How To Improve your Contract Templates – 6 Tips

Introduction

Even though most companies, especially tech companies, make great use of contract templates in their business, many still struggle how to make and use them well. Consider the tips we provide in this article ‘How To Improve your Contract Templates – 6 Tips’ to get your contract templates to the next level. At the same time, making use of the following 6 tips can save you time and money throughout the process. If you want even further insights on how to improve your contract templates, see our next article here: https://amstlegal.com/tip-1-80-template-20-no-template/.

Common issues

Why do many companies struggle with making and using contract templates well then? From experience in the legal field, we at AMST Legal have encountered common pitfalls. When making and using contract templates, the most common issues concerns having:

• outdated contract template that are difficult to find, make, use or explain. Non-structure makes the usage complex.
• incorrect, too complex or easily amendable contract templates. That leads to a necessity for the legal department or lawyer to review and negotiate too many contracts, and
• several versions of one contract template. When using too many templates, there is often a gap between legal/management.

These issues create delays in the creation of contracts, increases risk for the company and raises the workload of your commercial and legal team to try to solve issues with your clients due to the use of incorrect templates. To resolve these issues, we created this article ‘How to Improve your Contract Templates – 6 Tips’. Our aim is to show how you can change your contract templates to avoid these common issues.

Why is it Important to Invest in Great Contract Templates?

Even though the passion of AMST Legal is to negotiate and draft contracts for specific clients, one lesson learned is that it is also extremely important to invest time and energy in making good contract templates, instead of devoting most of your time making custom-made contracts. Investing time for creating good and easy-to-use-templates is worth the tedious work in many aspects. Not only will it result in saving money and limiting risks for your company, but will also help you with assisting your clients better and faster.

How To Improve your Contract Templates – 6 Tips

80 / 20 Rule of Contract Templates

At AMST Legal, it is our philosophy to work on structuring a company towards what we like to call it, the ‘80% template – 20% no-template’ rule whenever possible. Briefly, this translates to having templates for 80 % of your contracts. In turn, you will have more time and resources for larger, more complicated setups/clients that require custom contracts – both in terms of drafting and negotiation. Why we advocate for this rule is mainly significantly lower costs for legal fees as the contracting process will be easier to handle for non-legal.

Legal in the Lead

It may sound obvious, but make sure that Legal, i.e. an external lawyer or your in-house counsel, is in the lead when making the contract templates. This translates to letting legal control the drafting, implementation and filing. Our advice is to use this approach for all contract templates. Even for documents that you might feel like are purely commercial (e.g. Service Level Agreement, Pricing/Offer Documents or Engagement Letters). Using this approach on all contract templates ensures correct management of your contract templates. However, it is not necessary that legal complete and send out the specific contracts made from the contract templates.

Pro-tip: If you have the possibility, it is best to ask for advice from an internal legal counsel or department (interim or permanent) on this subject as he/she understands the business of your company better than external lawyers. Your internal legal department will also be able to advise you where you will need external lawyers for certain parts of your contract templates.

Legal involves other departments

Make sure that Legal is not the only one drafting and implementing the template contracts. Legal absolutely must consider the opinion of the other departments of the company and amend the contract template where necessary. Alignment with the business – for example Sales, Products, Finance or Compliance – is essential to make sure that the templates do not only cover the legal risks, but also mention important business risks, practical issues and all products/services of the company. Another important reason to include these departments in the creation of the templates is to create a support base. The business will be a lot more engaged if they understand and agree with the template contract and if they have helped with the creation of it.

Make an inventory of your contract templates

Regularly make a list of all the contract templates that the company is actually using day to day. Make sure you know how many specific contract templates the company has for its products/services, countries, languages and departments. The amount of templates in-use and their storage space might surprise you. Having this list will give you a better idea which next steps you should take to improve your contract templates. Legal will have to ask the input from each relevant departments to make sure that the list is complete.

Review the contents of your contract templates

As a follow up on the previous point, perform a detailed review of your contract template and all versions of the template. Ask Legal to go through the wording of the templates, together with other departments, to make sure that they are all legally up to date and still work for all products/services that you are offering and cover the business risks.

Consider the growth process of your company as an example:

• in the beginning, you might used certain contract templates without legal alignment (i.e., made by the commercial team or online templates), or
• over time, the company might have changed, but not your templates. Therefore, the old templates may no longer be suited to current needs.

When making the specific contract for your client, start with the correct contract template

The most common issue with contract templates is the correct use of these documents. In today’s modern world there are various technology for automatic contracts. The most used tool for writing contracts is however still word processing software, like MS Word. Many also save the contract templates in unstructured ways.

Additionally, people that actually (should) use the template contracts to make the specific client contract do not always use the actual template as a starting point when making a new contract. It sounds very convenient to start with the contract of another client or the contract template that you have been using for years, but this is the biggest issue with contract creation in case a company did not automate contract creation. This results in a need to invest more time and money. Mainly on (re)negotiation and/or potential mistakes or claims in the future. All because the contract did not fit with the client.

My advice is to put in place good procedures to make sure that all colleagues start with the correct template when drafting a contract. There are several ways to make sure this works efficiently:

• automate your contract creation and make it the only way of generating contracts, and
• give training (at start of employment and regularly thereafter) to your employees in how to use the templates.

Finally, make sure to stress the importance of this subject and discuss it regularly.

Conclusion

The key to mastering contract templates involves these 6 strategic steps. With some planning and discussion, these tips are easy to apply. This concludes this introduction of or coming article series ‘How to Improve your Contract Templates – 6 Tips’. We hope these initial tips has helped you by providing some guidance on how to improve your templates to increase efficiency and revenue.

We look forward to sharing more tips with you on this subject in the following 9 articles in the series ‘How to Improve Contract Templates’. As a bonus, we have an additional article series on how to roll out your new templates.

If you need further tailored advice on how to improve your templates, reach out to us at AMST Legal.

Background and Contact Information

Robby is an experienced international legal counsel. He provides legal advice with a pragmatic and business minded approach. He is specialized in legal and strategic advice related to commercial contracts, with particular interest in (i) negotiating and drafting of complicated commercial contracts, (ii) creating new or improved templates for companies and (iii) commercial contracting advice.

After almost 20 years of legal experience, as lawyer in international law firm Hogan Lovells and Legal counsel / Head of Legal at various corporates and scale-up companies, Robby founded AMST Legal Services in July 2021. If you are looking for tailor made legal advice, please get in contact with Robby on LinkedIn, rreggers@amstlegal.com or on www.amstlegal.com.