To improve your contracts, it is no surprise that we recommend Legal to take the lead in creating and implementing legal contract templates, particularly for critical documents such as loan agreements, NDAs, general terms & conditions, DPAs (data processing agreements), etc.

Involvement Legal is Crucial

Depending on the maturity of an organization, leadership and commercial teams often overlook the necessity of Legal approval or involvement, which leads to inefficiencies and the risks mentioned in the previous articles on this subject.

Even though it might be perceived as slowing down processes, it is advised to let Legal take the lead when creating, amending and rolling out your company´s contract templates.

Two Practical Examples

To illustrate this, see two scenario´s that we encounter in practice:

Small Businesses and Start-ups

Founders or commercial teams in smaller enterprises rely on freely available online templates or self-made documents. While this is an understandable practical approach in the early stages of a company, it is vital to re-evaluate these initial templates in consultation with Legal.

Corporates

Even in larger organisations with state of the art templates, it is not unusual that commercial and operational teams use their own, unapproved versions tailored for specific products or services. Case study: For example, when advising a company with 120 employees, we encountered 40 different contract templates of the same Sales Contract – one for each product! As the company – understandably – had serious contract efficiency issues, we worked on successfully consolidating this into three contract templates.

Contracting is a highly cross-functional activity (or at least it should be). Legal leadership is nothing without involvement from the other departments in a company. How to do this, we will explain in the next tip in the series how to improve your contract templates.

Doesn´t Legal slow down processes?

There is still a common perception that Legal will slow down processes, which is not correct if Legal embraces the possibilities of (i) standardizing and simplifying the contract templates, (ii) working towards the 80/20 Template Ratio and (iii) contract automation.

Involving Legal Early will Speed Up Processes

The research on this subject also confirms that – as we have also experienced in practice in many different companies – that it will actually speed up your processes.

Lately, with the boom of AI, the interest in Legal Tech & AI has skyrocketed. It is clear to everyone that it is a huge efficiency gain to involve Legal. They will be able to create standards and then automate processes where possible.

Use Agreed Standard Templates

To improve contract templates, it is crucial that at the start of the process standards not only contain legal, but also business requirements. Once the contract templates have been created and includes the input from all teams (see this article), the standardized templates can be used without input from Legal. This greatly improves the efficiency, scalability and negotiation time for your contracts.

Automation and Empowerment Commercial Team

Once these contract templates are final, these templates can be made available internally and/or externally depending on the type of contract. For example:

• online (Terms and Conditions, DPA, SLA (Service Level Agreement)
• contract management software (e.g. Customer Agreement, NDA (Non-Disclosure Agreement), Order Forms; and/or
• by the commercial teams (Enterprise Customer Contract, Partner Agreements, Master Services Agreement).

Central Repository and Automation

It is therefore crucial to have a central repository and/or automate the access to the contract templates to empower the commercial teams to use the contract templates within the agreed framework. Commercial teams need to be enabled to complete and send out contracts (e.g. Enterprise Customer Contracts, NDAs and Partner Agreements) that are made using the standard contracts. More on this below.

Broadened Scope
Work on involving Legal in leading the effort in creating typical contract templates like NDAs, sales or partnerships agreements. This also means related documents such as Service Level Agreements, Offer Documents and Order Forms.

The Role of Legal

What Legal Should Not Do

It is important that Legal and the Commercial Team understands that it should not be involved in all negotiation. This is the main reason that contract processes are slow.

What Legal Should Do

Legal should oversee the drafting, implementation and management of contract templates to ensure accurate and compliant use of the templates across the organization. After that it should train all teams, update the contract templates further to input from all teams and then work according with the 80/20 contract standards rule (see our latest article about this here).

Once Legal is in the lead of the contract templates and the business is working according to the 80/20 Contract Template – unsurprisingly – it typically first leads to more work for Legal. This is because Legal is now visible to all commercial teams. We then come to the next step: automation and empowerment of other teams is crucial.

Use the 80/20 Contract Template Rule correctly

If the 80/20 Contract Template rule is correctly followed however, Legal will become less of a bottle-neck. The commercial team will be more empowered in negotiating contracts and bringing them to execution. To optimize contract processes, teams involve Legal only when necessary. This primarily applies to large enterprise deals, strategically important agreements, or any non-standard contracts.

Contracting is a highly cross-functional activity (or at least it should be). Legal leadership is nothing without involvement from the other departments in a company.

This brings us to the next points that Legal should focus on: (i) involving other departments in the company and (ii) improving the communication and cooperation with other departments, please see this article.

Next Steps—Talk to AMST Legal

• Process audit – empower your commercial team in negotitaions
• Templates – Let us assist you to improve your templates.
• Training & change management – explain why training and cooperation is so important and how to implement such training.

Ready to build a smoother bridge between Commercial and Legal? Contact AMST Legal for a free initial consultation.