It is true that the so-called middle class is just a terminal disease away from poverty. This became very evident recently in the Braithwaite family when they decided to sell off the last of their assets to raise funds for Sir Benson Braithwaite’s major surgery.
After the necessary valuation by their accountant, one buyer invited them for the last meeting to iron out all the details of the contract before reaching a final agreement. Ma’am Latoya Benson called the family lawyer and accountant to help negotiate with the buyer and her representatives. The parties fixed the 3rd of August 2020 to wrap up negotiations.
Mrs. Odion, the buyer, was ready for the negotiation after obtaining the valuation report from Mrs. Braithewaite’s accountant. She had also done her due diligence investigation and had her lawyer, accountant, and some of her company’s directors with her to help with the negotiations.
Although the asking price was sixty million Naira, upon valuations, she realized that the subject matter was really worth forty-five million Naira. In fact, she was only going to offer thirty million Naira. She had heard the rumors that the Braithwaites’ were in dire need of money to save their breadwinner. She knew what desperation could do to the most aristocratic fellow.
The parties started out with the preliminaries and soon delved into negotiations proper. They had hoped they would be done ironing out all the terms but Mrs. Braithwaite was not ready to concede to thirty million Naira. She was ready to blow up, but her calm lawyer gently held her back. After going back and forth on the price, Mrs. Braithwaite’s lawyer called for an adjournment of the meeting till the next week.
During the course of the week, her Accountant called Mrs. Odion once more and sent her all the valuation reports for the second time. She also made sure to give her the option of paying up for the subject matter within a shorter period at a lesser interest rate or taking longer to pay at a higher interest rate. Mrs. Odion stated flatly that she was only willing to do thirty-five million Naira. Mrs. Braithwaite’s lawyer called again to see if she could get the buyer to agree to pay fifty million Naira. This went on and on until the next meeting. By this time, Mrs. Latoya Braithwaite became desperate.
She told her lawyer to close the deal. Mrs. Braithwaite’s lawyer then advised her to relax and negotiate with another prospective buyer they had come across during the week. Before long, they finished the negotiations with this new person, and the asset was sold at a good price. Everybody went home happy. Oh! Mrs. Odion called back the day after the sale to say she would be happy to do forty-five million Naira.
She was shocked to hear that the Asset was sold out.
It is at this point that I must say that real-life negotiations may play out to be more complex than the above, but this scenario is a good place to start illustrations.
Negotiation is a complex process of ironing out the details of a contract. Usually, a voluntary technique is used to reach a mutually beneficial result.
It is important that both parties understand why they are going into a negotiation, it is also key that they understand what is at stake? What is the value of the subject matter involved? To know what the value is, the parties will have to conduct due diligence investigation. They may need a team of lawyers, accountants, company directors, or no extra human at all; depending on what they are negotiating. Another key element we have to have in mind is that both parties may want to preserve the relationships that they have. This is why, although this game is played with a poker face; FAIRNESS should be an underlying principle.
Negotiations usually start with the seller making the opening bid with an asking price. The buyer may concede at this point or advance a counter offer.
Representations are made by the parties and where the parties agree on the price and other major terms of the contract, it is at this point that the seller will send a confirming letter or a letter of intent to the buyer. This letter is sent to the buyer before a formal agreement is entered into.
It is advisable to insert a conditional clause e.g. a “subject to contract” clause in your letter of intent. It shows that neither of the parties will be bound by the negotiations until a formal contract is duly executed by the parties. Whoever inserts the clause has ordinarily excluded himself from liability. Note that this conditional clause may not always negate an already concluded agreement especially where the buyer has acted in good faith and taken steps to fulfill the requirements of the letter of intent. Hence, a party may not be allowed to use this device to exclude himself from an already done deal.
Check out this next article for sage whispers to help you negotiate better.