In the process of debt recovery in general and specifically in the construction industry, negotiation is an approach for debt recovery. However, not all negotiation processes can yield the best results for businesses. In the following article, TNTP lawyers will provide insights into whether negotiation for debt recovery in the construction industry is effective.

1. What is Negotiation?

Negotiation is the process in which parties involved in a dispute engage in exchanges to understand, settle, compromise, and resolve differences to find a common solution to the dispute without the assistance or judgment of any third party. Among the methods of dispute resolution, negotiation is considered a common and easily implemented method when all parties have the willingness to resolve the matter. Similarly, in debt recovery in the construction industry, negotiation is an effective method that businesses should consider using.

2. Characteristics of Negotiation

a) Can Only Be Conducted Based on Voluntary Spirit, Goodwill, and Cooperation

The first characteristic of negotiation is that all parties involved must have the willingness to resolve the matter. Goodwill is demonstrated when parties can collectively exchange ideas and requirements based on a balance of interests among all parties to find the optimal solution. If any of the parties lack voluntariness and goodwill, negotiation cannot take place.

This is a fundamental difference between negotiation and other dispute-resolution methods. Negotiation is not simply one party making demands of the other; it involves both parties exchanging ideas to agree on the best solution for both. In this process, both parties must accept that the other party’s interests must be balanced with their own, rather than one party gaining an advantage while the other suffers a disadvantage. Therefore, negotiation can be either difficult or easy depending on the attitudes, expression of viewpoints, and interests of the parties involved.

b) Has Many Advantages Compared to Other Dispute Resolution Methods

• Not bound by legal procedures or third parties. Since only the parties involved in the dispute participate, negotiation is an effective and flexible method for debt recovery.
• Because it involves only the disputing parties, negotiation is a highly confidential method of debt resolution, especially when a successful negotiation does not harm the dignity, reputation, or cooperative relationship between the parties.
• It is cost-effective and does not incur fees or expenses compared to litigation or dispute resolution in commercial courts/arbitration. Any costs, if incurred, only involve travel and expenses agreed upon by the parties and are not subject to legal regulations.
• The resolution process is rapid if the parties can agree on a resolution plan. Debt repayment can occur immediately after the parties sign a mutual agreement to settle the debt.

3. Limitations of Debt Recovery Negotiation

Despite the many advantages of resolving disputes, debt recovery negotiation has some limitations, including:

• A mandatory condition is that all parties must have the willingness to resolve the matter; otherwise, no settlement agreement can be reached.
• The agreements reached in the negotiation process do not have enforceability and depend on the voluntary compliance of the parties. Therefore, if one party is not willing to honor the agreement, it can render the agreement meaningless.
• Creditors may have to accept a dispute resolution plan that is less favorable when they have to share their interests with debtors. In such cases, the amount recovered may be less than the actual debt.

Therefore, implementing a debt recovery in the construction industry can bring both benefits and drawbacks to a business. In such situations, businesses must weigh the advantages and disadvantages to choose an effective negotiation strategy that safeguards their interests. Hence, it can be seen that negotiation is an effective dispute-resolution option in the construction industry, but its success depends on various factors, and it may not always be beneficial for businesses.

This article presents the viewpoint on the effectiveness of debt recovery negotiation in the construction industry by TNTP lawyers. We hope this article is useful to our readers.