publication of the International Legal Technology Association
Issue link: https://epubs.iltanet.org/i/395170
a preferred form. In addition, each individual will have their preferred negotiating positions. This results in inconsistency in both the form of contract used, as well as in the contract provisions negotiated. One way to alleviate this is for the company to develop standard contract templates for use by all of its negotiators. The easiest ways to develop a template contract is for the various negotiators to review together their forms of agreement. Based on one or more meetings, the negotiators can agree to common language for use in each type of contract. This will be the basis for the contract template. This process can be repeated for each type of agreement the company deems a template would be of value. If the company can select appropriate form language for similar provisions within each template, this form language can be incorporated across multiple contract templates. One benefit of using form language of this type is that it is easier for the company to identify non- standard provisions that might be negotiated into its contracts. As these negotiated template contracts are entered into the company's contract management system, any non-standard provisions can be identified and used by the company to later identify risks that it has in its contract portfolio. For companies concerned with compliance risks, appropriate language can be included in the templates. USE NEGOTIATING PLAYBOOKS It is common for many companies to negotiate their contracts on an ad hoc basis. As a result, each individual will negotiate contract terms based on personal preferences and past experiences. This results in inconsistencies in negotiated contracts that could pose a risk to the company. A playbook is a list of negotiating fallback positions for the company negotiators to use when negotiating company contracts. For example, many of the company's contracts could have limitation of liability provisions. The company might take an initial position that all limitations of liability are capped. However, from past negotiations and through corporate policy, the company might determine certain limitations of liability could be uncapped if raised by the counterparty, such as liability for intellectual property infringement. In this case, since the company has agreed that unlimited liability for intellectual property indemnification is acceptable, it would be included in the playbook as a fallback position for changes to the limitation of liability provision. Determination of the content of the playbook is generally based on two factors: agreed fallback positions the company has generally accepted in the past and any company policies that might limit the flexibility of negotiators. For example, if the company decided, as a matter of policy, that unlimited liability is never acceptable in contracts, the playbook would reflect this position. If the company continues to rely on a particular fallback position, it might determine to amend the template in order to include the fallback position in its initial contractual position. One of the key benefits to using templates and playbooks is that it becomes less necessary for the company to use expensive legal staff to negotiate its contracts. In many cases, the company can begin to rely on legal assistants, non-lawyer contract negotiators or outsourced service providers to be responsible for generating contracts and negotiating those contracts end-to-end. This presents a huge cost savings opportunity to the company with very limited risk, because most of the risks have already been accounted for by the templates and playbooks. BETTER PRACTICES, LOWER RISK Implementing best practices for contract management will provide a company with a number of important benefits. Not only will the company be able to achieve significant cost savings through increased efficiency, but the resulting contracts will be of lower risk to the company. Where a company previously might have had various types of contracts for the same purpose and taken conflicting negotiating positions, it will now have much more consistency in its executed contracts. Furthermore, by using consistent contracts and an effective contract management system, the company will be able to better track risks attendant to non-standard provisions included in its contracts, as well as contractual rights that could improve the company's bottom line through more consistent enforcement. ILTA WHITE PAPER: OCTOBER 2014 WWW.ILTANET.ORG 40 LESS-RISKY BUSINESS: BEST PRACTICES FOR CONTRACT MANAGEMENT