Battle of the Templates!

Announcements:

I'll be in Chicago this week for the Midwestern General Counsel Conference where I'll speak with Professor Daniel Linna on "Exploring the Ethical Dimensions of AI Integration in Legal Departments" for the final plenary session which will be moderated by Heather Nevitt. Please reach out if you'll be attending that conference or if you're in town for the ACC LegalOps Con.

Also, I'll be back in Chicago in June for the CrushContracts Academy event. In what is likely my most ambitious CLE Course effort to date, I'm making a Jeopardy! style game show about Contracts and CLM that three contestants will face-off in to teach the audience important concepts related to contracts and contract lifecycle management. Getting CLE credit for watching a gameshow just might be my masterpiece. You can register here: https://www.dhirubhai.net/events/crushcontractsacademy2024-techn7155943355141562374/comments/

Now, onto the article, Battle of the Templates!

Battle of the Templates

Background and Overview:

When I tell people who have not attended law school that you have two semesters of Contracts and read zero contracts the response is usually surprise. It seems odd but the reality is that when you study contracts in law school you're focused on learning foundational concepts and case law.

One such concept we learn about, and have the opportunity to dive deeper into if we study the Uniform Commercial Code further, is the "battle of the forms." This scenario arises in the sales of goods when both parties have competing forms, e.g. the customer's purchase order contains one set of terms and the vendor's order form contains another.

I'm not going to unpack that for this article because I have a much more relevant topic that doesn't get taught in law school - "the battle of the templates." Which party's template are we going to use for the contract?

Our Stuff, Our Paper; Your Stuff, Your Paper

There's a negotiation that takes place before the contract negotiations begin and that is which party's template will be used. The amount of pissing contests generated over whose template will be used is an unfortunate byproduct of an industry that tends to attract society's most type-A people. It often results in wasted time and that's not good for anyone.

For me, this is an easy issue to resolve, yet it is a struggle for others. How do I resolve this predicament? I start with this general rule: our stuff, our paper; your stuff, your paper.

So, in a commercial agreement, if I represent the customer then I will agree to use the vendor's template. If I represent the vendor then I will insist on using my company's template.

Managing Risk is Easier with the Right Template

I used to be that in-house attorney who forced his company's MSA with its SaaS attachment on hapless startups and leverage-less vendors who would sign any contract they were asked to sign. So why change? Because I've learned that the biggest risks in a commercial contract are operational. The risk that you mess up your deal increases when you force a party to interpret its business and delivery model into a generic set of terms and conditions.

Forcing your counterparty to accept your form and bespoke commitments as to their operational standards sets them up to breach the contract. Is it more important to have their agreement to your company's template or to have your counterparty fully understand their obligations?

What about Mutual NDAs?

Can we not? No? Ok, then. Mutual NDAs are an instance where, presumably, both parties have "stuff" that the agreement concerns. BUT, here's the thing... one party's confidential information is probably driving the need for the agreement more than the other. If that's the case, then the party that is most likely to need to enforce the agreement should be given deference.

What if the agreement is... not good?

This is free guidance I'm sharing not advice that you're mandated to follow so if you get your counterparty's agreement and it's a mess and your form is better -- use yours instead. On this point, please have a sane template if you insist on using yours. If you still have a Y2K compliance provision then that's a sign you need to update your template or stop insisting on its use.

Conclusion

Setting the parties up for success in negotiating a contract should not be at the mercy of the egos of the folks doing the work on the contract. Having the humility to set aside your template to review the most appropriate one (according to my rule of "our stuff, our paper; your stuff, your paper") is the fast track to a streamlined negotiation process and an agreement that the parties can effectively operate against.