Negotiations comes from the Latin neg (no) and otsia (leisure) referring to businessmen who, unlike the patricians, had no leisure time in their industriousness; it held the meaning of business (le négoce in French) until the 17th century when it took on the diplomatic connotation as a dialogue between two or more people or parties intended to reach a beneficial outcome over one or more issues where a conflict exists with respect to at least one of these issues. Thus, negotiation is a process of combining divergent positions into a joint agreement under a decision rule of unanimity.
Negotiations are strategic discussion that resolves an issue in a way that both parties find acceptable. In a negotiation, each party tries to persuade the other to agree with his or her point of view.
In advance of the negotiations, participants learn as much as possible about the other party’s position and what the strengths and weaknesses of that position are, and are prepared to defend their positions and counter the arguments the other party will likely make to defend their position.
Many offers that people assume to be firm and final are actually flexible. For example, negotiation can be used to reduce debts, mortgages, to get a better deal on a car or to improve the conditions of a contract. Negotiation is an important skill when accepting a new job. Often, the employer’s first compensation offer is not a company’s best offer, and the employee can negotiate for higher pay, more vacation time, better retirement benefits and so on. Negotiating a job offer is particularly important because all future increases in compensation will be based on the initial offer.
Key Factors in Negotiation
There are understood to be seven elements or factors that come into play in successful negotiations:
– Who the parties are in the negotiation and what their interests are. What is the background of all involved and how does that affect their position in the discussion?
– The relationship of the parties and their intermediaries in the negotiation. How are the parties connected and what role does that play in the terms of the negotiation process?
– Deciding how best to communicate the needs of the parties involved in order to secure their agreements through negotiation. What is the most effective way to convey the desired outcomes and needs? How can the parties be certain they are being heard?
– Outlining whether there are any alternatives to what either party initially wants. If a direct agreement is not possible, will the parties need to seek substitute outcomes?
– What options may be possible to achieve an outcome. Have the parties expressed where there may be flexibility on their demands?
– The legitimacy of what each party requests and promises. What evidence do the parties offer to substantiate their claims and show their demands are valid? How will they guarantee they will follow through on the results of the negotiation?
– The amount of commitment required to deliver the outcome of the negotiations. What is at stake for each party and do the negotiations consider the effort that will need to be made to achieve the negotiated results?
What is Negotiable?
Negotiable is used to describe the price of a good or security that is not firmly established. It is also used to describe a good or security, such as cash, whose ownership is easily transferable from one party to another. Other words used to describe negotiable are marketable, transferable or unregistered.
You often hear the term negotiable used in reference to the purchase price of a particular good or security. The asking price is not set in stone and can be adjusted depending on the circumstance. Most securities are negotiable; they can be easily transferred from one party to the next, provided all proper legal documentation is included.
In the world of finance, negotiable refers to a legal document or instrument that is used in lieu of cash. It is used to make a promise of payment, generally cash flow(s), at some point in the future. In context, the word negotiable implies a cash value and comes with specific instructions about the timing of cash flows to be paid. The term negotiable is used to suggest the document or financial instrument comes with the same faith legal backing as cash under the law.
Characteristics of a Negotiable Instrument
For a piece of paper to be as good as cash, or negotiable by law, it must be a written document signed by the entity drawing on the instrument. This is what makes it marketable or transferable. It must also have an explicit order or promise to pay and state a specific amount of money. Negotiable instruments contain an unconditional promise to render payment for an exact sum. The agreement also provides instructions on timing, such as on demand or some time in the future, and must be made out to a specific person or entity. That said, if the instrument does not have a date, it does not impact its negotiability.
Negotiable instruments can be exchanged or transferred, and they often involve a financial component. For example, a check would qualify as a negotiable instrument, as it can be presented to a financial institution in exchange for actual currency. Funds in physical currency, such as dollar bills, are considered to be negotiable instruments, as they can be easily exchanged between parties.
Types of Negotiable Instruments
There are several types of negotiable securities, such as checks, time drafts, sight drafts and trade acceptances to name a few. A check is the most commonly used draft that orders a bank to make an amount payable on demand. A time draft makes the demand for payment at some time in the future. This is an example of a negotiable instrument known as a certificate of deposit. These can be easily bought and sold between different parties. A sight draft is payable when presented, and a trade acceptance is used between buyers and sellers of goods. The buyer accepts the draft, signs it and returns it to the seller.
What is Non-Negotiable?
An item can be considered non-negotiable if one party involved in a transaction is not willing to make any changes to a condition that has been set in place. This can refer to the price for a particular good or service, an element within a contract, or a financial product that cannot be exchanged or transferred to a new owner, even through the use of secondary markets.
When an asking price is considered non-negotiable, it means that you cannot try to change the price; it has been firmly established. When one party sets a non-negotiable price, the option to attempt to negotiate has been effectively removed by the first party’s unwillingness to participate in such a conversation.
In regards to securities, if an asset is referred to as a registered security, its price cannot be changed. This can apply to savings bonds, as they have a specified face value, or par, and cannot be negotiated to any other value.
Non-Negotiable Contract Elements
A contract may involve certain non-negotiable tenants. In the cases of leases on rental properties, the amount due as payment may be considered non-negotiable, as it is often a fixed price that must be provided by the tenant to the property owner.
Non-Negotiable Financial Products
Securities and products that are considered non-negotiable cannot be transferred from one party to the next and thus are typically illiquid. An example of a non-negotiable instrument, also referred to as a non-marketable instrument, would be a government savings bond. These can only be redeemed by the owner of the bond and are not allowed to be sold to other parties. These are also known as registered securities, non-marketable or non-transferable securities.
Negotiating with Funders
Negotiations with corporate funders for better terms, rates, and conditions, is ill advised. Think of it this way. A friends ask you to lend him some money which he will only accept on his terms. Ludicrous, right? But it happens every day and funders don’t appreciate it. They who have the money dictate the terms. Negotiating with funders is the best way to have your funding application declined.
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