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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]] |
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| For example:
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| {{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?
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| Your risk officer suggests exclude liability under the Indemnity where the loss arises as a result of our [[grossly negligent|''gross'' negligence]].
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| “'[[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>
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| Your risk officer shrugs. “Perhaps so”. But why don’t we [[give it a try]]?
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| }}
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| Let me tell you why.
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| ===The trade-off between “give it a try” and “will anyone object?”===
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| Because asking for a legal term that a counterparty then objects to has an ''actual'' cost.
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| *“'''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.
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| *“'''[[Give it a try]]'''” has a delayed, remote and contingent benefit:
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| :*'''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);
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| :*'''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);
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| :*'''Contingent''', because:
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| ::*it only has any value at all if we can persuade the counterparty to accept it
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| ::*even if we can, we don’t know
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| :::*whether we’d ever try in practice to exercise such a setoff,
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| :::*whether, if we did, it would be enforceable and
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| :::*whether, if we did and it was, there would be anything meaningful to set off against in the first place.
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| 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>
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| {{seealso}}
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| *[[Circle of escalation]]
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| *[[Gross negligence]]
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| {{ref}}
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