How to start a settlement negotiation

I remember when I first got started buying and renovating apartment buildings, a broker told me that if you haven’t been sued yet, you’re not really in the business. Fortunately for me, I’ve avoided being sued so far.

But that doesn’t mean I haven’t had to discuss settlements with people. Everyone once in a while, in business, someone wrongs you or you wrong someone and you need to come to some kind of agreement about making things right.

But there’s a problem when you want to talk to someone about a settlement: How do you go about doing so without giving them ammunition to use against you in court if the settlement talks don’t work out?

I asked this question recently to my lawyer, Bob Levinson (who I highly recommend, incidentally) and this is what he told me (Disclaimer: The following is not legal advice and should not be relied upon. Consult your own lawyer!): Settlement negotiations are not admissible as evidence.

What this means in practice is that, if you clearly label a communication with the other party as a settlement offer, they can’t throw it back in your face as a tacit admission of guilt during a trial.

It’s very reasonable, if you think about it. It’s almost always in everyone’s interest to settle cases before they go to court, because it saves everyone money and time. The law doesn’t want to do anything to make it more difficult to settle. Quite the contrary; the law wants to encourage you to settle. So, the law protects either party that makes an offer to do so, in order to help get the ball rolling.

Every once in a while, in business, you run across something that’s well thought-out and reasonable and it makes you smile. This is one of those things.