The Commercial Contract Playbook: Your Secret Weapon for Empowering HR, Sales, Finance, and Procurement Teams

Date
March 3, 2022
Category
Date
March 3, 2022
Author
Gary Sangha | Founder & CEO
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Contracts form the relationships that ultimately bring in revenue. Across all industries, contract drafting, reviewing, and negotiating are core processes that must be completed; however, they could often be accomplished more effectively. Most corporate legal departments use clause libraries and templates for drafting but rely on manual review processes to get through the last mile. 

A legal playbook containing the company’s standardized language, preferred negotiating positions, and deal-breakers can be a helpful resource for training new employees, upholding company excellence, and minimizing risk. 

Yet, only 23% of law departments use contract playbooks—and 54% of those playbooks are hard copies stuffed into binders. Once a digital commercial contract playbook has been created, legal tech can analyze, compare, and correct contracts to set parameters and minimize errors, review time, or risk. 

In this article, we cover what a contract playbook is, who uses it, tips on writing one, and how to combine your playbook with innovative technology to solve several organizational challenges.

What Is a Commercial Contract Playbook?

A commercial contract playbook is a document outlining the company’s standard contract terms and acceptable variations of them (i.e. fallback clauses). Preferred negotiation positions are typically included, along with notes describing when the company will walk away from a contract due to economic reasons or perceived risk. A well-prepared contract playbook keeps legal and business teams aligned, lowers risk, helps train reviewers, and closes deals faster.

Depending on the types of agreements they frequently review and sign, companies often have more than one type of playbook. The table below lists agreements commonly linked to playbooks. 

Types of Corporate Legal Playbooks 
  • Asset purchase agreements
  • Data processing agreements
  • Executive employment agreements
  • HIPAA business associate agreements
  • Hospitality rental agreements
  • Joint venture agreements
  • Mergers and acquisitions agreements
  • Mutual confidentiality agreements
  • Non-Disclosure Agreements
  • Office lease agreements
  • Operating agreements
  • Outside counsel billing agreements
  • Purchasing terms and conditions
  • Services agreements
  • Software-as-a-service agreements
  • Software license agreements

Which Industries Benefit from Commercial Contract Playbooks?

Every industry can benefit from having a contract playbook on file. Here’s why:

  • Playbooks use standard language. A playbook spells out the precise wording agreements should apply to minimize ambiguity and ensure better understanding. A playbook is an indispensable tool for new contract reviewers or attorneys joining the department as it allows them to quickly get up to speed on set parameters. Outside legal counsel and business partners are also able to better understand company expectations thanks to a flattened learning curve.

  • Playbooks encourage current language. The business landscape is always changing. Reviewing and updating a playbook’s standard terms and conditions to match modern language every two or three years is a best practice.

  • Playbooks unite departments. Separate contract review processes can create rifts between business, finance, and legal departments. Having one official document puts teams on the same page while clearly outlining all definitions of risk so that no one party is at blame for “killing a deal” unnecessarily.

  • Playbooks simplify the process and save time. Even experienced negotiators spend hours making sure they’ve properly applied every company doctrine to a new contract. New or less experienced reviewers can spend days combing through a contract. Counterparty demands can cause a lengthy back-and-forth exchange spanning weeks. With a playbook, the negotiator knows precisely how much room is allowed for revisions and can respond according to company standards.

  • Playbooks reduce escalations. Because a senior attorney’s time is very valuable, it’s best to minimize the time spent on routine review processes. Using a company playbook to answer questions junior associates may have or reduce drafting risks can reduce referrals by 50-80%. As legal teams strive to accomplish more with less, the commercial contract playbook helps companies do just that. When in doubt, “just follow the playbook.”

Tips for Writing a Great Contract Playbook

While there are many different approaches to writing a commercial contract playbook, we recommend the following tips to ensure thorough job:

  • Review existing contracts. Find positions the company has agreed to and points where it has walked away. Look for deviations from the template and learn everything about them. Create acceptable fallbacks for each clause. 
  • Invite multiple players to the table. Sales, risk management, finance, security, and legal teams can all participate in the creation of a playbook. While it may be a lengthier process at first, a collaboration that considers all angles will minimize disagreements later. 
  • Use the playbook for training. On large teams, having junior members own the playbook project is a great way to assign responsibility (which aids in employee retention) while training new staff on all the particulars. More experienced team members can review and edit, making the most of their valuable time.
  • Start with high volume/low complexity agreements. And then move to the high volume/high complexity agreements.
  • Color code by risk. Identify provisions in a color-coded manner: green (low risk), yellow (medium risk), and red (greatest business risk). 
  • Set parameters. Consider using words like “do/never/always do” or “if/then” conditions to provide strong and clear direction. Include instructions for when to hold ground and when to give. Add pre-approved fallback language where appropriate. Checklists can be helpful to include in the playbook as a final step to ensure nothing is missed.
  • Schedule recalibration. Add change management to the calendar at least every few years to ensure the playbook stays fresh, up-to-date, and reflective of the company’s goals.  

How an AI Digital Playbook Accelerates Contract Approval

Putting together a commercial contract playbook is just the first step toward standardizing your contract review and negotiation processes—and making them better. While a more thorough method may be to have a trained team member painstakingly cross-reference two documents at once, it’s still a slow process prone to human error. 

Once you’ve created a living document, you’ll need to store it digitally to automate comparisons between new agreements and existing playbook standards. LexCheck offers a groundbreaking AI-powered contract review and negotiation platform that fully integrates an AI Digital Playbook to automate contract markup. 

Painstaking contract review work that previously took staff members several days to complete can now be fully automated. In less than five minutes, the platform compares an agreement to the playbook’s standards and returns a fully corrected, redlined, and risk-analyzed version.

LexCheck uses:

Incorporating AI into the contract negotiation process can reduce sign and review times by 80% and 90%, respectively. With a commercial contract playbook and legal tech, you can enjoy a faster review process while still minimizing risk and adhering to core negotiation positions. 

LexCheck’s AI-powered contract review and negotiation platform leverages an AI Digital Playbook to automate and accelerate the contract approval process. Contact us at sales@lexcheck.com to learn more, or request a demo to experience the technology first hand.

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