Grounding the Character
There is an argument to start this thought by discussing character backstory. While that is relevant, I think it's pretty thoroughly discussed across different forums. Authors typically know what their characters are like and why they talk the way they do. There are a hundred think pieces online asking you to analyze the realism of your 18 year-old street urchin main character having a firm grasp on kingdom politics. So let's skip that for now.
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Relation to Goals
Often closely related to backstory, I find that good dialogue considers the character’s hierarchy of goals. Now, not every interaction will feed into the “capital G” goal that overarches the story, (and it likely shouldn’t. That sounds flat.) But characters should have reasons to talk. If a conversation isn’t related to the prime goal, what little goal has gotten in the way? Do big goal and little goal play nice together? Do they conflict? What immediate circumstances could overshadow one with the other?
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Example:
John is in a museum, completing an assignment for a college art course, but he doesn’t want to be here anymore. Everyone agrees this is the most useless course required for his major, and this William Smith guy, the featured local, specializes in abstract art. Meaning he only draws noodle-limbed people with unsettling eyes and heavy eyebrows. Plus, John is hungry. He slips away from his peers and is almost to the exit when he sees someone that brings him up short. Across the large lobby, an old friend, Mary, has just walked inside. Three years ago, Mary moved away very suddenly and with no explanation to anyone. They had planned to go to university together, and she didn't even tell him goodbye.
Suddenly, John's goal to leave and get food is outweighed by a new motivation: find out why Mary left. The hunger didn't go away, but it severely dropped in priority. Mary is walking deeper into the museum, so John no longer wants to leave. He needs to find the perfect words to get closure, or maybe salvage what is left of their friendship.​
Relation to Setting
Not every conversation should happen anywhere. Characters probably shouldn’t yell in a library. They probably shouldn’t discuss their forbidden love in a massive crowd. Of course, this is not a hard and fast rule. Not many writing “rules” are always applicable. And from a realism standpoint, people do things they shouldn't all the time. But be wary of this false security in the realm of storytelling. It's important to be honest about the literary value of ignoring realistic consequences. If social convention is broken and there are no repercussions, your audience will stop and wonder why.
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Example Continued:
The easiest way for John to catch Mary’s attention would be to call out to her, but what might that entail? Museums are quiet places, and John doesn’t know how Mary will react. Causing a scene could get him thrown out or attract the attention of his classmates. If he runs, a security guard may stop him, allowing Mary to disappear into the crowd. He weaves carefully through the crowd, deciding it’s best to get close before revealing himself in case she tries to lose him.
Mary is in the busiest exhibit room when John catches up to her, but, as their eyes meet, all his planned words dissipate from his mind. His mouth suddenly feels dry. Mary’s eyes flicker through several emotions that he can’t quite track. Will she run anyway? He doesn’t think so, but what does he know, really? Just as the silence becomes oppressive, John finds a single word. “Hey.”
Her smile seems shallow and stiff, but she doesn’t flinch away. “Hi, John.” Her voice is coarser than it once was, yet the familiarity makes him feel heavy.​
Relation to Context
Now, I hear you. “Setting and Context are one in the same.” Yes and no. Context does include setting, but I use them to capture different things. For this discussion, “setting” captures the more generic factors of the character’s surroundings. It’s a simple “when, where, and who is around” mindset. A setting might be “on the morning of a parade, in the streets of the main character’s hometown, and surrounded by hundreds of people in green uniforms.” Context takes things a level deeper. Context makes things more personal, more specific, or more insightful.
This same setting can play a completely different role based on context. What if it’s a religious parade, the streets are not decorated in the traditional colors, and the people in green uniforms stand off to the sides and don’t speak the local language? That would set different conversational standards from a parade headed by a single quavering trumpet, the streets are covered in rotten fruits, and the people in green uniforms march in messy formation past the town center. Is the main character wearing a green uniform or civilian clothes? Does the main character know the language being spoken? Each detail adds a new layer of interpretation.
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Example Continued Again:
Before John can form his next thought, one of his more annoying classmates, Susan, approaches with a quiet squeal and arms extended, despite the crowded room. “Oh, Mary! It's been too long!” The women hug like old friends. Susan pulls away and eyes John coolly. “You two know each other?”
“Yes, actually,” Mary says quickly. “John and I are cousins.”
“Really, now?” Susan purses her lips, one eyebrow quirked up. “Surely not on the Smith side.” Her head tilts slightly toward the center of the gallery.
Smith. Mary Smith. It’s such a common surname, John hadn’t even considered she could be related to this weird abstractionist and his love for people with purple skin. Mary shook her head. “Our moms were sisters.” Something in her tone felt dismissive; he sees her taking in the next breath to send him away. This is how she’ll slip away. No answers, no closure.
John finally finds his voice again. “We were actually just talking about that, Sue,” he emphasizes the name, knowing how Susan hates it. “Mary was just saying she wanted to show me some of the detail work on Blue in Motion, number five.”
“It is my favorite.” Mary’s lies are so smooth. Effortless. She pivots easily to keep John included. Whatever her reason for disappearing, he believes it’s a topic she doesn’t want a gossip like Susan hearing.
“It’s a shame it took us this long to meet up at one of these,” John says. “Didn’t he run an open gallery a few years back?”
“We were just so busy back then.” Another easy lie.
John fought to keep his voice light. “Well I’m glad it worked out this time. I’ve really missed seeing you.” The crowd shuffles forward, depositing the trio near a mostly-yellow painting entitled Magnum Magnum. Susan’s hawkish glare catches his eye. “Remind me,” John asks, “how the two of you know each other.”
Mary pales. “It’s been so long at this point, I don’t remember the exact way…”
“It was a few days after you moved in, wasn’t it? Moving that sleeper couch up the stairs?” Susan snorts softly. “I’ll never forget how small you looked behind that monstrosity. And to get all the way to the fourth floor? I hope you left it in the apartment when you moved out.”
“Neighbors, then?” John asks, quietly racking his memory for the name of Susan’s hometown. She wasn’t from anywhere nearby -- a few territories over, if he remembered correctly. How did Mary make it all that way alone? Had she been alone? “No one helped you move that couch?”
Mary’s eyes stay locked on the painting in front of them, too still to even study the brushstrokes. Her breathing seems shallow and irregular, but John can’t give up yet.
Susan hums softly. “Your cousin has a point.” The word ‘cousin’ is weighted in disbelief, but she doesn’t comment further. “When did you meet Peter? He would’ve helped if he’d been around.”
There it is. Peter. A name in this mysterious location, John can’t be sure if he’s found a reason for leaving or simply a result of relocation.