Negotiating with Contractors

"The nature of the relationship in negotiating and resolving disputes"

Mediation disputes involve having relationships with a wide variety of people including contractors, landlords, neighbors, acquaintances, friends, business partners, and family members. A contractor is anyone you pay to provide goods or services at a certain price or rate. The relationship with a contractor can be a one time arrangement (home or business renovations) or an ongoing relationship (landscaping or snow removal services). When looking for a contractor to hire use the reviews on various websites to help you make a choice. If you are negotiating a one-time project/ arrangement (major removal, wedding photography) speak to former clients. If you are negotiating with ongoing arrangement then talk to current clients for information about the services.

Depending on the type of contracting, you can have certain types of services provided that can cause damages or excessive repairs. For instance, negotiation agreements for a wedding or concert event only have one chance to be completed correctly. If there is an unfortunate problem that happens then the contract can be liable for the event's mismanagement. Contractors are usually formal and legalized negotiation agreements that are used to hold the company and customer accountable for the transaction of services. Contractors usually have a set payment or a payment based on the mutual agreement of services. A down payment is customary, yet you do not always need a down payment if the contractor is willing to negotiate their service price based on the successful completion and value of the event. The negative aspect of a down payment is that you lose leverage in getting the contractor to correct problems or complete the work in a timely manner.

In this world of negotiations, you must be careful to negotiate so that the other party feels liable to complete the worked that was agreed upon. It is a great idea to stay in contact with the contractor so that you can have an open working relationship with them. Similar to most contracting and negotiations you want to have a professional ready to work on your services and do an excellent job because they know who you are and are familiar with your needs. Unfortunate delays in the contractor's services might happen while completing the project which will result in a time delay. You should stay calm. Don't worry and keep the conversation open to new solutions, when delays happen it is best to stay confident in the project and stay flexible throughout the timeline.

"Mechanic's lien"

In many cases you can have a great working relationship with the contractor but you must stay on top of all components of the project or else you may fall victim to an undermining contractor. If a contractor doesn't pay the suppliers or subcontractors (i.e. anyone who provides materials or does work) the suppliers or subcontractors could put a mechanics lien on the property where the supplies were used or the work was performed. There is a time period where the contractor and suppliers or subcontractors must resolve the dispute, usually sixty days or six months on average. If the dispute is not resolved the suppliers or subcontractor could force the sale of the property at auction to get the money they are owed. While these disputes are not typically taken at this extreme, the property owner is liable and often ends up paying the supplier or subcontractor and can sue the contractor for reimbursement if the materials were included in the first negotiation agreement. If this happens then the disputes with the contractors can be very time consuming and can cost the property owner delays, money paid and the resources needed for the project. We see these types of disputes in mediation practices to avoid a civil litigation case against the contractors, suppliers or subcontractors.

Claims

Claims are demands or assertion by one of the parties seeking, as a matter of right, adjustment or interpretation of contract terms, payment of money, extension of time or other relief with respect to the terms of the contract.

In the flow chart, we can see the movement of a conflict to a claim then a settlement. These are the instances where the parties negotiate the claims validity and discover any possible liabilities that any party might have to the root cause of the conflict.

Figure 1

Legally the claims can be classified into three major types typically see in mediation practices:

1. Contractual claims are claims that fall within the specific clauses of the contract, ground conditions, valuation, variations, late issue of information and delay in inspecting finished work.

2. Extra-contractual claims are claims with no specific grounds within contract but is a result of breach of contract, which may be express or implied. An example of extra-contractual claim is the extra work incurred as a result of defective material supplied by the employer.

3. Ex-gratia claims are the claims that there is no ground existing in the contract or the law, but the contractor believes that he has moral grounds, e.g. additional costs incurred as result of rapidly increased prices.

These types of claims often arise during mediation practices and have another level of sub-processes related to claim management.

• Recognition and identification of change

• Notification of change

• Systematic and accurate documentation of change

• Analysis of time and cost impacts of change

• Pricing of change

• Negotiation of claim

• Dispute resolution and settlement

The significance of negotiation is to have a structured and proper settlement which includes (1) ascertaining that all information is current and complete, (2) minimizing the scope of negotiation beforehand so that insignificant points should not precipitate a violent argument and disrupt progress, (3) knowing one's weakness and trying to utilize weak points by conceding them in return from the other party, (4) foreseeing problems, and (5) anticipating the opposition's next move.

Figure 2

In figure 2, the flow chart shows a negotiator on each side who must come to an agreement on their strategy and interests priorities. Once the negotiator comes to position on their strategy they can begin the interaction with the other party, which can be called a mediation session. The negotiator must also use their interest priorities to build a outcome potential agreement with the other party. If both parties build the outcome potential that they can agree on, then they have a true outcome agreement.

(1) To effectively negotiate a deal, both parties must ensure that all information is current and complete. What happens is that many disputants have old information or documents that are not relevant to the claim and are using the information to push their position. This can cause a party to reconsider their initial position by lowering costs, price, materials, or other interests. (2) Minimizing the scope of the claim before the negotiations begin to limit insignificant points while arguing the agreement. In mediation practice it is best to find each negotiator's purpose. Limiting the distractions or other information that could be used to sway a unwanted outcome. (3) If the other party has a weakness in their argument, then the opposition negotiator will attempt to use this weakness to their own advantage. The argument will be based on the insufficiency of the interest priorities. It is best to keep any unknown disadvantages confidential instead of playing the "victim card" at the negotiating table. (4) A good negotiator can foresee problems before they even arise. When there is a negotiation between two parties that can take a long time then you will need to be proactive in preventing mistakes beforehand. (5) Finally, anticipating the oppositions' next move is critical in all legal agreements because to win on your interest priorities, you need to know what is at stake. The opposition can build new ideas on their agreement position that might hinder what you need in the final outcome. So, it is best to know what is your Best Alternative to a Negotiated Agreement (BATNA).

The Best Alternative to a Negotiated Agreement (BATNA) helps the disputant determine their limits. Based on your limits on compromising you can determine the amount of negotiations the other party is willing to give up to gain what they need in return. In a worst case scenario, you can use the best alternative to your original settlement priorities to your advantage. For instance, you can gain zero interest with a low minimum monthly payment due to a large down payment. However, your original priority negotiation was a zero interest, low down payment, and moderate monthly payment. Another example, would be a services trade off in place of down payment and a moderate interest and low monthly payment. Instances can include food services, private business services, construction, etc.

Negotiation deals with contractors come at a price of bargaining with people you might have to compromise with on some of your initial wants and needs. Negotiation deals are the best way to get what you want and need at a good price that can put you and the other party ahead in your field of work.