It’s no secret that handling contracts can be a bit of a headache. That’s because contracts involve a lot of moving parts, from the negotiation process to reviewing and securing final approval from the legal team.

A contract playbook is like a roadmap for helping lawyers and legal teams draft and manage contracts to help them make sense of them. In essence, it provides guidance regarding the contract terms and conditions, including which parts of the contract are negotiable and non–negotiable. 

The purpose of a contract playbook is simple: to help businesses save significant time, money, and energy when negotiating different contract types and to ensure that their best interests are reflected in the contract. 

In this article, we’ll explore this concept in much greater detail. 

What Is a Contract Playbook From a Legal Team?

In short, a contract playbook is a guide that outlines all the standardized positions and processes for reviewing contracts within a business. Think of it as the primary resource that legal teams use to ensure that all contracting activities across the organizations are consistent and compliant with those positions and processes.

Take note that most legal teams will use different playbooks for different kinds of contracts. For example, the playbook used for purchase agreements will be different than those used for licensing agreements or non-disclosure agreements. This is because different kinds of contracts carry different risks and special circumstances, so there’s no ‘one-size-fits-all’ approach when it comes to contracts. 

Each contract negotiation playbook needs to consist of terms and conditions that have been appropriately reviewed and approved. Each playbook will also provide legal teams with all of the relevant information they need to know about collaboration and negotiation between parties, as well as how the review and amendment process for contracts works. 

How Can Contract Playbooks Help Business Teams?

It’s not only legal teams who benefit from using contract playbooks. Business teams can also benefit from using contract playbooks in the following ways:

Contract Negotiations

Contract negotiations are notorious for being long and complicated processes because they commonly involve repeated back-and-forth discussions over terms, conditions, and clauses. Streamlining these workflows is key to improving law firm efficiency, and the function of a contract playbook is to simplify this process.

This is because playbooks should include standardized and pre-approved terms and language, as well as clear guidance on what is negotiable within the contract and what is not. This should ensure greater consistency in negotiations and reduce the time spent reviewing and revising each contract. 

Approval Processes

Another slow aspect of drafting contracts is the approval process, especially when there are multiple stakeholders involved. Yet again, a contract playbook can help to greatly simplify this process by providing a clear approval workflow that outlines who needs to approve what and at what stage in the drafting process. 

This should help avoid unnecessary delays during contract approval as a whole because how contracts need to move through the pipeline is clearly specified. 

Contract Management

Contract management involves the entire contract lifecycle, from the initial negotiations to the renewal of the contract later. This process is referred to as the CLM, or contract lifecycle management. 

A contract playbook is a key component of CLM because it effectively serves as the centralized reference that all team members can refer to at any time. Specifically, this will prove to be useful for post-execution issues, such tracking key dates in the contracts, the renewal process, expirations, and how to handle amendments.

What To Include in a Contract Playbook

Each contract playbook should be comprised of the following elements:

Types of Contracts

First and foremost, the playbook should clearly specify what kind of contract it is about. Examples of contracts that playbooks are often created for include:

• Non-Disclosure Agreements (NDAs) to protect confidential information.
  
  
• Master Service Agreements to handle engagements between service providers and customers.
  
  
• Data Processing Addendums (DPAs) to address the processing of data between a controller and processor.
  
  
• Software as a Service Agreements (SaaS) to handle the offering of software by a vendor to its customers.
  
  
• Sales contracts to govern the sales of services or goods.
  
  
• Employment contracts to handle the terms and conditions of employment. 

Standard Terms

The ‘standard terms’ are essentially definitions of the contract language. It’s important to standardize terms across different contacts to maintain consistency. This alone will greatly reduce the risk of disputes later on. 

Clause Library

The clause library is a collection of clauses that have been pre-approved to be used across different contracts. These could include clauses such as:

• Dispute resolution clauses for mediation or arbitration 
• Escalation clauses for changes in price based on outside factors
• Indemnity clauses for contractual agreements between two parties 
• Confidentiality clauses to ensure that confidential information is not leaked or misused

In essence, a clause library means that legal and sales teams can draft and manage contracts using language that is already vetted and approved, and thus the drafting process as a whole is greatly sped up.

Negotiation Strategies

The playbook should also include provisions regarding negotiation strategies for starting points, fallback positions, and deal breakers. Starting points refer to the suggested opening positions for negotiations with the counterparty. 

In contrast, fallback positions refer to the compromises that would be acceptable while still protecting their best interest. Deal breakers are terms that are not negotiable and, therefore, may not be altered in any way. 

Contract Templates

Each playbook needs to consist of a template that each type of contract will need to be followed. In other words, it’s a standard contract that a business or law firm will follow.

Each template needs to consist of the standard terms, clearly indicate what sections of the contract template may be customized and which areas may not be, and ensure compliance across all of the pre-approved clauses and terms. 

Training Materials

Last but not least, contract playbooks should also consist of training materials to help team members understand how they can effectively use the playbook. Specifically, they’ll need training materials on how to handle updates to legal changes, negotiation tactics, and the different types of contracts.

How To Build a Contract Playbook

Here’s how you can put a contract playbook together:

Select a Format

Contract playbooks can come in a wide variety of different formats. Some are written manually in a document folder, while others are digitized in the form of a Docs or Excel spreadsheets. 

When selecting a format, you’ll want to predominantly think about how employees or team members will be accessing the playbook. If team members work remotely, for instance, having a digitized playbook would certainly be advantageous. That’s why most contract playbooks are digitzed to ensure that all team members can access them from anywhere. 

Review Existing Contracts

You’ll recall that there are different types of playbooks for different types of contracts. That’s why you should separate the categories of contracts before you begin drafting the playbook. The existing contracts should be reviewed by category before drafting a playbook for that category. 

Consult With Stakeholders

Building a successful contract playbook will require input from the various stakeholders who will be involved in the contract. These should include those from finance departments, risk management, compliance officers, and legal teams. These stakeholders should be engaged early in the process to understand their needs. The playbook should be devised so it is in alignment with each. 

Use Legal Tech

Many contract review and management platforms will come with tools to help automate the process of drafting playbooks. For example, some platforms will come with automation features that can quickly generate contracts simply using templates and clauses that have already been pre-approved.

What Is LexCheck?

LexCheck is an AI-powered platform designed to accelerate the process of contract review.

How Can LexCheck Help With Contract Review?

As you can probably imagine, contract review is a critical part of the process of generating contracts as a whole. Before the advent of AI, legal teams had to spend countless hours, days, or weeks manually reviewing contracts. 

LexCheck’s contract review software, however, is built to significantly reduce the time that lawyers need to spend reviewing contracts because the AI technology automates much of the contract review process. 

LexCheck will create a standardized playbook that legal teams can customize and will then apply that playbook to all contracts that are run through it.

• Playbook Creation: LexCheck, using a legal team’s template as a guide, can nearly instantaneously create legal playbooks. This means that legal teams can have access to standardized procedures. 

• Redlining and Issue Spotting: LexCheck can also be used to identify problematic terms or deviations from their template in legal documents being reviewed. 

• Risk Management: Last but not least, LexCheck can help legal teams mitigate potential risks by identifying issues in legal documents before they are executed. These issues could include things like compliance problems, problematic or impractical obligations, or hidden risks. 

The Bottom Line

The bottom line is that a contract playbook is the number one thing that business and legal departments can use for streamlining their contract review processes as a whole. It significantly reduces the amount of guesswork that these teams will need to engage in and permits more thoughtful collaboration between stakeholders in the process. 

Sources:

What is contract lifecycle management (CLM)? | SAP

Non-Disclosure Agreement (NDA) Explained, With Pros and Cons

DEAL BREAKER | Dictionary

What is Contract Negotiation? | PON