Förklaring av NDAs – Vad du behöver veta (del 1)
Förklaring av NDAs – Vad du behöver veta (del 1)
I den konkurrenskraftiga affärsvärlden där idéer, innovationer, finansiell information och hemligheter är framgångsnycklarna, spelar Non-Disclosure Agreements (NDAs) ofta en viktig roll i att skydda ett företags konfidentiella information. NDA säkerställer att den konfidentiella informationen endast används för det specificerade ändamålet som parterna i en affärsrelation avtalat om. Denna artikel kommer att ge en omfattande översikt av NDA i sammanhanget Business to Business (B2B).
Vad är ett NDA?
Ett NDA, även kallat sekretessavtal, är ett juridiskt bindande avtal mellan två eller flera parter med syfte att skydda konfidentiell information som kan komma att delas under tiden av deras affärsrelation. Mer specifikt är företags konfidentiella information icke-offentlig information som skulle kunna skada företaget om det skulle offentliggöras. Vanligtvis inkluderas en lista över den konfidentiella informationen i avtalet. Det kan innehålla exempelvis affärshemligheter, know-how, produkt- och teknikrelaterad information, rabatter, kundlistor, försäljnings- och finansiell information, affärsplaner etc.
Varför och när behöver vi ett NDA?
I B2B-sammanhang kan NDA vara ett väsentligt verktyg för att skydda affärshemligheter och annan konfidentiell information som är viktig för ett företag för att bibehålla dess konkurrensfördelar. Denna känsliga information bör därför definieras tydligt och noggrant i NDA. Var däremot försiktig med att inte definiera det för snävt för att säkerställa att du inte har missat en viktig kategori. Genom användande av ett korrekt utformat NDA kan ditt företag skydda värdefull information från konkurrenter eller tredjeparter som kan dra nytta av att sådan information avslöjas.
Primärt syfte
Det primära syftet med ett NDA är att säkerställa att den avslöjade känsliga informationen används och hanteras säkert, vilket förhindrar en avslöjande part att använda eller röja informationen utan vederbörligt tillstånd och behörighet. Ett NDA undertecknas ofta i början av en affärsrelation innan man går in i affärsrelationen.
Exempel
Vanligt exempel: Ett teknikföretag planerar att sälja och erbjuda specialiserade programvarulösningar till en företagskund. Företagen börjar med att diskutera hur man integrerar programvaran i kundens system för att fastställa priset för integrationen och användningen av programvaran. För detta kan teknikföretaget dela insyn om sin prissättning, SLA, policys och programvara, och kunden kan i sin tur förklara sina utmaningar och dela affärsplaner. När företagen gör detta planerar de således att dela dokument, inklusive icke-offentliga sådana, det vill säga konfidentiell information. Därför rekommenderas det att sådana företag skriver under ett NDA innan de delar sådan konfidentiell information sinsemellan. Ett sådant NDA kan sägas upp när parterna undertecknar ett slutligt kundavtal, vilket också bör inkludera sekretessvillkor.
Hur skyddar ett NDA din konfidentiella information?
Precis som för vilket annat juridiskt avtal som helst, medför avtalsbrott av ett NDA rättsliga konsekvenser. Beroende på avtalsbrottets allvar kan konsekvenserna sträcka sig från rättsprocesser och ekonomiska påföljder till åtal i extremfall. Avtalsbrott avseende ett NDA kan också skada en parts renommé, vilket kan leda till andra långvariga konsekvenser för dess affärsverksamhet, särskilt i affärsrelationer och i branscher där förtroende och sekretess är avgörande. Rättsliga anspråk och stämningar rörande avtalsbrott av ett NDA hör inte till vanligheten, men det händer definitivt att ett företag behöver betala vite för avtalsbrott. Vi har även gett rådgivning några gånger tidigare i denna fråga.
Vilken slags NDA behöver du?
Det finns olika typer av NDA som kan användas baserat på de specifika omständigheterna och de involverade parternas behov. Nedan listas de tre vanligaste typerna:
- Unilateralt NDA (Ensidigt NDA): I ett ensidigt NDA ålägger en part, vanligtvis säljaren, den andra parten skyldigheten att säkra informationen och inte avslöja eller använda informationen för något annat syfte än det som specificerats i avtalet. I ett B2B-sammanhang, används ensidiga NDA ofta mellan köpare och säljare. Exempelvis kan ett bioteknikföretag (säljare) använda ett ensidigt NDA för att förhindra köparen från att avslöja känslig information de har fått vid köp av produkter eller tjänster såsom immateriella rättigheter och datorteknologi. Det är även vanligt i offentliga upphandlingar och för RFI (Request for information) vid RFP (Request for Price) situationer.
- Gemensamt NDA (tvåsidigt eller ömsesidigt NDA): Ett ömsesidigt NDA involverar två parter där båda parter kommer att dela känslig information med varandra och kommer ömsesidigt överens om att båda parter blir bundna av tystnadsplikt. Ömsesidiga NDA används ofta när parter behöver utbyta betydande mängder av konfidentiell information under sina förhandlingar eller affärsrelationer. Sådana situationer kan vara joint ventures, leverantörsavtal eller företagsförvärv.
- Multilateralt NDA (tre- eller flerparts NDA): Ett multilateralt NDA inkluderar tre eller fler parter, där åtminstone en part delar känslig information med andra parter och genomdriver tystnadsplikt. Den här typen av NDA förenklar pappersarbetet och administrationen för parterna på så sätt att parterna inte behöver ingå flertalet ensidiga eller bilaterala NDA med varandra. I en affärsrelation som involverar tre parter, där alla förväntar sig att avslöja konfidentiell information, kan ett enda multilateralt NDA ersätta behovet av tre olika bilaterala NDA mellan varje partspar. Sådana situationer kan vara partnerskap, regeringskontrakt (såsom försvars- och rymdfartskontrakt) och konsortieavtal.
NDA’s Explained – What You Need to Know (Part 2)
1. Introduction
Let’s dive deeper in the details of NDAs. After explaining the basics and different kinds of Confidentiality Agreements (NDAs) in the previous article, we will now zoom in on four key elements that are part of NDAs: Parties, Definitions of ‘Purpose’ & ‘Confidential Information’ and the Term of the NDA.
In part 1 of our series ‘NDA’s Explained’, we explained what NDAs are and which different kinds of NDAs exist (link to article: https://amstlegal.com/ndas-explained-what-you-need-to-know-part-1/). Also see this great practical article on NDA’s by Ironclad.
In this article, we will take a closer look at Four Key Elements of NDAs that are crucial:
- Parties
- Definition of Purpose
- Definition of Confidential Information
- Term of the NDA
Whether you are just starting or experienced in drafting, negotiating and signing NDAs, this article ‘What You Need to Know (Part 2)’ will help you understand the Four Key Elements of NDAs for keeping sensitive information safe in business deals.
2. Parties
Why is this important?
As with other contracts, it is often overlooked and easy to forget to add the correct parties in the NDA. When there is only one company in the group of the parties to the NDA this is simple, but when you are dealing with parties that are parts of larger groups this is important. With large companies like Nvidia, Siemens, Google, Nike, etc. this is obvious but when you are dealing with smaller groups, take a moment to consider which entity of the group is actually sharing the Confidential Information.
Most common parties
When in doubt, or when multiple companies in the group are sharing the Confidential Information, it is advisable that the parent / holding company enters into the NDA. The reason for this is that NDAs typically contain wording entitles the Receiving Party to share Confidential Information with affiliates. It is advisable to also add a well-defined ‘affiliates’ definition in the NDA which will extend the rights and obligations in the NDA to the affiliates of the parties of the NDA.
Specific wording
Example of specific Party wording that needs to be completed: [Add Exact full name of the Company including Ltd., Inc., BV, AB, etc.], a company registered under the laws of [add country/state], with registered office at [add full address] and company registration number [add number].
3. Definition of Purpose
Standards ways of defining Purpose
Most commonly, parties add the following purpose to NDA’s:
- ‘discuss the possibilities of a commercial relationship’ or
- ‘exploring potential partnerships or collaborations between Parties’.
More specific ways of defining Purpose
However, these is not the only purposes that we encounter. Other example are purposes relating to: (i) investors in your company, (ii) research and development, (iii) legal proceedings or (iv) visits to companies or factories, etc.
Key aspects for the Purpose
To identify the purpose of your NDA, ensure that its objectives align with your business goals. Typically, the essence of an NDA’s purpose revolves around two key aspects:
- Evaluating Business Relationship Viability: Assessing the feasibility and benefits of a partnership or collaboration by sharing confidential information to make informed decisions.
- Negotiating Relationship Terms: Engaging in discussions and negotiations to define terms, obligations, and parameters, aiming for mutually beneficial agreements through transparent exchanges of confidential information.
Why is it important?
Clearly articulating the purpose within an NDA is crucial for ensuring alignment between sharing confidential information and business objectives. It prevents misuse or unintended handling of information, enhancing trust and enforceability. In other words, the “purpose” is your tool to limit how and when the receiving party uses and shares your confidential information. This clarity not only enhances understanding and fosters trust between the parties involved but also reinforces the enforceability of the agreement by providing a clear reference point for evaluating compliance and addressing any potential breaches.
4. Definition of Confidential Information
Confidential Information refers to sensitive or proprietary data, disclosed by one party (the Disclosing Party) to another (the Receiving Party) during their business relationship. This information is confidential to protect the Disclosing Party’s competitive position, financial interests, intellectual property rights or reputation.
What should be included?
Confidential Information includes a wide variety of information a wide range of materials, for example:
- Trade secrets
- Business plans and strategies
- Financial data and projections
- Customer lists and contact information
- Product designs and specifications
- Intellectual property, such as patents, trademarks, and copyrights
- Marketing plans and sales data
- Technology, Software code and algorithms
- Research and development projects
- Any other information that is not publicly available and is treated as confidential by the Disclosing Party.
When you enter into a NDA relating to very sensitive information, ensure that you add any relevant confidential information that is typically not included in the definition of Confidential Information.
Specify which confidential information needs to be protected
The definition of confidential information in an NDA is crucial and should strike a balance between specificity and generality. Specific enough to ensure the protection of intended confidential information, yet general enough to cover unexpected but related information.
For instance, parties may opt for narrow definitions to protect only specified information, or broader ones to encompass all information exchanged during their business relationship.
Specific wording
A well-drafted NDA should also clearly state what Confidential Information is understood to be and how the confidential information is communicated. In our view a NDA should have a definition for Confidential Information similar to:
“Confidential Information” means any (non-public) information of and all written, visual or oral disclosed by or on behalf of one party or its Affiliates (“Disclosing Party”) to the other party (“Receiving Party”), identified as confidential or that reasonably should be understood to be confidential, including but not limited to information about their business, trade secrets, etc.
5. Term & Non-disclosure period
Standard Term
NDAs typically have a specified term after which they terminate. There is no standard, generally accepted limit, but the length should be reasonable, considering factors like the lifespan of the confidential information and industry specifics. Commonly, parties agree to a 2 or 3-year term for the NDA, with a further term that the confidentiality will be applicable after termination or end of the NDA.
Exceptions
For NDA’s that relate to intellectual property (IP) and Research and Development (R&D) projects, the confidentiality period is often longer – up to 5 years.
Confidentiality Term after NDA termination
After termination, the disclosing party may require the receiving party to uphold confidentiality obligations for additional years (typically also 2-3 years). When parties enter into a specific agreement relating to the purpose in the NDA, the confidentiality provisions in the specific agreement should replace the wording in the NDA. Even though this is not common, it is a possibility to add such wording specifically in the NDA.
6. Conclusion
Hopefully, this article ‘What You Need to Know (Part 2)’ helped you understand the Four Key Elements of NDAs for keeping sensitive information safe in business deals. Please reach out to us via +31650608964 or lowa@amstlegal.com if you need more information or advice about this subject.
Contract Management: Two Simple Tips to Optimize Your Contract Templates
Introduction: Understanding Contract Optimization
In today’s business environment, efficiency and clarity in contract management are more crucial than ever. One question we frequently encounter is, “What exactly is Contract Optimization Advice?” This concept might seem intricate at first glance, but it’s fundamentally about streamlining your contract processes to save time, reduce errors, and ensure legal compliance. Let me illustrate this with a straightforward example from our recent advisory work.
The Challenge: Streamlining Contract Processes for Enhanced Efficiency
A client approached us with a common yet complex challenge. They had two separate (fairly long) customer contracts in use, signed approximately 100 times each year. These contracts were:
- A standard customer contract for clients not receiving subsidies or government funding.
- A standard customer contract for clients that do receive such financial support.
They asked us to improve the wording of the contract, ensuring that companies signing the contracts understood the contracts sufficiently, avoiding legal jargon where possible. Additionally, they asked to advise them how to amend the contract in such a way that processes would be more efficient. Most importantly, we would of course focus on lowering the risks for the company, where reasonably possible.
Both contracts included a pricing annex, which was subject to regular updates.
Our Approach: Simplification and Innovation
After a brief introductory call with the client and a review of the contracts, we proposed a straightforward yet innovative solution. Our advice focused on two initial key changes which we already proposed without going into the details of the full contracts.
- Consolidation into One Contract: We recommended merging the two contracts into a single document with a distinct annex for subsidy or funding conditions. This approach not only simplifies the contract management process but also ensures that all customers are subject to the same core terms and conditions, promoting fairness and transparency.
- Digital Pricing Updates: To address the challenge of the frequently updated pricing annex, we suggested adding a link to the pricing information on the company’s website. This allows for real-time updates to be made accessible immediately after notifying customers, thereby significantly reducing administrative burdens and enhancing operational efficiency.
The Impact: A Smoother Path to Business Success
Our client implemented these changes and observed a noticeable improvement in their contract negotiation times and overall legal process efficiency. More importantly, this optimization made their business operations smoother and their customers happier by providing clearer, more accessible contract terms.
Conclusion: Let Us Simplify Your Contractual Challenges
Contract optimization is more than a service; it’s a pathway to enhancing your business’s operational efficiency and customer satisfaction. By embracing simplicity and leveraging technology, we can help you navigate the complexities of contract management with ease.
Are you ready to streamline your contract processes and make your business life easier? Contact us for tailored contract optimization advice. Book an appointment with us to discuss possibilities for your company.
Tags: #AMSTLegal #ImproveYourContracts #ImproveYourTemplates #Negotiation #ContractLaw #LegalEfficiency #Legal #CommercialContracts
How to improve your Contract Processes with Better Cooperation
Legal should focus on Better Cross-Departmental Cooperation
As we have highlighted in previous posts, it takes leadership and a team to improve your contract templates. Once Legal has taken the lead and the centralized responsibility to improve the contract templates, the next step is to involve and work together on this goal with other departments. The creation and use alone of contract templates will only offer limited benefits This is not only essential to receive all required input for the contract templates, but also for a successful implementation of the contract templates.
Legal professionals often limit their interactions to their Legal colleagues or senior management when creating and implementing contract templates or negotiating contracts. This limitation, while understandable, can lead to contract templates and agreed contracts that are legally sound but are missing critical business insights.
Additionally, as mentioned above, the complexity, inaccuracy and lack of processes will lead to the use of unauthorized or outdated templates and excessive Legal Review due to lack of internal processes and support from other departments.
Insight Integration: A Collective Approach on Template Creation
Therefore, aligning contract templates with the practical realities of the business is essential. Departments such as Sales, Products, Finance and Compliance offer invaluable insights on commercial and financial risks, practical considerations and the specificities of products or services offered by the company.
This input ensures that the contract templates are not only legally robust, but also fit in the commercial roadmap of the company and cover all other company risks (e.g. technical, compliance, operational and financial).
Another important reason to involve these departments in the drafting process of the templates is to create a sense of ownership and support from these stakeholders. When departments contribute in the development of the standardized contract templates of a company, they are more likely to endorse and actually use the templates. This collaborative approach not only enhances the quality and relevance of the contract templates but also ensures their acceptance and utilization across the organization, ultimately leading to smoother operations and reduced risks.
Enhancing Cross-Departmental Collaboration – Improve Communication & Cooperation
Legal´s role in improving the communication and cooperation with the rest of the company cannot be understated. Regular, strategic meetings between Legal and other departments are essential to set the stage for a more integrated and efficient approach to contract management of the company.
These discussions should focus on:
- a) Strategic Alignment: First, Legal needs to clearly communicate its short and long term intended contract optimization strategy to all departments. Secondly, these departments should share their strategy and specific requirements and contributions to the contract process and templates. This will give Legal the opportunity to create and roll-out the best strategy to improve the Company´s contract processes and templates.
- b) Issue Identification and Resolution: Facilitating an open dialogue where Legal and all other departments can highlight challenges encountered with current templates and collaboratively develop solutions to streamline cooperation and reduce operational burdens.
- c) Training and Involvement: Initiating internal workshops to educate teams on optimal contract template usage, Legal engagement policies, while encouraging feedback and suggestions for improvements to ensure templates remain relevant and effective.
- d) Proactive Communication: Discussing the optimization of the empowerment of the commercial teams, meaning that all relevant contract-related documents and information are proactively shared with customers and partners by the Sales, Partnerships and Procurement teams.
This will greatly minimize the workload of Legal and maximize their output due to a decreased need of Legal clarifications and Legal involvement in negotiations. The importance of regular, inclusive meetings and training sessions cannot be overstated. When planning, it is essential to engage every layer of the organization, from grassroots employees to top management, in strategic discussions and trainings.
These sessions serve as a cornerstone for aligning strategies, creating an environment where all team members are equipped with the knowledge and skills to navigate the complexities of the contract optimization process and their roles effectively.
By maintaining a consistent schedule of these critical discussions and training, organizations can avoid the pitfalls of reactionary measures during peak periods of activity. Instead, a well-informed and strategically aligned team will be ready to handle the demands of the business efficiently, ensuring continuity and resilience in the face of challenges.
NDAs Explained – What You Need to Know (part 1)
NDAs ensure that confidential information is used solely for the specified purpose set out between the parties in a business relationship. In the world of business, where ideas, innovations, financial information and secrets are the keys to success, Non-Disclosure Agreements (NDAs) often play an important role in protecting a company’s confidential information. This article will provide a comprehensive overview of NDAs in the context of Business to Business (B2B) dealings.
What is an NDA?
An NDA, also referred to as a Confidentiality Agreement, is a legally binding contract between two or more parties to protect confidential information which may be shared during the course of their business relationship. More specifically, confidential information is non-public information of a company that could harm the company when it would be shared in public. Usually a list of the Confidential information is included in the NDA, containing for example: trade secrets, know-how, products and technology-related information, discounts, customer lists, sales and financial information, business plans, etc.
Why and when do we need an NDA?
In the B2B context, NDAs can be an essential tool for protecting proprietary knowledge, trade secrets and other confidential data that is important for a company to maintain its competitive advantages. That sensitive information, therefore, should be defined clearly and carefully in NDAs. However, be careful not to define it too narrow to ensure that you have not missed an important category. By using a properly drafted NDA, your company can secure valuable information from competitors or other third parties who may benefit from the disclosure of such information.
Primary objective
The primary objective of an NDA is to ensure the disclosed sensitive information is securely used and handled, preventing its use or disclosure without proper permission and authorization by the disclosing party. An NDA is often signed at the beginning of a business relationship or before entering into a business relationship.
Example
Common example: a technology company is planning to sell and offer specialized software solutions to an enterprise customer. The companies start by discussing how to integrate the software into the customer’s systems to ascertain the price for the integration and the use of the software. For this, the technology company might share insights about their pricing, SLA, policies and software, and the customer, in turn, might explain their challenges and share business plans. While doing so, the companies therefore plan to share documents including non-public, hence confidential information. This is why it is advised that these companies sign an NDA before sharing this confidential information to each other. Such an NDA can be terminated when the parties sign a final customer contract, which should also include confidentiality terms.
How does an NDA protect your confidential information?
Like any other legal contracts, an NDA carries important legal consequences for breach of contract. Depending on the severity of a breach, its consequence can range from lawsuits, financial penalties to – in extreme cases – criminal charges. Breaching an NDA can also harm a party’s reputation, which may lead to other long-lasting consequences to its business, especially in business relationships and industries where trust and confidentiality are crucial.
Claims and lawsuits relating to a breach of an NDA are not common, but it absolutely happens that a company needs to pay out a penalty for breach of confidentiality. We have even advised on this matter a few times in the past.
What type of NDA do you need?
There are various types of NDA that can be used based on the specific circumstances and the needs of the parties involved. Below are the three common types of NDA:
- Unilateral NDA (One-sided NDA): In a unilateral NDA, one party, typically the seller, imposes on the other party the obligation to secure the information and not to disclose or use the information for any purpose other than what is specified in the agreement. In a B2B context, unilateral NDAs are often used between buyers and sellers. For instance, a Biotech company (seller), may employ a unilateral NDA to prevent the buyer from disclosing sensitive information they have gained during the purchase of products or services, such as intellectual property and computer technology. Also common in Public Tenders and for RFI (Request for information) in RFP (Request for Price) situations.
- Mutual NDA (Two-sided or Mutual NDA): A mutual NDA involves two parties, and both parties will be sharing sensitive information with each other and agree that both sides will be bound by confidentiality obligations. Mutual NDAs are frequently used when the parties need to exchange considerable amounts of confidential information during their negotiations or business relationship. Such situations can be Joint Ventures, Vendor Contracts or Mergers and Acquisitions.
- Multilateral NDA (Three or More Parties NDA): A multilateral NDA includes three or more parties, where at least one party shares sensitive information with other parties and enforces confidentiality obligations. This type of NDA streamlines the paperwork and administration for the parties in a sense that the parties do not need to enter several unilateral or bilateral NDAs with one another. In a business relationship involving three parties, where all anticipate disclosing confidential information, a single multilateral NDA can replace the need for three different bilateral NDAs between each pair of parties. Such situations can be Partnerships, Government Contracts (like defense and aerospace contracts) and Consortium Agreements.
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.
Contract Negotiations: How To Avoid Negotiation Peaks? Part 3
𝗩𝗲𝗻𝗱𝗼𝗿 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁𝘀
Picture the moment of buying new software, finalizing the lease on that dream workspace or formalizing your agreement with the new accountant via engagement letters. These are not just signatures or digital approvals of external contractual terms, they are important business decisions. Welcome to the world of vendor contracts!
Building on our previous discussion how to negotiate your 𝘰𝘸𝘯 𝘤𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘴 like customer contracts (Part 2), let’s focus now on contract of other parties.
𝗦𝘁𝗮𝗿𝘁𝗶𝗻𝗴 𝗽𝗼𝗶𝗻𝘁
One key principle we always advocate for: be cautious and hesitant to approve external template vendor contracts (referred to as Customer Paper) replacing your own template customer contract. Even though it is advised that large companies have their own template vendor contract for their vendors, only approve the use of such templates in exceptional and pre-approved cases. This will not only prevent delays, protect your business interests but also streamlines the negotiation process.
𝗠𝗮𝗶𝗻 𝗶𝗻𝘃𝗼𝗹𝘃𝗲𝗱 𝘁𝗲𝗮𝗺𝘀
𝟭. 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁:
Roles:
· Strategic direction
· Alignment other teams. ´If the Sales Team wants to buy this software tool, let’s involve Procurement, Finance and IT to check the suitability of the tool´.
· Final decision
* Best practice:
– Keep overview of vendors to align with company’s objectives.
– Work on communication between teams, especially for large vendor contracts.
𝟮. 𝗣𝗿𝗼𝗰𝘂𝗿𝗲𝗺𝗲𝗻𝘁: Acting as the bridge between your company and the external vendors, having the overview and responsibility for all vendor contracts.
Roles:
· Budget & Pricing; Assess value and benefits of vendor contracts.
· Relationship building and primary vendor point of contact
· Negotiating contracts.
· Contract compliance with company policies/procedures
* Best practice:
– Inform all teams early of anticipated engagements with vendors.
– Keep the management updated with vendor list
– Involve the legal team 𝗲𝗮𝗿𝗹𝘆 (avoid end of quarter requests) to review contracts with clear timelines.
𝟯. 𝗟𝗲𝗴𝗮𝗹.
Roles:
· Review, advice and negotiate contracts
· Streamline process
· For large companies: create vendor templates
· Create questionnaire for all vendors (create with Compliance / Data Security Team)
* Best practice:
– Create a vendor questionnaire
– Stay proactive (not reactive) to avoid review of vendor contracts in peak periods
– Improve communication between legal, procurement and other teams to avoid delays and last minute reviews.
Prioritize vendor contracts for Quarter start periods. handling contracts based on $value and potential impact.
How To Avoid Peaks in Negotiation Cycles by Improving Team Collaboration
1. Introduction
Working towards an optimized negotiation process is not only a legal matter but requires effective collaboration between various teams. In my experience, the teams highlighted below have the most important role in negotiation cycles.
The general rule to involve all teams in your contract template creation and contract negotiations will always apply. As Legal is in the middle of these processes, we have written this series from the point of view of the Legal department.
Let’s dig deeper into the roles of the different teams involved in negotiating your own contracts.
2. 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁
Next to a focus on the strategic vision of the company, the management will encourage teams to sign as many customer contracts as possible. It will especially crucial for the management to have a seamless process with minimal involvement from management, except where agreed.
Main roles
In contract negotiation, the roles of the company’s management will be:
- · Strategic Vision
- · Risk Management
- · Stakeholder Alignment
- · Escalations / final decisions
Best practice: Establish a robust structure that defines Management’s role and involvement in decision-making processes. Explore and discuss refinement of contract processes and agree on key priorities.
3. Commercial Team
With this we mean for example Sales & Account Managers, Business Development Managers, Partnership Teams. As a sprinter nearing the finish line, the Commercial Team will race to close deals at the end of each quarter. Smoother processes will mean better results so Commercial Teams are usually more than willing to work towards improvements.
Main Roles:
In contract negotiation, the roles of the company’s commercial team will be:
- · Overall Overview and Responsibility for customer contracts
- · Relationship building / primary point of contact
- · Getting the deal done
- · Stakeholder Alignment
Early involvement and cooperation with other teams is imperative for Sales to avoid bottlenecks & peaks. In the cooperation with Legal, focus on (i) Setting Priorities, (ii) Contract Template Training and (iii) when & how to involve Legal.
4. 𝗟𝗲𝗴𝗮𝗹
In contract negotiations, the legal team navigates all legal advice and negotiations from a strategic point of view, with a goal to improve processes and reduce risks for the company.
Main roles:
In contract negotiation, the roles of the company’s legal team will be:
- · Contract Advice, Negotiation and Drafting
- · Risk Management of the company
- · Creation of contract templates / playbooks and contract process improvement
Best practice: Legal shines in drafting, advising and negotiation of contracts. Do not create gridlocks by making them the point person for each negotiation. Strategize with Sales when Legal should step in, which should mainly be for large or strategic customer contracts.
Conclusion
By carefully dividing roles and collaborating closely between teams, we are able to work on improving contract & negotiation processes. This also includes working better together to avoid end-of-quarter spikes before the holidays.
In our other articles about this topic, see 1, 2, 3 and 4 we dive deeper on the ways to improve the communication and collaboration between these teams.
Contract Negotiatons: How to Avoid Negotiation Peaks? Part 1
Negotiating commercial contracts is always a daunting task, but is particularly complicated at the end of Quarter. We have written a series of tips on how to avoid these negotiation peaks, using my experience gained on this topic since 2004, as I have found that now a great time to start preparing for the end of Q3 and especially for the highest peak of the year (end of Q4).
If we all embrace the goal of reaching a steady negotiation rhythm, we are able to unlock benefits like improved decision making, streamlined processes, more joy at work and stronger relationships. Replace rushed contract negotiations & discussions with a strategic plan that allows for efficient and optimal contract negotiations.
As Commercial Contracting Experts, we focus on the following two scenario’s:
Scenario 1: negotiating your own contracts with buyers of your Products & Services: Customer Contracts.
-Teams involved: Sales, Account Management, Legal, Finance, Management, etc.
Scenario 1: negotiating contract of other companies to buy their products: Vendor & Supplier Contracts.
-Teams involved: Procurement, Finance, Facility, IT, Legal, Management, etc.
Top 10 common Commercial Contracts
– Confidentiality Agreement (NDA)
– Order Form
– Master Services Agreement (MSA)
– General Terms & Conditions (GT&C)
– License Agreement
– Framework Agreement
– Partner Agreement (Reseller, Distribution, Incentive Agreement)
– Service Level Agreements (SLA)
– Statement of Work (SOW)
– Data Privacy Agreement (DPA)
First Tip: start your preparation & planning and list your priorities now.
Are the teams your work with aware that the contracts you are working on need to be signed soon – particulary before end of Q3 or Q4??
Contact your team members this week to inform them of any upcoming contract negotiations.
Four Critical Factors: The following four Critical Factors will prepare you to work towards a steady negotiation cycle:
1. Early Preparation, Planning and Prioritization
2. Communication & Cooperation
3. Standard Templates & Procedures.
4. Implement Legal Tech & Digital Solutions
Bonus: specific actions for the last weeks of each quarter.
In the next posts in this series we will provide you with the specifics of the four Critical Factors and share practical tips for the teams involved, especially Legal, Sales, Procurement and Management.
How to roll-out a new Contract Template #6 – Meetings
Introduction
Last but not least! Here is part 6 and last part of my tips on how to roll-out a new Contract Template as an Expert.
Once you have sent out the new templates, these next steps are most important to ensure that the team will really use the templates. In this part of the series ‘How to roll-out a new Contract Template #6 – Meetings’ we focus on meetings and training sessions you should set up with your team.
How to roll-out a new Contract Template #6 – Meetings
𝗧𝗮𝗸𝗲 𝘁𝗵𝗲𝘀𝗲 𝗳𝗼𝗹𝗹𝗼𝘄-𝘂𝗽 𝗮𝗰𝘁𝗶𝗼𝗻𝘀 𝗮𝗳𝘁𝗲𝗿 𝗿𝗼𝗹𝗹𝗶𝗻𝗴 𝗼𝘂𝘁 𝘆𝗼𝘂𝗿 𝗻𝗲𝘄 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝗧𝗲𝗺𝗽𝗹𝗮𝘁𝗲
By following these last steps when sending out contract templates, you can optimize the contract management at your company. Consequently, this will create a more efficient and effective working environment with less discussions about the templates. If you train the teams well and empower them sufficiently you will also see that the negotiation process will run much smoother.
𝗦𝗲𝗽𝗮𝗿𝗮𝘁𝗲 𝗺𝗲𝗲𝘁𝗶𝗻𝗴𝘀 𝘄𝗶𝘁𝗵 𝗺𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁
Address and discuss the goals of the new Contract Template and raise specific concerns and considerations, engaging key stakeholders individually.
Full team meetings:
Provide comprehensive explanations of new templates/policies, emphasizing their purpose, benefits, and alignment with company goals.
𝗧𝗿𝗮𝗶𝗻𝗶𝗻𝗴 𝘀𝗲𝘀𝘀𝗶𝗼𝗻𝘀
Train and empower colleagues with the necessary skills and knowledge to implement the contract templates effectively.
Centralized document access
Establish a user-friendly location for all internal standards, guiding team members to easily find necessary documentation.
𝗥𝗲𝗴𝘂𝗹𝗮𝗿 𝗺𝗼𝗻𝗶𝘁𝗼𝗿𝗶𝗻𝗴
Check awareness, adherence, and effectiveness of procedures, identifying areas for improvement and ensuring compliance.
Support and guidance:
Offer ongoing support to help guide your colleagues by proposing one on one meetings and training sessions.
𝗙𝗲𝗲𝗱𝗯𝗮𝗰𝗸 𝗳𝗼𝗿 𝗶𝗺𝗽𝗿𝗼𝘃𝗲𝗺𝗲𝗻𝘁:
Create opportunities for feedback to drive future enhancements. Actively ask your team members for feedback in the training sessions and meetings mentioned above.
Conclusion
As legal professionals, we play a vital role to improve compliance, efficiency and risk mitigation. By implementing these tips, we create a more productive and legally sound workplace with the ultimate goal: more fun at work and driving success for the company. Most importantly, when doing so, we work together with the other teams and we do not only dictate what they should do.
Easier said, this way:
- You will waste less time in trying to (i) find the right template or (ii) figure out how to use it or who to involve when you have issues
- Your colleagues at the Legal department will have more time to dive deeper into your legal issues and have more time to negotiate and advise you from a legal and strategic point of view
- The other teams of the company will feel more involved- it will be very hard for your colleagues to say that they do not know where to find the Contract Templates (sound familiar?)
- Your Contracts will be signed quicker!
To see the other parts in this series, go to: bit.ly/amstlegal-blogs