Reviewing dull agreements

A big problem – and a way forwards
March 23, 2014
Beyond my Ken
November 26, 2014

Reviewing dull agreements

Having to review the 60-pager by close of play produced the usual enthusiastic response

If you’re a business manager, the chances are that you need to look at draft legal agreements from time to time. Because of the nature of deals, they usually have to be turned around pretty quickly. And because of the nature of lawyers, they’re often incredibly long. Taking a wild guess, I’d say this probably isn’t a task you relish – right? Well, here are a few pointers to reduce the pain, get the agreement effectively dealt with…and off your desk.

First of all, be really clear about your area of responsibility, and your business’ approach to risk, because how you respond should be driven by these considerations. If you’re a one of a team, for example, you’ll mainly be using your specialist knowledge. If you’re a business owner or MD, you’ll need to think more broadly about what you want the deal, or the relationship, to look like. Your attitude to risk will naturally depend on things like strategic and monetary value, and bargaining power, in the context of this particular deal.

Next, open up the document! Here we go:

  1. Start by reading the Background (also called Recitals, or Introduction). It should summarise the context of the deal, and explain the bare bones of what is being agreed.
  2. Reflect: jot down what needs to be clearly understood and agreed between the people signing up to this deal.
  3. Look at the list of contents, or clause headings. Highlight any key clauses, or those that may be relevant to the parts of the business for which you are responsible.
  4. Ignore the Definitions (or Interpretation) for now. You can come back to this later.
  5. Scan the rest of the document just to get a general feel.  It should, in a logical order, say what each party has to do and to be responsible for. Usually, the order goes: describing exactly what the deal is, the financials, relationship management matters, how the relationship may end and be closed down, and, finally, technical legal terms. Is everything you thought of in 2 above covered? Moreover, does it say what you want it to?
  6. Read the clauses you highlighted in the list of contents (see 2 above) in detail. Check back to the Definitions clause for the precise meaning of any capitalised terms, because these can be broader or narrower than a logical interpretation. Is what is stated in the best interests of the business? Make a comment where anything needs to be explained, amended or added.
  7. Highlight any other sections in the agreement where it is not clear to you what the meaning is, or whether it may be relevant to your area of responsibility.
  8. Save your reviewed draft with the date and your name in the header and title, and send it back to your lawyer, or whoever originated the agreement.

A final piece of advice: whilst it may be true that people have different bargaining powers, no draft contract is set in stone. This is your opportunity to make it really clear what your expectations are. Leaving things unsaid or vague (and there may be a tricky conversation or two to be had) increases the chances of it all going wrong later.

Good luck  🙂