Contracting: Slow Down & Fail Fast

Contracting: Slow Down & Fail Fast

June 11, 2018

In the clinic I direct at Michigan Law, I teach my budding transactional-lawyer students about project management and design thinking, both in seminar workshops and throughout the client work I supervise. A recurrent theme across these workshops and client work is hunting for and building in opportunities to learn as cheaply, easily, and early as possible—especially when it comes to client goals, plans, preferences, or any other opportunity for misalignment.

What does this mean? It means learning we slightly misunderstood our client's business objectives or plans from their helpful reactions to our post-kickoff summary notes. Or, better yet, even earlier when we mirrored back our understanding during the kickoff meeting. 

It means we learned which approach to drafting better aligned with our client's tone and optics goals after we sent a quick mock-up of a few paragraphs and not after we delivered a carefully drafted 20-page document that totally missed the mark.

While this value of failing fast absolutely applies to more efficiently delivering better client-aligned legal deal work, legal deal work itself also serves a failing-fast function in the broader context of a potential deal.

The process of negotiating a contract—while potentially tedious and time consuming—is an early opportunity to discover misalignment in at least two ways:

1. Gaps in Deal Points - Negotiating the specific terms of a written agreement often bubbles up to the surface deal points about which the parties have different expectations or assumptions. While this might cause some early discomfort or tension, it provides the parties an early opportunity either to reach alignment or to decide the revealed gap isn't worth closing.  

2. Gaps in Values/Trust - Negotiating with a potential new business partner also can reveal signals about who they are and how they operate. For example, say a negotiating party agrees to certain terms in negotiations but then later insists on walking them back or striking them in a later draft. While frustrating, this can provide some comfort in knowing that the frustration felt now likely pales in comparison to the hellish engagement avoided by walking away. Or if the frustrated party decides to proceed anyway, at least she does so with a clearer understanding of the folks on the other side.

Agile and lean approaches to doing work often involve a bias towards action. And oftentimes a goal of the business parties and lawyers on a deal is to reach signed agreement as quickly as possible. But sometimes going slow allows you to go faster in the end. By providing earlier opportunities to fail and learn as cheaply and easily as possible, the contracting process can help avoid failed, delayed engagements and distracting, expensive disputes.

Michael



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