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When I first began my career as an in-house lawyer, I had zero contract experience, but that lack of experience was of little concern to me. After all, I was joining a small, close-knit team of seasoned lawyers with contracting expertise. My job was to represent my employer in court and not at a negotiation table. Based on what I was told in my interview, I believed I would not be reviewing, revising, or drafting contracts immediately. I would be cross-trained by another lawyer on the team and that lawyer would provide support during that training process.
Well, you know what they say about “the best laid plans of mice and men.” Things rarely work out the way you expect. Soon after I began my tenure with my new employer, the lawyer who was primarily responsible for contract review began an emergency leave, and my employer looked to me to help pick up the slack while that lawyer was out. It was in that moment I realized I would need to learn what contract review was all about.
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When I first began reviewing contracts, I believed that my only job was to check the contract using a list of standard terms and conditions acceptable to my employer. It wasn’t until years later that I came to realize that contract review required more than just ensuring that the contract contained acceptable standard terms and conditions included on a checklist. Contract review required a comprehensive analysis of the entire agreement, considering legal, business, and risk management aspects.
Here are several ways in which I came to understand that contract review needed to extend beyond a simple checklist:
Business deal. Contract review involves understanding the specific business goals and objectives that the contract aims to achieve. This requires a deep understanding of the business deal. When you understand the business deal, it is easier to ensure that the contract is designed to help achieve those business goals and objectives.
Risk analysis. Contract review involves identifying potential risks associated with the agreement. This includes legal risks, financial risks, operational risks, and more. If you identify the risks and you understand your employer’s tolerance for risk, you will be in a better position to assess strategies to mitigate these risks and ensure that your employer is well-protected.
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Legal compliance. Contract review involves ensuring that the contract is in line with relevant laws and regulations. It involves an understanding of the legal landscape and any specific industry regulations that may apply.
Industry specific. Contract review often involves ensuring that the contract is tailored toward your employer’s industry, the nature of the transaction, and the parties involved. A checklist alone may not capture these nuances.
Realistic and measurable performance metrics and KPIs. Contract review involves taking a close look at the performance metrics and Key Performance Indicators (KPIs) contained within the contract. When reviewing a contract, ensuring that the metrics align with your employer’s broader business objectives and that the metrics are realistic and measurable is important.
Dispute resolution. Contract review involves an evaluation of dispute resolution mechanisms, ensuring that those mechanisms are fair, efficient, and practical. This involves considering alternative dispute resolution methods such as mediation or arbitration.
Post-execution considerations. Contract review involves more than just getting the deal done. It involves ensuring that the parties have thought about and included terms that relate to contract management, renewal, and termination.
Communication and collaboration. Contract review involves collaboration with various stakeholders, including internal business units, leadership, and other relevant parties, to ensure a holistic perspective is considered.
Technological integration. Contract review may involve leveraging existing technology, such as contract management software or artificial intelligence, to enhance efficiency and identify potential issues. If the contract relates to software, making sure that it can be integrated with existing software systems is important.
If you take anything away from this article, I hope it is this: While a checklist is a useful tool for ensuring that basic terms are present, contract review is a more holistic process that considers the broader business and legal context, risks, and relationship dynamics. It is a multifaceted analysis aimed at optimizing the value and minimizing the risks associated with contractual agreements.
Lisa Lang is an in-house lawyer and thought leader who is passionate about all things in-house. She has recently launched a website and blog Why This, Not That™ (www.lawyerlisalang.com ) to serve as a resource for in-house lawyers. You can e-mail her at [email protected] , connect with her on LinkedIn (https://www.linkedin.com/in/lawyerlisalang/) or follow her on Twitter (@lang_lawyer).