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Legal agreements: What NOT to do

by Marie Huntley

Legal agreements: What NOT to do

Some people build their own legal agreements with the help of that famous author Mr Copy N Paste, using scraps they find on the websites of their competitors. Or they buy a £10 template off the internet, created by that well known provider, Mrs Graspa Cheapskate.

You never want to use an agreement like this.

The problems sparked by these two characters are often pretty serious and unpleasant – and they are wholly avoidable.

I recommend that, if you are considering their individual or collected works, you remind yourself that your business and your team deserve something better than that. What you really need is a standard agreement that has been developed around your business, to fit you like a tailored suit.

(This article is part 2 of 2. Read part 1 here.)

Problems

As soon as you get to a point in the sales process where your customer is getting seriously interested, they will either want to see your agreement or try to foist their own agreement on you.

In the early days, most startups are so grateful to have new business that they will accept the customer’s terms unquestioningly. This can be a big problem, as the agreement will have been drawn up to protect the other party’s side of the deal.

Or, if the startup doesn’t have their own agreement in place and a potential customer demands one, they might turn to so-called standard terms provided by Mr Copy N Paste or Mrs Graspa Cheapskate.

Mr Copy N Paste’s offering results in a haphazard agreement, which, by the way, will also be breaching the copyright of at least one of your competitors. In my experience this type of agreement often still has the competitor’s name or product name or description or contact details still there. Life being what it is, the sharp-eyed new customer you are pitching to is likely to be the first to spot that gaff! At best, those documents will be based on someone else’s business and someone else’s deal at some other time.

The drafts provided by Mrs Graspa Cheapskate might be presented as readymade and ready to use, but will be incomplete and still containing [square brackets] or other options. Having looked at some of these, I can tell you that a user would need legal advice to decide on some of the options, or to complete the [square brackets] accurately. Some of the templates I’ve looked at were obviously out of date, referring to Acts of Parliament that have long since been repealed. Also, these downloadable templates have not been made for your business (or indeed any business other than the fictional one imagined by the person who prepared it). So, it would be possibly lottery-winning odds for them to match your actual real-life business model.

Taking this route means your agreement will potentially be badly drafted, out of date, and not entirely relevant to your usual business model, never mind any individual deal that you are doing… yet you might end up presenting it to a large and sophisticated prospect.

It’s very important you are contracting on well managed legal terms that address the risks and show your business at its best and smartest.

Benefits

Having a well prepared and well thought through agreement developed for your business is very empowering, because it gives you a level of professionalism and credibility in the eyes of your clients and suppliers that you just can’t obtain without it.

What’s more, when the agreement is well understood, the cost of further legal support is much reduced. Rather than needing to have a big debate every time, it will be down to the key points and take a small amount of time and cost to resolve. For example, updates are usually limited to making sure any agreed changes are dealt with correctly from a legal perspective, or where you need to reflect changes in your business or your sector.

Example

I have a client who sells very niche professional services to other professional businesses. Despite being a youngish and smallish business, they often deal with customers who are in a completely different league when it comes to turnover and headcount. But, because my client is expert in their niche, they are sought out by customers that, by comparison, look like the giants of the business world, and always have in- ouse legal and compliance teams involved in contracting and procurement.

When the business first started, my client didn’t have their own agreement. Then one of their prospective customers asked them for one so they approached me.

They have now been using their own standard agreement for some time and, when I work with them, it is easy to see the confidence and credibility that comes with that. No matter how big and impressive the prospect, they have a fully developed main agreement, and can focus with the client on the commercial details relevant to that deal.

It is quite normal in any but the smallest deals for there to be questions or some ’push and pull’ around a few issues, such as the right limits of liability, who will be responsible for certain compliance issues, and the Service Level details, or ownership of intellectual property, so I sometimes join my client on negotiation calls. These calls, when they are needed, are increasingly short and focused as the client’s team have been able to answer any initial queries and my involvement is usually limited to any particularly difficult issues and to manage the drafting to reflect agreed changes.

On reflection, if you compare this to what would be happening if they needed a review of the other side’s agreement, or a bespoke agreement for each significant client, preparing a core agreement has significantly reduced my workload and their costs!

Summary

Maybe you see your legal agreements as a dull, boring necessity that you close your eyes and sign without thinking because you need to make a sale. If so, I hope this article encourages you to rethink that approach.

Rather than a necessary evil that’s poorly used and understood, see your agreements as an integral part of your marketing exercise and approach. They display your expertise to your customers, especially in the B2B arena, and become a powerful tool and part of the business relationship.

Having your own master agreement is not an arrogant thing to do, even if you are a small or startup business. It’s about being prepared to organise and explain what your business does and how.

It’s not just about producing a good-looking fancy document (though once you have the words right, I would also recommend that a bit of effort on the visuals goes a very long way). It also involves a lot of practical thinking about your business model.

Used confidently, you can use legal agreements to your advantage.

For help with any of this, please give us a call.

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