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Announcement: My upcoming book: I’m working on an encyclopedic dictionary of contract clauses, for drafters, reviewers, and students. The book is built on a much-expanded version of the Common Draft clauses; it has links to specimens of real-world clauses found in contracts by companies you undoubtedly know; and it has lots of analysis and commentary. If you’d like to be notified and get a free sample chapter by email when I finish, send your email address to me at dc@toedt.com. Don’t worry, I won’t spam you or sell your email address.

Cut negotiation delays with a balanced contract form

In a prior life, I was vice president and general counsel of a medium-sized, publicly-traded software company. Whenever a customer asked us to agree to a change in our standard contract form, we treated it as a marketing opportunity.

Our thinking was this: Customer A thinks its life will be better if we can make this commitment. It’s willing to give us money if we do. Hmm — maybe we can tailor our business processes so that we can comfortably make this commitment, not just for this customer, but for others too. That might give us yet another point of differentiation for our products.

In many cases we changed our standard form, so that in the future, our basic offering would already include what Customer A had found it necessary to ask for.

This approach paid big dividends: As our contract form thus evolved, it began to get rave reviews from customers’ lawyers. My sense was that this significantly sped up our sales-negotiation cycle.

I made notes of customers’ favorable comments. I finally got smart and quoted the comments (anonymously) on a cover page of the contract form. This also turned out to be a good move, because it helped us “sell” customers’ legal people on the idea of using our contract form. Here are a few of the comments, all made by in-house counsel:

When I first looked through this, I wondered ‘did someone already negotiate this for us?’ It’s a pretty nifty document you’ve got there; I liked it very much.

I told our business people that if your software is as good as your contract, we’re getting a great product.

I giggled when I saw the ‘movie reviews’ on your cover sheet. I’d never seen that before – customers saying this was the greatest contract they’d ever seen. But the comments turned out to be true.

Needless to say, our sales people were not unhappy about getting to signature faster.

The above information is not confidential, by the way: With my CEO’s permission, I talked about our approach in continuing-legal-education seminars, and even included a copy of our standard contract form in the written materials.

You might wonder whether we ever experienced legal problems from having a customer-friendly contract form. I’ll note only that my CEO let me talk about our approach in public, and that we were eventually acquired by one of the world’s largest software companies.

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