I periodically moan about how inertia has rendered most of corporate America either complacent about suboptimal contract templates or incapable of doing anything about them. See for example this March 2012 post, and this article discussing a major source of inertia, the urge for autonomy.
I’m inclined to think that a company won’t overhaul its templates unless someone higher up the food chain gets involved. If you don’t have the perspective to see how suboptimal templates waste time and money, harm your competitiveness, and cause you to assume unnecessary risk, you’ll stick with what you know. That way, you guard your turf; you don’t show weakness to higher-ups; you preserve your autonomy; you don’t rock the boat.
But my assumption raises some questions: Higher up which food chain? Who calls the shots regarding, for example, procurement contracts? Legal or procurement?
And how involved do general counsel get when it comes to templates? Does it depend on their background? How likely is it that a general counsel with a litigation or regulatory background will do anything other than defer to what the contracts people say? On the other hand, if a general counsel has a transactional background, how likely is it that they’ll do anything other than stick with traditional approaches?
4 thoughts on “At Companies, Who Calls the Shots About Template Contracts?”
My situation is probably a bit different than the context about which you seem to be asking (mid-size to large companies) but, when I began my current position, I was the company’s first in-house attorney. I report directly to the CEO, who of course hired me. When I came up with my initial recommendations/action items, overhauling our contract templates was at the top of the list. She deferred to me on this and gave me (basically) free rein to revise them.
I have a mixed background in litigation and transactional at large firms and I was the one who revised all the contracts. I liberally drew on the recommendations you and others of similar persuasion recommend for drafting. Our contracts are largely sales contracts.
Larry’s experience cannot be too far from the context of Ken’s question, as my practice over the last several years has focused on these first-lawyer situations (for example, I currently act as the sole in-house attorney, with regular office hours, etc, for three companies, and have done the same for several more over the years), and in each instance, my experience has been almost exactly as described by Larry. In one instance, the CEO was initially concerned that there must be higher-priority “strategic” things to focus on, but was quickly disabused of that notion when deals started closing faster and on better terms.
To Ken’s point about what kind of primarily-responsible-in-house-lawyer takes this approach, I do have significant transactional background, and that’s a big part of why my clients hire me. Nevertheless, I also have significant generalist background (and duties) and quickly move from “fixing the forms” to fixing strategic gaps in HR, marketing, IP issues, partnering, etc etc. I find that if I don’t fix the forms first, then I spend all my time on one-off transactional matters and can’t get to anything else.
I am a sole in house general counsel as well. The attorneys before me were just outside hires to write up form releases. They were fairly terrible with completely unenforceable provisions. I called for overhaul and being their first GC they trusted me to just do it.
One of my most pleasent memories last year was during the middle of my cross examination of the plaintiff’s general counsel when he realized that a clause regarding payment of utilities by the tenant that his company had used for ten years did not say what he meant it to say. Following the trial they sent out a notice of change of terms to all their tenants.