The Fallacy of "Legal Approval" of Terms in Procurement Contracts

There is a major belief among contracts and procurement managers that if a contract has legal approval—if a lawyer has signed off on it or given that rubber stamp, then you are good to go, then it’s a great contract for the business.

Fallacy - If A Contract Has Legal Approval, Then You're Good To Go!

In fact we're going to show how this is completely untrue and it has nothing to do with the intelligence or capabilities of your legal department. It's just because they are looking for different things than you are. They have a completely different background and training and approach.

But before that, procurement and contract professionals need to understand that it is a ....

Fallacy That Procurement & Contract Managers Need to Know "Legalese" To Write Contract Clauses

Procurement and contract professionals think they need to know this language called "Legalese" and they don’t. You just need to be able to write plain English really clearly. The ...

Truth is that Procurement & Contract Managers Need to Know Plain/7th Grade English To Write Contract Clauses

If you can write a paragraph or a sentence and have five people read it and they all understand it to mean the exact same thing, then you can write contract clauses. That's all you really need to know how to do is to write very, very plain English.

Now to be fair to legal it is ...

True that there are certain contract terms that both legal & contracts people have common interests.

Both care about limitation of liability, insurance, intellectual property, damages, alternative dispute resolution, indemnification and things like these - these are all legal risk areas and legal wants to make sure that those things are covered, so that the risks to the company is mitigated.

But then after that, they want to make sure a big accident doesn't happen. They want to make sure something doesn't go dramatically bad that impacts their career and gives them a big black eye that they can never surmount. The reality and the ....

Truth is that Legal Wants To Make Sure That Nothing in the Contracts Blows Up in Their Face

That’s why legal will never rush your contract just because you're in a hurry. They're not going to risk their career to get it out the door quickly at the expense of potentially missing something. The bottom line is that legal will look at a contract along these lines:

"Will anything in this agreement turn into a legal problem that can get me fired."

On the other hand the ...

Truth Is That Procurement/Contracts People Care About Supplier Performance

They care about most favourite customer pricing, delivery mechanism, customer service, SOW compliance, pricing competitiveness, post sales support, lead time, inspection, acceptance and so forth.

The point is when legal approves the contract, they're not even thinking about any of those things on the left and how much time do you actually spend on the areas of overlap that legal is focusing on. When it comes to contracts risks then the  ...

Truth is that Lawyers' Approval of a Contract Means You're Going to Avert A Major Disaster That's Very Unlikely To Happen During Your Entire Career

Ask yourself, 'When was the last time you had a problem with limitations of liability or intellectual property or alternative dispute resolution or indemnification?'

You could have a 30 year career on procurement and never spend any time on any of those issues, therefore the areas where you're going to spend all your time post contract are the ones you're responsible for, not the lawyer.

So recognize that the ball is in your court and it's there for you to either hit the ball or to let it crash, but you have to do something about it. You have to go through the commercial terms and ...

Make Sure the Contract it’s a Good Deal For the Business ...  

because only one party has to live with that contract and it's not the legal department, it's you and it's your end user too. You both have to live with that contract after it is signed and so you need to take accountability and ownership.

This article is part of what we discuss in the 45 mins online class webinar with Omid Ghamami, on "Essential Contract Terms For Buyers & Contract Managers" - Insider Secrets To  Contract Terms That Even Legal Support Do Not Know or Do Not Care To Know. Omid has been called "The Godfather of Purchasing Negotiations" by Intel Corp and you can catch him when you register for this online class webinar here.