Key Takeaways:
- The best contracts are those that are generated in a way that prevents disputes, because they are built on a solid foundation of human expertise.
- Ambiguous contract language can lead to multiple interpretations of the text and, as such, disputes down the line.
- Contracts actively build and protect business relationships.
Some might see corporate lawyers as “deal-killers” who bog down contracts to dot their I’s and cross their T’s in relation to risk, compliance, and more. I get it, but this is far from the true purpose of lawyers.
The primary goal of corporate counsel is to foster organizational growth and protection, not obstruct said entity.
Far from a “deal-killer,” a corporate lawyer is a strategic negotiator and “dealmaker.” The best contracts are those that are generated in a way that prevents disputes, because they are built on a solid foundation of human expertise. To that end, let’s discuss why simple deals are risky, how contracts can build trust, and why post-execution contract management is critical.
Why a Simple “Handshake” Can Be So Risky
I understand the appeal of a fast and simple deal. Fast drafting and negotiation mean fast approvals and deliverables, right? Well, it’s not that simple. The facilitation of a quick deal often relies on ambiguous language and maybe some cheap online contract templates, which are insufficient and could leave an organization vulnerable.
The key culprit in most deals falling through is ambiguity.
Ambiguous contract language can lead to multiple interpretations of the text and, as such, disputes down the line. This is when the consequences of poor contract management manifest. For instance, a “work for hire” agreement without a clear intellectual property clause can lead to a future dispute over ownership.
This is where corporate counsel steps in.
Pure automation is not perfect. That’s why the meticulous definition and due diligence of a corporate lawyer are critical. It’s not about complicating things and being another “cook in the kitchen,” but rather, the corporate lawyer’s expertise can provide clarity and foresight during critical stages of contract management.
Building Trust Through a Strong Agreement
A contract is not just a legal shield or a strong defense of the football team of contract negotiation. Contracts actively build and protect business relationships. They demonstrate a commitment to a lasting and fruitful partnership.
To that end, the concepts of “good faith” and “fair dealing” are legal principles meant to facilitate the aforementioned partnership via honest, reasonable, and consistent contract conduct. They are implicit and unwritten, but they are a vehicle to the balance of counterparty wants and needs. These principles are not about adding new terms to a contract, but rather about ensuring that the existing terms are carried out in a way that is true to the spirit of the agreement. For example, it prohibits a party from using a loophole in a contract to exploit the other party or from acting in a way that is contrary to the original intent of the parties.
A tangible example of a clause that fosters trust is the tiered dispute resolution clause. It moves from negotiation to mediation before finally escalating to litigation. This format demonstrates a share commitment to finding a resolution expeditiously and amicably.
A proactive approach to contract negotiation allows both parties to focus on their shared organizational goals rather than worrying about potential conflict.
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Beyond the Signature: The Work Isn’t Over
A contract is not “over” once it’s signed. Rather, a contract is a living document with ongoing obligations and the potential for renewal down the line. Moreover, failing to manage the post-execution phase can be just as costly and disastrous as a poorly drafted contract. Missed renewal deadlines, non-compliance with reporting, and failure to meet key obligations can leave a contract burning revenue and ruining the organization’s reputation. As such, an organization needs to have a system for contract governance.
So, the lawyer’s work does not end with a signature. Rather, it extends into ensuring a contract’s terms are followed for its entire lifecycle, from legal requests to renewal. This oversight from corporate counsel protects organizations and secures the value of a partnership.
As we discussed, a contract is a tool for building relationships, not just enforcing rules. The true value of a contract is that it’s a shared roadmap for a successful business future. If you’re ready to see how a streamlined approach can help you negotiate with nuance and manage your contracts with confidence, we’re here to help.
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