United States: Writing Contracts That Get Signed

Far too often, the excitement of shaking hands on a deal gets lost when lawyers get involved. Instead of getting done, the deal gets buried under the contract details of what happens if and when something goes wrong.

This risk affects all contracts. Consider the sales rep and his client. Often, they negotiate only over a term sheet with key details - pricing, product and delivery date. The "legal" portions of the contract - warranties, remedies and escape clauses - are left for counsel to work out on "standard terms".

Unfortunately, when it comes to tech deals, the devil may be in those details. Such questions as compatibility with software in place, conversion of existing data, and whether the new product will satisfy the needs of the actual end-user may never be considered by those with the technical knowledge to answer them - unless counsel highlights such issues.

Moreover, a "standard" contract usually represents only one party’s one-sided form. That boilerplate may bear no relation to the principals’ understanding, and may not even be modified to fit the business deal.

As a result, the parties’ relationship can get off to a rocky start, if one side mistakenly perceives sloppy drafting as an effort to back out of the handshake deal. Even worse, inking a signature on a poor contract without proper review may prevent a meaningful solution, if problems arise.

Fortunately, these horrible outcomes are not inevitable. Experienced business lawyers who take the time to understand the deal can design a contract that reinforces the business relationship that created it in the first place.

However, everyone involved must clearly explain the deal, including assumptions about what each side will do and get. If the contract doesn’t match their understanding of the deal, both sides may quickly accuse the other of breaking it.

A contract with a clear narrative of what each side will do lets everyone make sure that the written document matches the verbal agreement. This particularly helps "lock up" a deal quickly, with a letter of intent. Headings such as "Duties of Each Party to Design and Implement the Software", and "Promises of What the Software Will Do" make the deal structure easy to understand.

Of course, not everything can be simplified. But separating purely legal sections from the rest of the contract lets the client focus on the business deal first, getting that part right before incurring attorney review time.

An experienced business attorney can even use contract drafting to identify unrecognized differences. If real problems exist, sometimes the best deal is the one that you walk away from.

In short, the attorney drafting the contract should - without sacrificing legal rigor - keep marketing in mind. A well-written contract that tries to satisfy the parties’ expectations sets a positive tone that helps the contract succeed. Hopefully, that attitude will carry throughout its performance, so that any glitches can be resolved without a lawsuit.

In the real world, whether a contract gets signed may depend less on what it says, than how it says it.