“At present I would prefer not to be a little reasonable” – Asking For The Unreasonable Vs. Acting Unreasonably

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We’ve written, with favor, about the use of words such as “reasonable” in agreements of all sorts. Just like the use of the modifier, “material,” the modifier “reasonable” works pretty well in practice. If you are curious about what we’ve written about “material,” click HERE. Today, we’re going to Ruminate about being “reasonable” in another context – negotiations.

First, two anecdotes, the first being about a large retailer, one with over 30,000,000 square feet of leased space, whose general counsel explained the company’s negotiation policy as follows: “It is our corporate policy to be unreasonable.” The second, perhaps not technically an anecdote, is a literary quote from Melville’s character, Bartelby, the scrivener: “At present I would prefer not to be a little reasonable.”

Like it or not, pleasant or not, academics who have studied “negotiation” seem to (virtually) all agree, being unreasonable in your negotiation stances gets you a better outcome. We remember, hopefully faithfully, having read an academic study that went a little further. Our searches came up empty-handed in finding the study we remember, but, with that caveat, here is a short version of its conclusion. As we recall, the researchers reported that the person who makes an outrageous demand gets a result closer to her or his demand than one who is “reasonable” in her or his demand. There was a caveat, an important one. Outrageous demands were only successful if the opposing negotiator believed that the demanding negotiator truly believed her or his position was a valid one. Please note the nuance here. The person making the outrageous demand needn’t believe her or his position was supportable; it was the opposing person who had to hold that belief. That’s called “bluffing.”

As Ruminations sees it, the limitation of these studies we’ve seen over a lot of years is that the subject matter of the observed negotiations was value, be it money or barter. And, the studies were about “single issue” negotiations, and that’s not what we see in commercial real estate transactions.

Where is this going?

We’d venture that very few, if any, readers believe that successful negotiators can be such without ever taking unreasonable positions. Ruminations concurs that the available data supports that generally held belief. But, does that mean that you will be successful if nearly every position you take is an unreasonable one? Taking too many unreasonable positions not only undermines the requestor’s credibility, it constitutes “acting unreasonably.” There’s a big difference. Aside from the general unpleasantness of dealing with someone who bargains in such a fashion, we continue to be influenced by the research that concludes: “Outrageous demands were only successful if the opposing negotiator believed that the demanding negotiator truly believed her or his position was a valid one.” If everything one asks for is unreasonable, it becomes hard for the “other side” to believe in the opposing negotiator’s “good faith belief” in the positions it is putting forth.

Basically, if you are going to negotiate for dozens of outcomes that the market would see as extreme or far to the “left” or “right” of what a typical deal would look like, you risk getting less than you would have liked to get or you might encourage the other side to “walk.” If not to walk, then perhaps not to come back for the next deal. That might not be a factor where one party, such as a small, local tenant has no bargaining power and probably doesn’t even realize that the landlord is being unreasonable. The same can be said when a strong, well-armed tenant overpowers a local, single property investor. But watch out when the “other side” is one you’d like to do business with again and again.

And, here’s another observation: There is a big difference between taking an unreasonable bargaining position and acting unreasonably. Acting unreasonably is bullying; it can be a failure to respect the other side’s articulated, legitimate concerns; it evidences many other “bad” behaviors all readers have seen for themselves.

Again, “where is this going?” Well we’ve gone there. Take unreasonable positions, if you like, in an effort to reach a mutually acceptable agreement (the only kind that count), but don’t act unreasonably in doing so. Each party to an agreement has legitimate interests to be satisfied. The trading process doesn’t have to be unpleasant in satisfying those interests.

Yes, this is a record for shortness in a Ruminations posting.

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Comments

  1. Ira, in some cases I can clearly distinguish between being unreasonable (i.e. taking unreasonable positions) and acting acting unreasonably (i.e. acting in bad faith). Take the consent standard in assignment or approval situations. “Unreasonable” in this context means that the approving party (the landlord) is acting for subjective reasons (i.e. personal preference) vs. objective ones. That does not mean he is acting in bad faith (saying no because he can). Other than that I find no difference between taking unreasonable positions and acting unreasonably (i.e. bullying). I have sometimes encountered an accusation of being “unreasonable” when the other side happens to strongly disagree with my position notwithstanding the fact that my concerns are legitimate.

    Maybe I live in a bubble but I have found that in dealing with experienced attorneys in negotiations, taking reasonable positions from the outset often gets you to the finish line faster with a balanced lease – experienced attorneys on both sides of the aisle know what that looks like – without the negotiation dance.

  2. Absolutely, Joel. Also, I think that sometimes “acting unreasonably” is a way to hide that you don’t know what you’re talking about. I guess you can call it bluffing, and as you say, maybe once or twice it will work, but then you have to wonder if there is any substance under all that unreasonableness. Life is too short. I prefer dealing reasonably with reasonable people.

    • Well, there is that element also. I have indeed noticed that when the lawyer (or business person) on the other side is not sure of himself/herself, there is a retreat to a position behind the word “No” or “We don’t have to do that because you need us more than we need you”. In these instances, they are afraid to deal with something new and admit at the same time that they are not familiar with the concept. In my first year as a young lawyer at The Gap I ran into a landlord who was immovable on a nitty point. I asked the (then)#2 person at The Gap whether he would yield. His reply to me was that the Landlord was simply being unreasonable and he didn’t deal with unreasonable people. I conveyed that message to the Landlord and we prevailed on the point. I never forgot that lesson.

  3. I agree, too many unreasonable’s equal somebody who does not really know what they are doing.Dealing with someone who does not know what they are doing is not good. I would rather deal with the toughest attorney, so long as they know what they are doing.Two reasonable attorneys/business people will get the deal that both parties want… and a lot sooner and cheaper.

  4. Jim Henegan says:

    By taking very hard or unreasonable positions, you can often get a more advantageous contract for your client. It generally will take longer to negotiate, cost more in legal fees and lost time and will generate ill will from the other side. I doubt that the short term wins in the particular contract or lease outweigh the downside in most instances. How many terms that are insisted on by an “unreasonable” attorney actually benefit the client?

    I was negotiating a Sears Homelife Lease about 20 years ago. I got back comments, made about half the changes and sent a letter detailing 30 open issues. The other attorney called and went down the list and said for each point “Your position is A, my position is B and we should settle on C.” I said “OK” 27 times and on the other 3 I said I would give it to him if I could, but company policy would not allow it. We ended up with a fair lease with only 2 drafts. I would much rather deal with this lawyer than others. It only works if both parties are reasonable.

    Contrast that with another Sears deal I did at the same time where the other attorney sent me handwritten comments to the first 3 drafts of the Lease copied onto 11″ x 17″ paper. The comments filled each page and were as voluminous on the third draft as they were on the first draft, even though we had made numerous changes he requested. The lease was eventually signed, but it probably took 6 drafts and several months to finish. It was a 2 store development. I think we has 3 pages on whether Sears would be bound by future exclusives granted to a tenant of the other store.

    The second Lease was probably “better” for the Landlord, but rent started 2 or 3 months later than it should have due to the time taken to negotiate the Lease. 20 years later I still remember it.

    I still remember the New York lawyer who insisted on 3 pages of condemnation language in a lease of the 35th floor in the Sears Tower. He said he needed to protect his client against a condemnation of the air rights where the 35th floor was. I finally put it in the Lease since I was sure it would never apply, but it wasted everyone’s time.

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