Unbalanced Agreement

An unbalanced agreement in the broad sense is one that, either from the outset, or through the course of events, creates a situation where one of the parties to the agreement suffers vastly greater detriment to any benefit that may result to it under the agreement (i.e., carrying out their ‘end’ costs them much more than they gain from the agreement.) This may arise because that party has already received most of its anticipated benefits ‘upfront’ or it may be because certain benefits expected under the agreement have disappeared, ceased to be of substantial value, or turned out to be illusory.

The danger with an unbalanced agreement is that the party which has little or no ongoing benefits and substantial detriments, is quite likely to cease to comply with it, or to only meet its obligations to the minimum degree possible (in simple terms they have ‘no incentive to deliver.’) A negotiator who holds a strong hand is wise to take care to ensure that the resulting agreement is not unbalanced vis-à-vis the counterparty because of this execution risk.

In the narrow sense an unbalanced agreement is one where certain advantages from one party are not balanced by protections for the other. This can, for example, often happen with “form agreements” and boiler plate when editing means certain clauses have been retained, while clauses intended to offset some of the consequences of the retained clause are deleted, or when a saving clause excises a contractual term. It may also result from a maximalist approach to negotiation.

Politically, the phrase “unbalanced agreement” that is often overused to describe situations where the agreement is not in reality ‘unbalanced,’ for example in international trade agreements, usually because the person using the term has decided to treat certain benefits accruing to their side as valueless – i.e., in a quid-pro-quo arrangement they do not acknowledge or denigrate the ‘quo‘ they received and have no desire to deliver a subsequent ‘quid.’

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