I’ve just spend the last two weeks of my life, weeks that I will never, ever get back, negotiating service agreements, statements of work and support contracts for four really huge deals. We’ll close all of them, of course, but it got me to thinking about all the time I’ve spent in my career dealing with contract negotiations and how much I love technology and people and how much I dislike contract negotiation.
Let me make it clear that I don’t hate lawyers or contracts. A friend of mine, an ex-judge on the Texas State Circuit Court and now a SWAT team litigator for a prestigious Dallas law firm, once took me to task for belittling the contract process and the attorneys involved in it. His insights, to this day, shape my attitudes and outlook on this process.
I believe contracts serve two purposes. First, they confirm the terms under which two parties want to form a close and often deeply intimate relationship. By being clear in these terms, they eliminate doubt, set expectations and clear the air in advance of work being done. This frees the creative juices of the parties to do the actual work they both believe will lead them to greater degrees of success. Second, they memorialize that understanding so the benefit of the agreement accrues to future or successive participants despite the absence of the originators. Again, this frees the new players from uncertainty and debate and allows them to more freely go about their business. Lawyers, to the extent they help the parties gain clarity, align in agreement and make clear their positions are doing some of the most important and admirable work in capitalist society. Not quite as important as those individuals who take significant personal and capital risk to build new companies, fund new ideas and create new jobs, but right up there.
When I negotiate with clients over these valuable little jewels of understanding, I run into three basic types of attorneys:
- The Business Guy: This is the attorney who is closely aligned with the commercial concerns of the business, understands those commercial concerns, and seeks diligently to reflect those concerns in the legal context and language of the contract. These guys are really easy to work because they only focus on clear understanding and alignment with the commercial concerns. I treat them like a trusted partner, am completely open and transparent in my dealings with them, and generally get deals done very quickly with them.
- The Rewrite Guy: This is the attorney that rewrites every aspect of your documents because they are not the way he would have written them. Their mindset and perspective may be protectionist of the commercial side of the transaction, but they end up changing everything. With these folks, if they are genuinely trying to act like “the business guy” you’ll just have to work through it. If they are acting like the next category (see below), you may have a challenge. I generally just bluntly talk to them about the issue, to wit: “These agreements may not be perfect, but they’re pretty good. Can we just focus on the commercial issue most important to you?”
- The Persecutor: This is the attorney who attacks you on everything, never gives an inch, and belittles every attempt to compromise. You have only three choices with this guy. If you need the deal, hard negotiate. It will take a ton of time and you have to be very patient. If you don’t need the deal, walk away and advise the prospect that their attorney is not being reasonable. Lastly, the approach I normally take, is to engage our executive sponsor, explain the situation and ask them to participate in the discussions in attempt to mediate. If they will, expect to spend a lot of time on the phone – sometimes days or months (one deal in Chicago took 6 months just on legal). If they won’t, I walk.
In closing, a big thank you to James Stanton (my buddy from Dallas) for his influence on my thoughts and to Betsy Tucker and Gregg Lallier who are two attorneys I recently had the pleasure to work with on deals and who were great partners in making the deals better for everyone.