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Yours, Mine or Ours by jigordon
January 31, 2008, 9:54 am
Filed under: contract management, contract terms, metrics, risk

Every major (and most minor) sellers have a contract/agreement template that they will send you to sign at the time you purchase their product. Sometimes is as simple as a click-through agreement inside the installation process. Sometimes it’s a multi-page license and services agreement that takes weeks/months to negotiate. But if they send you their template form, they want you to use it.

Why?

Because starting with their template gives them power. They wrote the document covering those things that are important to them and with language that is obviously agreeable to them as well. Do you sign it?

Most people do – without looking. And frankly, that scares the heck out of me. If you’ve been following along these last few months, you know that I’m putting contracts into a contract management system. Along the way, I’ve seen a heck of a lot of not-so-great deals that were “just signed” because someone on the seller’s side knew that if you start with a form, the Power of the Template(TM) usually kicks in.

So how do you counteract the Power of the Template™?

First: You need to remember that a template is a suggestion, not a mandate. If the seller really wants to sell their product, they will negotiate.

Second: Negotiation means that they will modify their template with changes you make and will sometimes even use YOUR template.

Third: Wait! Your template? Do you even have a template? Depending on the situation, if you know you’re going to be consistently buying a certain type of good or service, then by all means, you should have a template for that type of transaction!

For me, this means that I have at least 10 template agreements: at least 2 types of NDA (unilateral and mutual); a Software License and Services Agreement (covers EVERYTHING anyone would want to buy when they buy software: software, maintenance, installation, training, consulting, etc); a Master Services Agreement (for non-IP-related services like mowing the lawn); a Consulting Services Agreement (for people developing IP for me, like new software code, design, etc); a Statement of Work and a Work Order template (to make sure that I always cover the concepts I want in my orders); and an Amendment and/or a Change Order template (yes, a little much at times, but good to have).

In some cases, I’ll even develop my own ASP/SaaS template (if my organization does a lot of that kind of buying).

Now, you might say “But Jeff, how can I create a template for software or ASP stuff when I have no idea about how the vendor licenses their product?”

Well, you’re right… it’s a bit more tricky to develop these templates from the buyer’s perspective and you have to include a lot of extraneous things (like definitions for all of the known software licensing metrics). But it can be done… and once you have it, you can start to enforce the use of your templates. This will result in two positive things for you:

1. Your speed to deal completion will increase. I don’t know if you’ve been measuring how long it takes you to negotiate a deal, but the huge time-sucking thing at the beginning (the first read-through/red-line) takes an incredible chunk of time. Off-loading that to your vendors is a huge time-saver. And even if the length of time on the deal signature doesn’t decrease, YOUR time is freed for other things.

2. You can measure the number of deals on your paper versus those on vendor paper (ie: managing risk). Which is a metric you can share with your management regarding a decrease in overall contractual risk. I simply tell my vendors the truth to get them to use my template, combining these two points: If you want to close this deal in a relatively short amount of time, you’ll start with my document.

But writing templates is initially time consuming and requires a great deal of thought and organization. It’s not something you want to do in a hurry and it’s not something you want to do if you don’t have a significant amount of experience in the subject matter of the template. So don’t be afraid to seek out help.

Anyone want to share their experience in using their own templates?

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2 Comments so far
Leave a comment

Jeff,

If there’s only one thing that a purchasing department could do to dramatically improve its performance, it would be to have its own contract templates. There are so many resources available now to obtain contract templates–either for free or fee. I just don’t understand why more purchasing departments aren’t demanding that vendors use the customer’s “paper.” Here’s a link to one site that has tons of examples that contract professionals can use as a resource to “Frankenstein” their own contract templates: http://contracts.onecle.com/

Comment by Stephen Guth

thats kind of a simple response for me.. If the source decision has been made already then you have much less chance of pushing your paper. Not that you don’t push it. The vendor will use this againist you in time sensitive rush to project ‘s or purchases.

I much prefer using my own paper due to cycle time, wanting to keep legal out of my business and serving my customers with a better experience.

Comment by cjwebster




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