Contracts: How to Bring Counterpart Redlines to the Law Dept. for Review

Recently I received this email from a coaching client, who is a contract administrator on the buy-side. His concerns and my advice are applicable to sales-side contracting too.

How do I intelligently bring the contractor’s exceptions (to our master agreement) to the Law Dept. for review? I have this impression that the Law Dept. wants us to bring the exceptions to them but include our own analysis of how to proceed. This is frustrating because no one actually spells out these expectations. Should I be asking the contractors to not only redline the terms, but also provide their comments regarding why they are requesting the exceptions? 

Should I be taking it to the line of business first for review for their input into the commercial areas?

He is not alone in his complaint that the “Law Dept.” does not always set clear expectations with contracting professionals when it is time to engage them. Since I am an attorney, I laid out a universal approach that would work for the “Law Dept.” and for other senior stakeholders who need to review and approve changes to your standard terms.  

Use a linear thinking process to develop a “position statement – proposed argument”

Step #1 -- Start by understanding your organization’s why, how, and what of the underlying paragraph (that is being redlined by your counterpart).  Outline a few bullet points.  

Step #2 -- Understand your counterpart’s why, how and what for their changes to your terms. Outline a few bullet points.  If you don’t understand your counterpart’s position on the changes, then definitely call them to have them articulate clear a position statement to support their proposed changes.

Step #3 -- Taking the information from the first two steps, jot down any suggestions you have to address underlying issues.  If you find any middle ground between your template language and their suggested language, suggest that middle ground. This is where contract professionals can add value, especially to non-legal stakeholders who are asked to approve contract language changes. 

If you don’t have any suggestions, ask. Ask your counterpart what they have done with other similar (customers/suppliers) and why.   While you might question — “Ask my counterpart what they suggest? They know what they want and its in red ink (so to speak) on the paper” – I’ve done this. Specifically, with an international banking contracts professional, when she (contracts professional) rejected my proposed language, I asked her to look into what her organization had done in the past with similarly situated suppliers who requested my type of change.

In other words, I did not want the “policy” arguments; I wanted specific language adjustments from her organization. She provided that to us and her research provided the bridge to the solution.

If there is no middle ground – the issue is nonnegotiable—then you suggest that you’ve thought about this issue from both sides and you personally don’t see a middle ground solution. This signals to the stakeholder or Law Department that you’ve done your homework and you are not just tossing the issue over the fence. More importantly, you want to keep the dialogue open in the event that the stakeholder or Law Dept. has a solution that you’ve not anticipated. 

Yes, take commercial considerations to the line of business before the Law Dept.

Finally, in response to the last part of his question, yes, you take commercial considerations to the line of business first. I am a firm believe that the Law Dept. needs to be engaged as a resource of last resort, as a reviewer and approver. So many issues that my coaching clients expect the Law Dept. to weigh in on are issues that the line of business ought to review and approve. If this is true in your organization, your Law Dept. will tell you that the redline is a business issue and toss it right back to you. Even when reviewing changes to limitation of liability issues, you may want to solicit an opinion from the commercial stakeholder before taking it to the Law Dept. Your Law Dept. will likely ask you if you’ve asked the line of business before making a final decision anyway. So, ask.   

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