INTRODUCTION
Business law has become increasingly important and is currently universally recognised as a necessity in various countries domestically, but also in international relations.
More and more we are witnessing the growing importance of business law and lobbying, in which frequently lawyers function as the real representatives and speakers on behalf of the interest of major corporations and large multi-nationals.
Although the role of the business lawyer is increasingly viewed as important in terms of most national and international contracts, the truth is that in Portuguese law the concept of legal transaction has been established, but negotiation currently still does not have an express legal definition.
In Portugal, that we know of, there is as yet no independent negotiation discipline in the practice of law.
The common understanding of negotiation is that it involves a process of bringing together initially distinct positions, perhaps even opposite or unknown positions, in view of achieving an agreement of wills that produces legal effects.
1. THE RELATIONSHIP BETWEEN THE LAWYER AND HIS CLIENT IN RELATION WITH THE NEGOTIATION PROCESS
1.1 Role of the Lawyer
The role of the lawyer in relation to his client involves providing legal information that is in accordance with the rule of law and the client’s goals in the business dealings that will take place.
The lawyer is expected not merely to act as a “middle man” (bonus pater familias or “reasonable man”), but also to act as a specialist in terms of his study and counsel, having invested intellectually in the respective science and being equipped with knowledge that is inaccessible to the general public and acting in accordance with deontological rules that ensure his capacity.
Let us not forget that the lawyer’s prior experience in business dealings and knowledge of his practices is an essential factor, though not a guarantee, of the successful achievement of the intended agreement.
Although anybody may generally possess natural dialogue skills, the intervention of lawyers with lack of experience in such matters may in and of itself lead to failure or breakdown in the negotiation process.
1.2 Mandate
In negotiation, whether it be international or domestic, the first major question for the lawyer is whether his mandate should be laid out in writing or whether it should be merely verbal.
Under Portuguese law, there is freedom of form in business declarations, including the mandate, except for contracts in which the law provides for compliance with a special form, such as the purchase and sale of real estate or establishment of corporations.
There are specific legal norms for the lawyer’s mandate when he intervenes directly in court or in signing contracts that because of their specificity require a notarised deed or equivalent document. According to Article 262-2 of the Portuguese Civil Code, “Barring any legal provisions to the contrary, the power of attorney shall take the form required for the business that the proxy will be undertaking.”
The supply of legal services by the attorney may include compliance with the mandate contract, or it may take place regardless of the existence of a mandate in the areas that are specific to or related to the practice of law. The first group includes all acts of legal consultation, the actions taken by a lawyer that do not require a power of attorney and all actions necessary to the proper compliance with the rendering of services.
If the lawyer acts under his own name but in the interest of the client (as business manager cf art. 303-3 of the Portuguese Code of Civil Procedure), he acquires the rights and takes on the obligations ensuing from the acts that he formalises, transferring them to the mandator and the latter shall accept them in accordance with articles 1180 to 1184 of the Portuguese Civil Code.
It is presumed that the mandatary is the business manager of the mandator with the ability to remove himself from the orders given by the mandator with respect to the execution of the mandate and the instructions received, providing that:
- There is supervening knowledge of new or unknown, or undervalued circumstances at the time of the mandate;
- There is no possibility of timely communication;
- It is reasonable to believe that the mandator would approve his conduct in accordance with article 1162 of the Portuguese Civil Code.
It is also important to mention that the special mandate for practicing one or more acts always covers the ones mentioned in it, as well as all those dependent on them to execute the principal act.
We believe that whatever the case may be, it makes perfect sense that in order to safeguard himself, a lawyer who is hired individually or as part of a team, especially when the client does not accompany him personally to the negotiations, should always require a mandate from his client or at least prior written instructions for exercising his activity within the scope of the services to be provided.
2. THE LIMITATIONS AND THE APPLICABLE LEGAL FRAMEWORK IN THE PORTUGUESE LAW
2.1. Specific Limitations within the Portuguese Legal System
As has already been mentioned, there is no legal concept for negotiation; however, it is understood that it presupposes the existence of at least two parties with their own interests, which are at least initially divergent or non-coinciding in which at least one of them proposes to reach an agreement on certain matters.
This meeting of wills must translate into a legally valid and effective agreement.
The scope of the intended agreement is established by the parties, but is subject to some limitations.
On the one hand, we have all the limits imposed by law, namely those that objectively limit and regulate the legal capacity and legitimacy of the parties, as well as those that subjectively define their rights.
On the other hand, we have the legal limits resulting from the imperative norms pertaining to the regulation of the contracts standardised by law, such as the memorandum of association and the real estate purchase contract.
As general examples of limitations of legal transactions we have Article 280 of the Portuguese Civil Code, which provides for its nullity whenever the object is physically or legally impossible, against the law or indeterminable.
Article 282 of the Portuguese Civil Code also stipulates that any legal negotiation that exploits the situation of necessity, inexperience, levity, dependency, mental state or weakness of someone’s character, obtaining for oneself or third parties excessive or unjustified benefits can be nullified under grounds of usury.
As regards the content of the contracts to be negotiated, the parties have the option of freely establishing it, including in it whatever clauses they wish, seeing that the general principle recognised by Portuguese law is the principle of negotiation freedom.
However, when we reach the phase of forming the contract itself, there is often a limitation as to form in terms of the actual contract and the communications between the parties, which must meet certain requirements in order to be able to be considered business declarations.
In fact, the norms related to the types of business declaration provided for under articles 217 and subsequent of the Portuguese Civil Code are the parts most regulated by negotiation legislation, namely its form, validity and efficacy, as well as the duty to proceed in accordance with the rules of good faith (article 277 of the Portuguese Civil Code) and the respective civil liability due to culpable conduct (culpa in contrahendo).
This section of the Portuguese Civil Code also regulates the concept of contractual proposal, of revocation of the proposal, of rejection and acceptance, while the rules of interpretation and integration of the business declarations are included in articles 236 and subsequent of the Portuguese Civil Code.
Portuguese law also clearly distinguishes the preliminaries of the formation contract in aforementioned article 227 of the Portuguese Civil Code.
In this chapter we would like to point out that in addition to the Portuguese Civil Code there are pieces of legislation that regulate various matters interconnected with contractual negotiation, whether in terms of consumer protection or the General Contractual Clauses Law, of which we emphasise the need of the legislator to have established various norms that protect the weaker party, as is the case with adhesion contracts.
2.2. Limits in Relation to the Lawyer as Negotiator
The primary duty of the lawyer is to supply the client with the legal information necessary to achieve the client’s objectives. This analysis and legal advice are an inseparable part of negotiation in the practice of law.
The lawyer’s intervention should gauge the client’s expectations, even modify them, offering alternatives in accordance with the legal limits in casu.
Familiarised with the negotiation logic, with the behaviour scenarios that can be expected from the other party and equipped with legal knowledge and arguments, the lawyer will be in a privileged position to improve the position of his client, analysing the reasonability of the proposals that are on the table and adopting the behaviour that is most suitable to obtaining benefits for his client.
The chronology of his activity shall first of all be to establish a dual negotiation margin, defining the ideal agreement and the acceptable agreement, which will allow the negotiations to begin with a first margin that corresponds to the ideal agreement and during a second phase, if necessary, provide a second negotiation margin, corresponding to the conditions that find the middle ground between the ideal agreement and the acceptable agreement.
Negotiation is a process of gradual approximation in which the natural evolution of the process will extend more or less in accordance with the amplitude of the object of negotiation and may naturally involve various resources and negotiation rounds.
3. DIFFERENT NEGOTIATION STYLES : HOW THE LAWYER DEALS WITH THE MOST SOPHISTICATED NEGOTIATION TECHNIQUES. PRINCIPLED AND DISTRIBUTIVE NEGOTIATION APPROACHES
3.1. Style and Technique
Each one’s negotiation technique is developed through intuition and adaptation to the specific case of the person’s knowledge, combined with the experience acquired over the years.
Style has more to do with the individual characteristics of the participants in the negotiation.
Each negotiator normally has his own negotiation framework and should follow an orientation constructed on the basis of his experience and accumulated situations.
Firstly, the negotiator should objectively assess the alternatives to a negotiation agreement from each party and then the interests and the priorities. A combination of these elements shall determine the structure of the negotiation.
Secondly, the negotiator must understand the integral and distributive components of the negotiation in order to broaden the group of available resources and increase their pay-off.
Here is an example of a framework as proposed by Dierickx (2002):
1 – Acknowledge
2 - Assure
3 – Create positive dynamics
4 – Understand their concerns
5 – Create a negotiable agenda
6 – Don’t haggle over isolated issues
7 – Define priorities, measure outcomes
8 – Don’t divide in two
9 – The negotiation is not over when the contract is signed
10 – Always amplify the negotiation
3.2. Strategy
A good negotiation technique that the lawyer should use involves legal rigour, which allows some problems to be found and resolved more easily, while analysing the feasibility of the proposed legal solutions.
Throughout the negotiation one of the main factors is information management, which involves ensuring that information is not distorted or hidden in terms of what is essential to clarifying the business dealings.
It is important to give information out gradually because sometimes it is only useful to transmit it slowly as deemed necessary and advantageous to the negotiation.
Everything must be done carefully because sometimes too much information too early can hurt the negotiation; however, hiding information, especially when regarding essential elements of the matter can cause the other party to be suspicious of the negotiations.
It is essential that the proposals be presented with understandable grounds, as unjustified demands tend not to be accepted.
The considerations can be a concession by the other party or acceptance of a new demand, but the natural rule is to transmit an image of reasonability in terms of the correspondence between concessions and considerations.
On the one hand it is in the party’s interest to make a small concession, making it seem greater than it is in order to make it appear that it was a major concession, while on the other hand, when receiving a major concession from the counterpart, trying to transmit the idea that it is a minor concession, thereby conceiving an apparent balance, but with the necessary benefits for the represented party.
Multiplying demands without entering into exaggeration or absurdity may help to gain a negotiation margin in order to be able to make a greater number of concessions, which will in turn help obtain other considerations.
It can be very interesting to submit proposals with the suggestion of various alternatives for the other party to choose from, thereby influencing the course of the negotiation process and guiding it.
A good negotiation technique also involves establishing a hierarchised systemisation of the subject matters in order to advance more easily and to simultaneously become aware of the potentialities of the feasibility of obtaining an agreement.
The negotiation strategy must seek to influence the negotiation in order to be able to achieve more favourable conditions to obtain the ideal agreement.
We can classify the strategy as “win/win situations” when the goal is to achieve situations in which both parties benefit; in order to obtain some agreements, “win/win/win situations” are argued for when in addition to the parties third parties also end up benefiting, which is the case when the market in general also sees gains with the quality of the final product that is to be promoted.
A “win/lose situation” occurs when the agreement to be reached essentially involves obtaining advantages at the cost of concessions from the opposing party.
3.3. Integrative and Distributive Negotiation Orientation
Distributive negotiation is one in which the parties compete during the discussion to divide amongst themselves a particular amount, attempting to obtain benefits to the detriment of the other, such as the negotiation of a purchase and sale.
Integrative negotiation is one in which the parties cooperate with each other in view of obtaining the maximum reciprocal benefit, adapting and integrating the respective interests, such as in the negotiation of a commercial representation contract or a corporate merger.
Using the predominant criterion of the nature of the rights involved, we can distinguish two types. In the first type, the object of negotiation predominantly consists of the configuration of personal rights, such as family relations negotiations, namely negotiation of divorces or regulation of parental authority. A second type is one in which the object of negotiation predominantly consists of configuring equity claims, such as the negotiation of a construction contract or negotiation of a sharing agreement.
Using the criterion of the characteristics of the subjects involved, we can distinguish between personal and impersonal negotiations. In personal negotiations, the object of the negotiation mainly involves aspects related to the individuality of one or both parties, such as the negotiation of a commercial contract intuitu personae and in impersonal negotiations the object of the negotiation presupposes a minimum relevance of individuality of the parties, such as negotiation of supply contracts between large companies.
Using the criterion of the complexity of the negotiation object we can distinguish between the negotiation of an individualised subject versus integrated negotiation. With the first type the object of the negotiation covers an individualised topic, such as the negotiation of the payment of a debt or the negotiation of the purchase and sale of real estate. In integrated negotiation the agreement involves various interconnected topics and requires more sophisticated negotiation, such as negotiating a memorandum of association or a shareholders agreement.
Using the criterion of extension of the negotiation, we can distinguish between short-term or immediate negotiation versus long-term and multi-phased negotiation.
All these types and other that could be listed consist of merely broad distinctions because negotiations are rarely limited to one topic. To the contrary, they almost always deal with accessorial issues and those relevant to achieving an agreement.
4. HOW SHOULD THE LAWYER PREPARE THE CLIENT FOR THE NEGOTIATION AND EXPLORE BETTER ALTERNATIVES AND SOLUTIONS, WITHOUT LOSING HIS FOCUS ON THE BUSINESS PURPOSE
Legal negotiation covers various categories, such as negotiation of disputes. Because our study covers international negotiation for lawyers we have chosen the negotiation of contracts as being the most common and most relevant.
The negotiation of contracts is the process through which the conformation of a contractual legal transaction is sought, which presupposes the existence of the will to contract by at least two parties, seeking to harmonise distinct wills via the negotiating process, establishing terms and conditions necessary to confer the validity and efficacy of the legal transaction.
The involvement of experienced jurists becomes essential for the discussion and establishment of the legal terms of the contract, and is also essential to discussing and overcoming the aspects not expected by the parties at the start of the negotiation process.
Only jurists have a complete grasp of the meaning of all the matters to be discussed and of the actual business declarations to be exchanged in accordance with the applicable legal frameworks.
It bears mentioning that the forming of any contract implies a constant interaction between the will of the parties and the production of legal effects and as such the drafting of a contract in and of itself also obviously becomes an object of negotiation.
Thus, within the process of the formation of a contract firstly we have the will of the parties, secondly, the production of legal effects and thirdly, the drafting of the terms of the contract, all with reciprocal interference, and the negotiation will only be concluded with the signature of the definitive version of the contract.
The role of the lawyer must therefore be much broader than that of mere speaker for the will of the parties in each concrete case of the contract negotiation.
Firstly, he must offer qualified legal counsel to his client, establishing a trusting relationship with him.
It must be clearly clarified between lawyer and client what the client’s goals are.
The legal analysis of the client’s intentions should not be limited to the judicial-legal aspects, but should also include criteria of normality and habitual practices in legal transactions.
The lawyer must also cooperate with the client in order to better adopt his intentions in accordance with the framework of feasibility in the particular case at hand.
The negotiation preview shall be analysed using available information regarding the other party’s expectations in view of seeking to adapt the circumstances to the client’s interests.
This prior analysis phase shall evolve into the study of the strategy and negotiation techniques to be adopted, studying the conditions that are to be integrated into a first proposal in order to provide for sufficient negotiation margin, etc.
Depending on the particular case, submission of a draft of the future contract may be considered, depending on whether or not certain matters to be discussed are to be emphasised, or in view of rapidly progressing in terms of the accessorial part, concentrating on the negotiation of the essential part.
The effort of the lawyer should be directed at conquering the concessions of the other party. However, it is known that legal argument and persuasion alone cannot guarantee achievement of results.
Negotiation always involves the lawyer and the client, whether during the exchange of information or whether in the conformation of the initial intentions, or whether during the analysis of the context, the characteristics and reactions of the counterpart, during the pondering of the demands, the concessions or negotiation considerations, during the programming of the negotiation action, during the examination of the consequences and the legal effects ensuing from the drafting of contracts.
In this teamwork the lawyer plays the main role in terms of: (a) legal counselling, (b) strategic counselling, (c) drafting of the terms of the business declarations, (d) communication with the opposing party, (e) drafting and negotiation of the terms of the contractual clauses, (f) discussion and legal arguments with the opposing party.
The lawyer’s intervention also becomes essential to drafting the contracts, particularly due to his knowledge of the law and his negotiating experience, which will help achieve a contractual solution to certain issues that the law establishes by mere omission, referring to the supplementary framework provided for under the law, or inversely when contractual terms are established that oblige exclusion of said supplementary legal framework.
There are some common rules that can be considered extremely useful:
1. Always keep in mind the reasons that lead the parties to negotiate and the existing alternatives;
2. Do not show excessive interest in concluding an agreement in order to avoid putting yourself in a position of negotiation inferiority.
3. Foresee the minimum and maximum limits of the acceptable variables at each point of the negotiation in order to achieve possible agreement.
4. Establish the walk-away price after which it is preferable not to continue dialogue. This measure may motivate the opposing party to favourably review the conditions it offers in order to keep the negotiation going.
5. Define within reason the maximum useful time period for negotiation.
6. Favour objective discussion of the problems.
7. Avoid personal problems between the speakers.
8. Individualise problems, first dealing with consensual matters, which can help generate partial agreements and advance more carefully to sensitive matters.
9. Identify the proportionality of the concessions of both parties in order to favourably justify your proposals.
CONCLUSION
The negotiating capacities of the lawyer result from his experience and practice, but are directly linked to his intuitive and rational orientation and his natural aptitude to at any time benefit from the circumstances that he faces in order to use them to the best advantage of his client and achieve the business purpose.
When there are personal incompatibilities between the lawyers or the parties themselves, it is a good idea to change the speakers and replace them with people from within each negotiating group in order to prevent personal conflicts from causing the negotiations to break down.
Should negotiations reach a stalemate and the other party is intransigent even after having argued adequately and having unsuccessfully attempted to readjust the intransigent position, the lawyer may remind everyone of the advantages for all parties involved to reach a consensus, also questioning the motivations of the opposing party, calmly discussing the reasons for the impasse, re-looking at the possibilities of reaching an acceptable final agreement for everyone even if this implies readjusting his position with one last concession to the demand of a new consideration.
Notwithstanding the above, there are cases in which the agreement can only be reached by changing the circumstances, such as abandoning the negotiations or moving towards a discussion involving court proceedings, which may provoke new reactions in terms of the parties’ negotiating positions.
We would like to point out the importance of people involved in mediation, conciliation and arbitration as autonomous forms of resolving disputes, which have also gained increasingly importance as an alternative to the courts.
Finally, we would like to point out that no two negotiations are alike, even when they have identical purposes. All negotiating processes have their own inner workings and circumstances, different from each other and the solution that may have worked in one process may not be relevant for obtaining agreement in another.
We will conclude by paraphrasing a well known author: “The technique and knowledge of the negotiation process is a starting point that must be addressed according to the personal style of each person.”
Jorge Leão - Advogado
UIA 54 th Congress – Istambul
November 2, 2010
© UIA 2010
Av. da Boavista, nº 1681 – 7º S. 1, 4100- 132 Porto
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