One of the toughest decisions you'll make in negotiating is what to do once you have proof your counterpart is a liar. Do you cut off all contact, withdrawing on the spot from any current transactions? This isn't always possible, practical, or desirable. Though strictly speaking, you do have a justification to at least call for a pause in the action to determine whether you and your assets are at risk.

And is there a material difference between big lies, ones that misrepresent significant deal points, and little ones that seem irrelevant to the proceedings? For instance, I was dealing with two executives at a company that was a franchised unit of a major services firm. One person revealed information to me about the other, not because I probed for it, but because they volunteered it. A few days later, one of them confessed that they were married to each other, though "for business purposes, we generally keep it a secret."

Apart from the disclosures they made regarding the others' management practices, their marital state was not relevant, until it became clear they lied about it. "Why lie?" I found myself wondering. Did it serve any purpose, except to alert me to the fact that they do lie, that they practice deceit, that they're in the habit of using ruses? Soon thereafter, I chose to sever our relationship, partly because I believe in the "Iceberg Theory." This states, if what you can see is treacherous, what you cannot see, what lies below the surface, is potentially devastating, so steer clear!

One of my law school professors admonished those of us that were studying Mediation with him to consider the sage advice one of his mentors gave him. "99% of legal problems can be avoided if you simply deal with honest people." But wasn't it the Greek philosopher Diogenes who wore out many sandals pounding the cobbles of ancient Athens, lamp in hand, seeking to find "an honest man"? If we only do business with the completely honest, won't we become very lonely negotiators? I believe it is wise to make a few distinctions, for practical purposes. There are three kinds of liars:

(1) Those that do it where something major is at stake and they're pursuing it.
(2) Those that lie about trivial things, out of habit, or seeking some thrill.
(3) Those that exaggerate or negligently misrepresent facts, without checking or supporting them with proof.

I would avoid dealing with the first two, not bothering to accuse them of prevarication or mendacity. Just walk away, if you can't run. With the third, I'd proceed, but carefully, requesting documentation or substantiation for every assertion they make. The adage, "Trust, but verify" is always good advice, especially when you're negotiating!