Negotiation - Rapid vs Scott
The Settlement: • Year 1; Rapid to pay cost for equipment and not services ($68,000) • Year 2; Scott to provide 2nd generation “Print Rite”, Rapid to pay original contract amount for year plus at minimum, $12,000 at the end of year (equivalent to $1,000/month) for software application with the following contingency: 1. In case, Rapid increases print volumes by 25% - end of year software charge is calculated at $2,000/month, or $24,000 for the year (Scott’s original price for this version of the software solution) 2. In case, Rapid increases print volumes by 33% - end of year software charge is calculated at $2,500/month, or $30,000 for the year 3. In case, Rapid increases print volumes by > 50% - end of year software charge is calculated at $3,000/month, or $36,000 for the year • Scott to provide additional training on software, and general business management principles to Rapid • Rapid to assist Scott with user interface and software product marketing/development specific to printing industry • Scott will not offer the new software (further developed through the above mentioned marketing/development initiatives) to Rapid’s competitors • Year 3 – Year 5: Revisit contract terms
Preparation – Scott:
Target Point: Get Year 1 paid; find opportunity to increase contract total beyond original amount of $500,000.
BATNA: Litigation
Preparation Brown:
Target Point: $5,150,000
Reservation Point: Total current sunk costs: $2,592,192
BATNA: Litigation
Analysis – Scott: Scott felt that in no way did it violate the terms of the contract. Scott had not been paid for the first year of the contract. However, it became clear early in the mediation that Rapid was not in a good financial state. So, winning a legal battle could ultimately end up being a loss for Scott if Rapid filed for bankruptcy. Both sides agreed that there was a miscommunication regarding the deliverables on the software between the lower level managers.
Preparation – Scott:
Target Point: Get Year 1 paid; find opportunity to increase contract total beyond original amount of $500,000.
BATNA: Litigation
Preparation Brown:
Target Point: $5,150,000
Reservation Point: Total current sunk costs: $2,592,192
BATNA: Litigation
Analysis – Scott: Scott felt that in no way did it violate the terms of the contract. Scott had not been paid for the first year of the contract. However, it became clear early in the mediation that Rapid was not in a good financial state. So, winning a legal battle could ultimately end up being a loss for Scott if Rapid filed for bankruptcy. Both sides agreed that there was a miscommunication regarding the deliverables on the software between the lower level managers.