As mentioned in our May 2020 webinar, “Leveraging Technology and People for Contract Review,” contracts are the lifeblood of any organization – regardless of size, industry, or location. For professionals in legal, sales, procurement, and other roles involving relationships between a myriad of parties, executing terms in writing is paramount to the health and function of an organization. We’ve found that there are typically 5 perspectives people have when it comes to thinking about and addressing contracts.
Contracts are typically seen as:
- A “necessary evil”
- Roadmaps for relationships
- Opportunities to find and make more money
- Instruments for arbitrage
Let’s unpack each of these below perspectives below.
Barrier to Entry
Some groups or organizations perceive contracts as getting in the way of business. They are seen as potentially turning customers off and endangering a deal. Negotiating various clauses and provisions in a contract can present grounds for disagreement which, left unresolved, prompt one or both parties to walk away from doing business together. So why present a contract when you can seal the deal with the proverbial handshake? This mentality presents great risk for a disconnect or disagreement in the future causing irreparable damage to a partnership than contract negotiation ever would. This course of action also robs a company of thorough due diligence which could potentially uncover serious business risks they’d rather not take. As a short-sighted business practice, rushing to agreement threatens organizations of all sizes and in all industries.
A “Necessary Evil”
This perspective is when parties recognize the need for executing a contract but think of it as an uncomfortable process. Therefore, parties rush to sign a contract as-is without properly reviewing or managing the contractual relationship. This approach carries similar risk to the Barrier to Entry mentality above; but companies may find themselves with no support or protection should a disagreement occur.
Roadmap for Relationships
With this perspective, parties view contracts as a way to define the relationship between themselves and other entities or individuals. They see the contract as a lodestone to which everyone can turn if or when there is a lack of clarity or business dispute.
Opportunities for Profit
Here we actually look forward to contracting because effective contract execution represents the opportunity for profit. A contract allows both parties to grow their relationship within defined terms and leverage key variables. Each party understands their responsibility in any scenario and has a clearly defined “if this, then that” call to action.
Instrument for Arbitrage
With a clear contracting strategy, businesses know their key variables and in turn get better contract results. Each step they take is clearly defined and the impact to business in any environment has clear protections. Using the impact of COVID-19 on business as an example, businesses with thoroughly executed agreements will immediately understand their exposure – or what they stand to gain – at every juncture. These organizations can then negotiate net positives even when the general business climate is chilly.
Whether you need help re-shaping your team’s perspectives on the contracting process or wrangling your contract universe for a deeper look into your business, we can help. Let’s partner together to ensure you’re protected, aware of all your responsibilities and obligations, and maximize business practices and potential profit. Contact us today to schedule a custom analysis of your contracting work flow.
About the Author
Robert DeVries is the National Director of Consulting and Outsourcing for Special Counsel. His practice focuses on consulting, outsourcing and large-scale litigation. He is adept at complex project design and large remote team management with expertise in quality control/quality assurance best practices and multiphase workflow management.
Rob manages projects of all scopes but specializes in tailoring solutions to intractable problems. He leads a team of Contract Management Administrators for a Fortune 50 technology company, managing their ~5 billion dollars contract portfolio through intake, drafting, and renewal. Recently, Rob assisted a Fortune 100 transactions department overhaul their contracting processes and procedures dropping TAT from 30 to 5 days, and helped a nationally recognized health non-profit restructure their RFP process.
Rob is a graduate of the University of Pittsburgh School of Law, where he served as editor for JURIST: Internet Journal for Legal News Research. Prior to law school, Rob graduated from Miami University with dual degree in Economics and History. He completed his honors thesis in Rational Choice Economics at Cambridge University. Connect with him on LinkedIn!
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