Give it a try: Difference between revisions

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All too often a [[negotiator]] is told, by a [[risk controller]] who is seeking a preposterous term, well [[I'm not going to die in a ditch about it]], but at least [[let's give it a try]].
#redirect[[if in doubt, stick it in]]
 
For example:
{{box|You have, at [[credit]]'s insistence asked your client to [[indemnify]] you for your losses performing the {{tag|contract}}. But what standard of conduct must you display before claiming on the indemnity?
 
Your risk officer suggests exclude liability under the Indemnity where the loss arises as a result of our [[grossly negligent|''gross'' negligence]].
 
“'[[Gross negligence|''gross'' negligence]]? But surely no sensible client will accept that?” you say.<ref>Conventional wisdom has it that US counterparties will unblinkingly accept gross negligence standard. Which makes you wonder about conventional wisdom in [[US attorneyAmerica]]. But anyway.</ref>
 
Your risk officer shrugs. “Perhaps so”. But why don’t we [[give it a try]]?
}}
Let me tell you why.
 
===The trade-off between “give it a try” and “will anyone object?”===
Because asking for a legal term that a counterparty then objects to has an ''actual'' cost.
*“'''Will anyone object?'''” has an ascertainable, certain, upfront cost: the time and devotion of negotiation and, via the [[circle of escalation]], [[risk management]] resources to clear the client objection. You incur this expense even if the point is immediately dropped - clearly the longer you argue about it, the more expensive the cost.
*“'''[[Give it a try]]'''” has a delayed, remote and contingent benefit:
:*'''Delayed''', because the right, if you manage to get it, will only ever have any value at some point in the future (that is, when you get to exercise the right);
:*'''Remote''', because it is extremely unlikely, at any time, that circumstnaces arise whereby you would be entitled to exercise that right; (<1% of counterparties would ever be closed out);
:*'''Contingent''', because:
::*it only has any value at all if we can persuade the counterparty to accept it
::*even if we can, we don’t know
:::*whether we’d ever try in practice to exercise such a setoff,
:::*whether, if we did, it would be enforceable and
:::*whether, if we did and it was, there would be anything meaningful to set off against in the first place.
 
Where, as is usualty the case, the [[present value]] of “give it a try” is close to zero, then if the present value of “will anyone object?” is not zero, ten even giving it a try is not a rational move.<ref>Who said [[Mediocre lawyer|lawyers]] were ''rational''?</ref>
{{seealso}}
*[[Circle of escalation]]
*[[Gross negligence]]
{{ref}}

Latest revision as of 13:12, 20 October 2022