Many vendors experience the same problem. Salespeople work hard to make a sale, but then it takes forever to sign the contract. From the salesperson’s perspective, the sale is made, but not from a legal perspective, as the transaction must still be recorded in an agreement and concluded.  While an agreement is very important, it should not get in the way of the deal – some contractual risks are worth taking to get the business.

At the end of a long sales cycle, the last thing that the vendor wants is for it to take months to sign the agreement. It often goes something like this:

  • The vendor has to first prepare the agreement to send to the customer. This can take a while and may not be done correctly or may contain mistakes.
  • Then, the customer often sends the agreement to their legal advisor for review and comment. This can take weeks and results in a list of comments or requested amendments.
  • The vendor (or their legal advisor) then reviews it and responds.
  • The customer (or their legal advisor) reviews what has come back and responds because they feel that some of their issues have not been adequately addressed.
  • And so it goes.

“Legal ping pong” is what I call it.

The result is that the agreement is signed only a while after the “sale” has been made, resulting in a loss of revenue. It can also be a very frustrating process that can damage the relationship between the vendor and the customer. Sometimes the vendor starts providing the goods or services before the agreement is signed – this is not a good situation and can have serious consequences.

What are the causes of this situation, and what can be done to make it a shorter process?

There are many causes, but some relate directly to the template the vendor uses for their customer agreement. Often they are horrible documents. This cause is in your control, so you can do something about it.

To sign-up customers fast you need to fix your template.

Mistakes

Sometimes there are mistakes in the agreement that is presented to the customer. For example, the commercial details might be wrong. Or changes that were made for a previous customer are included in the agreement for the next customer. This does not create a good impression. This can be avoided by including tags or drafting notes in the templates. Tags denote where variables need to be inserted, ensuring that all necessary variables are inserted. Drafting notes assist the person who creates an instance of the template for each customer.

One sided

The agreement that gets presented is often one-sided in favour of the vendor. If an agreement is one-sided, the other party tends to over-correct the bias in their favour. A lot of negotiation is then required to reach a middle ground.  It is better to start closer to the middle ground, as this shortens the negotiation process.  Sometimes unnecessary wording is used that creates the impression that an agreement is one-sided. For example, a clause that says, “Vendor shall not be liable in any circumstances whatsoever for any cause …” sounds much more one sided than “Vendor will not be liable for” and it means the same thing.

Badly drafted

The agreement is often badly drafted. This makes the agreement harder to understand, and if a customer feels like they are being asked to agree to something that they do not understand, they are more likely to send it to their legal advisor and ask more questions. All agreements should be drafted in plain language, as there are significant benefits to doing so. Simple agreements get signed more quickly. In a long sales cycle, some quick wins make a big difference.

Badly structured

Often the general or legal terms and the commercial terms are all mixed up in the same document. They are meant for different audiences and should therefore be in separate documents. There are many advantages to using a modular approach to drafting. A customer is less likely to negotiate terms if they are in a separate document, in two columns, and in PDF format. The agreement should be cleverly structured to discourage the customer from requesting amendments.

Placing unnecessary obligations on the customer

Sometimes the agreement places unnecessary obligations on the customer. For example, a clause that says “the customer must comply with all applicable laws” is unnecessary because the customer has to do that by law anyway. When the obligation is placed on the customer but not the vendor, it will put the customer’s back up against the wall. Just leave it out – the vendor is in no worse position.

Outdated dispute resolution clause

Often the alternative dispute resolution clause is outdated. Use the latest recommended clause.

“Affiliates” or related parties are not dealt with

Often the agreement does not deal with the “affiliates” of the parties – if it did, it would avoid the need to sign multiple agreements with multiple entities within the same group of companies. This can make a huge practical difference. It can mean that you negotiate and sign one agreement, rather than five or more.