Deconstructing Contracts

As it is for most in-house counsel, much of what I do involves negotiating contracts. Handling contracts is a task that needs to be taken seriously. “Contract in haste, repent at leisure,” I often say.

However, there is a distinct oddness to negotiating contracts. The issues that arise are often less about the substance of the matter and more about form. I’ve seem parties choose to make life-or-death issues out of the most apparently meaningless items. Parties will propose awkward language then rationalize that the most oblique, obfuscating phrase somehow satisfies their concerns. Negotiators will predict the future with a certainty that exceeds their ability to describe the present. So what’s it all about?

To me, contract negotiating is a ritual; the process is designed to test and build trust between counterparties, and is designed to build consensus between the stakeholders within a party.

Trust and consensus- the easier your contracts lead to this result, the quicker and more effective will be your negotiations.

I don’t mean to minimize the risk control aspects of contracts, but in large part, the most important concern to an enterprise is less the nuance of a choice of law provision and more often the iron law of the market- that a company’s fortunes will rise or fall on the relationships it forges with its customers.

As such, I contend that a well-conceived contract negotiation methodology can be an effective sales tool and a competitive advantage to companies that do it well.