influence and can benefit or punish the other side more? But it's also about skill, momentum and greed: Who's got better negotiators? Who's working against a deadline? Who's got the best information? Who's the real decision-maker? Who wants the deal more?
Sometimes the answers to questions like those will be obvious. Other times, you'll have to force yourself to see the big picture and study your opponent. As negotiations continue, each side learns more about the other's strengths and weaknesses. So you should re-evaluate your leverage from time to time. Things change.