Tip 4: Make an Inventory of Your Contract Templates
Introduction
Earlier, we provided tips on how legal should not be afraid to involve other departments. You can access that article through this link: https://amstlegal.com/tip-3-legal-involves-other-departments/. Moving on, we are going to dive into the next tip in the series on How to Improve Contract Templates. This tip 4 concerns making an inventory of all contract templates.
Make an inventory of your contract templates
A must when using contract templates, which we at AMST Legal highly advocate for, is to
- Regularly make a list of all contract templates that your company is using day to day.
- Make sure you know how many specific/different contract templates the company has for its products & services, countries, languages and departments.
Best is not to only ask the legal department, but to especially ask the business (e.g. Sales, Partnerships, Procurement, HR) which template contracts they are using day-to-day. Just to make sure, also ask them to send you the exact template they are using and check if they are using the right templates.
After making the list, you might be amazed how many different templates are currently in use by the company and where they are all stored. Having this list will give you a better idea which next steps you should take to improve your contract templates.
Conclusion
Organizing your contract templates, reviewing how many you have, and sorting them can be a life saver in stressful times. Oftentimes you might not even need all of the templates that you have currently. So make sure to regularly check up on the status of your contract templates.
How many contract templates do you have in your company?
If you want to become even more structure, and streamline your contracting process – contact us at AMST Legal for tailored advice. Let’s take your contracting to the next level!
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.
Tip 1: 80% Template – 20% No-template
Introduction
In our previous article where we launched an introduction to the series ‘How to Improve Contract Templates – 6 Tips’, which is available here: https://amstlegal.com/how-to-improve-your-business-contracts-contract-templates-part-1-the-basics/. In that part, we highlighted some common issues companies face when it comes to effective contract template usage, especially in the tech industry. These issues include:
- limited resources to dedicate time to create great templates – understandably, business always goes first;
- the contract templates are outdated, hard to find or difficult to use;
- the legal department / lawyer still needs to review and negotiate too many contracts because contract templates are incorrect, too difficult or can be amended too easily; and
- there are multiple versions of a contract template in use that are not aligned with Legal or the management.
This causes 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 address these challenges, we introduce Tip 1 in our ongoing series on ‘How to Improve Contract Templates – 6 Tips’: The ‘80% template – 20% no-template’ Rule (80-20 % Rule).
Tip 1: 80 % template – 20 % no-template
Why use the 80 % template – 20 % no-template rule?
One tip that we at AMST Legal always recommend for improving the overall structure of contract processes is the ’80-20 %’ rule. What does this mean you may ask. To put it simply, the rule concerns how you can strategize your contract processes. Doing this ensures faster contract processes while making work peaks less significant.
How does the 80 % template – 20 % no-template rule work?
As mentioned, our advice is to opt for working towards a contract process structure in line with this rule whenever possible. This rule is easy to apply, so we encourage you to start using this to make your contract processes smoother.
The idea of the 80-20 % Rule is that:
- you have templates for 80 % of your contracts, and
- that there is no involvement of templates for the other 20 %.
In practice, 80 % of your contracts stems from templates, while you have 20 % made from scratch.
Why is this beneficial?
Ensuring that 80 % of your contracts have templates might sound like a lot of work. Indeed, it does require time, structure and work to fulfil this. However, when you all contract templates in place, processes for those specific contracts will move quicker. At the same time you can save money, and time in the long run. I.e. from legal costs, costs due to minor errors in certain contracts etc.
The time you save from working with the more standardized contracts, that might only need minor changes, will release precious time and resources for your larger and more complex setups/clients. In other words the contracts which require you to draft and negotiate custom contracts.
If you structure your contract processes in line with the 80-20 % Rule and overall in a well organized manner, the contract process can bring all these benefits.
Conclusion
Finally, the advice on what you should do stands – incorporate the 80-20 % rule now to enchance your company. It will improve your everyday work life since you have better control, as well as the company’s financial status and ability to get solid contracts in place. We hope that this has been an eye-opener for use of contract templates. If this subject is something you want to delve into more, go ahead and read our next article in the series ‘How to Improve your Contract Templates’, here: https://amstlegal.com/tip-2-legal-in-the-lead/.
If you need specialized advice on improving contract processes, or how to implement the 80-20 % Rule, reach out to us at AMST Legal. We look forward to helping you.