Getting the client to agree to your contract departures
I’ve been working with contracts for 13 years. During that time, I’ve seen all manner of strategies for negotiating contract terms, ranging from a few scribbles on a napkin to full-blown A3 laminated flow charts in rainbow colours and everything in between. But for some reason, no one ever seems to know what to put in a clarification schedule.
There are pros and cons to all methods but personally, I LOVE a clarification schedule.
I’m using the term “clarification schedule” here, but feel free to read it as “table of departures” or “commercial clarification register” or whatever you like to call it. Essentially it’s a very simple Word table that you can use to track contract discussions with the other side.
Here’s a rundown of what I put in a clarification schedule, to help my clients secure their clients’ agreement to a better contract.
But first – why don’t we track changes directly in the document?
From time to time, I see heated (understatement) debates between lawyers on social media on the best way to exchange contract changes.
UK and US commercial teams favour changes marked up directly into the draft contract. This has some advantages, including that it can be done “in real time” by sharing a screen that everyone can see.
However, I’ve seen some real downsides, particularly for early-stage contract negotiations. This is particularly the case where version control isn’t managed well, or the negotiation is conducted by emailed attachments rather than in a centrally shared “source of truth” document.
My main concern is that there is little record of fundamental changes being “accidentally” accepted or rejected, which can be a problem where negotiation is fast-paced with many stakeholders. Also is there anything more demoralising than a draft contract that is a sea of red, bleeding minor changes?
Why is a clarification schedule better?
Using a schedule allows for clearly tracking each party’s proposed departure or amendment, the other party’s response and any concluded agreement on the issue. When the parties agree on all points, one party can take the final version of the clarification schedule and mark up the agreed changes to the draft contract, ready for the other party to approve and execute.
I like this approach because there’s less room for confusion, and it allows less licence for unscrupulous “accepting” of tracked changes. These things promote a favourable negotiation, a more robust contract and consequently, a better project relationship.
What does a template clarification schedule look like?
Often there will be a departures or clarifications template in the tender package, in which case you should use that. Fingers crossed it isn’t an Excel table, as those are a pain to format and spell check.
If there’s no template in the tender documents, I recommend that you develop a Word table with five columns, something like this:
It’s best to orient it in landscape view to allow for adding columns at the right of the table for each party to respond to the previous round of negotiations.
What order should the departures go in?
You can enter departures either in sequential order of the provisions of the contract or by grouping categories of issues together (e.g., pricing, liability, change, termination, insurance etc.).
In my view, you’re better off dealing with them in sequential order, as it makes it easier to discuss when it comes time to meet and discuss.
As a bonus, doing it this way will give you a snapshot of the structure of the contract, so you can see whether it is logical and whether there is anything important missing.
What goes in the “internal comments” column?
When I prepare a clarification schedule, I include a “traffic light” assessment of risk in this column so that clients can consider which amendments to leave out. For example, I might flag that typographical errors are very low-priority changes, but adding a limit on liability is a critical amendment.
I also share ideas that might remove the need for contract amendments (e.g., buying insurance or implementing project management strategies).
This means the bid manager can cull the list if they feel that the number or scale of departures will make their bid less competitive. No one wants their clarification schedule to look like a shopping list.
Want to use ours?
Hopeless with tables or too lazy to create one yourself?
No judgment from us – feel free to download one we prepared earlier.
HOW CAN SOUNDLEGAL HELP?
Often, the bid team can do more productive things with its time than review a 100-page contract, such as refining the scope, pricing or nurturing a relationship with the client. We’re happy to do the contract review for you. You’ll get a professional, bid-ready schedule of clarifications. These reviews are our bread and butter: we are quick and will use industry knowledge to draft amendments most likely to be accepted by the other party.
Not every contract requires a legal review. We can tailor a training program to upskill your commercial team. Hence, they know how to find the key project risks in a contract and start the negotiation process by preparing a professional clarification schedule.
Book a free, 15 minute discovery call so we can workshop your business needs.