negotiationskills Tag

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 company´s contract templates.

To illustrate this, see two scenario´s 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 – 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).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.

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 (ii) contract automation. 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. 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 – 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 – 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