Is your contracting playbook an information manual or a dynamic tool that can evaluate negotiation options?
New decision support technology I am developing can turn your playbook into a tool that can help parties reach a “best possible” collaborative agreement. Here is a more in-depth look at how it works.Each party weighs in and gains value
In an online choicebox system each participant can express views about the relative acceptability of each aspect in each contract version under consideration, and about the relative importance of different aspects. Specific aspects of particular versions may be judged not only in terms of their substantive acceptability, but also in terms of attributes such as industry “standardness,” clarity, and brevity.
Each version or proposed contract, including the one ultimately agreed to, represents a different package of aspect handlings. New combinations can be introduced and assessed in the course of drafting and negotiation.
How does the choicebox decision support system work?
The choicebox system employs a three-dimensional box metaphor to express key aspects of a choice: the options being considered, the factors that differentiate them, and the evaluative perspectives in play, each of which may involve differing assessments of the relative “goodness” of options and the relative importance of factors.
The moving parts of contract drafting and negotiation map fit quite readily into this framework:
- The options (columns) are possible or proposed versions of the contract.
- The factors (rows) are the terms, provisions, and other aspects that might vary from one version to another.
- The perspectives (slices) are those of the parties or particular team members within a party (and perhaps other entities and/or reference standards).
Let’s consider again the example I used in my article, to illustrate how a choicebox system works:
Suppose that Newco and Ventura are negotiating a preferred stock agreement and it has come down to differences over a material adverse change clause and a closing condition. Members of the negotiating teams have different perspectives because they assign different weights to the goals of, for example (a) preserving good will and future dealings with the counterparty (b) avoiding risk and (c) minimizing the chance of protracted litigation.
See Figure 1, Newco’s View of the Options and Figure 2, Ventura’s View of the Options. These boxes show how Newco’s options might look in a choicebox with four contract versions - “Newco ideal,” “Ventura ideal,” Draft 13,” and “Executed contract.”
- Preferences among the various provisions are expressed by the weights at left. (Weights are expressed on a scale of 0 to 10.)
- The numbers in the cells represent the percentage of “goodness” a party gets under the scenario.
So for example, for the “Newco ideal” version, Newco gets its ideal outcome (represented as 100%) on every issue, and obviously would find that most attractive. Likewise, it might find the “Ventura ideal” least attractive (represented as 0%). Compromise versions like the penultimate draft (13) and the final contract give each party some of what it most wants.
Figure 1: Newco’s View of the Options
Figure 2 for Ventura might look as follows. Notice that it has different factor importance weights, for instance caring more about liquidation preferences than Newco.
Figure 2: Ventura’s View of the Options
In this imaginary case, each party gets either all (100) or none (0) of what it wants on most of the issues they have not yet been able to agree on. Most negotiations of course involve sub-ideal resolutions of multiple issues for all parties, but also many that even the “losing” party finds more than minimally preferable.
Look at the bottom right cells where the parties’ perspectives are reflected. The 48 shown in Figure 1 and the 52 in Figure 2 both represent how parties respectively judge the desirability of the compromise resolution reached over a tricky closing condition issue in the final contract.
When rendered three-dimensionally, this configuration of weights and preferences might look like Figure 3: Value of Deal Terms.
Figure 3: Value of Deal Terms
Figure 3 shows how the rectangular blocks represent the value of deal terms to the two parties under the various scenarios. And the cylindrical shapes at top reflect the total goodness in each vertical column.
Therefore, Newco and Ventura get everything respectively in the first two scenarios, and their total “utility” for these two scenarios (back row of cylinders) is the same. Draft 13 at the top of Figure 3, second line down, produces a higher joint utility, but it is unevenly distributed between them. The executed contract – reflecting the closing condition compromise – delivers just slightly less joint utility, but it is evenly divided.
Return to Transform Playbooks Into Negotiation Game Changers, by Marc Lauritsen, Capstone Practice Systems.
ABOUT THE AUTHOR
Marc Lauritsen, author of The Lawyer’s Guide to Working Smarter with Knowledge Tools, is president of Capstone Practice Systems and of Legal Systematics. Marc has worked as a lawyer, directed the clinical program at Harvard Law School, and done path-breaking work on document drafting and decision support systems. He’s a fellow of the College of Law Practice Management and past co-chair of the American Bar Association’s eLawyering Task Force. Marc can be reached at email@example.com or @marclauritsen on Twitter.
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