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Corporate Counsel and Contract Management - Make the Most of Business Contacts

Contract management should not be considered corporate counsel's prerogative -- rather, it requires the strong involvement of all the people who are ultimately responsible for managing the commercial activities of a company, specifically the procurement and sales departments.

Each "player" involved in a contract's lifecycle should know what to do and when to do it, and though theoretically this sounds easy, practical issues can quickly arise in our daily routines: how do you get on the same wave length as your business people? How can you make sure everyone does the job that falls within their perimeters? Here are some keys to efficient collaboration in contract management.

It all starts with a simple fact: contract management is teamwork. Corporate counsel cannot deal with it alone. This is a concern shared by most of our clients. I remember one of the first times it struck me as a young legal counsel working for a company in the industry sector. I received an email (the first in quite a long series of communications) from a purchasing manager who sent me a supply agreement for review without giving me any information on the project, the contracting parties, or their expectations regarding that particular contract.

Dealing with contracts is complex; they commit your company. As such, if something goes wrong, consequences can be dramatic. As the legal voice of a company, in-house counsel can sometimes be perceived as the only experts able to deal with contractual questions, and I believe this is a mistake. How can you start reviewing a contract and giving relevant advice when you do not even know the background and the scope of the project, the purpose of the contract, or your company's hopes and fears regarding this particular contract?

This is where corporate counsel's main challenge lies: being able to convey the right messages when it comes to your role in the contract management process.

Contract Management Requires the Involvement of All Players

First, legal counsel should stick to legal matters. Whenever possible, your business people should not rely on you to define their commercial strategy. Rather, they should have clear expectations on the contract's outcomes, or at least provide clear requests on which you will work to see whether they are feasible and, if so, how they can be legally implemented.

For instance, when dealing with a contract to be signed with a supplier, the business issues (prices, specifications, deliveries, etc.) should remain mainly the prerogative of the procurement staff.

Your role would be then to focus on the legal issues and on the legal impact these business decisions may have. That being said, whenever the legal department is involved in drafting or reviewing contracts, it should always be kept in the loop regarding the business negotiation process in order to provide the necessary warnings when appropriate and ensure that the contract's legal provisions accurately reflect and protect business decisions.

Second, legal counsel gives legal advice based on facts. Reviewing a contract or dealing with a contractual dispute implies that you have discussed the issues with your business people in order to understand the scope of the contract (for instance, are we talking about standard products, or products developed specifically for your company?) and the foreseeable consequences in case one of the parties breaches its contractual obligations (if we do not receive the products on time, what could happen?). Only the individuals dealing with the project on a day-to-day basis can understand and evaluate these issues, and you need this evaluation to assess the contractual risks and manage them properly.

Communicate Your Value

Your business people should know you are available and why consulting with you is important. You do not want them to think of the legal department as the spoilsport, but rather as a valuable partner they cannot go without as they try to secure a relevant deal.

This also means giving your business people the ability to identify red flags from the start so they will know when to seek legal advice. For instance, if you insist on including a limitation of liability clause, you should explain -- with concrete examples -- what risks the company will take on in the absence of this clause.

Making sure the role of corporate counsel is understood and valued is, once again, a concern shared by many of our clients. Most of them have found an answer in transparency: they now give access to certain legal documents (such as contracts) to operational employees, they centralize and keep track of the diverse requests they receive, and they communicate on their productivity and current projects through regular activity reports.

These steps contribute to a better understanding of how the legal department works; streamlines the communication between corporate counsel and their internal clients, and, ultimately, helps achieve an efficient internal contract management process.

Do Not Forget Your Sense of Business

Always bear in mind that your legal decisions have an impact on the business. You are corporate counsel, by definition working for a company's best interests, and as such your legal decisions, should always be made in contemplation of business perspectives. Your advice is usually required from both a legal AND business perspective. As such, though legal counsel's role is to mitigate the company's risks, business is speculative by essence, and you must balance the benefits of the contract with the risks the company should reasonably take to enter into that relationship. Do not be overzealous or insist on stopping negotiations at all cost over issues that are genuinely trivial in terms of financial and/or legal risk; you will unnecessarily delay negotiations and upset the sales department. Your time is precious, so spend it wisely - you will be rewarded for it.

Trust is Critical

Finally, and perhaps most importantly, you should trust your business people. This trust is critical, as it triggers the success of the other steps listed above. They know their job and the context in which they do it, so do not hesitate to give them a sense of responsibility. They should take care of contract renewals or contract terminations. Once again, rely on the "training" you give them to ensure that they will contact you whenever they feel there could be an actual legal issue lying underneath a particular business decision.

In short, communication is key and this is, from my perspective, one of the most important qualities any in-house counsel should have.

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