Concession

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The term concession is used in a variety of situations, often referring to an agreement to do something, usually grudgingly, or as part of a compromise, or in order to improve a situation. Concessions are often made during contract negotiations, may be made as a grant by the government, and even have a place in politics. In the private sector, a concession is a business operated in a rented space, for which the operator pays either a fixed amount, or a percentage of his earnings, to the owner of the space. To explore this concept, consider the following concession definition.

Definition of Concession

Noun

  1. The act of conceding, or yielding a right or privilege, or a point or fact.
  2. A grant of land or property by a government in exchange for services, or a particular use.
  3. Something conceded or granted by a government or other controlling authority.

Origin

1605-1615       Latin  concēssiōn

What is a Concession Contract

In some circumstances, the government allows a company to operate a specific business on government property, or within the its jurisdiction. This grant of permission is documented in a concession contract, also referred to as a “concession agreement.” A concession contract may grant anything from mining or drilling rights, to the right to operate a hotel or restaurant on government property. As an example of a concession contract, ABC Concessions may be granted a concession contract to operate the general store, two restaurants, and other retail facilities within a national park.

Alternatively, a concession company may be offered a concession contract to operate a coffee stand, lunch truck, or other retail stand on the grounds of a large corporation, within a hospital facility, or on the grounds of a university. With either type of concession contract, the concession company, referred to as a concessionaire, pays the grantor of the contract, either the government or private entity, for the right to operate. This may be a flat rate on a monthly or annual basis, or it may be a percentage of its profits while operating on the grantor’s premises.

Example of Concession Contract

Deb’s Donuts obtains a concession contract to operate her business within a small area near the hospital waiting room. Deb sells fresh donuts, gourmet coffees, and other snacks. The concession contract specifies that Deb will pay to the hospital 5% of her net earnings each month. For the first couple of months, Deb’s profits were small, and so was the hospital’s take. Once it became known that the donut stand was nearby, patients and their families began visiting frequently during their stays, and Deb’s profits soared. The hospital, in turn, earned a higher amount from its concession agreement with Deb.

Concession in Contract Negotiations

When negotiating terms of any agreement, knowing when to make concessions is vital to creating a strong and successful contract relationship. Concessions in negotiation involve relinquishing certain rights or a position in order to obtain something desirable from the other party. This give-and-take process, and the making of concessions, though reluctantly, are how deals are reached, and contracts made.

Experienced negotiators approach the process knowing that they will have to give something up in order to get something they want from the other party. Strategic concession involves having a good understanding of the other party’s needs in the final agreement, and using those needs to steer the negotiations toward a desirable outcome.

For example:

Martin wants to make a tidy profit on his rental home, while protecting his right to quickly get rid of a tenant who proves to be a problem. He is asking $1,750 per month in rent, with a security deposit of $3,500. While interviewing prospective tenants, Arthur offers to sign a two-year lease if the rent is lowered to $1,500 per month, with a security deposit of $3,000.

Arthur has a clean credit report, good references, and he lived in his previous rental for 12 years. While a concession to a lower rent amount means less income each month, having a reliable tenant may be worth it in the long run, getting Martin to his goal of making a profit with low risk.

Basics of Concession in Contract Negotiations

While making concessions during negotiations is a necessary thing, it is always best to get the most favorable outcome possible without giving away the farm, so to speak. The following basics of concession are critical in working toward that goal.

  • Be daring – ask for what you want. Because neither party is going to give something up they don’t have to, it is plain that, if you don’t ask for what you need, you won’t get it.
  • Know what the other party needs. Do some homework ahead of time to learn just what the other party truly needs, other than the obvious. During the negotiations, look for clues to things he wants that you absolutely don’t mind giving away. Be sure to only give that thing away, concede it, by making it look like it’s a big deal, exchanging it for something you really want.
  • Make the other party work for your concessions. There is nothing quite like the feeling that you could have gotten a better deal if you had simply asked for it. Experienced negotiators understand that the best deal is one that leaves both parties with a “win.” Making the other party work for your concessions, even if they are easy for you to make, is likely to leave him feeling like he has won something, rather than feeling he missed out.
  • Allow your opponent to set the reference point. It is possible that, if you make an unrealistic offer up front, the opposing party will make a counteroffer. Without even knowing it, he has made your unrealistic offer the reference point for negotiations. By contrast, should your opposing party make an unrealistic offer, do not make a counteroffer. By not responding, but guiding the negotiations into discussion of other issues for the time being, it is often possible to regain control over the negotiation.

Example of Concession in Contract Negotiations

Adam is looking to buy a used lawn mower, for which the owner is asking $1,500. Adam looks at it, starts it up, and says “I’ll give you $1,300 for it,” and the owner trips over himself to say “Sold!” Adam immediately feels that something is up, and he probably could have gotten a much better price if he had asked. It’s human nature to feel a type of anxiety when this happens. Had Adam made the owner work for every dollar he got for the mower is more likely to have left both of them feeling they got a good deal. For example:

Adam: “I can really only give you $1,000 for the mower.”

Owner: “I can’t go that low, how about $1,300?”

Adam:  “Maybe I can pay $1,200.”

In this example of concession, the two finally settle on $1,250 for the mower, and each feels like he got something from the other.

Political Concession

In the political arena, a losing candidate may make a concession, publicly stating that the election cannot be won, and yielding to the winning candidate. Political concession is completely optional, though it provides the losing candidate a way to graciously congratulate his triumphant opponent. If a candidate is going to concede the election, it is usually done once enough votes have been counted to make it obvious that he has no chance of winning. It is common for a losing candidate to privately offer his concession to his opponent before making a public announcement.

Political concession is not a binding act. In other words, it does not bar a candidate from changing his mind, or from taking the office should a drastic change in the vote count occur. While it is a rare thing for a public concession to be withdrawn, it has happened.

Concession Example of Retraction

During the 2000 U.S. Presidential election, Democratic candidate Al Gore, Jr. picked up the phone and called the apparent victor, George W. Bush, to concede the election. Mr. Gore was apparently not aware that the vote count in the State of Florida was extremely close. When Gore’s campaign supporters called for a recount of the Florida votes, insisting that the electoral votes for the state were still undetermined, he picked up the phone to call George W. Bush, withdrawing his concession.

Although Bush was not happy about the retraction, Gore supporters felt it was the right thing to do, as what was thought to be a 50,000 vote deficit in Florida, shrunk to 900 votes, and then to 500 votes. The issue of whether a manual recount of the state’s votes should be allowed went to the Florida Supreme Court, where it was struck down. Gore prepared and delivered a speech “withdrawing” from the race, rather than phrasing it as a concession.

On November 26, 2000, George W. Bush was declared the winner in Florida by only 537 votes out of the roughly 6 million votes cast in the state. This new count meant that Al Gore had won the popular election across the nation, while Bush came out with more electoral votes. That was the first election since 1888 in which the outcome was split, with the people choosing one candidate, while the electoral college chose the other.

Related Legal Terms and Issues

  • Counteroffer – An offer made in response to a previous offer.
  • Grantor – A person who grants, conveys, or transfers something.
  • Offer – A presentation of something for acceptance or rejection.
  • Retraction – The formal taking back of something one said or did; a public statement withdrawing or canceling an earlier statement.