The Bullard Houses Agency And Ethical I

Topics: Ethics, Law, Negotiation Pages: 21 (902 words) Published: December 4, 2014
Ethics and Agency Issues in
Negotiation

Prof. Sungu Armagan

“Bullard Houses” Negotiation

DOWNTOWN, Inc.

Downtown Reality
seller representative

ABSENTIA, Ltd

Jones & Jones Reality
buyer representative

2

Ethics and Agency Issues

“Bullard Houses”

3

Agreements on board

4

seller

buyer

BATNA
rp

interests

5

Instructor version

Going through agreements on board

6

Instructor version

Bargaining Zone

7

Instructor version

Debrief

8

Instructor version

Debrief

9

Is it ethical.....
... to hide your Rp? Your BATNA?
(traditional competitive bargaining)
…to make an opening demand that is far greater than you hope to settle?
(traditional competitive bargaining)
…to threaten to go on strike/walk when you don’t plan to do so? (bluffing)
…distort information?
(misrepresentation)
…convey impression that you have no authority to make
decisions when you actually do?
(misrepresentation)
…only disclose information that supports your side?
(selective disclosure)
…to lie?
10
(falsification)

Is it legal?


No general duty of “good faith” in negotiation
“In a business transaction both sides presumably try to
get the best deal. That is the essence of bargaining and
the free market… No legal rule bounds the run of
business interest. So one cannot characterize self-interest
as bad faith. No particular demand in negotiations could
be termed dishonest, even if it seemed outrageous to the
other party. The proper recourse is to walk away from the
bargaining table, not sue for “bad faith” in
negotiations.” (US Court of Appeals, 7th Circuit)

11

Is it legal? Facts, intentions, and opinions


Reservation prices and weighting of issues are not
material to a negotiated deal
“Estimates of price of value place on the subject of a
transaction and a party’s intentions as to an acceptable
settlement of a claim” are not materials facts for purposes of the rule prohibiting lawyers from making false
statements to a third person” (Model Rules of Professional Conduct for US Legal Profession)



Lies about BATNAs can be material and subject to
litigation



Example – Commercial landlord
Example – Oklahoma case
12

Is it legal? Knowing, misrepresentations, and
non-disclosure


The common law definition of fraud requires that a
misrepresentation must be made knowingly (but willful
shielding from material information does not exculpate the
individual – i.e., refuse to see company reports to maintain stance that company is in financial health)



In general, law requires a positive mis-statement to be made before attaching liability to fraud



Seller generally has greater burden of disclosure than buyer 

Seller must disclose if termites in house. But, buyer does not have to inform seller if there is newly found oil on property. Or, employer must inform prospective employee of potential plant closing

13

Factors that encourage use of unethical
tactics


Own motivations - maximize self-interest



Own perceptions of what’s ethical and fair



Expectations of what the other party will do



Perceived justifiability



Uncertainty/ambiguity



No expectation of future interaction



Social forces - acting as agent, member of group,
following directions...



Perceived ability to “get away with it”

14

Avoiding ethical traps


Have a personal standard for dealing with ethical problems
in negotiation



Recognize the limits of your standard and the implications of failing to follow your standard



Be prepared in advance with an answer to a question you
don’t want to or can’t answer



Be alert to issues of trust, especially the trap of “hearing what you want to hear”



Be prepared for misunderstandings (make sure you clarify
issues and double-check terms of agreement)
15

Different ethical standards - some
examples
...
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