Why Contract Planning is Essential: Everything Lawyers and Contracts Professionals need to know about Planning to Draft a Contract

Introduction

It’s essential to plan before drafting a contract

Writing a contract is no easy task. It’s not just about putting words on paper. There are a lot of moving parts and potential pitfalls to consider.

If you’re like me, you’ve probably had at least one nightmare where you’re drafting an agreement and suddenly realise that it doesn’t meet your client’s needs or even make sense.

There are so many moving pieces and so many things that can go wrong with a written contract—from missing signatures to conflicting terms to an entire contract that’s not fit for purpose.

Contract Planning is an essential skill for Lawyers and Non-Legal Professionals

That’s why Contract Planning is so essential for Lawyers and Non-Legal Professionals.

It allows you to anticipate any potential issues and vulnerabilities before drafting the contract, ensuring success for all parties involved and for the project as a whole. And it makes the Contract Drafting, Contract Review, Contract Negotiation and Contract Management phases run much smoother.

Contract Planning is one of the most important skills Contracts Lawyers should utilise – but often overlook – in their day-to-day tasks. Having a comprehensive understanding of how contracts work, how they are put together in the drafting process, how they affect clients and how they are managed by clients can be game-changing for any Legal Practitioner.

And it is critical that Contract Professionals also spend significant time and efforts in the project planning process, so they are able to provide sufficiently clear instructions to their Lawyer about how the contract should be drafted to fit the needs of the Project.

So buckle up as we dive into understanding what is Contract Planning and why it’s so critical to plan a contract before you start drafting!

What is Contract Planning?

The Definition of Contract Planning

Contract Planning is the process of preparing to draft a contract. At a higher level, it involves:

• taking instructions about the project;

• identifying the goals and objectives of the client, the parties and the project;

• deciding which type of contract will be used;

• determining how the contract will be structured.

• determining the risk allocation of the contract;

• allowing for better risk management; and

• enabling better project management and contract management throughout the project.

More specifically, Contract Planning is also the process of collating and preparing all of the necessary information and documentation before you begin to draft the contract.

This includes:

• identifying the relevant parties;

• understanding the needs of both parties (eg one party cannot make payment within 14 days due to their internal payment processes) and what both parties want out of the agreement;

• determining the terms and conditions of the contract;

• researching the relevant industry and project type;

• analysing the laws and regulations that will apply to the project and your client;

• outlining specific terms and conditions that should be included in the contract; and

• and ensuring that all necessary legal formalities can be satisfied.

Both Legal and Non-Legal Contract Processionals have an important role to play in planning a contract – neither could carry out their task properly without the other!

The purpose of Contract Planning

The goal of Contract Planning is to ensure that the contract – when drafted – is clear, complete, and enforceable, and suits the needs of the organisation and the particular project.

If you don’t identify these needs before drafting, then your final contract may not be fit for purpose (either for the client or for the parties and the project as a whole).

How do Non-Legal Contract Professionals need to plan contracts?

Why do Lawyers need to plan contracts before they draft?

The planning process is often curtailed or non-existent

Contracts are the backbone of most business and legal transactions. They are essential for protecting the rights and interests of all parties involved.

Unfortunately, with more and more Lawyers using precedents or templates rather than drafting from scratch, the whole Contract Planning process seems to have either become severely truncated or else is no longer carried out at all.

But that’s not the best approach!

Here’s why Lawyers should plan contracts

Contract Planning helps Lawyers to:

• Identify potential issues and conflicts before they arise;

• obtain information and instructions from relevant stakeholders (at the client’s direction);

• Minise the chances of misunderstandings and disputes between the parties;

• Ensure that the contract is fair and balanced for all parties involved (unless they have been instructed otherwise, in which case considerations of risk allocation will arise).

• Ensure that the contract is clear and concise, and that it includes all of the necessary information and terms agreed between the parties and required for the project; and

• Ensure that the contract is legally binding and is enforceable once it is executed. 

Benefits of Contract Planning

There are many benefits of Contract Planning, including:

• Satisfied clients: Lawyers can ensure that they comply with their client’s instructions when drafting the contract (and that they know the specific topics on which they will need to have further discussions with those clients);

• Improved communication: By taking the time to plan out the contract, Lawyers can ensure that all the parties are on the same page and that there is a clear understanding of the terms and conditions of the contract;

• Performance improvement by both parties: A well-planned and well-drafted contract allows the parties to identify exactly what their performance obligations are, and ensure that they meet those obligations (or undertake continuous improvement in an effort to get there) and contract effectively;

• Reduced risk: Contract Planning helps to identify potential issues and conflicts before they become a problem. This can help to reduce the risk of disputes and legal challenges, which is particularly important in contracts with a high contract value;

• Better risk management: A contract that has been planned beforehand allows for better risk management by your client (and both parties) throughout the project. In the construction industry, for example, it is common for the parties to price the various risks into the contract price – having a contract that deals with all the practical details of risks and risk management can help keep the price lower for the Principal;

• Better for the Project: A contract that is properly planned will be better for the project as a whole. It will also allow for better project management and more effective contract management by contract managers as the parties perform their contractual obligations;

• Better Contract Management Plans: If a Contract Manager can read and understand the contract and its obligations easily, this makes for a much better Contract Management Plan to be prepared by the Contract Manager, as well as a Contract Management Framework that benefits the project and your client;

• Increased efficiency: A well-planned contract can be drafted more quickly and with fewer revisions. This saves the client time and money in the long run and will likely increase client satisfaction with what the contract delivers.

• Ensuring multiple contracts work together: For the bigger projects, a number of contracts need to work seamlessly together. This is impossible to achieve without proper planning to ensure that each of the multiple contracts properly links together and points to the other contracts as required.

When the contract is carefully planned, it also allows for good management practice once the contract is signed, and monitoring performance becomes much easier. Project Managers are able to manage the contract effectively, for example ensure that key milestones are met, if it has been planned properly beforehand.

Contract Planning Tip for Lawyers

Although you are drafting the contract at your client’s directions, it is important to remember that you are drafting the contract FOR both parties and the project as a whole.

There is no point in making the contract so one-sided that the other party will never sign.

And it is wrong for you to draft a Services Agreement when the parties are carrying out a multi-million dollar Alliance (and require an Alliance Agreement).

You need to keep this in mind during the planning process, and have discussions with your client if required.

I have a precedent/template contract, so I don’t need Contract Planning, right?

Incorrect.

Precedent/template contracts are only as good as the person who drafted them.

That person had no idea about the specific project for which you’re drafting the contract. Nor about your client’s needs or idiosyncrasies within the industry in which the project will be carried out.

The precedent or template may also be out of date.

You need to identify these things as part of the planning process.

Contract Planning 101

The Contract Planning process can seem daunting, but you’ll soon be on your way to drafting solid contracts that meet your client’s needs.

Here are some key steps you can take to get started:

1. Use a contract planning template (steal mine below!)

You can use the same Contract Planning Template for the Contract Planning process for each project, whether you are a Lawyer or a Contracts Professional.

You could develop your own, based on questions you answer each time you draft a contract.

But if you don’t know how to go about drafting a Contract Planning Template, or would like to use mine (which I use on every contract I draft), check it out here.

2. Identify the Goals and Objectives of the Contract

Before you begin drafting, it’s important to ask yourself: “What is the vision, purpose, or goal of the contract?”

This question will help you understand the purpose of the contract and guide you in drafting it.

3. Research and Gather Information

This step includes looking at similar contracts and example documents.

This is crucial as it will help you understand the terms and conditions of contracts in similar industries, particularly if this is not your “usual” speciality.

4. Outline the Terms and Conditions of the Contract

After you have gathered all of the necessary information and documents, you can begin to outline the terms and conditions of the contract.

Here is also where you can consider risk allocation and how the risk allocation in particular clauses will be weighted (ie who will the clause favour, your client or the other party?).

It’s important to plan before drafting a contract, but it doesn’t have to be hard.

You should plan before drafting a contract. But it doesn’t have to be hard! Planning is an important part of creating contracts, but it need not be a laborious and boring process.

Planning is just like any other process: start at the beginning and follow through until you reach your goal.

The first step in planning any document is determining what needs to be done, who will do it, when they should do it and how much time they will need (and money).

Then you can move on from there–you’ll know exactly where each element belongs in your contract because all those things were taken into account during this phase of development.

Conclusion

I hope this post has helped you understand the value of Contract Planning.

The next time you start drafting a contract, make sure you think about these steps and use a Contract Planning Template to help you remember every step you need to take.

It’s not hard to do, but it will help ensure that your contract is fit for purpose, meets the needs of the project, and is otherwise awesome!

And check out my detailed post here on How should Contract Professionals Plan Contracts?