Prepare a written opening statement for negotiation against the other party:

Client file - Purchaser Memo from Partner Our client is Hien Ngoc, the owner of Life's a Cake, a boutique caf in the shopping strip in Forest Gully, an outer suburb of Melbourne. She did not have legal advice when entering into the transaction. Hien has approached up for advice as the caf has not lived up to her expectations. The business is not generating anywhere near the amount of revenue that was indicated and she is struggling to cover her costs.

We have already provided a letter of advice to Hien setting out the legal situation. On the face of it, she is in a good position, and we believe it will be possible for Hien to prove misrepresentation and/or breach of contract. However, we do believe that it will be in Hien's interests to resolve this commercially now. The cost and stress of litigation will certainly have a detrimental impact on her business and on her personally.

Your instructions:

We would like to arrange a negotiation with Rosa and/or her lawyers. Please consider the client's instructions and complete the Negotiation Pro forma to help prepare for the negotiation.

1. Identify your client's underlying interests (not your client's position).

2. Identify what you consider are your opponent's interests

Client statements:

Six months ago, I entered into what I thought was going to be my dream business. I bought a caf called "Life's a Cake" in Forest Gully. Having grown up in the area, I had warm memories of going to Life's a Cake with my grandparents when I was a child. I was confident going into a business that was established more than 50 years ago and has a somewhat

legendary status in the area. The business purchase came about because my partner and I recently moved back into the

area. He is an IT specialist and was now able to work from home. Forest Gully was more affordable than where we were renting in the inner city, and we were excited to move to an area that seemed a bit more peaceful and had excellent bushwalking nearby. The only downside was that my job as an HR professional was based on the other side of the city and

would be a two hour commute each way. I decided to quit my job and invest the inheritance I received from my grandmother into buying a business closer to home. It seemed like a great time for a change. It felt like a dream when Life's a Cake came up for sale at just the right time but now, I'm feeling that it's a nightmare.

We had just moved into our new house and I was in town doing some shopping. I stopped by Life's a Cake for a coffee and saw a sign near the cash register that the business was for sale. I asked if I could find out more about it and was told that the owner would come over and chat to me. I was quite surprised when Rosa Panzetti came over and sat down with me. She had been the owner when I used to come with my grandparents, and I thought she'd long ago have retired. Rosa told me that she'd been back running the caf for about two years. She had handed it over to her son who ran it for several years but was then tragically killed in a car accident. Rosa told me that she no longer had the energy to keep going but didn't want the business to close and was particularly keen to make sure that her loyal customers continued to be served. When I told Rosa that I was looking to buy a business with the inheritance from my grandmother, who used to take me to the caf, she was delighted. We both thought that it was just meant to be. I asked Rosa what the caf made. She said that the average revenue was $25,000 a week with a profit of around 15% ($3,750). I calculated that this was roughly $200,000 in profit per year. That was definitely more than I was making in my HR job and seemed pretty appealing. She told me that the price for the caf was $350,000 which was inside my budget (just). I figured that the payback period of 1.5 years seemed more than manageable, and we did a handshake deal. Rosa said that she would have her lawyer draw up the contract.

Rosa also offered for me to come and spend time in the business. For the next two weeks I went into the caf each day. Rosa spent some time with me showing me how everything operated, including ordering, staffing and food preparation. I was grateful for this time as I learned a lot from Rosa. I was concerned that there didn't seem to be as many people in the caf as I expected. It certainly didn't seem that busy, but Rosa said things were always a little quiet during the school holidays when the parents were busy. The clientele I saw were mainly retirees and their spend was low. I then went away for a few weeks on holiday and when I came back, Rosa had the contract ready for me. It looked like a pretty straight forward contract, and I didn't want to spend too much on getting a lawyer to review it. I asked my brother's girlfriend, who is a lawyer, to review it. She reluctantly did so and said it all looked pretty standard form. I signed the contract and took over the business two weeks later. The first few weeks after I took on the business, it was an absolute whirlwind. I realised that I still had a lot to learn. I would call Rosa occasionally to ask for guidance. At first, she was really helpful but then she stopped answering my calls. After the first few weeks, the weekly takings were much less than Rosa had told me. I decided I needed to do something to ramp things up, so I started some promotions on social media. This brought in some new customers. Many of these seemed to be remote workers who wanted a change from working at home. They would come in around 9am and sit working at a table with their laptop until lunchtime. Others would come in later in the day and

stay until I closed. I also started having problems with suppliers. My main cake and pastry provider called to say we needed to enter into a new supply contract as the deal they had was with Rosa's company not mine. The prices they quoted were 20% higher than what Rosa had paid. They told me this was because Rosa also purchased a high volume of cakes on behalf of the local retirement village. Because her order quantities were much higher, she got a volume discount. I later found out Rosa had similar arrangements with other suppliers. My costs all started skyrocketing. I'm now in a position where I'm not generating the revenue I expected, I'm paying higher prices for my supplies and I'm losing money every week. I can't keep this up. I went to my accountant to get some advice. She told me that I should have come to her before the sale to get the books inspected. She says that there was revenue from sales to the retirement village, but Rosa never mentioned this to me, and the retirement village has never come to me for anything.

My accountant also indicated that in her experience, based on the figures, the value of the business was nowhere near $350,000. A back of the envelope valuation suggested a value more in the range of $230,000 to $270,000. I don't' really want to get out of the business, but I'm not generating the revenue I expected, and I now feel like I have been ripped off by Rosa. I'm so embarrassed that I've invested my grandmother's inheritance in this dud that I haven't been able to tell my partner or my parents how bad things are. I really want to keep this quiet and just get an outcome with minimal fuss. I need to get some money back to help me stay afloat while I get the hang of the business and I also don't want to feel like I've been ripped off on the purchase price.