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Contract Templates

June 25, 2013
Contract templates – and their management – is not a topic about which much is written, yet it was the source of animated discussion at yesterday’s IACCM member meeting in Zurich.
The big issues seemed to be, first, the extent to which templates cause rigidity and second, whether there is any point having them if you typically deal with trading partners who impose their terms.
In both cases, I think the problem is a misunderstanding of the role of templates as part of a contract management strategy and process.
Just like any rule book, templates should not be a static imposition. They must reflect business realities and organizational goals. That means a need for regular adjustment and the recognition that they reflect principles, not absolutes. Good templates are embedded within a process that monitors shifts in market and business needs or circumstances and which are adjusted accordingly. They are also supported by relevant levels of guidance, training and empowerment, for example in the use of fall-backs and alternates or in negotiating on another party’s terms.
Templates exist to reflect a known base-line of capabilities. Without them, a business will be less efficient and more risky. But as with any business instrument, they must be developed collaboratively and remain flexible to changing needs.
IACCM will shortly run a webinar on ‘Best Practices in Contract Template Creation & Management’
  1. Bob May permalink

    Templates are indeed valuable for all the reasons you mention. But like us they need to be watched over, pruned, and guided. In our high volume contract work, we couldn’t hope to survive without templates to empower the appropriate sales teams, and let us “experts” get called in to help as needed.

  2. Bob May permalink

    One other thought about templates. We ought to consider our clause libraries in any discussion of templates. These too represent valuable tools to increase our effectiveness in offering different approaches to helping negotiations stay positive and always moving towards some common ground.

    No one tool solves the problem, but templates can aid in creating scalable documents for those repeatable transactions, and creating clause libraries allows for empowerment of cross border contracts teams while still keeping a reasonable level of compliance with standards.

  3. Shalas Benson permalink

    I agree that templates are valuable and necessary to accelerate the speed at which many agreements may be negotiated and closed. Carefully managed clause libraries are equally valuable. If templates are used, it is extremely important that well trained contract professionals or lawyers use them and not release them to sales or other business people who may use one template for everything resulting in confusion of the receiving party, inappropriate terms, and more time redrafting language to suit the deal.
    It is also important for templates be regularly reviewed to ensure they reflect current corporate positions on certain issues. When one company acquires another, it is critically important for templates used by the acquired company to be reviewed to ensure the terms and conditions contained are consistent with the policies of the acquiring company. For example, the company I work for was acquired by another company two years ago. Review of professional services templates drafted by my company’s legal department and that of the acquiring company revealed that there was a significant lack of alignment between the two. In one template issues such as binding arbitration, most favored customer, invoicing and payment terms and basic insurance requirements were extremely different. While one company favored binding arbitration in its template, the other stated that binding arbitration was not permitted. One template permitted and even included most favored customer clauses for services to be provided to customers although corporate policies of the other company do not permit it. One template required payment on net thirty day terms while the other required payment on net sixty day terms and provided for an early payment discount for payment received on or before thirty days.
    Best practice when using templates is to review them often to make sure they align with current company policies, include instructions on how and when they are to be used, and are controlled by trained professionals to avoid misuse. When templates are updated, all prior drafts should be pulled from the template repository. The individuals responsible for template maintenance should send notifications to the users of the templates advising them of template updates and instructing them to purge their files of all prior drafts.

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  1. Don’t Want Static Templates? Use Document Assembly « Adams on Contract Drafting

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