Contract Negotiations: How to Avoid Negative Reactions in Redlines and Mark-ups
๐ค๐๐ถ๐ฐ๐ธ ๐๐ผ๐ป๐๐ฟ๐ฎ๐ฐ๐ ๐ก๐ฒ๐ด๐ผ๐๐ถ๐ฎ๐๐ถ๐ผ๐ป ๐ง๐ถ๐ฝ ๐ผ๐ณ ๐๐ต๐ฒ ๐๐ฎ๐: When reacting to a comment or suggested wording by a counterparty that is commenting on your contract, ๐ข๐ท๐ฐ๐ช๐ฅ using negative language like:
“Adding this wording in the Article is incorrect because it has already been covered in Art. 12.”
Instead, try saying:
“Thank you for your comment. I agree with your addition. Please note that we have already covered this in Art. 12.”
Additionally, for important subjects, you can add:
“If you do not agree with this wording, please let me know”; and/or
“Please let me know if you would like to discuss this topic during our next meeting”.
As we know, during contract negotiations, it’s important to maintain a cooperative relationship with the other party. Remember, the counterparty is also just doing their job and you are working together to reach a mutually advantageous outcome.
By using positive language in your reactions to comments, you can help keep negotiations running smoothly and maintain a good relationship with the counterparty.
For a bit more background on The Importance of a Relationship in Negotiations, please see the following article on the Harvard website.
See our original post on this subject on LinkedIn
#ContractNegotiations #HowtoNegotiateBetter #ContractLaw #AMSTLegal #contracts #negotiation #negotiationskills #relationshipbuilding
Legal in the Lead when improving Contract Templates
To improve your contracts, it is no surprise that we recommend Legal to take the lead in creating and implementing contract templates, particularly for critical documents such as loan agreements, general terms & conditions, DPAs (data processing agreements), etc.
Depending on the maturity of an organisation, leadership and commercial teams often overlook the necessity of Legal approval, 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 companyยดs contract templates.
To illustrate this, see two scenarioยดs that we encounter in practice:
a) 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.
b) 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 โ understandably โ 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).2 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.
Doesnยดt 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 (ii) contract automation. The research on this subject also confirms that โ as we have also experienced in practice in many different companies โ that it will actually speed up your processes. Lastly, this is also substantiated by the interest in Legal Tech & CLM (Contract Lifecycle Management) tools offered that automate and streamline contract processes during key stages in the contract lifecycle.
To improve contract templates, more work will indeed need to be done at the start of the process to ensure that the standards not only contain legal, but also business requirements. Once the contract templates have been created and includes the input from all teams (see next tip 4), the standardized templates can be used without input from Legal โ which will greatly improve 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).
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 template contracts. More on this in point 5 below.
Broadened Scope
Key to this approach is that Legal is not only involved in leading the effort in creating typical contract templates like NDAs, sales or partnerships agreements, but also documents such as Service Level Agreements, Offer Documents and Order Forms. Once these agreements have been agreed by Legal and the rest of the company, they can be used at scale within the agreed framework.
The Role of Legal
Legal should oversee the drafting, implementation and management of these contract templates to ensure accurate and compliant use of the templates across the organization. Once Legal is in the lead of the contract templates and the business is working according to the 80/20 Contract Template โ unsurprisingly – it typically first leads to more work for Legal. This is caused by the fact that Legal now has control over all contracts that are sent out by the company. This is why automation and empowerment of other teams is so crucial.
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, which we will discuss in our next post
Contract Negotiations: How To Avoid Negotiation Peaks? Part 5
As we approach the end of Q3, this week a short message as the pressure is on to review, negotiate and close contracts before end of next week!
To make the end of the Quarter more manageable, lay the groundwork:
1. Early Preparaation and Prioritization
2. Communication & Cooperation
3. Standard Templates
4. Implementation of Legal Tech
However, at the end of the Quarter it will always be busier than normal.
๐๐ผ๐๐ฟ ๐๐ถ๐ฝ๐ ๐ณ๐ผ๐ฟ ๐๐ผ๐๐ฟ ๐น๐ฎ๐๐ ๐๐ฒ๐ฒ๐ธ:
* Prioritize: Focus on high volume and strategic deals that are nearing closure and absolutely need to close this month.
Ask yourself: Is the very important contract you are working on now actually closing next week, or should you pause this deal for now and pick it up again in Q4 because it is actually a Q4 deal? Focus on Q3 deals only when busy.
Check: what are the Top priorities of the company & Sales department? Are you working on the right deals?
* Clear Communication:Keep open and transparent communication with your customers and internal teams. Confirm their (timing and process) needs, address any concerns and reiterate the urgency to reach a final agreement.
Streamline the contract process by collaborating closely with internal teams. Set daily meetings where necessary with clear goals for each day.
* Team Collaboration: The management, sales, legal, and procurement colleagues have to collaborate seamlessly to resolve any last-minute hurdles. Cross-functional teamwork is key to overcoming last obstacles or escalation matters
Avoid solo working on your very complicated deal, but collaborate with internal and external teams to ensure maximum efficiency and alignment to avoid delays.
* Deadline Management: Keep a close eye on deadlines, review the full list of contracts to be signed and requirements (contracts, documents, approvals, etc) and plan a few days ahead โ leave room for error. Missing a critical date, signature or document in the last week of the quarter can be costly.
Closing deals in the final week of Q3 is all about focus, prioritization, communication and teamwork. Let’s make this week count and finish the quarter with success!
Contract Negotiations: How To Avoid Negotiation Peaks? Part 4
In the run up to Quarter 3 end (30th of Sept.), I advise you to send an email out today to your Sales, Partner & Procurement colleagues informing them that in the next two weeks, you will only pick up contracts that are:
* already ongoing;
* truly urgent; and
* need to be signed before the end of this month / end of Quarter (3).
Any deviations from this rule should get a green light from Senior Management.
Why?
The above is a pro-active step to manage your workload and working towards an efficient Legal department.
By emphasizing urgency and advanced planning, you can alleviate the end-of-quarter rush, enabling Legal to focus on what genuinely demands attention.
From experience I am aware that it is not an easy sell to the organisation, but , but trust the process. Once the wider organization realizes this is the gold standard for the legal team, they will (most of the time):
(i) initiate timely discussions, and
(ii) forward their inquiries and feedback well in advance.
I have deployed this strategy previously and while it takes a while for teams to get used to, the positive change is undeniable after 2-3 Quarters.
It ensures that your team’s time and resources are directed toward the most critical and time-sensitive matters. This approach also prevents (to the extent possible) that the teams are working on less urgent tasks, allowing for better productivity and focus.
Next Steps before you hit send:
1. Inform the sales, procurement, partnerships teams during your regular sync-up meetings about this communication and approach of the Legal department.
2. Align this approach with your manager and stakeholders or C-suite overseeing the sales, procurement, partnerships teams.
Good luck! Let me know if it also worked for you or if you have questions / comments.