How-to: Contract Drafting for Legal

How-to: Contract Drafting for Legal

22nd September 2020

How-to: Contract Drafting for Legal

By Deirdre Leone, VP of Sales, North America at ContractPodAi

Drafting a contract for your corporate legal department or law firm requires more than just a set of well-honed writing skills. It demands attention to detail and deep knowledge of your organization’s standards for risks and relationships. Whatever the length, complexity, volume, or nature of the agreements that your company works with, contract drafting should be a process that you prioritize in your digital transformation journey.

To ensure that your contract manager’s skills and abilities do not go to waste, it really helps to have an innovative contract authoring tool set in the first place. A tried and true strategy to use the tool to your advantage, too.

However, contract drafting does not end when the last paragraph, clause, or appendix page is written. It continues until the contract terms, conditions, and details are described effectively. This is so that all parties understand their responsibilities to the other parties, and what will happen whether the relationship unfolds as described or not. In fact, revisions or negotiations can extend through multiple review cycles until parties are ready to agree with the terms.

Now, here are five tips to keep in mind when drafting contracts for your particular legal needs. They come from our team of experts from the legal contract lifecycle management (CLM) and application development realms.

 

1. Curate a Diverse Library of Contracts and Clause Templates

Your sales and marketing teams likely have templates for webinar presentations or sales proposals. Your finance team likely has templates for invoices, credit applications, and lease renewals. Meanwhile, your HR department probably has a number of contract templates for onboarding new employees or closing the books on departing ones. And your legal team probably uses approved non-disclosure or joint-venture agreements.

So, whether you realize it or not, you have at least the foundation of a contract template bank right in your own company.

Contracts should be reviewed for many reasons including accuracy, legal compliance and clarity.

Building out your repository of pre-approved contract Word templates, then, offers many benefits concerning the contract drafting process:

  • Templates of full contracts or clauses can provide consistent, pre-vetted language across many customers, employee, partner, and/or supplier agreements
  • The contract drafting process can be accelerated without increasing risk or liability. Any changes in template language can be flagged by redlining or tracking changes
  • An audit trail - created by anyone who used, modified, and shared a contract template - can be captured and tracked
  • Template clauses or entire documents can be locked down entirely or in part, preventing unauthorized changes beyond standard permissions

Naturally, some of your agreements will require a handful of custom clauses before being sent out to other parties in a pending contractual relationship. Others will require many more, especially when the negotiations begin. Yet, having a set of template documents can mitigate risk while demonstrating how easy it is to do business with your company.

 

2. Personalize Your Legal Documents

A good contract template should not read like boilerplate copy. So, be sure to personalize your agreements before they are sent out for signing. Ensure that you have identified every company name, address, and contact placeholder, and replaced them with the proper information. Nothing can spoil a new relationship like sending a contract with the wrong company or contact name in it!

A CLM with advanced analytics shows which contract templates or clauses result in closed contracts.

Even if a contract reads like standard terms, a personalized introductory or closing paragraph can go a long way in making other parties to the contract feel as valued as they should be. Basically, a contract should read as though both parties will share in the benefits and protections contained within it.
 

3. Ensure the Agreement is Clear, Concise, and Consumable

You have likely worked with contracts that are dense with legalese, jargon, and redundant clauses. They may be rife with paragraphs that are ten sentences or longer - the only white space found in the margins of the page. And even then, there may be annotations!

If you are on the drafting side of an agreement, do not follow suit. Instead, use conversational language as much as possible, except where specific legal vocabulary is required. Write concise sentences and paragraphs, with enough space around them, to make yourself abundantly clear. That means no hiding “gotchya” clauses in long-winded paragraphs. Do not use double negatives, filler words, or acronyms that are not defined in a glossary or somewhere else in the document. Also, accentuate the positive when introducing otherwise negative clauses. For example, write, "contracts will automatically renew after the first year unless terminated in writing."

Although conversational language is ideal in your contracts and templates, avoid using words like "we," "they," "you," "us," and the like. Establish a short form of your company’s name and that of the other party or just use full names throughout. Simply use "Acme" if not "Acme Widgets Inc." You could even use a person’s name or their role in the agreement throughout the document. For example, use “Tenant” in an office lease or “Contractor” if you are augmenting your team with a skilled individual for a fixed period of time.
 

4. Learn from Previous Agreements to Draft Contracts Going Forward

A CLM platform, with advanced analytics capability, can detect which contract templates or clauses result in swiftly closed contracts and which require multiple revisions. After all, there may be problematic terms, which impede revenue and growth unnecessarily, lurking in your templates.

It also identifies important trends and predicts outcomes, with contract reports helping contracts and legal teams to make better decisions about contract authoring, in general.
 

5. Review and Edit Agreements Before They Go Out the Door

Even when contracts are based on your approved templates or clauses, documents should be reviewed for many reasons. These includes accuracy, legal compliance, and clarity.

For complex, custom contracts that may require multiple review cycles, a virtual legal assistant (VLA) can identify errors in multiple pages of text - those that human eyes tend to miss. Legal teams can then approve the contract draft with an e-signature. This is with all of the confidence that the draft meets the set of standards programmed into the VLA’s algorithm.

Want to know how a CLM solution can accelerate your contract generation? How about the kinds of benefits that your business can expect from such an investment? To learn more, read another one of our blog posts, “How can automatic contract generation address company pain points?”

 

AUTHOR:

Deirdre Leone

Deirdre Leone
VP of Sales, North America
Connect with us on LinkedIn 

AI-Based Contract Based Management and Corporate Legal Hazards

Find out the latest on Corporate Counsel's employment of legal technology in 2020 with this research paper from ContractPodAi.

 

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