Understanding Standard Contract Terms (2023)
You are working on finalizing a deal with a business client and you are confident that both parties are satisfied with the core terms of the agreement. Your client says that everything looks good and that they will send it to their legal department to draft the terms up and for a final review. When the client sends you the final copy, you notice that in addition to the core terms there are a handful of other terms that seem like maybe they would be important. You have also seen these boilerplate-type terms in all kinds of other agreements. This is a big client and you do not want to seem overly focused on details that maybe do not matter in the larger context of the deal.
The above situation is probably not an uncommon one. Often, as a deal is negotiated, either party will often review the core terms and also include some of their standard terms with them. These standard terms are usually not negotiated as heavily as the core terms of the deal, but they are important and can have significant consequences.
If you find yourself in this situation and are unsure about the impact of certain terms, here are some tips that can help you understand the general purpose and effect of the term so you can decide if it is something that you want to negotiate more specifically.
Get your attorney’s advice. No-brainer here, of course, if you have legal counsel, you should definitely have them review the provisions and then have them explain what they mean and do. Not only will your attorney be able to give you an understanding of the terms, but they can give you some feedback regarding potential unforeseen risks or problems, revise the terms to your needs, and with your permission, even negotiate with the other party.
Basic Internet Search. Your basic internet search is not a substitute for a licensed attorney, or even other methods of more thorough research, however, sometimes you may just be trying to get the basic idea of what a boilerplate-type provision does. Many of these provisions have very similar and consistent styles and language and by simply searching for some of the key terms you can get a general idea of what it does.
Compare to standard terms of other clients/providers in your industry. Sometimes you can learn about what these terms mean and do by comparing them to other similar terms that are common in your industry. There are many standard contracts floating around the internet. I do not recommend trusting them without the advice of an attorney, however, you can often get some general insight from exploring them.
Draft your own standard terms. It is valuable to have your own set of standard terms drafted that you can compare to the other party’s and that you can use with future clients and deals. You can work with your attorney to draft a standard contract that fits the specific needs of your industry and business. The exercise of thinking about the contract carefully with your attorney will result in a much better contract and standard terms that are more likely to meet your needs and protect your interests.
If you need some contract review or if you are looking for a fresh new contract from the ground-up, please, give me a call.
