Contract Redlining Etiquette – Rule #3 on Email Exchanges

Redlining Etiquette During Contract Negotiations – Rule #3 on Exchanges, by Nada Alnajafi, for Contract NerdsThese days, contract negotiations start with an exchange of redlines via email and then move to a live discussion. How do you determine when to switch from email to another mode of communication? Ultimately, you should use whatever method helps you facilitate the most efficient and effective negotiation for that particular contract or deal.

Many contract negotiators engage in two exchanges (or rounds) of redlines before switching to a live mode of communication, such as a phone call or virtual meeting.  However, you’re applying the rules of Contract Redlining Etiquette, such as including explanatory comments and using silent redlines where applicable. Right? In that case, your higher quality redlines should counterbalance the need for additional exchanges. Here’s why.

Rule #3 – One Email Exchange, Then Switch to Live Negotiations.

Overall, we should strive to exchange redlines as few times as possible between contract initiation and contract execution. The redlining etiquette rule of thumb (or challenge) is to initiate contract negotiations via email, exchange redlines once, then switch to live negotiations to move negotiations forward.

For purposes of this article and my series on redlining etiquette, an “exchange” of redlines involves two sets of redlines, one from each side. The first exchange takes place after the parties have decided on a template. The party who receives the template provides initial redlines. Then the originating party reviews the redlines and provides their input. The second exchange involves another round of redlines from each side. And so on. The diagram below visualizes the process of exchanging contract redlines.

Diagram 1.0 - How I define an "exchange" of redlines.
Diagram 1.0 – How I define an “exchange” of redlines.

If you find yourself exchanging email redlines more than once, that usually means there’s a deeper issue that needs to be clarified and resolved, such as poorly drafted redlines or explanatory comments, misalignment between business and legal requirements, an uncooperative party, or some other roadblock. In any case, moving to a live discussion will help identify the problem.

Limiting the email exchange to one round can help you streamline the contract negotiation process. You can ensure this fluidity by striking a balance between emails and meetings to avoid wasting time on one phase—email discussions—that could be better handled by moving onto the next phase—live discussions. And, vice versa—you also want to avoid packing people’s calendars and scheduling extra calls for things that you could address via email more quickly.

Verbal vs. Non-Verbal Communication

To understand when to switch communication modes, we need to first understand the different values that each one brings to the negotiation table. According to the “7%-38%-55% rule” and other similar studies, non-verbal communication has a more substantial impact on the receiver or listener than verbal communication.  In his 1967 study, Albert Mehrabian concluded that in determining a person’s attitude towards someone, words account for 7%, tone of voice accounts for 38%, and facial expression accounts for 55% of the liking.[1]

I would hope (and passionately argue) that words account for more than 7% in the context of contract negotiations! While Mehrabian’s findings do not directly translate over to contract negotiations, we can use the concepts of verbal vs. non-verbal communication to guide us.  For example, in a phone or virtual meeting, you’re more likely to receive and interpret non-verbal cues that you otherwise would not have received from email.

As you escalate through the negotiation process, your communications should grow increasingly more effective. And your discussions, increasingly more detailed. The key is to switch from one mode of communication to another in an efficient and effective manner that does not disrupt, but rather supports, the negotiation process.  For more about the pros and cons of virtual meetings and when to leverage them in negotiations, I recommend listening to the Negotiations Ninja Podcast on How to Master Virtual Negotiations.

Diagram 2.0 – Escalation of negotiations across multiple modes of communication.
Diagram 2.0 – Escalation of negotiations across multiple modes of communication.

The Exceptions

Contract negotiations involve multiple variables that must all be taken into account and appropriately balanced throughout the negotiation process. While most cases should only involve one exchange of redlines via email, here are some exceptions.

  • Short and simple contracts. For short (two pages or less) and simple contracts (such as non-disclosure agreements), you should only need one exchange of redlines to finalize, without a phone call. For these types of contracts, there’s usually only a handful of negotiable items to begin with, the variations are limited, and contract experts can usually predict what they will be and address them fairly easily.
  • Long or complex contracts. On the other hand, for longer (twenty pages or more) or complex contracts (software-as-a-service agreements), you might end up exchanging redlines via email two or more times before switching gears to a live discussion. For example, you could need multiple email exchanges at the outset to align internally on requirements, get approvals from stakeholders, or consult with outside counsel on specialized matters.
  • Urgent or high priority contracts. Though every client will say their contract is urgent, there will come a time when they’re not bluffing. In this case, email can slow down the negotiation process and it might be wise to setup a call from the outset. Start with a call, and then memorialize the discussion via email.
  • Logistical issues. When dealing with international parties in different time zones or a large group of stakeholders, it can prove difficult to find a time that works for everyone. If your attempt to move to a live discussion is only slowing down the process, stick with email exchanges.
  • CYA. Continue to use email to confirm or memorialize important points that you need to keep record of for compliance or CYA purposes.

[1] Albert Mehrabian & Morton Weiner, 6 J. Personality & Soc. Psychol. 109–114 (1967).

Nada Alnajafi currently serves as Corporate Counsel for Franklin Templeton, a Fortune-500 global financial services organization. She has been practicing in-house for 11+ years and created Contract Nerds to connect with and serve the people who love contracts just as much as she does.
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