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Now sell-siders may occasionally engage with ostensible hostiles — competitors for example — but when they do, they abide by an unspoken pact of [[good faith]] for the limited ends which have brought the warring sides together. They must, at some level, trust one other or at least have a common interest, or they would not contract at all. | Now sell-siders may occasionally engage with ostensible hostiles — competitors for example — but when they do, they abide by an unspoken pact of [[good faith]] for the limited ends which have brought the warring sides together. They must, at some level, trust one other or at least have a common interest, or they would not contract at all. | ||
We don’t negotiate with terrorists. | A presumption of any negotiation is [[good faith]]. Some level of trust. We don’t negotiate with terrorists. | ||
In any case, the “merchant-to-customer” contract is, by a landslide, the most common kind. Those with any in-house experience of bona fide, non-existential, customer disputes know one thing: if there is any doubt — and frequently, when there isn’t — ''the business will roll over''. No-one takes a point with a solvent client. | In any case, the “merchant-to-customer” contract is, by a landslide, the most common kind. Those with any [[in-house counsel]] experience of bona fide, non-existential, customer disputes know one thing: if there is any doubt — and frequently, when there isn’t — ''the business will roll over''. No-one takes a point with a solvent client. | ||
This is nothing more than common sense: you stand far more to gain in future revenue by preserving your relationship at the small cost of excusing a customer the occasional gaffe than taking a literal stance on technical errors. | This is nothing more than common sense: you stand far more to gain in future revenue by preserving your relationship at the small cost of excusing a customer the occasional gaffe than taking a literal stance on technical errors. | ||
The instinct to | The instinct to “let it go” is so pronounced that compliance teams have contrived means to prevent the business granting these concessions for fear they are seen as impermissible “inducements”.<ref>Were it not for the deeply embedded [[agency problem]] inside most organisations, by dint of which these arrangements could well be, this would be a bit silly. As It is, it probably isn’t.</ref> | ||
In any case, the [[commercial imperative]] is so overwhelming | In any case, the [[commercial imperative]] is so overwhelming a factor in ongoing business relationship that there is little point in asking for, let alone achieving, terms that go beyond fair. ''No-one will ever use them''. Seeing as, all other things being equal, you will conclude a fair contract faster than an unfair one — [[the ideal negotiation is no negotiation|the ideal negotiation is ''no'' negotiation]] — you should start with a fair template. | ||
===Confident=== | ===Confident=== | ||
{{Drop|Y|our form should}} inspire confidence in your | {{Drop|Y|our form should}} also inspire confidence, and not fear, in your own negotiating team. It is a fact of life that negotiators these days have less combat experience and expertise than they once had. If they are to do a good job they need to feel comfortable with their tools. They should ''understand'' your templates and the product it governs. You should encourage them to go beyond the contract’s formal articulation to grasp the underlying commercial drivers of the relationship. <ref>JC is well aware that, among [[management consultant]]s, this view borders on the heretical.</ref> If they do this, they will help you identify the parts of the contract that aren’t achieving what they seem to be. | ||
A | A negotiator who fears her material will hide behind the formal rules you give her to manage it. She won’t be drawn to discuss it live — if she doesn’t comfortably understand the form and what it is trying to achieve, why would she put that vulnerability on show? — so will hide behind her keyboard, thereby contributing to the familiar experience of electronic trench warfare. She will lob long, bulleted issues lists over no-man’s-lsnd and into the enemy’s advanced positions, or even internally to internal risk departments, where they will hidden and sputter, being passed about for days, before eventually being lobbed back, annotated in [[BLOCK CAPITALS]] and with appended with yet more more bullets. This state of impasse can go on, as it did in Ypres, for years. You could write [[strange negotiation|war poetry]] about it. | ||
Reverence to and intimidation by your own contractual form is madness, of course | Reverence to and intimidation by your own contractual form is madness, of course. While we should not be surprised, in our [[High modernism|high modernist]] times, that we fetishise the [[Substance and form|form over the substance]], ''deference'' to a contractual form that is plainly suboptimal is no cause for celebration. A confident negotiating team ''engages'' with the form rather than deferring to it. This is the negotiator’s version of “[[jidoka]]”: the human touch that makes the machine sing. | ||
=== Clear === | === Clear === | ||
{{Drop|[[Qualities of a good ISDA|O]]|f the many}} [[The purpose of an ISDA|purposes of the ISDA]], most deal with the present | {{Drop|[[Qualities of a good ISDA|O]]|f the many}} [[The purpose of an ISDA|purposes of the ISDA]], most deal with the ''present'' — desired capital treatment; the availability of close-out [[Close-out netting|netting]], margin obligations — and the ''past'' —representations and warranties, and [[Section 2(a)(iii) - ISDA Provision|conditions precedent to transacting and continuing to perform]] — but only one deals with the ''future''. The close-out terms: the circumstance in which one can break the glass, sound the alarm and head for the lifeboats. | ||
Closeout terms will only come into serious contemplation at times of extreme stress: the market’s, your management’s and, therefore, ''yours''. The more the firm stands to lose, the more extreme those stressy circumstances are likely to be. Your management will be going mad — make no bones about that — but so will the market and, quite possibly, the geopolitical situation too. All kinds of people will be doing inexplicable things. | |||
Your customers will be AWOL: the defaulting client certainly will. Bank chief executives won’t take each other’s calls. Prime Ministers will be ordering overseas embassies to max out their credit cards just to have cash on hand to meet the government’s obligations.<ref>This happened in New Zealand in 1981. [[Wage and price freeze|True story]]. </ref> Central bankers will be ordering the banks they regulate to lowball [[London Inter Bank Offered Rate|LIBOR]].<ref>Controversial, I know, but this seems increasingly likely to have been the case.</ref> | Your customers will be AWOL: the defaulting client certainly will. Bank chief executives won’t take each other’s calls. Prime Ministers will be ordering overseas embassies to max out their credit cards just to have cash on hand to meet the government’s obligations.<ref>This happened in New Zealand in 1981. [[Wage and price freeze|True story]]. </ref> Central bankers will be ordering the banks they regulate to lowball [[London Inter Bank Offered Rate|LIBOR]].<ref>Controversial, I know, but this seems increasingly likely to have been the case.</ref> |