templates Tag

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:

1. A standard customer contract for clients not receiving subsidies or government funding.
2. 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.

Contract Negotiations: How to Avoid Negative Reactions in Redlines and Mark-ups

𝗤𝘂𝗶𝗰𝗸 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝗡𝗲𝗴𝗼𝘁𝗶𝗮𝘁𝗶𝗼𝗻 𝗧𝗶𝗽 𝗼𝗳 𝘁𝗵𝗲 𝗗𝗮𝘆: When reacting to a comment or suggested wording by a counterparty that is commenting on your contract, 𝘢𝘷𝘰𝘪𝘥 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

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.

Communicate Early: Pre-inform and Notify Team Members

As part 3 of my tips on how to roll-out a new Contract Template as an Expert, the following:

𝗪𝗵𝗮𝘁 𝘄𝗲 𝗵𝗮𝘃𝗲 𝗹𝗲𝗮𝗿𝗻𝗲𝗱 𝗳𝗿𝗼𝗺 𝗽𝗿𝗲𝘃𝗶𝗼𝘂𝘀 𝗽𝗼𝘀𝘁𝘀 𝗶𝗻 𝘁𝗵𝗶𝘀 𝘀𝗲𝗿𝗶𝗲𝘀:
* The top-down approach does not work
* Team members need to know the critical components for the use of the new Contract Templates: the Why, How, When and Benefits
* Create and follow a strategic communication and follow-up plan (the Communication Plan)
* Step 1 Communication Plan: ‘Identify Relevant Users and Teams’

Now, let’s continue to the next step of the Communication Plan:

𝗦𝘁𝗲𝗽 𝟮: 𝗖𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗲 𝗘𝗮𝗿𝗹𝘆: 𝗣𝗿𝗲-𝗶𝗻𝗳𝗼𝗿𝗺 𝗮𝗻𝗱 𝗡𝗼𝘁𝗶𝗳𝘆 𝗧𝗲𝗮𝗺 𝗠𝗲𝗺𝗯𝗲𝗿𝘀

Does the team know that the new Contract Template is final and will be implemented soon?

Before actually sending and rolling out new Contract Templates, create groundwork and buy-in from senior management and each team member to make sure that they will actually use the new Contract Template now it is final.

It is important to provide opportunities to these team members to ask questions, express concerns and offer feedback. In this stage, ask these questions to yourself:
– Are the team members aware that the new Contract Template needs to be used at a certain date?
– Is the new Contract Template clear and does the team (in principle – not everyone will agree from the start) agree and appreciate the new Contract Template?
– Do they know the Why, How, When and Benefits?

𝗧𝗵𝗶𝘀 𝗰𝗮𝗻 𝗯𝗲 𝗮𝗰𝗵𝗶𝗲𝘃𝗲𝗱 𝗶𝗻 𝗮 𝗻𝘂𝗺𝗯𝗲𝗿 𝗼𝗳 𝘄𝗮𝘆𝘀:
* Have honest and open conversations with people that will use the Contract Template every day and with Senior Managers that will lead the relevant teams.
* Send out a pre-announcement e-mail / Slack of the actual intended roll-out date
* Organize meetings to explain the Why, How, When and Benefits of the new Contract Template
* Conduct Training sessions
* Involve key stakeholders in the process like Senior Management and Team Members from all Relevant Departments
* Set expectations and hold people accountable

In summary, by notifying, briefing and pre-informing team members of the upcoming Contract Template, businesses can ensure that everyone is on the same page and that team members are prepared for the upcoming changes. This can help to minimize any confusion or disruptions and increase the likelihood of a successful rollout.

𝘛𝘩𝘪𝘴 𝘪𝘴 𝘱𝘢𝘳𝘵 𝘰𝘧 𝘮𝘺 𝘭𝘢𝘴𝘵 𝘵𝘪𝘱 (10) 𝘰𝘯 𝘩𝘰𝘸 𝘵𝘰 𝘪𝘮𝘱𝘳𝘰𝘷𝘦 𝘺𝘰𝘶𝘳 𝘉𝘶𝘴𝘪𝘯𝘦𝘴𝘴 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵𝘴 𝘣𝘺 𝘤𝘳𝘦𝘢𝘵𝘪𝘯𝘨 𝘨𝘳𝘦𝘢𝘵 𝘊𝘰𝘯𝘵𝘳𝘢𝘤𝘵 𝘛𝘦𝘮𝘱𝘭𝘢𝘵𝘦𝘴. 𝘊𝘩𝘦𝘤𝘬 𝘵𝘩𝘦 𝘸𝘦𝘣𝘴𝘪𝘵𝘦 𝘪𝘯 𝘵𝘩𝘦 𝘤𝘰𝘮𝘮𝘦𝘯𝘵𝘴 𝘵𝘰 𝘳𝘦𝘢𝘥 𝘵𝘩𝘦 𝘰𝘵𝘩𝘦𝘳 𝘵𝘪𝘱𝘴.

Effective communication is critical when introducing a new Contract Template

As part 2 of my tips on how to roll-out a new Contract Template as an Expert, the following:

𝗘𝗳𝗳𝗲𝗰𝘁𝗶𝘃𝗲 𝗰𝗼𝗺𝗺𝘂𝗻𝗶𝗰𝗮𝘁𝗶𝗼𝗻 𝗶𝘀 𝗰𝗿𝗶𝘁𝗶𝗰𝗮𝗹 𝘄𝗵𝗲𝗻 𝗶𝗻𝘁𝗿𝗼𝗱𝘂𝗰𝗶𝗻𝗴 𝗮 𝗻𝗲𝘄 𝗖𝗼𝗻𝘁𝗿𝗮𝗰𝘁 𝗧𝗲𝗺𝗽𝗹𝗮𝘁𝗲.

To ensure effective communication, make a strategic communication and follow-up plan to convince and inform the company’s teams to use the new contract template.

As we have learned, the top-down approach does not work. It is not sufficient to simply send out the new template and expect its adoption.

To ensure success, team members need to know the critical components for the use of the new Contract Templates:
* Why
* How
* When
* Benefits

𝗦𝘁𝗲𝗽 𝟭: 𝗜𝗱𝗲𝗻𝘁𝗶𝗳𝘆 𝗿𝗲𝗹𝗲𝘃𝗮𝗻𝘁 𝘂𝘀𝗲𝗿𝘀 & 𝘁𝗲𝗮𝗺𝘀

Before starting your communication in the company, make a thorough analysis who will use the new template the most and/or who should be informed about the new template.

It is not about just informing the most obvious stakeholders like – for example – the sales managers who will use the new client contract.

In fact, there may be teams that business owners and Legal did not initially realize needed to be informed, like HR, Finance, Compliance, Operations, Product Teams, etc. Once identified, a communication plan can be developed that includes reaching all relevant stakeholders.

In summary, to ensure success in the roll-out of your new Contract Template, communicate your new templates to a wider group than you initially first thought of.

Tip 8: Consistent terms & definitions in your documents

𝐂𝐨𝐧𝐬𝐢𝐬𝐭𝐞𝐧𝐭 𝐭𝐞𝐫𝐦𝐬 & 𝐝𝐞𝐟𝐢𝐧𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐲𝐨𝐮𝐫 𝐝𝐨𝐜𝐮𝐦𝐞𝐧𝐭𝐬

Make sure that you use the same terms and definitions in your contracts and other important documents. It is also advised to follow the same rule for commercial documents like pitches / offers and even your website. 

𝗪𝗵𝘆?

1. To ensure that everyone knows what is meant exactly by a certain term that you use in your company.
2. To create the best possible customer experience.
3. To avoid any misunderstanding on what service or product the customer has purchased from you exactly, and under which conditions.
4. In case of commercial discussions (and even litigation) about a term in the contract for whatever reason: e.g. exact services purchased (and under which conditions), the price for the service, termination possibilities, volume commitments, compliance and system requirements, etc.

𝗘𝘅𝗮𝗺𝗽𝗹𝗲

For a typical SaaS/Software company this means that the same terms/definitions should be used for the following documents (depending on the contractual set-up): 
– General Terms and Conditions 
– End User License Agreement 
– Customer Contract / Master Ordering Agreement 
– Order Form / SOW (Statement of Work) 
– Annexes likes the Data Processing Addendum (DPA), Data Security Addendum and the Pricing Annex
– Disclaimer on the website

𝘓𝘦𝘵 𝘮𝘦 𝘬𝘯𝘰𝘸 𝘪𝘧 𝘺𝘰𝘶 𝘯𝘦𝘦𝘥 𝘩𝘦𝘭𝘱 𝘸𝘪𝘵𝘩 𝘺𝘰𝘶𝘳 𝘤𝘰𝘯𝘵𝘳𝘢𝘤𝘵 𝘵𝘦𝘮𝘱𝘭𝘢𝘵𝘦𝘴!

Tip 7: All templates in one place

𝐀𝐥𝐥 𝐭𝐞𝐦𝐩𝐥𝐚𝐭𝐞𝐬 𝐢𝐧 𝐨𝐧𝐞 𝐩𝐥𝐚𝐜𝐞

Remember to store all your (contract) templates in one central place to make sure that everyone is (i) able to find the correct templates quickly and (ii) using the correct template.

Sounds very straight forward, but in reality I rarely see companies that store all templates in one central place easily accessible for all involved team members.

Storing all contract templates in one central place is challenging for most companies, but especially in case of:
– fast-growing companies
– mergers/acquisitions 
– activities in multiple countries 
– large groups with many subsidiaries or a complicated corporate structure
– contracts in different languages 
– involvement of different departments (Account Management, Sales, Partnerships, Sales Operations, …) 

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐭𝐡𝐞 𝐞𝐚𝐬𝐢𝐞𝐬𝐭 𝐰𝐚𝐲 𝐭𝐨 𝐦𝐚𝐤𝐞 𝐭𝐡𝐞 𝐭𝐞𝐦𝐩𝐥𝐚𝐭𝐞𝐬 𝐞𝐚𝐬𝐢𝐥𝐲 𝐚𝐜𝐜𝐞𝐬𝐬𝐢𝐛𝐥𝐞? 

Best options are: 
(a) fully/partly automate your contract creation and be strict that this is the only way that contracts can be generated. This way the relevant, most up to date and correct Contract Template is used and all templates are stored in one spot as you should only be able to use this automated system; and
(b) create a central place (usually an internal website or – less ideal – a shared folder).

𝐂𝐫𝐮𝐜𝐢𝐚𝐥: give training – at the start of employment and regularly thereafter – to your employees to make sure they know where the contract templates are located and how to correctly use these templates.

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:

1. Fully/partly automate your contract creation and be strict that this is the only way that contracts can be generated; and
2. 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.