We’ve all heard stories about lavish closing dinners (perhaps you’ve attended one or more), where the completion of large corporate transactions are celebrated over dinner, drinks and token gifts of appreciation. Yet, even the execution of a small commercial agreement can be cause for raising a glass or simply breathing a deep sigh of relief. Hard work deserves a moment of pause. However, once the ink has dried on a newly-executed agreement and the party is over, what happens (or should happen) next? Placing the agreement into a neat, three-ring binder may feel organized, but it will not ensure performance under the agreement.
With 30 years of legal experience under my belt, I have crossed this bridge more times than I care to count; and over those years, I’ve learned that the person who physically signs a contract is rarely, if ever, the same person who is forced to live under its terms. I also realized early on that ensuring performance of specific obligations by key stakeholders requires a deliberate and proactive approach. I’ve jokingly referred to this approach as my “Happy Post-Mortem” ritual, which includes the following steps:
1. After a contract is signed, it is important to gather stakeholders from key departments (legal, business development, finance, tax, compliance, and project managers, to name a few) and walk through the agreement and identify specific responsibilities such as reporting or filing requirements, payment or renewal deadlines, insurance or indemnification issues, and any technical specifications which must be followed. In some instances, this meeting may result in an immediate request to amend the agreement. Most importantly, it forces your team to read the agreement carefully.
2. A “point person” for the contract should be assigned, not necessarily someone from the legal department, to ensure that obligations are being met. In larger companies, a contract management system may be in place to support this function. If so, be certain that critical milestones and/or deadlines (such as renewal, termination and payment timelines) are identified and reporting features are turned on.
3. In highly regulated industries such as the life sciences and healthcare, lawyers must look beyond the four corners of an agreement and ensure that their client understands any applicable rules and regulations. For instance, if the client is subject to the EU’s General Data Protection Regulation (GDPR), do they understand the rules and do they have processes in place to fulfill their obligations?
4. Finally, preparing a summary of the contract’s main provisions can be helpful, as long as it includes a disclaimer that the summary does not provide an exhaustive list all of obligations found in the agreement. Likewise, by citing specific provisions within the contract, stakeholders will also be forced to read the contract in order to fully understand its finer points.
An experienced attorney understands that a contract is very much a “living and breathing” document in that it cannot be simply “stuffed away” in a drawer once it is signed. Its impact will likely be felt across functions until it is terminated; and therefore, it should be embraced wholly by an organization from day one, post-execution. If you would like to learn more about this approach, or if you have questions about commercial transactions in general, please contact Michèle Linde at firstname.lastname@example.org or 302-256-4724.