Contract Negotiations: “A Sophisticated Ballet Often Ending in Mid-Pirouette”

Negotiations of the type I mediate on a regular basis are rarely the subject of appellate opinions — at least not the part of negotiations we call the “dance.”

Having stumbled across this opinion while searching for something else, I couldn’t resist the pulll of posting it here — both for my readers’ enjoyment and, frankly, using the blog as my own personal filing cabinet for some of my favorite appellate opinions (yes, I am a geek!).

The prose below is from Judge Barbara Johnson’s dissent in a transactional legal malpractice case that made its way up to and then back down from the California Supreme Court.

Enjoy!

From Viner v. Sweet (2004) 117 Cal.App.4th 1218, 1251-1252.

Contract negotiations are fluid events. Offers and counteroffers, and counter-counter offers, and counter-counter-counteroffers, etc., typically flow back and forth across the table. It is a sophisticated ballet often ending in mid-pirouette or even mid-leap-when the contract is finally signed. But if one side of the negotiations stops the dance too soon, only because their lawyer promises them they have the very terms they told him they wanted despite the fact they don’t, that side should not be foreclosed from suing their lawyer for his malpractice. It is one thing if the lawyer only misjudges when the deal is at the optimum for his clients. It is entirely different when the lawyer misrepresents the terms of the deal-as the evidence indicates happened here-and thus leads his clients to sign a bad contract. 

Under this third scenario, whether the plaintiff would or would not have been better off with “no deal” than the deal they got is simply irrelevant. Also irrelevant is whether they could have obtained the exact deal they wanted and thought they had. The real question is whether they could have gained a better deal than they ended up with, had the negotiations continued. In most instances under this third scenario, it will not prove to be quite as good a deal as they thought they had. That is, to gain some favorable contract language important to them, they may well have to give somewhat on other contract terms. But almost certainly it will be a “better net deal” than the one they mistakenly signed.

If juries are capable of deciding Lightstone would or would not have accepted terms more favorable to the Viners, they certainly can be entrusted with the determination whether Lightstone would have accepted those terms if the Viners had offered new terms on other issues, which terms were more favorable to him. Cross-examination often would prove especially revealing-as someone in Lightstone’s position was exposed to a succession of questions about what changes in the Viners’ position on certain contract terms might have caused him to alter his position on other terms.

For instance, had the Viners offered to reduce the price of purchasing their stock by $250,000, would Lightstone have been willing to modify the ambiguous language in 1.10 that arguably prevented them from pursuing movie and television deals with Dove authors and readers? How about if they cut the price by $500,000? How much did Dove’s earnings increase because of the existence of that language in 1.10? Furthermore, beyond cross-examination of this nature, other testimony and circumstances also could point in the same direction. If the negotiations had not stopped in mid-stream because Sweet erroneously told the Viners they had already “won,” further negotiations would have been possible and would have led to a more favorable contract (perhaps to both sides) than the one they signed.

                       

Victoria Pynchon

Attorney-mediator Victoria Pynchon is a panelist with ADR Services, Inc. Ms. Pynchon was awarded her LL.M Degree in Dispute Resolution from the Straus Institute in May of 2006, after 25 years of complex commercial litigation practice, with sub-specialties in intellectual property, securities fraud, antitrust, insurance coverage, consumer class actions and all… MORE >