Law assignment on formalizing a planning document and negotiation between the buyer and the seller
Task: Briefly create a planning document for each side, Lindsey Oil Representative and the Lindsey Oil station owner, and identify the bargaining zone. Can you discuss in the law assignmentall the issues prevailing in the agreement between the buyer and the seller?
1. Planning document for each side in the law assignment
Negotiation planning for Lindsey Oil Representative:
Lindsey Oil Company is an established petroleum refining organization having several service stations dotted across the territory. The company in thelaw assignmenthas decided to add over 100 new stations as its five-year propaganda. So, it is exploring various options to expand the network and comes across the proposed service station on the route leading to Mumbai port. The owner of the service station in the law assignmentis trying to sell the property as he and his wife are gaining and not cope up with the rising competition in the market. Accordingly, Lindsey Oil Company is negotiating with the owner in terms of price and conditions to buy the service station.
Substantial issues in negotiation –
Lindsey is quite interested in having the proposed property but it needs upgrading to live up to the market standards. Though the operation of the service station is runningwell as per the law assignment, it needs an overhaul. For this, adequate investment is necessary to have modern equipment in the station and construct a mini-mart for generating supplementary income. Again, the owner is asking for INR. 2 crores which seems to exceed the budget of the company. Further, there is another service station at an interval of one kilometer making it a competitive zone as per the law assignment.
Reservation price –
The reservation price in negotiation is a significant aspect representing the highest worth that the buyer is willing to deliver to the seller(Santamaria, Paolone, Cucari, & Dezi, 2021). Accordingly, Lindsey Oil Company has around INR. 1.6 crores in mind to make the deal. It is the maximum that the firm can afford as they need to invest further in the service station to upgrade it. The company as per the law assignmentought to stick to it as it is a competitive market and another service station is just a kilometer away.
Target price –
Lindsey Oil Company has a budget worth INR. 1.6 crores to buy the service station put up for sale. But the company cannot afford to pay off the entire amount to buy the property alone. The service station as per the law assignmentneeds an overhaul like having modern equipment and the constructionof a mini-mart to increase the footfall on the station(Verschoor, 2016). The company must survive in the competitive market. Thus, it is better to settle the deal within INR. 1.45-1.5 crores. It will help the company to save some portion of the budget and exploit it to upgrade the facility.
BATNA or the best alternative to a negotiated agreement, in this case, will be to buy a vacant plot and inculcate a new service station right from the scratch. The new service station as per the law assignmentwill be entirely modernized with modern equipment along with a mini-mart. Herein, the passersby may visit and spend time making it a favorite travel joint(Généreux, et al., 2021). The phenomenon will help Lindsey Oil Company to earn supplementary income. But it will cost around INR. 2 crores that exceeds the company’s budget.
Interest to the buyeras per the law assignment–
The deal to buy the service station along the route to the Mumbai port will be quite feasible for Lindsey Oil Company. The organization according to the law assignmentis on a spree to expand the network and having a readymade service station at abusy route is an attractive proposition. By having the service station, the company can mark its presence along the route to Mumbai port, one of the busiest ports in India. It is hectic and time-consuming to erect a completely new service station from scratch while there is an existing facility that can be upgraded(Benetti, Ogliastri, & Caputo, 2021). So, it is a good business opportunity for Lindsey to grab on.
Negotiation planning for the seller:
The independent service owner of a particular service station is finding it difficult to run the service station and decided to sell off the facility. According to the law assignment, the owner is looking for a prospective buyer for his property to transfer the ownership at a suitable consideration. The owner is planning to use the proceeds to go on a global voyage along with his wife.
Substantial issues in negotiation –
The owner in the law assignmentis quite eager to sell off the service station but is not able to find a suitable buyer. He advertised for it in the newspaper as well asin the national professional journal of service station owners. But could not get any suitable buyer and so far, the best offer he got was for INR. 1.4 crores. The owner is planning for a voyage holiday for two years costing around INR. 1.8-2 crores. He plans to fund his trip from the proceeds but the price he is being offered is not suitable to cover the required expenses.
Reservation price –
The owner in the law assignmentpursues the dream to sail on a voyage along with his wife. To pursue his dream and cover all the costs associated with it, the owner needs around a sum of INR. 1.8 crores. It is the minimum price that the owner is quoting for the property that is located en-route the major way to Mumbai port(Filo, Fechner, & Inoue, 2020).
Target price –
The owner in the law assignmentwill be in a comfortable position if he asks for INR. 2 crores. The aforesaid amount will not only take care of his dream voyage but also help himtoretain some liquidity for a peaceful retired life(Šimonová, entéš, & Beles, 2019). So, it will be favorable for the owner to start negotiation with the Lindsey Oil Company and transfer to them the ownership against a suitable consideration.
In this case, the owner may wait further to explore the market for a prospective buyer who can fetch them the required INR. 2 crores. He can again run advertisements in the prime daily newspapers or business journals the likes of the national professional journal of service station owners(Vasileiou, 2021). He can also hire agents against commissions to get the prospective buyer. Or else as per the law assignment, he can accept the offer of INR. 1.4 crores made by the former manager of an Indian oil company.
Interest to the seller –
The seller should keep in mind that Lindsey Oil Company is an established company and if he sells it to the firm, he can be assured of safe transfer of the possession. The company will not delay the settlement as they have the requisite affordability to buy the service station, unlike other prospective buyers(Santamaria, Paolone, Cucari, & Dezi, 2021). Moreover, the company as per the law assignmentis also keen to buy the property. Hence, it will be favorable to the owner to start negotiation with the firm at the latest to get the best deal in the market.
2. Agreement issues between the buyer and the seller according to the law assignment
Lindsey Oil Company is interested in the individual service station enroute to the Mumbai port. The facility will help the company to lay a step forth ahead of its five-year plan to add 100 more service stations. It is wise to have a well-managed existing service station in its portfolio like the one in the law assignment. It will be difficult for the company to look for a vacant plot and establish a service station from the scratch. The cost is supposed to be around INR. 2 crores while the company can buy a running service station at a comparatively lower price. Of course, the company can invest in the project to upgrade the facilityforadditionalreturns.
Again, the seller used to operate the service station along with his wife without the help of any staff. They worked hard to save and sail for a dream voyage that will cost around INR. 1.8 crores. To pursue the dream as per the law assignment, the seller decided to sell off the service station that he is running with his spouse. Again, both of them are in their 50s which is a trouble for them to run the errands of the facility. Besides their competition in the market that will gradually outdate them in the evolving market. So, they should sell off the facility to a prospective buyer like Lindsey Oil Company.
Agreement issues between the parties –
Lindsey Oil Company has a budget of INR. 1.6 crores to buy the existing service station while the owner has a price band of INR. 1.8-2 crores in mind. The company believes that it cannot go above the yardstick of INR. 1.6 crores as the facility needs an overhaul. For instance, the oil company will provide a new look to the facility by equipping it with modern machinery to serve the customerswell. The company as per the law assignmentalso plans to have a mini-mart for the passersby to convert it into a popular hotspot en routeto Mumbai port(Vasileiou, 2021). So, the company is reluctant to revise the price upwards rather it may try to have the settlement within the range of INR. 1.45-1.5 crores. Similarly, the owner has plans to pursue selling off the service station. Since he will be off on a prolonged global voyage. Accordingly, he has worked out a financial plan that will require around INR. 1.8 crores for the purpose. The owner is proposing the service station as per the law assignmentat a worth INR. 2 crores but is not able to fetch a customer who can pay such a lump sum. The best offer he came across was around INR. 1.4 crores which are quite lower than his expectation. Meanwhile, the owner came across the offer by the corporate, Lindsey Oil Company. Still, he is not able to satisfy his expectation as the company is not ready for the whopping prize of INR. 2 crores. Thus, there is an acute disagreement between the seller and the prospective buyer concerning the price of the deal.
An integrative deal between the parties –
The deal is important for both parties. Lindsey Oil Company needs the servicer station to establish its presence along the route to Mumbai port. Through this facility, the company can encase the opportunity to attract the transports plying to the nearby port. Moreover, it will constitute part of the company’s 5-year plan to add 100 such service stations. Again, the owner is not in a suitable state to run the service station due to his advanced age and growing competition in the market. Further it can be stated in the law assignment, he is planning to pursue his dream voyage but yet to come across a suitable buyer. It will be favorable for both parties to come to a suitable agreement to go ahead with the deal.
Lindsey has a maximum budget of INR. 1.6 crores whereas the owner is expecting a whopping amount of INR. 2 crores. The company is trying to get the deal done within INR. 1.45-1.5 crores as it will convert the service station as a modern outlet. So, the company is trying to save some amount of the budget while the owner is planning to fund his voyage by selling the facility for INR. 2 crores. In such a scenario, both parties need to compromise to have the deal successfully. The law assignment calls for a downward revision of the price by the seller as he is not in a position to ask for such a whopping deal(Filo, Fechner, & Inoue, 2020). His service station seems to be outdated as compared to other outlets in the neighborhood.
Thus, the owner should agree on the deal for INR. 1.6 crores that are the maximum that Lindsey Oil Company can offer for the service station. As per the law assignment the firm needs the service station to attract the transport playing to the Mumbai port. It will cost the company more if they buy a plot and construct it, this will also be a time-consuming process(Santamaria, Paolone, Cucari, & Dezi, 2021). So, the corporate should seal the deal for INR. 1.6 crores.The aforesaid amount in the law assignmentwill be acceptable to both the parties as it is the best option available to them in the current scenario.
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