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Swallow your pride and do a deal

There are definitely times when it’s better to settle the matter and put it behind you,
rather than spend time, effort, and possibly professional fees, in fighting a lost cause, says Barry Ashmore.

THIS may be a very tough piece of advice to follow, but trust me, I’ve seen many times when a client didn’t do a deal and walk away from a difficult situation, only to live to regret it later. Doing a deal can come in many forms and be applicable in many situations.

Don’t misunderstand, I’m not advocating that every time you hit a problem, you go weak at the knees and cave in. Ask any of my clients whether or not I give up in a difficult situation.
However, there are definitely times when it’s better to settle the matter and put it behind you, rather than to spend time, effort, and possibly professional fees, in fighting a lost cause. This can be painful, but it’s less painful than incurring extra pain to end up with the same result or worse several months later.

It’s not always easy to look at the situation objectively. It’s easy for advisors, like me, who aren’t directly involved in the problem and it’s not our money that’s at stake. But you must do your best to analyse the situation from a totally objective point of view. This may be even more difficult if the problem involves a specialist subject area such as the law, which is something with which you are not familiar. Let me give you an illustration.

This concerns a specialist contractor who had been negotiating with the main contractor over the last £70,000 of his £420,000 account. The situation dragged on and the main contractor made my client an offer of around £20,000 to settle the matter. My client thought that this was simply not enough and asked me to get involved.

An objective analysis of the situation revealed that the problem was far from straightforward.
Despite having been asked for details of various variations, my client had failed to provide them.

Some of the variations had been revalued by the main contractor using rates which didn’t bear any resemblance to anything submitted by my client.

There were issues regarding extensions of time and each party blamed the other for not finishing the works on time. There was also an issue over the deduction of a £20,000 discount allegedly agreed at the outset of the project.

Having discussed it with various people within my client’s team, it was obvious that it was going to take a lot of work to get to the bottom of each issue. It was one of those situations where it was impossible to predict the outcome until you had really got to grips with the details. This takes time which, of course, costs money and ties up the client’s personnel.

We decided to have a meeting with the main contractor to try and resolve the situation. This was a useful meeting, if only to air each of the issues and for each side to understand what would be required to unscramble the problem. Subsequently to the meeting, the main contractor made a further offer to settle at £30,000 but steadfastly refused to
go higher.

My client decided he’d put this offer to the directors of his company to see if they would accept it. Somehow, this process took several more months but finally the directors agreed they’d accept the £30,000.

When my client went back to the main contractor, he was in for a very nasty surprise. In the absence of any response to his offer, the main contractor had assumed my client was preparing for adjudication. This had led him to go away and take professional advice from a construction contracts consultant like me.

Having taken advice, the main contractor’s position had now changed substantially. Rather than having been advised to pay the £30,000, he had been advised that he should pay nothing. In fact, he had been advised that he had a valid claim against my client and that my client owed him £30,000!

An objective or helicopter view
As I’ve said above it’s not always easy to look at any given situation objectively, but you must do your best to divorce yourself from the details and take what some call a helicopter view. If you’ve ever watched ‘Dragon’s Den’ or ‘The Apprentice’ you will have seen the Dragons or Lord Sugar talk about taking a step back or looking at the issue with fresh eyes, or taking a helicopter view. What they are referring to is trying your best to look at the problem as if you had never been involved and looking at the bigger picture.

In the unfortunate example above, my client had become hung up on the numbers and he believed they were right without having any objective analysis to support that view. It’s a common problem but one I would encourage you to avoid.

Similarly, you need to think about all the other factors that might come into play. Such as, how much will it cost to recover what you think you are owed, how long will it take, and in today’s uncertain times, will the main contractor or client be around to pay out even if
you win?

As I said, I’m not advocating that you go all weak at the knees and cave in every time things get tough, but you need to be sure you’re taking the right course of action, because getting it wrong can have serious consequences.

As always, our consultants are on-hand to provide advice and assistance with all your commercial, contractual, and business problems, so don’t hesitate to get in touch.
01773 712116
Barry Ashmore is managing director and
co-founder of StreetwiseSubbie.com

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