Increased complexities in commercial agreements – unique pricing models, rapid technological innovations, and increasing government regulations – have translated into mounting challenges for in-house attorneys tasked with properly organizing and documenting contract negotiations. While young in-house lawyers understand the concept of accurately and clearly transforming the business intent of a transaction into writing, even seasoned attorneys must remain focused to ensure their transactions are diligently organized and properly documented in order to avoid the common pitfalls that unnecessarily complicate business transactions. With this in mind, young in-house attorneys should remember that transactional business is a team sport, properly documenting the negotiation process is essential, and negotiating dynamics are an integral part of any transaction.
Transactional business is a team sport
Lawyers rarely initiate business deals. Rather, business colleagues bring in lawyers at the appropriate stage of the transaction, oftentimes when the parties begin to contemplate a written agreement. By the time an attorney is involved, relationships already exist, commercial issues have already been discussed, and certain expectations have begun to solidify. As such, before any legal issues are discussed, playing catch-up is the first step to organizing and documenting a transaction, which requires having an initial internal discussion in order to understand these preexisting relationships, representations and timeframes.
Young in-house lawyers also need to learn when to utilize subject matter experts. Just as an attorney is brought in at the appropriate time, the young in-house lawyer must understand where and when to recruit additional business or technological team members. While lawyers are primarily responsible for reviewing and documenting the written agreement, oftentimes it would be inappropriate and detrimental for an attorney to make business decisions without seeking the appropriate advice. Because of this, young lawyers need to remember to appropriately involve internal subject-matter experts to address operational, commercial, or administrative concerns.
By securing insights from the relevant experts, young in-house lawyers will not only improve their negotiating positions by developing a more comprehensive and practical understanding of many internal concerns, but they will also have the comfort of knowing that they did not inadequately document the commercial intent or agree to infeasible or administratively burdensome technological or operational responsibilities. While this may be a risk an experienced attorney might assume, it is not a gamble a young attorney should take.
Properly documenting the negotiation process matters
Properly documenting a transaction requires a great degree of focus at the macro-level (establishing the general contractual framework) and micro-level (selecting and “wordsmithing” language to a degree of care sometimes shocking to business colleagues). Failing to take the necessary degree of care while documenting a transaction will almost certainly lead to unnecessary complexities and discussions. Therefore, the first step to mitigating these concerns is to ensure that revisions made by either party are properly highlighted (typically using “tracked changes”) and thoroughly explained with comments and explanations. Failing to take this basic step almost always leads to some level of distrust or frustration.
Young attorneys should also take steps to ensure internal and external drafters and reviewers are working from the same document (i.e. version control). With issues being simultaneously reviewed by internal and external parties, it is important that everyone is working off the same version of the document, ensure the proper version is sent out, and that the other side responds to the latest version. Not only is significant time wasted if the wrong document is reviewed, opposing attorney and subject matter experts will almost certainly experience some level of frustration if they are required to unnecessarily duplicate efforts because of a careless oversight. In particular, young in-house lawyers should implement and utilize informative document-naming conventions and organized document-repositories in order to facilitate better version control. By taking the time to document the transaction correctly, many of the costs of redundancy and confusion, such as increased time-frames and strained relationships, can be easily avoided.
Negotiating dynamics are important
After one, or multiple, attempts at reviewing a transactional document (“redlining”) the parties to a transaction typically schedule an initial call to address outstanding issues. Because attorneys typically dominate the conversation at this stage of the drafting process, it is vital to again facilitate off-line discussions with internal team members. In particular, young lawyers need to ensure that business colleagues are aware of business, operational, and financial issues, which they will be expected to address.
At the onset of the call, young in-house lawyers should remember to first confirm that everyone is working off the same document. During the call, diligent notes of the discussion should be taken: points of agreement, operational questions, representations made, each party’s post-call responsibilities, and issues to escalate to internal decision-makers. After the call, an attempt should also be made to have an internal post-call conversation to highlight any major issues, answer questions, and create a “to-do” list. While the foregoing may be time consuming and initially seem burdensome, the information cultivated by these tasks will be invaluable throughout the business transaction.
While adequately negotiating and documenting a business transaction may be initially difficult for a young in-house attorney, the typical obstacles can be easily mitigated by reaching out to subject matter experts, taking the time to appropriately document the negotiation process, and remembering the importance of negotiating dynamics. Failing to do so will inevitably increase the difficulty and complexity of almost any transaction.