Contingent Contracts

When parties disagree about future facts—will the product hit sales targets, will the market grow, will the project finish on time—a contingent contract resolves the impasse by making terms depend on what actually happens. If a seller believes their company will grow 30% and a buyer believes 10%, they can agree to a base price plus an earn-out that adjusts based on actual growth. Each party believes they're getting a good deal based on their own predictions. Contingent contracts work because they convert disagreements about the future into bets that both sides believe they'll win. They also create accountability: parties who make confident predictions must stand behind them with economic stakes. The technique transforms stalemates into deals by saying 'let's let reality decide' rather than forcing one party to accept the other's forecast.

When to use it

When parties disagree about future outcomes and this disagreement is blocking a deal. When you want to filter genuine confidence from cheap talk by requiring parties to back their predictions with stakes. When structuring compensation, partnerships, or vendor relationships where future performance is uncertain.

How it can help

Whenever a negotiation stalls because of different predictions about the future, propose a contingent contract. In hiring, if a candidate claims they'll bring in $1M in new business, offer a base salary plus a commission structure that pays handsomely if they're right. In partnerships, tie equity splits to milestones rather than fixed percentages. In vendor relationships, structure fees with performance bonuses tied to specific outcomes. This approach filters out cheap talk—people who won't back their predictions with economic stakes probably don't believe their own numbers.