Tip 6: When making your specific contract, start with the correct template
Introduction
Previously in the series “How to improve contract templates”, we emphasized knowing the content of your contract templates. See the full article here: https://amstlegal.com/tip-5-review-the-contents-of-your-templates/. Now we’re zooming in on perhaps the most common issue with contract templates: How the templates are used daily. Because even with all the technology available to automate contract creation, most contracts are still created in word processing software such as MS Word. The templates are often saved in unstructured ways too. Additionally, the people that use the template contracts on a daily basis for a specific customer contract do not always use the correct template, i.e. the latest version, when making a new contract. While simultaneously doing that without using contract automation, unexpected risks can show up later on. Keep reading to learn what risks you could be facing, and how you can manage them.
When making a specific contract, start with the correct template
Why is it so important to start with the correct template?
Naturally, it sounds very convenient to use a contract of another client or the contract template that you have been using for years when making a new contract. However, this is the biggest risk associated with contract creation for companies that do not use contract automation. More time and money will need to be spent on the (re)negotiation of the contract and/or potential mistakes or claims in the future because your contract did not fit with the client or the specific situation. Using the correct template can be a step on the way to minimize encounters with these risks.
How do you minimize this risk?
So how do you avoid the risks connected to not using the correct template? There are many options to minimize those risks. However, we have found from experience that the two best ways to minimize these risks are:
- Fully/partly automate your contract creation and be strict that this is the only way that contracts can be generated; and
- Create a central place (usually an internal website) to store the contract templates, and give your employees regular training.
Unfortunately, the first tip can take some time to set up and requires recources for it to fully work. The pros outweigh that though, so don’t fear the power of technology when making contracts. For the second tip to fully work, we advise to provide training to the employees regularly. For example at the start of the employment followed by regular consistent training after that. This is our standpoint because you want your employees to know where the templates are located and how to use them.
Another tip that could be conjoined with the other two is to make sure that the importance of this is discussed regularly in your team or during company meetings.
Conclusion
To sum this article up, it can make a major difference on the aftermath of your contracts whether the correct template is used or not. Therefore we do advice to invest in good templates and good training for the employees. Doing this will make your contracting process much easier. If you feel like this is something that you would benefit from, contact us at AMST Legal for further personalized advice.
Tip 3: Legal Involves Other Departments
Introduction
Previously, we shared valuable tips on how to structure legal’s responsibility of the contract process. Access it here if you haven’t read it: https://amstlegal.com/tip-2-legal-in-the-lead/. Continuing, we are moving on to tip 3. That concerns making sure that Legal involves other departments when drafting and rolling out / implementing templates.
Looking back, we have seen lengthy processes when working with large corporations. There, it would typically take 3-6 months before their client contract (a relatively straightforward Services Agreement) would be negotiated, agreed and signed. When working there, we were able to reduce the time spent on this to maximum 1-2 months. Keep reading to learn how you could do the same.
How to shorten the contract process
Three tips
We were able to bring this period down to a maximum of 1-2 months by:
- sitting down with the business to discuss how the contract could be improved, not only from a legal point of view but from a business point of view;
- amending the templates accordingly; and
- strongly involving the business with the roll out/ implementation of the new templates.
This provided an overview of the contract process and having other departments that use the templates on board from the start.
Why should legal involve other departments?
I have seen this working in every company where I had the opportunity to use this strategy. It is therefore my strong belief that Legal absolutely must:
- consider the opinion of other departments of the company, and
- draft/amend the contract templates accordingly where necessary and possible.
This applies especially to commercial contracts and less for purely legal templates like NDAs (Non-Disclosure Agreements) and DPAs (Data Privacy Agreements).
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 cover 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.
Conclusion
Incorporating insights from other departments when drafting and implementing legal templates can significantly shorten the contract process. By involving key teams such as Sales, Products, Finance, and Compliance, Legal can create templates that not only address legal risks but also align with business needs. Ensuring cross-departmental alignment leads to more effective contracts and greater support from the business. That makes the process more efficient and streamlined.
Stay tuned for our next article on tip 4. In the meantime, contact us at AMST Legal if you want to enhance your contract process through personalized expert help.
Tip 2: Legal in The Lead
Introduction
After having advised in the previous post, which you can read here: https://amstlegal.com/tip-1-80-template-20-no-template/, that your company should work towards structuring it to the ‘80% template – 20% no-template’ rule whenever possible, the next step is to let legal be in the lead.
Let Legal be in the lead
When you have applied the 80-20 % Rule, you are ready to take the next step. The next step that can improve your contract processes concerns creation of templates and followingly, getting the necessary personnel up-to-speed. For this, an advice from us at AMST Legal is to let legal be in the lead when creating and introducing new contract templates. This shall apply to all contract templates that are within the plan – i.e., 80 % of your contracts – according to the AMST Legal approach.
Do you find this to be unnecessary to point out?
Having legal in the lead on creating and rolling out templates might seem to be very obvious. Especially for e.g. your Terms & Conditions, DPA (Data Processing Agreement), etc. In reality, this is not always the case, as the practice may be to have legal in the lead, but ends with other rogue approaches that we will explain below. Thus, it is not always so obvious, why this is necessary to point out.
Some examples of what AMST Legal have seen at companies are the following:
- With small (local) businesses, start-ups and scale-ups: the founders and/or the commercial team have downloaded templates from free online resources or made templates themselves. All very acceptable and completely understandable when starting a company, but if your company grows or becomes more mature it is important to review these old templates and make sure that you discuss this with Legal.
- With (large) corporations: the company has good templates, but the commercial / operational team has their own individual versions (not approved by legal) that they like to use and amend for specific products/services. Example: I once advised a company of 100 people where there were 40 versions of the same Sales Contract – one for each product! We were able to bring it back again to 3 versions.
Therefore, make sure that Legal, i.e. an external lawyer or your internal legal department, is in the lead when making and rolling out new contract templates. We see it way too often that management or the commercial team use templates that legal have not approved. This can create various problems later on.
AMST Legal Recommends
Our recommendation in this regard is (obviously) to let Legal review and control all contract related documents.
Legal should be involved with the following contract processes:
- The obvious ones that is not only pure commercial contracts (like a sales contracts, DPA or partnership contracts), and also for
- documents where you might be of the opinion that they are purely commercial (e.g. Service Level Agreement, Pricing/Offer Documents or Engagement Letters).
In other words, legal is crucial for the inital contract process. Legal should control the drafting, implementation and filing of the template contracts to make sure that the templates are managed correctly by the company. However, note that this does not mean that legal have to complete and send out specific contracts made from contract templates.
Conclusion
To sum this article up, we at AMST Legal believe that it is in the company’s best interest to really let legal take the lead in contract processes. It might seem easier to create your own templates, but that can lead to other worrying moments that is best to avoid. If legal is taking the lead, the idea of improving your contract templates can improve rapidly, while requiring less help from legal.
Do you feel like your contract process align with the two problem areas we described and wish to improve your processes? Reach out to us or book a consultation with us at AMST Legal to recieve specialized advice tailored to your specific needs.
