LegalEdge SaaS and operational specialist, Lisa Miller wants companies to get good, useful contracts in place quicker, which needs a change of approach.
The problem
Lisa says:
“All too often, after lengthy (and expensive) negotiations by procurement teams and law firms, businesses find themselves signed up to an “over lawyered”, unrealistic agreement which is pretty much incomprehensible to the people on the ground like the sales team and project managers. Consequently, these important documents get ignored; and ad hoc arrangements spring up, or changes get made, but are not documented. This can cause significant trouble down the line—not only in the event of disputes but also during corporate housekeeping ahead of fundraising or exit, where missing, inconsistent, or poorly documented agreements can result in costly delays, diminished valuations, or even jeopardize the success of the deal entirely.”
The solution
Lisa’s tips for better contracts:
- Discuss why a contract is needed and what needs to be covered – keep it practical, i.e. what might happen if you don’t have one, or you don’t have important terms in place. Sometimes the right answer is that a contract isn’t actually needed or advisable, or – newsflash – that lawyer input isn’t needed (if it’s low risk / low value).
- Keep negotiations (and lawyers) under control, don’t let them get into low-risk minutiae or be unnecessarily adversarial – this just delays the process and can rack up unnecessary fees. Suppliers and customers need to have a good ongoing relationship.
- Use plain English and simple language to keep the agreement accessible to everyone that will be mostly non lawyers. If your lawyers can’t do this for you, you’ve got the wrong lawyers.
- For the same reason, make contracts easy to read and access, use headings to signpost important clauses for different users, for example, payment terms for the finance team. (We can help with the legal design of contracts.)
- Mitigate key risks, don’t waste time arguing over low risk or purely theoretical stuff. For example, some ‘standard’ IP indemnities are outdated due to technological advances, so can be sensibly abandoned.
- Use playbooks to help the sales team get contracts signed quicker. See our blog on this here.
- Once agreements are signed have a clear process for documenting and communicating changes so that everyone knows what is going on and has a central reference point for what has subsequently been agreed. Common changes made ‘on the ground’ include: price changes, adding new users, customisation of product, etc. This can be particularly problematic if bespoke requirements aren’t properly recorded because these are most likely to impact the bottom line.
- To help teams manage and comply with key contracts once they’re signed, have easily available summaries of the main requirements (TL;DR).
How can we help?
We can review your existing commercial agreements and help you negotiate new ones that protect your business in a proportionate and accessible way. We can draft summary documents and playbooks and deliver training to help your staff understand their legal obligations and make doing business easier. Get in touch at: info@legaledge.co.uk.
