Disagreeing Agreeably in Contract Disputes
Disagreeing in Disputes
More than 20 years ago, I got involved in a long-running contract dispute. The work had been completed in the tiny country of Brunei, population of about 400,000 living in an area equivalent to 75km by 75km. With any contract its not unusual to have disputes, commonly about the scope of the contract. For example, what was included or what was excluded and what information was provided when the proposal was made.
Often these disputes are argued out and resolved in a few months. In this case, the dispute had lasted two years. Both sides had dug trenches and were throwing grenades at each other. It was now a dispute filled with emotions. Communications from both sides included words like lies and liar. Just to make things more complex, the law of the contract was Brunei. According to World Bank rankings, for enforcing contracts, Australia is 5th, and Brunei is 67th. So, for the Australian company, resolving the dispute in the Brunei legal system was not an attractive option.
There are many examples of uncertainty for organisations around the world. Whether its Brexit or America, refugees or trade wars, whether groups feel wealth is being concentrated in other groups, or groups want independence, there is one cause: people are not listening to them.
In the Brunei dispute, both sides had stopped listening. All negotiations go through stages, for example: Prepare – Argue – Propose – Package – Agree. It’s normal to argue, then propose something, find a package that works for both parties and then agree. But many people get stuck in the argue stage.
Arguing in Circles
Many people get stuck because they argue in circles. They always find faults and errors in the other side’s arguments. Usually, they find fault before the other side has finished what they want to say. Then the argument escalates because the other side starts to interrupt too. So, both sides keep going round in circles going over the same points, repeating their arguments.
In the Brunei contract dispute, both parties had been arguing in circles for two years. They were never going to get out of the argue phase alone.
Getting out of Arguing in Circles
The first step for getting out of arguing in circles is to listen. Listen without interrupting. Just doing this will reduce emotions a little. Without listening, you will make no progress. To speed up the process, summarise their argument. You can say, I am not agreeing with your argument but what I think you are saying is… have I got that right? Only when they say “Yes” can you move on.
For the Brunei contract, after hearing and understanding the Brunei arguments, I heard the Australian arguments. Then I said, “Clearly from these arguments, we disagree, and since both sides have been arguing for two years, I suggest we need to agree to disagree.”
At this point, I emphasised to both parties, that we had the option of resolving the issue in court. However, this would take a great deal of money and time for both parties. So, I proposed we tried to find a commercial settlement which assigned no blame to either side. Both parties agreed in principle.
Getting to this step meant both parties had temporarily moved out of arguing in circles. Both sides felt they had been heard, so both sides were no longer thinking about arguments from the past. Both sides were focused on the future.
Sometimes both parties fell back into arguing; all it took was a reminder that we understood their arguments and that we all understood we were never going to agree. Now we needed to focus on finding a commercial solution both sides could live with.
Using normal negotiating techniques and paying special attention to using decreasing increments of offers, the dispute was resolved in a few hours. See earlier blog about sending signals when negotiating.
Warren Buffet once said, “When you find yourself in a hole, stop digging.” I suggest when you find yourself in a contract dispute, start listening. Once the other side is convinced you understand their arguments, even when you don’t agree with their arguments: make a proposal.