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Clarity, not florid language, called key to managing risk through contracts
Robert Freedman |
August 17, 2023 |

 13,962 total views

Eight ways to improve legal and compliance risk management

Write what you mean, write it once and don’t write anything that contradicts what you’ve written elsewhere, 26-year contracts veteran Laura Frederick says in a LinkSquares podcast in which she shares advice for in-house lawyers. 

New lawyers tend to think their contract drafting should involve florid legal prose but the best contracts don’t necessarily sound good; they’re clear and simple about what the parties agree to. 

“Lawyers in law firms working on financing deals are like surgeons,” said Frederick, a Big Law contracts lawyer for almost a decade before moving to in-house work. “Those of us in the weeds working on commercial – whether supply chain or sales – are like emergency room doctors. We’re triaging. We’re making sure this $10,000 deal doesn’t kill the company.”

It took her a number of years to learn that she does her job best as in-house counsel when she asks what’s motivating a contract before she writes anything or goes into contract negotiations.

Unless you know why someone wants something, whether it’s a vendor relationship or a tool, you can’t know which provisions are important and which ones aren’t. 

“When I started out, I don’t think I asked enough questions,” she told Tim Parilla, chief legal officer at CLM software company LinkSquares, the podcast host. 

But once you get the answers you need, Frederick said, you can draft a contract, or negotiate it, with your eye on the big picture. That’s what helps ensure you’re spending your time on what’s important and not on matters that are more contract boilerplate language than anything else. 

Take the concept of severability, she said. “The chance of severability being an issue – I can see it in a big M&A deal maybe – but for the things I was doing, no way. So I learned how to focus my time on the things that would matter.”

Until they get more experience, she said, lawyers tend to mimic model clauses, filling contracts with dense language that doesn’t need to be there and that can obscure what’s important to the parties.

Once you get comfortable simplifying your language so it speaks to issues directly, though, you can create a contract that manages risk the way it’s intended to. 

“I’m a proponent of risk management as the most important tool for managing your contract drafting and good negotiating,” said Frederick, who worked in-house at Tesla.

In the last three years, Frederick has become a contracting specialist who provides how-to videos, courses and other resources to lawyers looking to improve their drafting and negotiating skills. She does so as the founder of How to Contract

“Nobody was really trying to convey that judgment call we have to make every day when we decide, here’s a sentence – one provision – what do I do with it?” she said. “Do I change these words? Which words do I change? What if it’s this kind of deal? Does it change?”

Law school doesn’t teach these practical skills. And, if you work as outside counsel, you can acquire contract writing skills. But until you work in-house, you won’t necessarily have a sense of what’s important and why. 

“I try to take that training I got and package it in bite-sized chunks for lawyers and contract managers and business people,” Frederick said.

Her top advice is for lawyers to first ask about the “why” of the contract – what’s the core reason for the service or good that’s being contracted for, so they get a clear picture of which provisions are important and which aren’t.

Next is to write with brevity and clarity – saying what you want, saying it once and not contradicting other things you say. 

For the most important contracts, do your A-level work; for less important contracts, where the downside risk isn’t crisis level, be comfortable with good mid-level work that gets the job done but doesn’t try to be more than it needs to be. Making that distinction frees up your attention for the contracts that matter. 

“It’s not about crafting beautiful documents,” she said. “It’s, ‘Am I managing risk appropriately as a resource of the company?’ That’s hard to get to as a lawyer.”

Author: Robert Freedman

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