Today’s plea… start negotiations with suitable documents

A delightful American lady (who is also a good friend) once called me a “pompous ass” because she thought I was suggesting that amending templates and drafting legal agreements should be the exclusive preserve of professionally qualified individuals.  I don’t think that is the case at all.  In my time I have come across many people who have no formal legal training but who nonetheless have a detailed knowledge of the law and a shrewd understanding of the consequences of different drafting strategies.  For the record, I have every confidence in the readers of this blog.

But, there are also a significant number of people (muppets, mostly) who clearly do not understand the documents they are using and who have, at best, a loose grasp of the legal principles involved.  I doubt that I am the only one who is fed up with the aggravation this can cause and who resents the extra costs that are incurred as a result.  To quote one professional colleague: “Why can’t they just outsource this to a solicitor and provide a document that is half way fit for purpose?”

The most recent example of this sort of muppetry that I have seen involved a service provider presenting my client with a detailed licence and revenue share agreement that we were expected to treat as a non-binding heads of terms.  To make matters worse, when we pushed back, the service provider’s initial response was that it had not budgeted for the legal costs of negotiations and therefore would we please contribute to their solicitor’s fees?  We didn’t.

I am never quite sure why people do this sort of thing.  In some cases, I think it might be a straightforward failure to understand coupled with a reluctance to ask for an explanation.  After all, some legal words (any legal words) must be better than no legal words at all, right?  In other cases, it may be a sign of a devious mind that is trying to obtain a commercial advantage.  It might be an attempt to cut a corner and to save a few pounds.  Sometimes, it might result from a fear that referring a question to The Lawyer will lead to interminable delay, uncomfortable questions and risks killing the project stone dead – a pretty spineless approach if you remember that lawyers are retained to offer advice (which can be ignored) and that clients take decisions.   As an aside, I appreciate that this mantra can apply differently where the lawyer is in house.  The in house lawyer is the personification of company policy and generally has a strong influence on the organisation’s risk profile which means that it is harder for their commercial colleagues to decide not to follow the advice The Lawyer offers.

Unfortunately, I am not aware of a simple way of dealing with the problem of the inadequate draft and if any reader has a solution I’d be glad to hear it.  I have tried a variety of strategies.  The most obvious solution is to ensure that I get to produce the first draft or to suggest that the draft that has been provided is wholly inappropriate and that it would be quicker for all concerned if I could prepare a fresh draft.  This has the strategic advantage of allowing me to structure the deal as I (meaning, my client) would prefer.  But time and capacity do not always permit this and it is of course more expensive for my client if I do the lion’s share of the drafting.

Alternatively, I have asked my client to negotiate a detailed commercial term sheet and then pass it to me to add in the legal bits.  This minimises my involvement (and therefore my invoice) but it only really works where the client has approached me early in the negotiation process.

Sometimes, I have recommended that my client rejects the draft provided and insists that their own template is used.  This is slightly more confrontational and the balance of bargaining power often means that it is not a realistic option.

A more time consuming solution (and therefore one that risks racking up costs for the client) is simply to negotiate with (meaning, educate) the other side.  This can be worthwhile, especially where there is an ongoing commercial relationship – investing time at the outset makes future negotiations easier.

My feeling is that things would go much more smoothly if people would take a minute to take stock at the outset.  Remember the story of the hare and tortoise who had a race and remember who won?  Remember the proverb festina lente?  Make haste slowly.  For us, I think that there are two lessons:

First, clients should listen to their customers and should read a document before submitting it.  If in doubt, ask.  Ultimately, a template should only be used or a document recycled where the user actually understands it and its limitations.  Recycling agreements on the basis that they include a couple of key words that look like they might be relevant is, as all our readers no doubt know, a recipe for disaster.

Second, lawyers have a role to play too.  Lawyers should listen to their client’s requirements and provide relevant draft documents rather than offering cheap, quick and dirty solutions that don’t actually address the problem at hand.

It might even be worth spending some time and money at the outset in order to make sure that the proposed agreement is suitable and that it protects key interests rather than ignoring them.  I appreciate that spending money (especially spending money on lawyers) is not always a popular option but just think of the amount of time, effort, stress and cost it might save…

5 Comments

Filed under Commercial negotiation, General Commercial

5 responses to “Today’s plea… start negotiations with suitable documents

  1. Stephen Brett

    Don’t get me wrong. Cheap, quick and dirty can be a good thing and I take Stuart’s point. Clients often don’t want a document that is polished to perfection. A cheap, short document is fine provided that it is relevant and provided that the client understands that it does not address each and every eventuality.

    My point is more that I wish people would actually consider what they are trying to achieve and what the document they plan to use was designed to do before they try to recycle it. Taking account of the limits of any given draft should help to reduce the muppetry that I have been grumbling about. Square pegs and round holes.

    That said, not all lawyers are perfect and not all clients will hear what they are told. As Doug says, both clients and lawyers can be guilty of failing to pause to think things through at the outset….

  2. Michael Berkson

    I agree with all the comments.

    Except possibly for boiler plate, I use precedents or templates merely as a check list.

    In addition to the client’s commercial requirements, I find the better way of clarifying my own thoughts is to draft the agreement starting with a blank sheet of paper.

    One of my more difficult negotiations was my single-handedly facing an American team including both the Chief Executive Officer and an in-house attorney. The CEO insisted on drafting detailed legal wording himself and ignored his own attorney. In my private conversations with the attorney, he was practically in tears with frustration.

  3. Stuart

    Well, yes – but what if a client expressly asks his lawyer for a cheap, quick and dirty solution? This happens a lot.

  4. Mark: Here’s my all-too-predictable suggestion: use sophisticated document assembly to create your first draft. Any client who comes to you with their own draft would see that starting from scratch would be quick and efficient and result in a draft that’s entirely tailored to their needs, so it would be easier to convince them to set aside their own effort. You could even let the client answer the document-assembly questionnaire–it would be a simple matter for you to relaunch the questionnaire and, in consultation with the client, change any answers. Ken

  5. Douglas Robertson

    I agree wholeheartedly. The need for more focus early in the negotiation is essential. That focus should be on the key principles and purpose of the agreement not its content. Too often both lawyers and their clients go into deep-dive before checking if the water is shark infested. The danger with templates is they immediately avoid the need to figure out the principles.

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