The consultant might have been more fortunate if she had offered a conditional contract. It would have proposed, for example, not to charge a fee for its work if the client had agreed to pay the consulting firm 25% of the amount of more than $100 million it had received when the division was sold in two years. Such a proposal would likely have convinced the client that the consultants had confidence in their rotation plan and were negotiating in good faith, which removed a significant obstacle to an agreement. The consulting firm did not even consider such a proposal because, as one of its partners said, “We don`t do that.” But if the company had known that its advice was good, it could have earned a considerable amount of money with the quota contract, both for itself and for its client. To mitigate this risk, catalogue distributors and manufacturers often implement a form of quota contracts called “safeguard agreements.” The distributor agrees to purchase a number of units and the manufacturer undertakes to deliver part of the order before the catalog is sent and to retain the rest as backup units. After observing the rate of sale, the distributor has the option to purchase the rest of the order at the initial purchase price. Or, if the expected sales do not occur, the merchant can cancel the rest of the order and pay an agreed fine for the backup units. The negotiation dynamics that have taken place between the producer and the chain are common in business. Two parties with common interests fail to reach an agreement – on a sale, a merger, a transfer of technology – because they have different expectations for the future. Both are so confident in their forecasts or so wary of the other side`s prognosis that they refuse to compromise. During the negotiations, differences dominate discussions and common interests are out of sight. Think of the case of a large U.S.
apparel company that had entered into a contract to purchase a large quantity of sweaters for the upcoming fall season from a foreign manufacturer.