Sometimes, when business people can’t directly negotiate (or re-negotiate) favorable deal terms, they are tempted to withhold a payment or some other obligation in an effort to leverage the other party into an agreement it otherwise would not make.  In-house counsel should be wary of endorsing such conduct, as this could result in exposing their companies to liability going far beyond simply having to lose face and/or doing what they should have done in the first place.  Take, for example, the following scenario:

Acme engaged Alpha as its exclusive manufacturer for widgets and gidgets for two years.  Four months later, Acme tries to negotiate a similar deal with Beta to manufacture didgets, and, if consummated, such a deal would provide Acme with ten times the revenue that the Alpha contract was expected to provide.  While Beta expresses interest, it eventually makes clear that unless it also can manufacture gidgets, there will be no deal.  While Acme tries to buy out of the gidget portion of the Alpha contract so that Acme can give Beta what it wants, Alpha refuses.  Acme’s CEO realizes that the Beta deal is going to fall apart if something does not change quickly, so she … Keep reading