I thought it worthwhile to scoop from the comments to my recent post on deal risk an exchange I had with Vickie Pynchon of the Settle It Now Negotiation Blog regarding the connection between drafting a contract and negotiating it.
Here’s the relevant part of Vickie’s comment:
I’ve been devising a negotiation class for transactional lawyers with a transactional attorney/negotiation professor in Northern California. I was surprised to hear him say that most transactional lawyers don’t possess negotiation skills—I always thought of them as the negotiation go-to guys. My new business partner says “no, they’re ‘write the deal up avoid risk’ guys.” That put transactional practice in an entirely different light. Do you think, Ken, that transactional attorneys would be better contract drafters if they were more involved in the negotiations leading to the deals they memorialize (or criticize)?
And here’s the relevant part of my response:
I’d flip your scenario: Instead of transactional lawyers becoming better drafters through being involved in negotiations, I suggest that they’d be better negotiators if their drafting were to improve. The urge to draft by regurgitating precedent constrains how you approach a transaction: you end up wanting to make your deal fit your precedent. If drafting were commoditized, lawyers could focus more on devising strategy and negotiating, and much drafting would be turned into a ministerial task.
I invite you to wade in.
16 thoughts on “The Connection Between Contract Drafting and Negotiation”
In my experience, the problem with many transactional attorneys is that they don't possess the litigation or business experience that would help them better evaluate risks. In this vacuum , all risks are created equally, with predictable results on both drafting and negotiation. Commoditized drafting would certainly save some cycles, but hiring attorneys with more breadth of experience – and willingness to offer meaningful, risk-adjusted advice – would make a far bigger impact.
I find it downright frightening to consider that someone negotiates based on precedent language they have in their toolbox. That just seems so limiting.
But I would go one step further than Vickie's partner: virtually every lawyer I know sucks at negotiation. People confuse an ability to argue with an ability to negotiate. Lawyers are, via law school, trained to argue: to present their side in an indefatigable, perhaps even relentless manner. That's not negotiation.
So when a lawyer who has been trained to argue is asked to negotiate, all they can do is argue. Makes for a very frustrating conversation. I should know, I've been in thousands of these.
Interestingly enough, it's usually so severe a deficit that my opposing business person recognizes that their lawyer is ineffective and will, if asked in a gentle way, get their lawyer cut out of the transaction. How's THAT for being a poor advocate for your client?
Don't you find that agreements that are heavily "negotiated," that is, that every word and comma has been fought over by many teams of commentators, often become less elegant and clear? And that documents that are beautifully written are more likely to be written by a single person, not by a committee? When every participant wants to get their thoughts included somehow, the resulting wording can become cumbersome. Maybe that proves your point that people who fight over agreements are not necessarily good negotiators. They might just be people who, like Jeff G above says, simply like to argue. If they were good negotiators they might be more likely to be aiming for a common goal of creating a workable and clear agreement.
Another related point: Sometimes heavily-negotiated documents between parties who really do not agree on fundamental issues can result in a deliberately-ambiguous document, because that is the only way to achieve an agreement. I did a post on this using as an example the ambiguous Security Council resolution that condemned the violence on the blockade-running ship heading for Gaza last week. http://www.mediate-la.com/2010/06/value-of-ambigu…
I'm with Joe on drafting by committee. An important role of the draftsman is to keep control of the detailed wording of the contract. This may be required as much in internal negotiations with colleagues as in negotiations with the other contracting party.
Are lawyers good negotiators? Too sweeping a question for a yes/no answer.
Are commercial transactions often negotiated in a standardised way, using lawyers to "paper" a deal that others have done? Yes.
Are negotiations over the detailed contract terms often conducted by each party putting forward their ideal (or even extreme) position/draft, then trying to minimise concessions from their ideal position? Yes.
Is there an identifiable practice among some lawyer-negotiators that involves conceding on minor deviations from an ideal position and arguing against larger changes until they wear down the other side or their client tells them to say yes? Yes.
Is this an inefficient and unimaginative way of negotiating, that involves expense and the generation of heat rather than light? Yes. But why this process is allowed to continue is perhaps beyond the scope of this blog.
Should the draftsman be involved throughout the negotiations? Yes, although cost constraints may affect how much they are involved.
Will the involvement of a good draftsman in the negotiations help lead to a better quality contract that reflects the parties' intentions? Yes. The clarity of thought and expression of a good draftsman should always help the negotiations.
Is a good draftsman likely to use many of the principles set out in MSCD? Yes.
In other words, good drafting is important, but in my view it is only one aspect of a much larger question of how best to conduct and manage contract negotiations, and the role of lawyers in negotiations.
I do a lot of M&A work (closely held businesses, mostly representing sellers in the $5m-180m range) and most of the time, my clients let me negotiate the deal (of course, they have the final word). This lets me handle critical things in the letter of intent and also puts me "in the zone" when it comes time to work on documents. I have a very tight team (one CPA with extensive business experience and me, with a few others if needed) and we handle everything that we can — especially negotiation, document drafting, and closely monitoring due diligence. I believe that this "holistic" approach makes us far more effective at everything.
Agreed with Joe and Mark on committees. And it may even be worse than that. I've had success outmaneuvering the other side's lawyers when they had inadequate interior lines of communication. The tendency to compartmentalize allows a more maneuverable, smaller opponent to exploit gaps in coverage.
Of course, there's always a tradeoff with my preferred approach. I happen to be a business nerd of the highest order (grew up in a family business, etc.). Many attorneys simply aren't that interested in the business side of transactions. My super-lean approach seriously limits the number of deals I can handle at a given time, and of course makes me pretty much completely responsible for anything bad that happens. On the other hand, that has a rather, uh *focusing* effect.
Agreed with Joshua on the general lack of business acumen among lawyers. This seems true of most professions, by the way. And agreed that this can weaken their effectiveness.
I haven't thought about whether better drafting would lead to better negotiation, but it seems plausible. As a devotee of Bryan Garner (took his seminar in 1996 in law school), I detest unclear writing in contracts. That said, the reality is that drafting lean, clear, readable documents from scratch require skill, experience and time, which increases cost. This tends to incentivize form documents, which seem invariably to be filled with baroque boilerplate. (Or is that like saying "tall giant"?)
At the very least, I think that business contract lawyers should survey the negotiation field (my library has about 30 business negotiation books, though that's probably overkill). Given the high BS component of negotiation literature, no one should rely on a single book in my opinion.
–Ty Beard, Texas
I would agree that attorneys in firms tend to be poor negotiators. Often, they have extremely deep subject matter expertise, but they negotiate deals too infrequently to build the skills needed in negotiation. And, because they are with a firm, they can't really build the understanding of the client's business that is necessary to be an effective negotiator.
But in-house counsel are different. I negotiate hundreds of deals a year. Not all of them are significant. Often, it's just a couple sentences in an NDA that need to be changed. But the volume means I've seen a lot of negotiations. Where the other side has in-house counsel who has been on the job for at least a couple years, the deal always runs several times faster than if I have to deal with either a procurement department or an outside attorney. That's mainly because in-house counsel do have the needed negotiation skills. They know where the rubber hits the road, what the reasonable compromises are, and how to give on things that really don't matter.
From my experience of working with European lawyers: I cannot generalise and say that lawyers 'across the board' don't possess negotiation skills . Many of them do extremely well in simulated negotiation exercises in the corporate field, and I have to praise Norwegian lawyers here. However, as mentioned above, these are usually the in-house counsel that excel in this. The problem occurs when they come to translate the outcomes into clear and precise drafting language. I've also found that many business lawyers have an aversion to calculating things like Royalties or the use of formulae and fractions e.g. bond yield.
I wholeheartedly agree with those previous posters who beleive that in-house counsel prove to be better negotiators than outside counsel. I would argue that the primary reason for that may be less due to a lack of skills overall, and due more to the fact that they understand the business behind the contract, the business driving the deal, better than their colleague across the aisle.
As a lawyer in private practice, I agree with the general consensus. Lawyers in private practice should have a general feel for industry practice, but it is hard to assess the practical impact of particular clauses on a client, and it is difficult (even inappropriate) to concede a commercial point in those circumstances, or to ask for exactly the right thing. The only approach is to identify the relevant clauses and discuss them with the client beforehand, which is more cumbersome than having in-house lawyers negotiate directly from a position of knowledge and authority.
It may play out differently in other industries – if a lawyer negotiates for a particular client frequently, they should come to understand the specific business drivers of the client, and understand much better what they can agree to.
I would try to draw a rough distinction between commercial/practical points and legal points in this context. A pair of lawyers should be able to negotiate the legal aspects sensibly, because they should know what the market standard is, and (for when a side seeks to move away from it) why it is market standard. However, it takes both sides to make this work.
"A pair of lawyers should be able to negotiate the legal aspects sensibly, because they should know what the market standard is, and (for when a side seeks to move away from it) why it is market standard."
But that this were actually true…
The most frustrating deals to negotiate are when the other side's attorney feigns denial of knowledge of market standards in risk allocation terms of a particular industry, and then proceeds to demand, for no compensation, a complete reallocation of the balance of risk. I agree that in the end it's impossible to close such matters without reference to some sense of a market standard, particularly since the deal points (i.e., prices…) that were proposed were certainly based on an understanding and presumption of that market standard. And, where one or the other fails to understand that those standards exist, you have a recipe for a long and frustrating negotiation (one that makes both lawyers look bad in the eyes of their respective clients).
I came to be an in-house after 13 years in sales and marketing (in the industry that I serve as an attorney). In the past I conducted business negotiations for deals similar to those that I now draft (and negotiate!). The training and experience that I gained in the course of those many years is what differentiates my practice from that of other attorneys in the same space.
I'd strongly recommend that a transactional attorney consider enrolling in (and attending!) a 2-3 day sales and negotiation seminar. Several posters have said – without expressly saying so – that an attorney is always selling something. If that is the case – learn how to do it right! Your client(s) will perceive increased value in your services if you can bridge the legal-business gap.
As you know, I also teach business contracts drafting. I reserve about 20% of class time for the subject of negotiation: 3-4 classes are devoted to this subject approximately mid-semester (including group and one-on-one exercises), then we finish out with a "project" where students team up to negotiate, and subsequently draft, an agreement. Given the "artifice of the classroom" (read: time crunch) the experience has been overwhelmingly positive. I'd like to think that in some small way I am contributing to the business development side of a small sliver of the next generation of lawyers.
My experience in the entertainment industry is different from most of what's been posted here. The community of attorneys on both studio and "talent" sides is small. It takes about two years to fully train someone coming in, because he/she must learn not only how to do the legal drafting, but must also be familiar in some detail with the mechanics/decision points/alternatives with respect to making motion pictures, tv programs, etc. Also, lawyers are directly involved in most deal negotiations: the clients don'e know the jargon, the custom and practice, etc. Lawyers who remain in the business on a full time basis (as opposed to those who dabble, but have a central practice in another field) have, on the whole, impressed me over my 25 years here as quite competent, technically up to date, and forthright (even though they may be as tough as nails if the other side wants to take that position). All that said, our agreements are too long, and we could make it much easier on ourselves than is industry custom.
Yes they’d become better contract negotiation lawyers is they improve their drafting.Experiencing precedent constraints and help them to tell how to approach transaction also results in becoming a good lawyer.