CBN Ethical Boundaries & Good Faith 2 — Questions and Answers
Question 1: A negotiator discovers mid-negotiation that a key assumption underlying the deal is false. What does good faith require?
- Disclose the error to the other party promptly (Correct answer)
- Continue negotiating since the other party should do their own due diligence
- Use the error as leverage to extract a better deal
- Delay disclosure until the contract is signed
Correct answer: Disclose the error to the other party promptly
Good faith requires honest dealing, which includes correcting material errors that could affect the other party's decision-making.
Question 2: Which behavior constitutes 'sharp practice' in negotiation ethics?
- Asking for more than you expect to receive
- Exploiting a technical loophole to gain advantage unfairly (Correct answer)
- Declining to reveal your bottom line
- Making a conditional offer
Correct answer: Exploiting a technical loophole to gain advantage unfairly
Sharp practice involves exploiting technicalities or procedural tricks in ways that violate the spirit of fair dealing, even if technically legal.
Question 3: When a negotiator says 'I need to check with my principal' as a tactic rather than a genuine need, this raises concerns about:
- Positional bargaining
- Deceptive authority misrepresentation (Correct answer)
- Principled negotiation
- Integrative strategy
Correct answer: Deceptive authority misrepresentation
Falsely claiming limited authority to create negotiating room is a deceptive tactic that undermines good faith.
Question 4: The ethical concept of 'duty to speak' in negotiation refers to:
- The obligation to always make the first offer
- The requirement to volunteer material information the other party would reasonably expect (Correct answer)
- The rule that all offers must be made verbally
- The duty to explain every clause of a contract
Correct answer: The requirement to volunteer material information the other party would reasonably expect
Duty to speak arises when silence would be misleading — negotiators must disclose information that a reasonable party would expect to receive.
Question 5: A supplier negotiating a long-term contract knows their manufacturing facility will close in 6 months. Ethically, they should:
- Disclose this fact as it is material to the contract duration (Correct answer)
- Keep it confidential since it is internal business information
- Negotiate the shortest possible contract to avoid liability
- Ask the buyer to conduct site visits instead
Correct answer: Disclose this fact as it is material to the contract duration
A facility closure is material information that directly affects the supplier's ability to perform, creating an ethical obligation to disclose.
Question 6: Which of the following best describes the difference between puffery and fraudulent misrepresentation in negotiation?
- Puffery involves specific false facts; fraud involves vague boasts
- Puffery is vague promotional opinion; fraud involves knowingly false statements of fact (Correct answer)
- Puffery is verbal; fraud must be written
- There is no legal distinction between the two
Correct answer: Puffery is vague promotional opinion; fraud involves knowingly false statements of fact
Puffery ('best product on the market') is non-actionable opinion, while fraud involves knowingly stating false facts that induce reliance.
Question 7: In ethical negotiation, 'reciprocity' as a principle means:
- Always matching concessions dollar-for-dollar
- Treating the other party as you would want to be treated in return (Correct answer)
- Demanding equal information disclosure from both sides
- Splitting all differences equally
Correct answer: Treating the other party as you would want to be treated in return
Reciprocity as an ethical norm means applying consistent standards of fairness and treating others as you'd expect to be treated.
CBN Ethical Boundaries & Good Faith 2
A negotiator discovers mid-negotiation that a key assumption underlying the deal is false.
What does good faith require?