For many companies, the team that negotiates a contract is different from the team that drafts the arrangement. Of course, a completely different team then oversees the management of the finalized agreement. This is an understandable and efficient allocation of human capital, but a complete division of labor is often one of the underlying reasons that contractual relationships go sour and contract disputes arise.
Although it may not be realistic for the management team to actively participate during all phases of the contracting cycle, they should become engaged in the process as early as possible because their insight will help prevent the emergence of certain issues. Here is how their early engagement and input can help:
Use the Correct Terms
The contract management team ultimately has to ensure that the terms of a contract are fulfilled appropriately, done so fully, and completed in a timely fashion. This task becomes inordinately more difficult when there are numerous and/or onerous terms contained within the drafted contract. Granted, contract terms explain the gist of the agreement and dictate how matters are meant to occur, but sometimes the terms themselves get in the way of the deal.
An experienced management team often knows what type of contract terms are applicable to a particular deal, and often which terms are actually feasible with respect to performance. Thus, if they are involved during the drafting rounds, they can help ensure that the correct types of terms are included, thereby facilitating management and compliance down the road.
Avoid Excessive Details and Focus on Reality
There is a huge shift toward results-oriented management, and this is particularly important for contracting. For so long, contracts went into painstaking detail regarding every facet of a deal. In essence, the drafters were trying to prematurely micromanage how things would unfold. This is both inefficient and unrealistic.
The ultimate goal of any contractual relationship should be focused more on the outcome and not necessarily how the parties go about achieving their end of the bargain. And, it is the contract management team in particular that is in the best position to analyze how contract requirements can and will actually get done. Therefore, the negotiators and drafters should solicit the management team’s input when it comes to including and/or excluding the detailed delineation of certain matters.
Build the Right Relationship
In general, lawyers help draft contracts. They have been trained to think of all of the worst case scenarios and use that foresight to build protective measures into the contractual language. This is necessary to a certain degree, but it should not be the driving force behind a contract’s evolution. As contract managers know, a successful contracting relationship depends on a cordial business relationship. Consequently, contracts should be drafted in a way that fosters a positive working relationship.
Again, the management team is in the best position to shape a realistic agreement with reasonable terms that focuses on the formation of a strong, mutually beneficial working relationship. After all, they are the ones that have to put words into action.