Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 1

LAB Minor-I

Kuldeep Kumar
Registration No.: 2300332MBS
MBA-SM
1st year (2nd Semester)

Minor-I Exam Submission

Submitted to: Dr. Kavita

TOPIC : Understanding the differences between a business

negotiation and Litigation
Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 2
LAB Minor-I

Understanding the difference between business negotiation

and Litigation

Introduction

When disputes arise, Litigation and negotiation are the most common methods of dispute
resolution. Dispute resolution is the process of resolving conflicts or disputes between
two or more parties. In India, there are various methods of dispute resolution available,
including Alternative Dispute Resolution (ADR) and litigation.

ADR refers to the process of resolving disputes outside of the traditional court system,
through methods such as mediation, arbitration, and negotiation. These methods are
typically quicker and less formal than traditional court proceedings and can be more cost-
effective.

Negotiation is the strategic discussion of issues among the parties to resolve a dispute in a
mutually acceptable way. In contrast, Litigation involves conflict resolution through
formal court processes. So It is important to understand Business negotiation, Litigation
and their advantages and disadvantages of before deciding which route is best.

What is Business Negotiation?

“Negotiation and conversation are the best tools we have for advancing peace and
development,” said Nelson Mandela.

Business Negotiation refers to any direct or indirect discussion between the disputing
parties to resolve the conflict outside the traditional court system. It facilitates a
confidential settlement between the parties without a formal legal judgment on the issues.

Business negotiation can be for a range of items, including but not limited to: employee
compensation, business acquisitions, vendor pricing and sales, real estate leases, and the
fulfillment of contract obligations.

Business Negotiations are usually confidential, meaning only the negotiating parties
would have any knowledge regarding the matter, offers to settle and the settlement terms.
While negotiating, parties can discuss issues candidly without fearing the disclosure of
sensitive and potentially damaging information.

Additionally, negotiation allows the parties to find creative solutions to their legal
problems. They can adopt any settlement terms and negotiate any non-monetary remedy
a court would not be able to award.

The upside to Negotiation

Negotiation is usually the first step in any dispute resolution process. Usually, your
solicitor (a lawyer whose job is to give legal advice, prepare legal documents and arrange
Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 3
LAB Minor-I

the buying and selling of land, etc.) should discuss with you what you may expect from an
early negotiation of your dispute, and give you an idea of what would be reasonable
bearing in mind the cost and time it takes before you can get a Court hearing. Just because
you do not resolve something early on does not necessarily mean that further
negotiations will not be successful. Usually most cases settle but if you settle too early,
you may compromise your position more than you need to.

Engaging a lawyer in negotiation can be extremely valuable. An experienced lawyer will

work through your matter with you and determine what your ‘best alternative to a
negotiated agreement’ (BATNA) is. They will then work with the other side and
vigorously negotiate on your behalf.

Major advantages of negotiations are:

 often a lot faster than litigating

 Cost-Effective: Negotiation is typically more cost-effective than litigation. It involves

less paperwork, fewer legal fees, and a shorter resolution timeline.

 Preservation of Relationships: If your business dispute involves ongoing relationships

with the other party, negotiation allows for a more amicable resolution, minimizing
potential damage to those relationships.

 Control Over the Outcome: The parties are involved actively in resolving their dispute,
and are not leaving it up to a judge, so you can control and decide the outcome and
they can tailor solutions that better fit their specific needs.

 Confidentiality: Negotiations can be kept confidential, preventing sensitive business

information from becoming public.

Downside to Negotiation
It is often said that ‘both parties often walk away from a negotiation feeling like they have
lost’. The reason for this is that in a negotiation, both parties often need to compromise in
order to come to an agreement. Your lawyer will try to ensure that you compromise as
little as possible, but you will usually need to ‘give a little to get a little’.

Disadvantages Of Negotiation
 Power Tactic: It is not always necessary that the parties to negotiations are of equal
stature and power. Therefore, in the absence of a neutral third party the party
whichever is in the position to dominate the other uses the dominance over the
consent of other party and come at an agreement. This leads to an unfair agreement
which is ultimately useless.

 Impasse: Sometimes the difference is and disagreement between the parties may lead
to a deadlock situation. And Impasse situation occurs during the negotiation process
where at any discussion the parties are stand still and cannot have any for the
discussion. This stage is very frustrating when no possible successful outcomes can
happen. This generally happens when any one party is so rigid over its goal that no
middle ground can be achieved. This ultimately results into a walkout situation.
Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 4
LAB Minor-I

 Backing Off: The unsuccessful negotiation leads to creation of bad relations between
the parties along with termination of any business are contractual relations
afterwards. It also happens that sometimes the parties lose confidence in the process
of negotiation as a dispute resolution and consider the other options.

 Not all issues are Negotiable: There are various cases which involve multiple
stakeholders for home negotiation process cannot be made applicable and such cases
can directly go to the court for the decisions.

Some examples of business negotiations:

Mergers & Acquisitions

Tata Steel - Corus (2007): Negotiation between Tata Steel and the UK-based Corus Group
for the acquisition of Corus, a leading steel manufacturer. This negotiation resulted in
Tata Steel acquiring Corus in a landmark deal, making Tata Steel one of the largest steel
producers globally. This landmark acquisition saw Tata Steel, a relatively unknown player
on the global stage, successfully acquire Corus, a larger European steel producer. The
complex negotiation involved cultural differences, pricing strategies, and political
considerations.

Joint Ventures
Maruti Suzuki (1982): This iconic Indo-Japanese joint venture revolutionized the Indian
car market. The negotiations involved balancing the technological expertise of Suzuki
with the market knowledge and production capabilities of Maruti.
The Joint Venture of Maruti Suzuki (1982) is a example of successful business negotiation
for several reasons:

Meeting Needs of Both Parties:

India: Needed modern and affordable car technology to develop its domestic automobile
industry.
Suzuki: Sought entry into the fast-growing Indian market but lacked the experience and
infrastructure to navigate regulations and establish a strong presence independently.

Negotiation Highlights:
Technology Transfer: Negotiations likely involved discussions on the level of technology
transfer from Suzuki to Maruti, ensuring Maruti could eventually produce cars
indigenously.
Production Sharing: Agreements on production facilities, component sourcing, and profit-
sharing would have been key negotiation points.
Market Knowledge: Suzuki likely negotiated for Maruti's commitment to utilize their
market knowledge and distribution network effectively.
Government Regulations: Negotiating the joint venture structure and navigating Indian
regulations for foreign collaboration would have been a crucial aspect.

Successful Outcome:
The Maruti Suzuki joint venture became a front-runner in the Indian car market,
benefiting both parties.
This success story showcases how effective negotiation can lead to a mutually beneficial
outcome.
Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 5
LAB Minor-I

What is Litigation?

Litigation is the process for individuals to resolve disputes by suing through the courts.
Individuals usually litigate in hopes of a higher damages award and to have their day in
court. The court may also award legal costs to a successful party on a partial indemnity
(some costs) or substantial indemnity (most costs) basis.

The upside to Litigation

Though litigation is often seen as a last resort, it is sometimes necessary to resolve
disputes. Where parties have attempted negotiations but cannot come close to a
resolution, litigation can serve two purposes.

1. In some cases, starting litigation makes the situation very real for both parties. It is
common for parties to only really start negotiating once litigation has commenced.
This may seem counter-intuitive, but the fear of having a judgment made against a
party can nudge them towards a compromise.

2. When compromise is not an option, litigation will provide a binding resolution that
both parties must follow. The judge will make a decision taking into account all the
facts, commercial sensibility and if there are children involved, what is in the best
interests of the child.

Whether you are seeking the first or second outcome above, an experienced lawyer is a
must for successful litigation.

Advantage of Litigation
 Legal Resolution: Litigation offers a legally binding resolution to a dispute. The
court's decision is enforceable by law.
 Access to Legal Remedies: In cases where negotiation fails to yield a fair resolution,
litigation ensures access to legal remedies, including monetary damages and court
orders.
 Discovery Process: Litigation allows for a thorough investigation of the facts and
evidence, which can be particularly beneficial in complex cases.
 Precedent Setting: Court decisions can establish legal precedents that may influence
future cases.

The downside to Litigation

In Australia we have an adversarial litigation process. This means that both parties’
lawyers put forward their best case to the court and based on the facts presented, a judge
will decide the outcome. It is important to remember that judges are humans. Their skill
level, experience with previous matters and personal judgment will determine how they
view the case, and always carries a level of unpredictability. This is called ‘litigation risk’.
A good lawyer will never tell you that you have a 100% chance of winning a case.
Regardless of how strong your case is, there will always be a chance that judgment is not
made in your favour.

Litigation is also a costly and time-consuming process. Not only do you need to pay your
solicitor’s fees, you may also need to pay barristers’ fees and court fees. In the worse case
Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 6
LAB Minor-I

scenario, you may also be required to pay the other parties’ costs. Court schedules and
deadlines can also mean that disputes are not resolved for several months, and
sometimes years.

Some Classic Example of Business Litigation:

Satyam computer scam

The Satyam Computer scandal, also known as India's Enron scandal, involved fraudulent
accounting practices and misrepresentation of financial statements by the top
management of Satyam Computer Services Limited, one of India's largest IT services
companies.
In the case of Satyam, after the scandal came to light, legal proceedings were initiated
against the company's executives and auditors, leading to criminal charges and civil
lawsuits. This scandal is a classic example of business litigation.

Here's why:
A) Litigation refers to a legal proceeding where a dispute is settled in court by a judge or
jury.
B) Negotiation involves two or more parties working together to reach a compromise or
agreement outside of court.

In the Satyam scam, the company's founder admitted to fabricating financial results. This
resulted in legal action being taken against him, which is characteristic of litigation.
Negotiations might have been possible if the discrepancies were identified and addressed
before going to court, but that wasn't the case.

Ratan Tata - Cyrus Mistry Case

The dispute between Ratan Tata and Cyrus Mistry, which emerged from Mistry's ousting
as the Chairman of Tata Sons, is seen as a business litigation because following Cyrus
Mistry's removal as Chairman of Tata Sons in 2016, Cyrus Mistry filed a legal petition
against Tata Sons and its board members, alleging oppression and mismanagement of
minority shareholder interests. This legal action initiated a prolonged legal battle
between the two parties. The case was heard in various courts, including the National
Company Law Tribunal (NCLT) and the Supreme Court of India, indicating a significant
aspect of business litigation.

So which one to choose, Business Negotiation or Litigation ???

Each case is different. Both litigation and negotiation have their relative strengths and
weaknesses. Using the strength of both processes to overcome their individual
weaknesses can help resolve disputes effectively so its very important for us to
understand whether to go for negotiate, litigate or both.

Typically, it makes sense to stick to one out-of-court process at a time, and hopefully our
first attempt at alternative dispute resolution specially Negotiation does the trick. But if
not, you can always move to another process, including litigation.

In the legal world, success doesn’t always equate to courtroom victories. Resolution, cost-
effectiveness, and preserving relationships are often better achieved through dialogue
Kuldeep Kumar Understanding the difference between a business negotiation and Litigation Page 7
LAB Minor-I

and negotiation. By understanding the nuances of the legal process and considering
alternative avenues, individuals and businesses can navigate their legal challenges with
wisdom and efficiency.

It is important to understand that we can continue in a non-litigation process at the same

time a litigation is pending. In fact, courts encourage these continued efforts to resolve
the issues out-of-court, even as the court process unfolds. Think of negotiation and
litigation as running on parallel tracks. They are separate and distinct processes, but they
are connected, and one process often can impact another, ideally in a way that benefits
your position and hastens resolution.

Most dispute resolution processes involve negotiation. It is also common to start with
negotiation and end in litigation.

Negotiating benefits both parties Litigation usually results in a winner & loser

References:

 https://kalickicollier.com/negotiating-vs-litigating-
2/#:~:text=Negotiating%20vs%20Litigating%3A%20Procedure%20and%20Process,-
Litigation%20usually%20results&text=While%20in%20some%20cases%20negotiation,heavily%20fa
voring%20a%20specific%20party.

 https://achkarlaw.com/is-negotiation-better-than-litigation/

 https://www.linkedin.com/pulse/litigation-vs-negotiation-flo-mitchell

 https://www.weisberglawoffices.com/blog/2023/november/negotiation-vs-litigation-choosing-the-
right-pat/