I've had a lord with 43 units refuse against me leading an army of 900. I never seen it work. I do rarely see some looters surrender but most of the time they choose death.
That's one of my main issues with the game and to a degree, with Warband. The NPC don't follow the rules as the player do; Ghost armies out of nowhere, unlimited money, no attrition in sieges, no surrender, etc.
About this topic tho, I think "the Recruits Army" in recent patch is a good start. I tried to observe a party of mine, the issue is it's just they hold too many upgrades. Once I have to manually took 50 recruits back upgraded 30+ of them.
They should be the ones to offer negoiating tbh. They should offer money, horses etc if they want to get away and maybe even consider surrendering/changing sides.
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