Over nearly 30 years in both law firm and in-house settings, I have spoken with representatives at companies of all sizes—including those in the restaurant industry—regarding their contracting process. Generally, when asked about this topic, they reply, “Sure, we have a contracting process.” That response is usually followed up with a look of anxiety, even concern, about what I say next: “Great! How good is it?” In other words, if using a report card scale, where would the company land?
Shockingly, even in-house counsel have given some all-too-common answers:
- I hadn’t really thought about it lately, but maybe a “C.”
- I don’t have time to evaluate the process. It seems to work OK, so maybe a “C.”
- It was in place when I joined the company, and no one wanted to change it, so maybe a “C or D.”
The hard truth is that companies—including those in the restaurant industry—can’t afford NOT to regularly evaluate their contracting process because a “C” or “D” process is likely hurting the organization in a variety of ways, including:
- Confusion about how to get legal work done. For example, whom do legal requests go to?
- Lack of clarity regarding what or whose “paper” to use for contracting.
- Outdated or insufficient contracting forms that are overly complicated and/or don’t contain appropriate company protections.
- Unrealistic expectation setting, both internally and externally, regarding turnaround time (no “service level agreement” from the legal team or outside counsel stating expected completion for legal tasks).
- Ineffective or no communication between internal teams once a request is submitted.
- Inability of sales to close mission-critical deals in a timely fashion due to a protracted and/or nonexistent contracting process.
- Termination and/or expiration of important existing contracts without the opportunity to discuss renewal in a timely fashion.
- Ultimately, financial detriment to the company due to all of the foregoing.
Understandably, evaluating and changing the contracting process can feel daunting when it involves so much substantive legal work, but it doesn’t have to be. A competent, experienced attorney can evaluate and revamp a company’s processes relatively quickly using something similar to the following process.
First, the attorney should meet with the legal and business teams to understand their business, discuss the existing contracting process and find out what’s working and what isn’t. Then the attorney should conduct a comprehensive review of all relevant contracting forms (confidentiality agreement, master services agreement(s), vendor agreements, etc.) and provide suggestions for change. Often, this results in shorter, more precise agreements that better serve the business than protracted, overly complicated 30-page forms that contain unclear and/or unnecessary provisions. The attorney should then obtain legal and business team sign-off on updated forms.
From there, the attorney can create an “A” grade contracting process document that outlines items such as:
- Where to send all legal requests.
- When to contact legal—does the document require legal review? (The answer is almost always “yes.”)
- Clear guidelines regarding whose contracting paper to use. Company paper is always preferred.
- Clear guidelines regarding how to request the appropriate contracting form and instructions regarding the deletion and prohibition on use of old forms.
- Clear guidelines on expectation-setting with external customers/vendors. For example, don’t promise a customer a turnaround on a contract within 24 hours without first asking legal if that is reasonable for that contract.
- Clear guidelines regarding considerations before submitting the contract to legal. For example, if using the other party’s paper, the document must be in Word or a similarly editable version. Also, read the document before sending it to legal. It is the requestor’s responsibility to know the contents of the document and ensure that it presumably expresses the deal struck with the other party.
How to prepare a legal submission email is particularly important. For example, it should explain:
- Whom the company is contracting with (legal name of party, vendor, customer, partner, etc.).
- What is needed, e.g., “legal review of Company X’s software license agreement.”
- When the document is needed or requested deadline for legal review. Be sure to offer a realistic timeline. “ASAP” is not a timeline/deadline; choose an actual completion date.
- Why the company is contracting with this party (description of goods and/or services), e.g., “The company needs to purchase a one-year software license for software that does …”
- What the dollar value of the deal is.
Other items include:
- Clear service-level agreements (SLAs) regarding turnaround times – for example, one to two business days unless there is a reason that isn’t acceptable, in which case legal will notify the requester within a reasonable time regarding why the SLA cannot apply and provide a realistic time frame for completion.
- Clear guidelines regarding what happens after submitting a request to legal. For example, who is responsible for sending a redline back to the client?
- Clear signature protocols—who can sign on behalf of the company, signature method, etc.
- What to do with fully executed agreements.
- Management of agreements post-execution—tracking expiration dates, renewal discussions, etc.
Don’t settle for a “C” grade (or worse) contracting process! With the assistance of an experienced attorney, your “A”-grade contracting process is just a step away.
Tracy Caswell is a partner in Kabat Chapman & Ozmer’s Atlanta office. Over her 30-year career serving as both in-house and outside legal counsel, she has handled complex commercial contracts, business negotiations and transactions, employment/human resource matters, litigation, arbitration, mediation, intellectual property, risk and resource management, and board governance. She may be reached at tcaswell@kcozlaw.com.
