If you’ve ever spent time with toddlers, you know their favorite question is “Why?” (often on repeat). And for them, much like for opposing counsel in contract negotiations, “because I said so” is hardly a satisfying response.
In-house counsel needs to know the "why"
A key to success as a negotiator is deeply understanding your service or product and the terms in your agreements. Most important is knowing why those terms are needed. It may seem like a basic requirement to negotiate a contract, but I’ve run across numerous attorneys (primarily outside counsel) who are not able to give a simple and clear business reason why specific language is needed in the agreement.
Let’s take an example from Lexion Chief Legal Officer Jessica Nguyen from the In-House Connect CLE on “How to Redline SaaS MASs and DPAs for In-House Counsel.” She has been on both sides of the SaaS negotiating table as vendor counsel and as customer counsel and deeply understands the contract management system Lexion provides.
As vendor counsel, she often encounters redlines from customers inserting overly broad definitions of “Customer Data.” This happens because the attorney doesn’t fully understand the nuances of the service and how expanding that definition would limit Lexion’s ability to provide the service.
Since Jessica is deep on the business she supports, she can explain how the service would break if these limitations were imposed, and why it is beneficial for the customer to allow for broader rights for service usage data. Having a few simple examples of what data is collected, and how that data is used to provide the service, and, most importantly, the value that usage by Lexion provides to the customer, is one of the best ways to break through getting bogged down in the language and entrenched negotiation positions vs. focusing on the business reality of the product.
How to get to the "why" for your business
So how do you “know your why” as a new in-house counsel, or other contract negotiator?
1) Bring a beginner’s mindset to your agreements. As you start a new role, review existing form templates. Don’t skim them. Review each section and ask questions to understand why terms may be there and the importance of them to the business.
2) Ask why! If you’re joining an established legal team, inquire if there are contract guides or fallback positions, or someone who can sit with you to answer your questions. If you’re the first lawyer, question whether these forms are appropriate - they may have been created by someone less connected to the business that you will ultimately be.
3) Know the service or product you support. There can’t be enough said for deeply understanding the business you support. Do you build developer tools? Then learn how to develop using them. Manufacture a physical product? Learn the manufacturing process and how the products go from idea to manufacturing to distribution. Support a warehousing operation? Visit it (frequently)!
Example: When I supported Amazon’s drone program during its initial stages, I finished up my pilot’s license as there was simply no better way to understand airspace and regulations than learning to fly an airplane myself. You’ll never regret the investment of time you make to learn your business, and it will pay dividends with your in-house clients and in external engagements like contract negotiations.
Documentation will serve you well
For extra credit if you want to add additional value as your early stage team scales. As you learn the why - document everything. If you’re asking why, inevitably others coming behind you will ask the same questions. Document what you’re learning to create negotiation playbooks, fallback provisions, and perhaps even guidance for opposing counsel (imagine sending your agreements to customers with a one-page handout with the most frequently asked questions -solving the need to answer these during every negotiation).
For more SaaS and DPA negotiation tips, check out Lexion's webinar with In-House Connect, How to Redline SaaS MASs and DPAs for In-House Counsel.