Contract negotiations and contract drafting go hand-in-hand. Like soulmates, they’re meant to be together.
The parties start with an initial contract draft – the template. Each time the contract is redlined, it is being re-drafted. Eventually, the parties will reach a final draft that they both agree on.
The key is to avoid sacrificing quality of drafting for quality of negotiation, or vice versa. But instead, to balance the two together so that they work in harmony with one another.
This article will focus on the importance of re-drafting clear contractual language during the contract redlining process.
When you propose a substantive revision, you should re-draft clearer contractual language to correspond with it.
Remember, you’re still drafting even while negotiating. The key to drafting a clear contract is to re-draft clearer contractual terms that correspond with your redlines and reflect the parties’ intent. The best way to accomplish this is for the party requesting a substantive change to propose the corresponding language.
Here are some best practices to keep in mind for this simple yet often overlooked rule of thumb.
Clear comments lead to clearer contracts.
Redline comments should be drafted in clear sentences, not fragmented mumbo jumbo. The clearer your comments, the more likely it is that the other party will understand your ask, and the more likely they will agree to it. If you’re not clear the first time around, it will cause delay in the overall contract negotiation process.
Clear comments lead to clearer contracts. How can you draft clear comments?
- Accompany redlines with explanatory comments.
- Use section references when necessary.
- Identify which party you are addressing a comment or question to.
- Propose new language to go with your ask.
- Use full sentences rather than writing in short-hand or notation style.
Re-draft clearer language.
The first version of a contract is usually a template created by one of the parties as a starting point. It is standardized to meet the general needs and expectations of the deal. The beauty of re-drafting during the contract negotiation, is that you can craft language that specifically meets your needs. This is your opportunity to customize the template to your deal.
Wherever possible, your goal should be to end up with a better contract than you started with. This can include improvements in style, terminology, legal effect, formatting, or organization. Improving any or all of these elements of a contract will lead to a clearer contract.
For more information and best practices on “drafting clearer contracts,” be sure to check out Ken Adam’s blog.
Re-draft your own revisions.
There is nothing more frustrating than lazy redlines. Unfortunately, I’ve come across this phenomenon far too often. The counterparty marks up my template with comments only and expects me to do all the re-drafting. Gee, thanks.
For example, “Please make the indemnification clause mutual.”
So you’re asking me to not only agree to a mutual indemnification clause. But also to re-draft the existing indemnification clause to make it more favorable to you? That’s asking a lot. And more times than not, the answer will be “No.”
Don’t propose a revision and expect your counterparty to craft language that is supposed to be in your favor. They are not mind readers or scribes. If you ask for something, earn it by putting in the work to draft suitable and clear contractual language to correspond with your request.
The more work you put into your redlines, the more likely they are to be accepted.
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If you enjoyed this article on redlining and want to learn more ways to negotiate better contracts faster, check out all 10 Rules of Contract Redlining Etiquette™.
Author: Nada Alnajafi
As a SaaS supplier, ensure that your contract gives you adequate rights and licenses to the data your customer provides you so that you can do all the things you need to do to provide the SaaS and other related services. If you collect usage data or will be aggregating your customer's data into (hopefully, anonymous) data sets, make sure that you get the appropriate rights to do so as well.
To learn more and join in the discussion, check out my LinkedIn post.