It’s About the Deal, Not You: A Lawyer’s “To Do and To Not Do” List for IT Contract Negotiations – Article

[NOTE: This is another in the series of repostings of my previously-published articles. After a frustrating conference call negotiating an IT contract, I sat down and wrote this article (2004). In it, I tried to capture whatever wisdom I might have learned over the years as a lawyer involved in negotiating matters. It's my approach, but I think most of the ideas would be useful to many lawyers. I'm always looking to improve, so I welcome the suggestions of others who have experience in these areas. Warning: it's a very long article, but I think it is a good article, with lots of practical tips and pointers.]
It’s About the Deal, Not You: A Lawyer’s “To Do and To Not Do” List for IT Contract Negotiations
Many moons ago, as a third-year law student at Georgetown, I took a class called “Business Planning.” We spent the first few weeks of the class studying negotiation, reading some of the now classic books on the subject and doing mock negotiations. At the time, the idea of “win-win” approaches to negotiation was just beginning to become popular, but that was our focus. We were also taught that the role of the lawyer was not to kill deals (as many lawyers make business people believe), but instead to help make deals happen by creatively solving problems.
I later had the good fortune to work with a good number of excellent lawyers who had a similar approach. I also have had the chance to see in action some of the lawyers who fall into the deal-killer category and the damage they can do in deals that have great potential, sometimes costing their clients millions of dollars of lost revenue in circumstances where the business issues were essentially resolved.
As a result, I’ve formed some strong opinions about the role of lawyers in negotiations and the behaviors lawyers should adopt in the normal negotiating session. While there can be special circumstances when approaches that are more theatrical are called for, in most events the lawyer should play a limited role.
I recently spent what seemed like an eternity on a conference call with a lawyer who broke every rule I can think of for how to handle a negotiation by conference call. My clients even remarked after the call ended that if the deal fell through, it would be because of this lawyer. I submit that this comment is one of the worst evaluations a transactional lawyer can receive.
Even worse, I felt embarrassed for the legal profession because this lawyer confirmed almost every negative stereotype business people have about lawyers. Ironically, people feel that they compliment me by saying, “Dennis is a lawyer, but he’s not like most lawyers.”
My experience was instructive and I wanted to use it to illustrate some points about negotiation, especially how lawyers should behave in negotiations and how business people might better manage their lawyers in this setting, both to save on legal fees and better use their lawyers’ expertise.
Here’s the background. Assume my client wants to enter into an “e-commerce” arrangement and the business people have been negotiating for a few months, like each other and want the deal to happen. I get a call that the business issues are all worked out and there will be a conference call that includes the lawyers with the following agenda: (1) confirm that everyone is in agreement on the final checklist of outstanding business issues, and (2) discuss briefly any remaining legal issues and get the revised draft of the agreement moving. Both parties believe that it will help speed up the process if the lawyers hear the discussion of the business issues.
I like this approach. In many cases, the best use of lawyer time is to discuss the significant legal issues and then the business people work out the deal points to their satisfaction before getting the lawyer back into the process. It makes good sense to nail down the deal and then have the lawyers document the deal. Having lawyers working away as the deal evolves often results in expensive legal time being spent on language that later becomes irrelevant.
My reaction to this call is very positive, because it sounds like we are ready to roll and get this deal finalized and signed. I expect a conference call that will last about an hour, and maybe ninety minutes at most.
Given the stage of the negotiations and the purpose of the call, I have the following goals for this conference call:
1. Support my client’s representative in the most helpful way I can. In the case where the business people have been carrying the conversation, I expect that this will mean that I will (1) prep the rep on key issues, points that may still need to be dressed or clarified, possible approaches on likely issues of contention and the like, (2) be ready to discuss issues with the rep when he or she puts the speakerphone on mute and be ready to make comments or handle issues when prompted by the rep, (3) determine any other role I’m wanted to play, and (4) at the end of the discussion of business issues, be prepared to clarify any legal or drafting issues that need the input of the business person and, only to the extent necessary, clear up any significant legal questions and follow-up steps that it makes sense to handle with the other attorney during this call.
2. Obtain the information needed to document the actual deal accurately. “Does the invoice cover the prior month or the following month?” “Does the license also include independent contractors as well as employees?”
3. Identify and frame legal issues in ways that business decisions can be made. “Under this language, if X happens, Y will result. I want to make sure that Y is what is supposed to happen.”
4. Explain what I meant by language I drafted or how a certain issue is covered. “I think we handled that in Section 3.3 rather than in the section you are looking at. Let’s take a look and be sure.”
5. Keep the process moving. “The best approach is probably to get some words on the page that cover the concept, and maybe leave some blanks for time periods, and then adjust them once we can look at something in writing. Why don’t I put something together and get it to everyone? I have a good understanding of what each side has in mind. I think we can then knock off the next issue pretty easily.”
6. Provide the blessing or play the bad cop. As I mentioned earlier, especially as people work together over time, clients prefer that a lawyer play a certain type of role. Sometimes a client prefers that a lawyer bless the acquiescence to a point so the client does not actually concede the point. Sometimes the client wants the lawyer to hold the line on legal grounds so the client can appear to be accommodating but constrained by the lawyer.
7. Keep a positive attitude about how close we are to getting the deal done. “We’re almost there on the business points. It’s down to finding the right language.” “I see that we have two main points that are keeping us from putting this to bed. Are they deal-breakers or can we nail this down now?”
8. Leave my client feeling good about my role in the meeting. Lawyers do not need to be present in every meeting in which a contract is negotiated. Over time, I want to educate my clients and give them the tools with which to handle everything that they are comfortable in handling and bring me in at the points where it makes the most sense and does the most good. Each client has a different comfort level, but I would like to find at the end of each meeting that my client felt that it was appropriate that I participated and that I gave them what they needed for that meeting. In some cases, this may mean that they are ready to “graduate” and handle similar meetings on their own or with me available by phone on an as needed basis.
Sixteen Suggestions.
In my hypothetical situation, assume that I have a knowledgeable and focused CIO who had carried the negotiations to this point. She has a specific checklist of the key points to cover. We talk about the legal issues before the call and positions to take on a few points that may still be unresolved. I fully expect to say very little, primarily covering a couple of legal points. I also expect that I may offer to draft some proposed language if the discussion of a point bogs down. Otherwise, the CIO is more than capable of handling the discussion.
In the real situation that formed the basis for my hypothetical, the call lasted over four hours, left everyone with the feeling that positions were farther apart than before the call, and left my client and I shaking our heads. Unfortunately, the blame for all of that fell squarely on the other lawyer. Perhaps the nadir of the call occurred when my client had to interrupt a monologue from the other lawyer to say, “It’s our deal, not yours.”
After the call, I jotted down the following list of sixteen rules for lawyers involved in negotiations, especially when your client is also present or on the phone call. I made this list because I felt the other lawyer broke every single one of these rules in that one phone call and I’d like other lawyers to avoid going down that road. For those of you who are not lawyers, this list will help you prep your lawyers so that they work with in the most helpful ways and so that you can recognize counter-productive behavior and change it rather than simply accept it as “what lawyers do.”
However, I can sum them up in five words, “It’s not about the lawyer.”
In other words, if the other party or your client reminds you that “it’s our deal, not yours,” you are not part of the solution, you are the problem.
1. Know the Purpose of the Meeting. I spent some time earlier in this article explaining the underlying scenario because the purpose of the meeting greatly influences the role of a lawyer. In that type of meeting, the business issues are front and center and the lawyer’s role will be limited. If the purpose of the meeting is to work out technical issues about indemnification language, the lawyer’s role will naturally be greater. The better a lawyer understands the purpose of a meeting and the wanted or expected results, the better the job the lawyer can do. A hint: if both parties start the call by making a statement of how much they like working with each other, how much they want the deal and the relationship to work, and how they schedule the meeting or call to confirm the details and get the lawyers to work on finalizing the agreement, you not only should get a good feel for the purpose of the meeting, but you should also get a clue that your contemplated role is not to raise objections to every proposed change, complicate every process, not give on any point, large or small, and generally take over the call.
2. Discuss Your Role in the Conversation with Your Client. It simply makes good sense for the people who have been talking to do most of the talking and lead the conversation in this type of call or meeting. In most cases, it also makes sense for a lawyer to talk mainly with the other lawyer and not have an extended discussion (or, even worse, an argument) with the other party, unless that is the approach that the client wants you to take. If a lawyer takes over or monopolizes the call, the lawyer runs the risk of undercutting or embarrassing the client rep in front of the person they will be dealing with on an ongoing basis. Worse yet, many women and young business people are sensitive, I believe correctly, to this issue and will complain to superiors about your approach. The client rep on the call has ownership of this deal, it may well be the most important thing that they working on, and it may also be a major opportunity to show that they can handle this type of deal. Ignoring their preferences or directions and turning the meeting into the “lawyer show” is a recipe for disaster.
3. Agree on Your Signals. This rule goes hand in hand with rule #2. There will be times when the client wants the lawyer to step in or stay out. There will be times when a client wants the lawyer to give on a point, stay firm on a point or move on. There will also be occasions where you want to take a break or discuss a point in private. By signals, I do not mean engaging in skullduggery. Signals might be physical when you are in the same room with your client only, such as when you are on a conference call. They might be verbal when both sides are present. Simply pointing to who takes the lead, indicating when to mute the speakerphone your side of the conversation or asking for a break can all work as signals that will keep you and your client in sync. A tip: if you need to take a break to discuss a point, you will find at least one participant more than happy to agree if you ask for a bathroom break any time after an hour into a meeting.
4. Do Not Confess Your Lack of Preparation. There is only one exception to this rule. In certain rare circumstances, you may “confess” that you haven’t had time to look at the revisions closely, apologize and then spend the rest of the meeting citing section and paragraph numbers and showing complete knowledge of the draft. Obviously, you take this approach only when you are fully prepared and primarily as a tactic to make people wonder how good you would be if you did have time to review the document closely. There are three things worse than simply confessing your lack of preparation. The first is mentioning it two or more times throughout the meeting. The second is confirming the fact time after time by not knowing either what is in the agreement or the fundamental aspects of the deal. The third is giving your client good reason to wonder why they are paying you.
5. Do Not Bluff on Your Knowledge or Your Experience. No matter what lawyers like to believe, law is not rocket science. Business people who work with contracts develop a good understanding of the major issues, the common compromises, what is normal and what is an overreach, the legal issues that matter to their business, and have heard many arguments posed by lawyers many times. Your argument that “even Microsoft can’t get that concession” will make you look ridiculous when you are talking with someone who routinely gets that concession. Worse yet, many lawyers will try to bluff on their knowledge of the underlying technology, software or operations. While this approach usually just results in a good laugh for people who understand the technology, it can make the lawyer look foolish and lead to an agreement that does not cover key issues adequately.
6. Know When to Move On. As we all know, it is possible for a lawyer to beat a point to death. It is also possible to run into issues where it’s not possible to hammer out all the points. At some point, the lawyer needs to say either “Why don’t we have the lawyers draft some language that we can look at?” or “Let’s come back to this point and see if we can get everything else done.” The first approach turns an uncomfortable discussion into a “to do” item for the lawyer. The second approach is the standard negotiation strategy of putting the tough items aside and getting agreement and momentum on what can be agreed upon with the hope that the “held” issue will seem smaller and easier to resolve when you come back to it. Either approach advances the negotiation and keeps the ball moving.
7. Understand Standard Negotiation Practices. If you read the literature on negotiation tactics, you’ll see that there are some standard practices and approaches to negotiation. It’s important to learn to recognize those and to use them where appropriate. You will also find that there are some general principles of negotiation etiquette. If you don’t recognize these or run roughshod over them, you take the risk that the other side will dig in its heels and turn a relatively small point into a deal-breaker. For example, if I say that we are very close and we want to get the deal in place and then accede to your first point, pointing out my willingness to not create issues that get in the way of the deal, that means that I expect you to take the same approach on some issues that mean more to me than they do to you. If you instead decide that it means that you are going to win on every point and never relent, there will likely come a time where my client will dig its heels in on an issue that you will not see as important. Part of the reason is that you have set off alarm bells for my client that your client will be difficult to work with when the deal is implemented.
8. Avoid High Pressure Sales Techniques. “We never negotiate on this.” “We’ll only give you these terms if you sign today.” “It’s our policy and our hands are tied.” On occasion, you find lawyers whose conversation sounds like a Negotiating 101 class because they use every negotiating cliche in the book. While there are occasions that one of these approaches makes sense, most of the time they are boring, tedious and get in the way of meaningful negotiation. In addition, you later look foolish when you have to back off from these positions and lose important credibility when you need to take a position on something that matters. Good responses to consider are: “We have a policy never to agree to those terms. Where does that leave us?” or “OK, if it’s deal-breaker, tell us and we’ll go back and make a business decision about whether we want to call things off right now.” The last response is “calling your bluff” and may not result in an answer you want to hear, but if you are willing to walk away from the deal, it can be fun and instructive to see what happens when you use it. I routinely use this approach when a publisher wants me to agree to a one-sided agreement to publish or reprint one of my own articles because I have no trouble walking away in those cases.
9. Avoid Explaining Basic Law School Concepts and Turning Everything into Legal Jargon. I’ll admit that I find this approach more irritating since I started to teach a law school class. Lawyers can do a great service by explaining legal issues when they are asked to do so. However, some lawyers cannot resist jumping in with lengthy explanations of standard principles that everyone in the conversation is already familiar with. It’s usually a little insulting and it’s invariably not responsive to the issue at hand. Similarly, the use of legal jargon generally interferes with effective communication and will grind a discussion to a halt.
10. Remember Business People Are Not As Fascinated by Legal Issues As Lawyers Are. It’s sometime difficult for lawyers to believe that not everyone wants to be a lawyer. Legal education teaches lawyers to excel at spotting legal issues. Unfortunately, almost everyone else is interested in getting the deal done. A legal issue should always be discussed in connection with potential solutions and/or the business risks involved in making one choice over another. Raising “interesting” legal issues in a negotiation meeting is pretty much a “no-no.” If a legal issue will affect your client, you need to discuss it privately, not brainstorm about it in the meeting. I’m fascinated by the number of lawyers who will launch into rambling, thinking-out-loud discussions of legal issues that may have a negative impact on their clients.
11. Don’t Be a Know-it-all. I’ve always found negotiating sessions to be a great way to learn more about my client’s business, the other side’s business, the industry and what economic and other issues are most important these days. I even have a tendency to ask questions about processes and the subject matter of the agreement. In a good number of cases, learning more about the underlying subject matter will help make the agreement better or show ways that an “irresolvable” issue can be handled satisfactorily. Too many lawyers take the attitude that either there is nothing new under the sun or that they don’t have anything to learn. A big part of this approach comes from an unwillingness to admit they don’t know something, which will be taken as a sign of weakness. Unfortunately, the result is that the lawyer doesn’t “hear” what the client insists is a key concern or that they use a “standard” agreement for something that is not standard at all. My favorite example is lawyers who want to use standard software license agreements for application service provider arrangements. As lawyers like to say, those are “apples and oranges,” and not interchangeable at all.
12. Don’t Be Condescending. There’s a step past being a know-it-all that will get you in trouble. Taking a condescending approach will push hot buttons, which means that it can, in certain cases, be used as a tactic, but most of the time it will cause the other side to stiffen its opposition. Most lawyers respond very negatively to being treated in a condescending matter, almost as if it is part of the “lawyer personality.” Taking that approach with a lawyer is almost guaranteed to make him or her less cooperative. Taking that approach with the business person on the other side is likely both to confirm stereotypes about lawyers and make the business person less likely to agree to legal changes. Taking that approach with your client, which I’ve seen too often, is unforgivable in my book.
13. Don’t Cut Off or Undercut Your Client. I cringe when I see or hear this one. I have the old-fashioned notion that a lawyer should be on the side of his or her client and be of assistance. While I don’t think that this point needs much explanation, the fact is that it occurs all too often. If I think I can help by jumping in, I use the agreed-upon signal or pass a note to my client. Too often lawyers jump in when they don’t understand what their client is saying and either address a point that is not at issue or confuse a point that everyone else was clear on. This is especially true when the discussion focuses on a technology issue that is not understood by the lawyer.
14. Don’t Interrupt or Talk Over the Other Party. Lawyers are used to arguments and dealing with other lawyers. Non-lawyers are not. Lawyers have learned not to take things personally, but that’s not usually the case for non-lawyers. To my horror, I listened recently to a lawyer interrupt the ultimate business decision-maker for my client, talk over the top of him and generally not let him get in a word edgewise. At the same time, the lawyer was doing the same thing to her client. I honestly think that I could feel that lawyer’s client sinking down into his chair over the telephone. People will attribute the behavior of another party’s lawyer to the other party and a lawyer’s rudeness can have a very negative affect on a deal.
15. Don’t Imply You Don’t Trust the Other Side For No Reason. Look, sometimes there are good reasons that you don’t trust the other side. In my opinion, if that’s the case, you need to be questioning whether you want to do the deal at all. In those cases, it’s important to address the issue directly. However, there is no good reason to imply that you don’t trust the other party for no reason at all. Here’s a great example. The conversation is over, everyone feels great and it’s time to turn to the lawyers to draft the changes. I ask for the Microsoft Word version of the document so I can easily make the changes, noting that the other side sent the prior draft as in the PDF format. The proper answer should be ‘yes.” If you have concerns about changes not being properly reflected in a redlined version, take steps on your end to be able to prepare a redlined version that you can check. Here’s what recently happened to me that I would caution you to avoid at all costs. “No, we can’t do that. We’d have to check what you send us word by word to make sure that you didn’t change things other than what we talked about.” My client said, “But that’s what ‘Track Changes’ are for.” The other attorney would not give an inch and my client was looking at paying me to type in a whole set of changes by hand when an electronic version was readily available. There was a certain irony to this situation because an earlier draft from the other side contained metadata that should have been scrubbed before the document was sent to us. In this case, I resolved the situation by saying that I’d simply copy what I needed out of the PDF document, being 99% sure that they hadn’t taken steps to prevent me from doing that. Not surprisingly, we got the Word document the next day. What purpose did insulting us serve?
16. Remember That It’s About the Deal, Not About You. It’s easy for lawyers to get caught up in being the lawyer and wanting to take the stage. What almost invariably results is that the focus moves away from getting the deal done. The best lawyers keep their clients’ concerns and the deal as their priorities. That’s a hard skill to learn, but one that benefits clients greatly.
Conclusion. It is no easy chore to try to follow each of these rules, but they give lawyers a good target to shoot at and clients a good checklist to use in preparing and evaluating their lawyers. Notice that all these rules can be followed no matter how easy-going or aggressive a lawyer might be. Those tactics can and do vary from one deal to the next and you can be extremely aggressive and still follow every one of these rules. These rules create a solid foundation from which you can advance a deal, protect clients and treat everyone in a way that will lead to good ongoing relationships. The contract is important, but ultimately the business relationship you develop matters most.
[Originally posted on DennisKennedy.Blog (http://www.denniskennedy.com/blog/)]
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