How do you use a contract to drive negotiations forward? How can redlines help you save time? What is the importance of internal alignment to contract negotiation? I had an incredible discussion with Nada Alnajafi about contract redlining etiquette in this episode of Negotiations Ninja.
Nada has been practicing law for over 12 years and is currently corporate counsel for Franklin Templeton. Nada recently wrote “Contract Redlining Etiquette,” which focuses on using smarter redlining practices to drive contract negotiation forward. This is a book all contract professionals need to read. She covers some important concepts from her book in this episode. Don’t miss it!
Outline of This Episode
- [2:10] Learn more about Nada Alnajafi
- [3:37] Get on the same page about the redlining process
- [5:36] Proper etiquette with redlining + comments
- [8:23] Working with outside counsel on contracts
- [11:34] Why I despise separating commercial from legal
- [12:38] Using redlining to make negotiations more efficient
- [15:27] The operational implications of what you’re contracting for
- [18:23] The impact of artificial intelligence on the redlining process
- [20:39] How Nada handles “hidden redlines” in contracts
How to get on the same page about the redlining process
At the beginning of a discussion, both parties agree to redline within the contract. But without fail, the other party always seems to send edits or deviations from clauses in an email. Then the person redlining the contract has to insert those somewhere in the contract to maintain the integrity of the agreement. It’s my single biggest pet peeve.
Why is this so common? Nada points out that very few people have had formal training on contract redlining etiquette. Most people learned from their boss, mentor, or colleague on the job. Everyone does things differently. And once they’ve learned something, it’s hard to get people to change. That’s why Nada is trying to educate people on the most efficient process possible.
Proper etiquette with redlining + comments
I see this often: You receive a redline from in-house or external counsel, but they don’t describe the reason for the redline. Let’s say they scratch unlimited liability instead of offering a proposal or cap. How do we ensure that we get appropriate comments during the redlining process?
Whoever is sending over the contract template should include instructions in the email. They could say:
“If you want to mark it up, do so in Microsoft Word and add explanatory comments in the margins so when we send this over to legal counsel, they have some background as to why you’re making these changes. This will help us move the process forward much faster.”
You lay out the process and explain why it’s beneficial to them. Oftentimes, the other side likes to hear that things can be sped up and will do what they can to oblige.
Using redlining to make negotiations more efficient
Every rule Nada brings up in her book is meant to make a negotiation more efficient and drive it forward. The best scenario is to combine the rules with the right technology. But the #1 best tip Nada could give someone is rule #1: Leave an explanatory comment with your substantive redlines.
When you’re negotiating and trying to persuade the other side of something, they need to understand the “Why” of your ask. That’s where explanatory comments come into play. The person reviewing sees your comment right next to the language. It gives them a fuller picture and allows them to respond to you instead of saying no right away.
Nada shares that “It’s more than marking up a document. It is the heart of the contract negotiation.”
Working with outside counsel on contracts
We are often dealing with parties who aren’t aligned on an overall goal. I usually see this when working with external counsel. The redlines are often far more significant from external counsel than they are from in-house. In my opinion, it’s because external counsel is overly focused on billable hours—not what’s best for the organization they’re working with.
Nada points out that while she agrees to some extent, redlines from outside counsel tend to focus on the legal side of things versus in-house counsel. They’re being hired for a particular subject expertise and feel it’s their duty to capture everything they can identify as a risk. They also aren’t as tied into their client’s business, so their feedback isn’t as customized as an in-house counsel’s feedback would be.
Nada knows that her marketing department is comfortable with certain types of risk. She knows that her IT department is very concerned about certain risks. She can tailor her feedback based on her internal client and what they’re looking for.
It’s the responsibility of the department hiring outside counsel to communicate what their expectations are. They can ask outside counsel to use the same framework that’s been previously outlined. You can ask them to explain why they’re redlining something.
Resources & People Mentioned
- Nada’s Book: Contract Redlining Etiquette
- Navigating the Limitation of Liability Clause with Jeanette Nyden, Ep #256
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