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Corporate Counsel and Contracting

    

As many folks know, a big part of an in-house attorney’s day involves reviewing contracts, discussing contracts, drafting contracts, and reviewing contracts some more. It does not matter what size the company is, what sector it is in, or what product it is providing, contracts are unavoidable. Contracts are actually anxiety-inducing for a lot of people because of the potential impact they can have on the business, especially the company bank account. For attorneys, contracting is a pretty standard practice, but we have heard that it presents its fair share of challenges for them as well. Here is a rundown on some of the biggest issues in-house counsel encounters when it comes to company contracts:

Risk

Contracts present risk in all sorts of ways. The biggest risk is obviously the financial piece. There may be lost revenue, litigation and enforcement costs in the event of breach, and even the ponying up of damages if it goes that far. Of course, there are a lot of other risks that contracts create that counsel must constantly evaluate, such as regulatory compliance, intellectual property protection, and the issues that may arise due to a vendor or supplier’s actions, or lack thereof.

 

Plus, irrespective of where the risk derives, if any of these problems come to fruition, it inevitably wastes company resources, as management usually has to get involved and money must be spent to sort things out. Although some of these risks are inescapable, there are ways to mitigate their likelihood or impact. Broadly speaking, careful planning, a comprehensive contract management approach, and keen oversight are key.

Cost

There are a myriad of costs associated with contracting. Obviously, multiple people are involved in negotiations and drafting, which means someone is forking over a salary for those individuals. Money has to be invested in the right tools and software to actually draft, circulate, sign, and save contracts. Plus, there are the many costs associated with overseeing the execution of such contracts.


Of course, there also has to be money available to fix any problems in the event that something with the contract goes wrong. And, the really tricky part is that many of these costs are hard to nail down with precise numbers, which makes budgeting for these items rather difficult. Lawyers often focus on the aftermath of a contractual breach, which is undoubtedly important, but company leaders should work together to manage the contractual portfolio to prevent costly problems from arising or spinning out of control.

Efficiency

A lot of company leaders, and their lawyers, seem to have perfected the art of having too much to do and too little time to do it. It is inexorable human nature, and many people thrive under the pressure of having to get something done in a short amount of time. However, when it comes to contracting, there is possibly nothing worse than waiting until the last minute. In fact, it is usually the combination of poor contract management and ineffective communication that allows risk to seep in and costs to rise.

 

In addition, contracting can be an inefficient process when the individuals responsible for the final creation (usually the lawyers) are expected to start agreements from scratch or constantly have to make adjustments because the negotiations continue unabated. There may also be problems depending on the software that is used for drafting new contracts and storing executed ones. Counsel obviously has to strike a careful balance between getting things done quickly while ensuring that things are done properly. Of course, finding this sweet spot also requires solid management and effective communication. 

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