Mark is a supplier who's been negotiating with Sophia who's the buyer. they've agreed on everything and signed the contract for 50 million US dollars. Mark returns home to his HQ satisfied from a meeting with Sofia only to learn that his company are lacking cash. In order to fulfill the order so clear they will need to prepay sub suppliers 15 million US dollars. In order to get essential components they need to deliver the complete solution to Sofia and they haven't got 15 million US dollars. Mark realizes that they only have two options.

They can go to Sofia and ask if she's willing to make an upfront payment of 15 million US dollars. To they can go to their bank and ask if the bank wants to lend them 15 million US dollars. Mark call Sophia the next day to ask for the upfront payment. Mom. Hi Sofia, thank you so much for the contract. I appreciate the old however, I got a great idea.

Why don't you pay 15 million US dollars up That would be great. Sofia denies the request. Mark is forced to negotiate with the bank. The bank agrees to lending 15 billion US dollars. The total cost for box company lending the money from the bank is $550,000. Sophia is sitting in her office thinking what's a great agreement I've got why not paying 15 million US dollars up front.

I saved my company 150,000 US dollars. Even though we are good on cash, it's still a project saving. My boss is going to be happy. Bob feels he got a bad deal on the terms of payment. Sofia feel she got a great deal. But reality none of them did.

Well. They both lost on the potential legal economics. Mark lost 550,000 US dollars. Sofia gained 150,000 US dollars. The legal economics is 400,000 US dollars that just flew out of the window. What could they have done instead?

Mark could have reduced his price by $300,000. By doing that, he would reduce his loss by 250,000 and Sophia would have gained 150,000