10 Tips You Need to Know to Improve Your Contract Templates
1. Introduction
Sales teams, entrepreneurs, procurement specialists and legal professionals all share one common need: contracts that are clear, efficient and enforceable. When done right, they accelerate deals, minimize risks and build trust. Contract Templates are great to achieve this.
These legal documents do not only formalize agreements but also protect business interests by clearly defining risks, responsibilities and expectations between the contractual parties. However, as important as contracts are, the process of managing them can be complex, time-consuming and inefficient.
The solution is standardizing contracts in templates. This can be in the form of template NDA’s, Custom Agreements, General Terms & Conditions, Master Services Agreements, Order Forms or even letters. The key is to create easy to use, not overly complicated (and short where possible!) templates that cover the company’s risk. A great practical book on this is ‘Sign Here: The enterprise guide to closing contracts quickly’ by Alex Hamilton.
Creating and maintaining strong, streamlined contract templates can help companies enhance efficiency, reduce legal risks and optimize resource allocation. Also see my article on this here. However, simply having templates is not enough. Organizations need to ensure that they are accessible, up-to-date and aligned with both legal and business objectives.
This article series, “10 Tips You Need to Know to Improve Your Contract Templates”, was written to help businesses tackle these challenges head-on. We will explore key strategies to improve contract templates, ensuring they become valuable tools that drive efficiency, consistency and strategic growth.
Let’s start by understanding why we need templates in the first place and how to overcome common issues that arise from their use. This Introduction article will be followed up by 10 more articles including a practical, step-by-step guide explaining how to improve templates, creating better processes and rolling them out successfully.
2. Why we need (better) Contract Templates
Companies need to work on avoiding overcomplicating contracts and to focus on improving contract workflows.
One effective way to achieve this is by creating standardized templates for the company’s most common agreements. For example, Non-Disclosure Agreements (NDAs), Terms & Conditions (T&C), Data Privacy Agreements (DPA), Service Level Agreements (SLA), Master Services Agreements (MSAs) etc.
Standardized contract templates can also significantly reduce the time spent on repetitive drafting. It enables faster contract creation, review, and approval, which not only speeds up business processes but also frees up valuable resources for more strategic tasks.
Moreover, contract templates help maintain consistency in the language, terms, and legal safeguards across all agreements, reducing the risk of errors, contradictory clauses, and legal disputes. By ensuring that key legal protections are consistently applied, contract templates minimize legal risks and contribute to more efficient, reliable contract management overall.
However, despite the clear benefits of using standard contract templates, many companies struggle with effectively implementing them. The correct use of these templates often remains a stumbling block, and failure to address common issues can lead to inefficiencies, delays, and legal risks.
In the next paragraphs, we will first highlight what the 4 most common issues are with Contract Templates, secondly what the consequences are of these issues, finalizing with explaining are the 9 advantages of having great (so not complicated & long) Contract Templates.
3. Common Issues with Contract Templates
While standardized contract templates can improve efficiency, many organizations encounter obstacles that prevent them from fully realizing their potential by using contract templates. In practice several factors can hinder the successful implementation and utilization of such contract templates.
Four of the most common issues with contract templates include the following:
Complexity
Overly complex and lengthy templates often result in confusion and create more questions than answers for the commercial team who use the templates in practice. The language may contain specific legal terms or overly complex wording, that can be difficult to comprehend, which in turn can slow down the contract review process. We also often spot that templates are outdated and no longer fit with the products & services that the company is providing.
Accessibility
Locating and using the correct template can be a challenge. The absence of a clear system for accessing the right templates often results in the use of outdated or unauthorized versions, creating further inconsistencies.
Limited Resources
Many businesses lack the resources to dedicate time to continuously improve their contract templates. This lack of investment often leads to templates that are outdated or irrelevant to current business needs.
Excessive Legal Review
Despite having templates in place, Legal often still need to review and negotiate a high volume of contracts due to the lack of well-defined processes and the issues mentioned above. This increases the burden on the Sales, Procurement & Legal department and slows down the contracting process.
The existence of these obstacles highlights the importance of having a clear strategy and process for managing contract templates. Understanding these common issues is a first step towards addressing them and ensuring smoother contract workflows.
4. Consequences of Contract Template Issues
The issues described above surrounding contract templates can have significant, far-reaching consequences for businesses in several areas. The idea of having solid contract templates in place relies heavily on whether the templates are easy to use, if they are consistent and whether they have been reviewed and continuously get managed properly. Mainly, this revolves around inefficiencies connected to the contract templates due to poor contract template management.
Incorrect, overcomplicated and long templates result in the following issues:
Delays in Contract Creation, Negotiation and Closing
Complex and outdated templates can prolong the time it takes to finalize contracts due to the need to involve legal professionals. If the template is too complex, it won’t be possible for anyone to use the template at issue. Additionally, this can cause delays that may disrupt operations and hinder business growth that otherwise would have been possible.
Increased Risk Exposure
Contracts that are inconsistent or not properly reviewed make the company vulnerable to legal and financial risks, including disputes, compliance issues, and unfavorable terms. This is especially the case if there are several contract templates that cover different areas.
Higher Workloads
The inefficiencies of managing contract templates translate to additional work for Legal and other involved departments. This means that they must spend more time resolving problems, negotiating terms, and handling unnecessary contract revisions since they are the only ones who are fit for the job. In turn, this creates less time for them to focus on more complex, high-value deals.
Strained Business Relationships
Poor contract management can also erode trust with clients, vendors, and partners. If the contracting process is slow, confusing, or fraught with errors, it can negatively impact business relationships and damage the company’s reputation. For instance, the counterparty can get the impression that the inconsistent templates may reflect your way of doing business.
In other words, the consequences of poorly managed contract templates extend far beyond operational inefficiencies. To prevent these issues, companies need to reassess their contract management strategies and prioritize the development of high-quality templates.
5. Results of having State-of-the-Art Templates
When businesses take the time to develop and maintain strong contract templates, they unlock a wide range of benefits that positively impact both their day-to-day operations and long-term strategic goals. These benefits arise from the ability to standardize contract processes, reduce legal risks, and enhance collaboration between departments.
Nine key advantages are:
Shorter Contract Negotiation Times
High-quality templates serve as a strong starting point for contract negotiations, eliminating the need to negotiate basic terms and conditions from scratch. Since most of the standard clauses are pre-approved and align with company policy, both parties can focus on customizing specific deal points rather than revisiting the entire contract.
Increased Efficiency and Simplified Contract Handling
Streamlined templates reduce the time and effort required to draft, review, and approve contracts. This reduces the administrative burden on both Legal and business teams, allowing them to focus on higher-value tasks such as negotiating complex deals or working on strategic initiatives. In fast-paced industries, this can provide a critical competitive advantage.
Reduced Workload
With standardized, well-organized templates, the Legal department can reduce the number of contracts that require individual review. This means that only the most complex or high-risk contracts will require in-depth legal review. It allows the Legal team to focus on more strategic activities, such as risk management or regulatory compliance.
Enhanced Consistency and Contract Quality
High-quality templates ensure that contracts across the organization are aligned with company standards, reducing the risk of errors and inconsistencies. Enhanced consistency also helps to build trust with external parties, as they can rely on the fact that the company’s contracts follow a predictable structure.
Risk Mitigation
Strong contract templates serve as a built-in risk management tool, ensuring that all agreements contain the necessary legal safeguards to protect the company’s interests. By ensuring that contracts contain the necessary legal safeguards and are compliant with applicable regulations, companies can better manage their legal and financial risks.
Decreased Legal Costs & Improved Cost Efficiency
With fewer contracts requiring in-depth legal review, companies can reduce their legal expenses and allocate their budgets more efficiently. This cost efficiency allows companies to allocate their legal budgets more effectively, focusing on complex matters that truly require expert legal input.
Stronger Business Relationships
A smooth and transparent contracting process enhances trust and collaboration with clients, vendors, and partners. It also reduces delays and confusion, making it easier to finalize agreements quickly and without unnecessary back-and-forth.
Optimized Resources
Well-organized contract processes help businesses make the most of their available human and financial resources. By standardizing and streamlining contract workflows, companies can minimize the time and effort spent on repetitive tasks, allowing teams to focus on strategic growth initiatives rather than administrative burdens.
Empowered Commercial Teams
With easy access to effective contract templates, commercial teams can take the lead in negotiations without the constant need for legal intervention. When teams have access to well-structured, pre-approved templates, they can confidently lead discussions and close deals faster.
In summary, adopting state-of-the-art contract templates into your business processes leads to a wide range of benefits. Not only do they increase efficiency and reduce legal costs, but they also improve the consistency and quality of your contracts. By streamlining contract workflows and fostering better business relationships, high-quality templates help companies mitigate risks, optimize resources, and accelerate growth. Implementing these templates is a smart investment that delivers long-term operational and strategic advantages.
6. Experienced Results of Contract Optimization
Throughout Robby Reggers’ 20-year career advising businesses on contract optimization within legal departments, the most successful outcomes were achieved by companies that embraced a collaborative methodology for template optimization. By refining contract templates with input from across the organization, companies can ensure that their contracts are not only legally robust, but also fully aligned with business objectives and responsive to customer needs.
For help improving contract templates, negotiations and related processes, reach out to us via lowa@amstlegal.com or book an appointment with Robby Reggers here.
How to improve your Contract Processes with Better Cooperation
Legal should focus on Better Cross-Departmental Cooperation
As we have highlighted in previous posts, it takes leadership and a team to improve your contract templates. Once Legal has taken the lead and the centralized responsibility to improve the contract templates, the next step is to involve and work together on this goal with other departments. The creation and use alone of contract templates will only offer limited benefits This is not only essential to receive all required input for the contract templates, but also for a successful implementation of the contract templates.
Legal professionals often limit their interactions to their Legal colleagues or senior management when creating and implementing contract templates or negotiating contracts. This limitation, while understandable, can lead to contract templates and agreed contracts that are legally sound but are missing critical business insights.
Additionally, as mentioned above, the complexity, inaccuracy and lack of processes will lead to the use of unauthorized or outdated templates and excessive Legal Review due to lack of internal processes and support from other departments.
Insight Integration: A Collective Approach on Template Creation
Therefore, aligning contract templates with the practical realities of the business is essential. Departments such as Sales, Products, Finance and Compliance offer invaluable insights on commercial and financial risks, practical considerations and the specificities of products or services offered by the company.
This input ensures that the contract templates are not only legally robust, but also fit in the commercial roadmap of the company and cover all other company risks (e.g. technical, compliance, operational and financial).
Another important reason to involve these departments in the drafting process of the templates is to create a sense of ownership and support from these stakeholders. When departments contribute in the development of the standardized contract templates of a company, they are more likely to endorse and actually use the templates. This collaborative approach not only enhances the quality and relevance of the contract templates but also ensures their acceptance and utilization across the organization, ultimately leading to smoother operations and reduced risks.
Enhancing Cross-Departmental Collaboration – Improve Communication & Cooperation
Legal´s role in improving the communication and cooperation with the rest of the company cannot be understated. Regular, strategic meetings between Legal and other departments are essential to set the stage for a more integrated and efficient approach to contract management of the company.
These discussions should focus on:
- a) Strategic Alignment: First, Legal needs to clearly communicate its short and long term intended contract optimization strategy to all departments. Secondly, these departments should share their strategy and specific requirements and contributions to the contract process and templates. This will give Legal the opportunity to create and roll-out the best strategy to improve the Company´s contract processes and templates.
- b) Issue Identification and Resolution: Facilitating an open dialogue where Legal and all other departments can highlight challenges encountered with current templates and collaboratively develop solutions to streamline cooperation and reduce operational burdens.
- c) Training and Involvement: Initiating internal workshops to educate teams on optimal contract template usage, Legal engagement policies, while encouraging feedback and suggestions for improvements to ensure templates remain relevant and effective.
- d) Proactive Communication: Discussing the optimization of the empowerment of the commercial teams, meaning that all relevant contract-related documents and information are proactively shared with customers and partners by the Sales, Partnerships and Procurement teams.
This will greatly minimize the workload of Legal and maximize their output due to a decreased need of Legal clarifications and Legal involvement in negotiations. The importance of regular, inclusive meetings and training sessions cannot be overstated. When planning, it is essential to engage every layer of the organization, from grassroots employees to top management, in strategic discussions and trainings.
These sessions serve as a cornerstone for aligning strategies, creating an environment where all team members are equipped with the knowledge and skills to navigate the complexities of the contract optimization process and their roles effectively.
By maintaining a consistent schedule of these critical discussions and training, organizations can avoid the pitfalls of reactionary measures during peak periods of activity. Instead, a well-informed and strategically aligned team will be ready to handle the demands of the business efficiently, ensuring continuity and resilience in the face of challenges.