In the old days, knights would compete by jousting. That would involve charging at each other on horseback with a lance with the intent of knocking the other knight off his horse. With jousting, both sides are trying to achieve a goal of some kind and only one of them will win in the end.
That’s the way every bit of dialogue needs to work in a screenplay. The first flaw of dialogue is the mundane. We don’t want to hear two characters exchange greetings with each other, talk about the weather, and ask about the latest sports scores or TV shows. We want conflict right away and conflict implies that both characters have a goal of some kind.
In “Sicario,” the hero is an FBI agent assigned to work with a covert CIA operation, although she doesn’t know that at first. So every time she asks a question, the people around her give her cryptic answers. They’re not ignoring her and they are giving her answers, but none of it makes sense until the midpoint when she finally learns that her role is simply to provide legal justification for the CIA operating domestically.
In “The Lady in the Van,” an old, crazy woman parks her van in a man’s driveway and proceeds to live there for the next fifteen years. Each time the man talks to this crazy woman, their conversation is civil, but goal-directed. The man wants to get information about of the woman and the woman wants to remain as cryptic and mysterious as possible about her past.
In “The Karate Kid” (both the original and the remake), the hero wants to learn karate from the apartment handyman, who hides a painful secret from his past. The hero wants to know more about the handyman and the handyman wants to keep his past hidden from the hero while teaching the hero how to fight.
In action movies, characters are often trying to kill each other, but before they get into physical battles, they often get into verbal jousts. In “Die Hard,” John McClane taunts Hans the terrorist leader over the radio. Hans is trying to find out who John McClane is and John is trying to remain mysterious about his connection with the corporate party that the terrorists have taken hostage. Both characters have a goal and they use dialogue as a way to further their ends.
To make dialogue interesting, you must have conflict. To have conflict, you must have goals your characters are working towards. To have goals, your characters must want something that the other character doesn’t want to give them. That creates conflict and that ultimately creates better and more interesting dialogue.