Negotiation: Meaning, Scope, Advantage & Disadvantage

This article discusses the Meaning, Scope, Advantages & Disadvantages of Negotiation. Negotiation, as the name suggests, means discussion with the objective of solving the issue at hand, which is also called the negotiation problem.

Nelson Mandela mentioned that “Negotiation and discussion are the greatest weapons we have for promoting peace and development.”

Negotiation is the process of dispute resolution between parties through mutual understanding and agreement where there is no involvement of the third party. A negotiation is a contemporary form of dispute resolution. It is a part of the ADR (Alternative Dispute Resolution) system of resolving disputes out of court.

A famous legal maxim, ‘Consilia omnia verbis prius experiri, quam armis sapientem decet’ rightfully suggests that an intelligent man would prefer negotiation before using arms. The word ‘negotiation’ can be interpreted in a number of ways, and thus the word has a number of definitions.

The Essential steps required for a negotiation to be successful are as follows:-

1. The voluntary consent of both parties to negotiate the dispute.
2. The dispute concerns both parties in such a way that the parties are dependent on each other.
3. The parties should have the willingness to settle the dispute.
4. The dispute at hand should be negotiable.
5. In certain cases, there is a sense of urgency and deadline in the dispute leading to negotiation.

I. Case laws defining Negotiation

In the case Werner v. Hendricks 182 A. 748 (Pa. Super. Ct. 1936), the following two perspectives of negotiation were prevalent:-

Simplified version

“Negotiations are the deliberations which take place between the parties touching a proposed agreement.”[1]

Breakdown of the purpose of negotiation

“To negotiate is to transact business, to treat with another respecting a purchase and sale, to hold intercourse, to bargain or trade, to conduct communications or conferences. It is that which passes between parties or their agents in the course of or incident to the making of a contract; it is also conversation in arranging terms of the contract.”

The Commercial Union Life Assurance Co. of Canada v. John Ingle Insurance Group Inc. showed the restricted definition of negotiation:-

Restricted Definition of Negotiation

“… arrangement through communication or agreement through discussion. It need not contain an element of bargaining.”[2]

The Aronovitch & Leipsic Ltd. et al. v. Berney et al., (2006) 208 Man.R.(2d) 231 (CA), two perspectives of negotiation were seen.

Negotiation as an engaging Process

“A consensual bargaining process in which the parties attempt to reach agreement on a disputed or potentially disputed matter.”[3]

Components of Negotiation

“Negotiation usually involves complete autonomy for the parties involved, without the intervention of third parties. Dealings conducted between two or more parties for the purpose of reaching an understanding.”[4]

II. Scope

The process of negotiation started a long time back during the times the kings negotiated at the time of an ongoing war or to prevent the happening of war. We are even aware of the negotiation rounds after the two great world wars in the 20^th century, which ultimately resulted in the creation of the League of Nations and the United Nations, respectively.

Over time negotiation has increased its scope. The reason is mainly that the parties wish to settle their disputes out of court. There are several disadvantages of the litigation process, which include bulky paperwork, excessive time and delays in the process of settlement. With the increase in the fame of negotiation, the demand for experienced negotiators has increased.

There are several cases in which negotiation is applicable.

1. Marital Deadlock

In the pre-litigation process of a marital issue, negotiation is predominant. The ego and sentiments between the husband and the wife in a conjugal relationship are often settled by communication during the negotiation process. A couple already divorced is also advised to negotiate as to the terms of alimony and the custody of the child.

2. Business Negotiation

Business negotiation is a key skill in managing business and corporate matters. The skills required in negotiation include making deals, discussing on the profits of the company, building a team, negotiating with the employees and the labours, negotiating for contracts, handling cases of dispute between clients, employee compensation cases, mergers and acquisitions, fixing the prices of various consumer goods, negotiation on auction prices, real estate prices and so on.

For settling a business agreement, the art of negotiation is essential. Business negotiation is the skill where the big problem is broken down into smaller chunks, and then the solution to every problem is carefully found.

3. Contract-Based Negotiations

The contract-based negotiation is the most famous type of negotiation where the parties to a dispute negotiate the terms and the conditions of the contract before entering into contractual relationships with each other. The contract-based negotiations are somewhat in line with the business negotiations. The deadlock after the breach of the contractual requirements is also sometimes settled with the help of negotiations.

4. Administrative Negotiations

The negotiations between different organizations with each other on important decisions are also in the form of negotiations. The various negotiations in the dispute between states, organizations, the agencies of the government, military negotiations, legislative negotiations, etc. Wherever there is a decision of utmost importance that ought to be taken up, a round of negotiations with the stakeholders is of vital importance.

5. International Negotiations

International negotiation is the process of dialogue between the parties in power with the objective of achieving certain common goals or dissolving an impasse. International negotiations can also be a medium to improve international relations, strike a deal or make an agreement on a topic of law. However, records of international negotiations have not always shown to be successful in completely solving the issue at hand and clearing the strained relationship.

The types of international negotiations are varied from public to private, bilateral to multilateral. The subjects of the negotiation are not always states and can also involve non-state actors such as the origination of UN, UNICEF, etc. and other terrorist originations, thus increasing the scope of negotiations in the field of international relations. Researchers claim the fact that the style and the manner in which international negotiations are dealt with is place-specific, where a number of factors influence the negotiations, such as the customs, the language, the conduct and the style of speaking.

The major aim of international negotiation as stated above is to allow smooth interconnectivity and inter-relativity between nations in a way that is beneficial for both the countries in the economical as well as the other spheres.

The conflict between nations can easily turn into scandals that need to be resolved. International negotiation generally takes a longer time than that of other negotiation processes. The process is complicated and involves many steps, and bureaucrats are involved in the process.

There are various types of negotiations, such as bilateral and multilateral negotiations, regarding the strength of the parties to a dispute. The bilateral negotiation consists of 2 parties, whereas multi-lateral negotiations have many parties involved in the process of negotiations.

III. Advantages of Negotiation

1. Party-based dispute resolution: One of the reasons for the absolute success of a negotiation is that negotiation only involves the stakeholders and does not include any other party, as a result of which the negotiation process remains an absolutely private affair.
2. Freedom of the Parties: Negotiations ensure that there is absolute freedom of the parties. Freedom to set agendas of their choice and to ensure the objective of the negotiation is achieved.
3. Consent of the Parties: This process ensures that the consent of both parties is taken into consideration and that the individual interests are well looked after. The freedom also ensures that there is no play of powers and all the parties in the negotiation are given equal footing to speak and consider their options.
4. Successful Dispute Resolution: The negotiations have a possibility of greater successful outcomes because it is ultimately based on the party’s interest and is entirely run by the party’s consent to dissolve the dispute also, the process of dispute resolution is suited to that of the parties.
5. Strategy Oriented: By using the principled approach to the negotiations and considering the various other strategies, one can successfully conclude a negotiation process. The parties can easily come to a win-win situation which is mostly the advantage of negotiations.
6. Voluntary Process: Negotiation is considered to be a voluntary process. However, agents representing the parties can also take part in the negotiation process. There is no interference from a third party in the negotiation process, which leads to the proper safeguarding of confidential information.
7. No third-party intervention: The need for a neutral third party which is the characteristic of most of ADR systems, is not the case with negotiations. This type of ADR is mostly recommended in cases of highly classified information, such as the case of administration which, if leaked through a third party, would create havoc.
8. Comfortable process: The process of negotiation is safe. It normally is a speedy process. The decision does not bind any other party other than the stakeholders. The process does not require witnesses. It is comfortable. There is no third party imposing any order over the parties. It is a completely self-built process.
9. Improvement in relations: After the successful completion of the negotiation rounds, such as in international negotiations, there is an improvement in the relations between the parties. The successful completion of negotiations further leads to the incentives of the negotiations with the other countries as well. Thus facilitating the process of negotiations on further occasions.

IV. Disadvantages

1. Power Tactic: the parties to negotiation may not always be of equal stature and power. In the absence of a neutral third party, the party which is in a position to dominate uses the scope to dominate over the consent of the other party and thus comes to an agreement. This play of powers, thus, is a disadvantage in the negotiation process. The result may be an unfair agreement which later can be relegated to be useless.
2. Unequal Agreement: The agreement that the parties arrive at the time of negotiation can be unequal when there is one is a more powerful party than the other.
3. Impasse: The dispute and disagreement between the parties sometimes lead to an impasse. An impasse is a situation at the time of negotiation when the parties to an agreement reach a standstill in their discussion, where they cannot proceed with their discussion any longer. It is a stage of frustration of the discussion of the parties wherein the parties where no possible successful outcomes can happen. This generally happens when one of the parties is so adamant over its goals that no middle ground can be achieved.
4. Walkout Situation: The walkout situation happens when an impasse frustrates the parties to the extent that no fruitful discussion can happen any longer. The parties in such situations may storm out of the room and terminate negotiations any further.
5. Strained Relations: The unsuccessful rounds of negotiations sometimes lead to bitterness in the relationship. The parties are not ready to come for another round of negotiations and fail to reach an agreement at all.
6. Backing off: The unsuccessful negotiations sometimes lead to the creation of bad relations along with the termination of any other business and contractual relations altogether afterwards. Some parties sometimes lose confidence in the process of negotiation as a process of dispute resolution and consider other options.
7. Not all issues are negotiable: There are cases that involve multiple stakeholders that are non-negotiable. These cases directly go to court.

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[1] 121 Pa. Super. 46 (Pa. Super. Ct. 1936)

[2] Commercial Union Life Assurance Co. of Canada v. John Ingle Insurance Group Inc., 2002 CanLII 45028 (ON CA),  retrieved on 2019-06-24

[3] 2005 MBQB 180 (CanLII)

[4] 2005 MBQB 180 (CanLII)

Originally Published on: Jul 14, 2019

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