Over the years, I’ve been a party to several business-related lawsuits. Regardless of which side I was on or the eventual outcome, the process was stressful, time-consuming, and costly. It’s an experience I’ve never liked. In addition, the adversarial nature of a court proceeding can leave a legacy of anger and resentment.
This is why I have become a big fan of arbitration and negotiation. Two recent incidents have confirmed the value of talking first and suing later.
One of my friends recently bought a house to rent to his daughter. The day after she and her three kids moved in, the sewer backed up. It turned out that the septic system hadn’t been installed properly. The sellers obviously knew there were problems, because they had compensated with a jury-rigged system of hoses and a sump pump. They had failed to disclose any of this to the buyer.
The solution, reinstalling the septic system, would cost several thousand dollars. Clearly, the sellers bore some responsibility for this. Unfortunately, they had moved out of state. They didn’t respond to the buyer’s phone messages.
Initially, the real estate agent wasn’t much help, either. She had represented both parties under a limited agency agreement, and she interpreted her position to mean she shouldn’t get involved at all in a dispute between the buyer and the sellers.
The buyer was beginning to think a lawsuit was his only recourse. Before going ahead, however, he decided to give negotiation one more try. He talked with the real estate agent’s employer, who convinced the agent it was 
in her best interest to help her clients come to an agreement. She started making phone calls.
The outcome? The issue was resolved within two weeks. The sellers sent the buyer a check for about two-thirds of the cost of the new septic system. The buyer felt his complaint had been heard and that he had been treated fairly. The sellers may not have been especially happy, but they avoided a costly lawsuit. The real estate agent also avoided being named as a party in a lawsuit. In addition, she maintained and even enhanced her professional reputation. By the time everything was finished, the buyer told her he wouldn’t hesitate to use her services again.
My second example involves a used van my wife and I recently bought. It was a great vehicle except for an annoying whistling noise. I was very clear that I would not buy the car unless the whistle was fixed. The salesman said it was a simple problem to solve and they would fix it. They did, supposedly. We bought the car, on the salesman’s assurance that we could bring it back if the problem wasn’t taken care of.
Within a week, the noise was back. Over a period of two weeks, the van was in and out of the shop several times, whistling merrily along each time. Finally, we said we wanted our money back. The dealer refused. The salesman, it turned out, had made us a promise he wasn’t authorized to make. We negotiated—heatedly, at times. Eventually, the dealer gave us our refund even though, legally, he didn’t have to.
The outcome? We aren’t stuck with a whistling van. The salesman learned to make promises more carefully. The dealer made clear he would prefer not to do business with us again. Still, we were left with respect for his integrity in keeping the commitment his salesman had made. And none of us had the stress and expense of a lawsuit.
There are times when a lawsuit is necessary. It’s almost always worth your while, though, to try negotiating first.
