How to review a contract.

The other day a SaaS vendor asked me to review a reseller agreement that they had received from a large US company.

SaaS reseller agreements are notoriously complex (more on this in a future post) but that wasn’t the key point. The key point was this: a template contract is never neutral – it represents someone else’s point of view.

And if the template contract is not your template, then it’s not your point of view that is being represented in the contract.

So when you are reviewing someone else’s contract, what you are actually doing is comparing it to your view of the proposed deal. And you can’t do this unless you already have a clear view of the deal (operational, financial, legal).

If this is a standard deal for you, then it’s relatively easy.

But if it’s not a standard deal, and the proposed deal has some significance for your business, then the first thing you need to do is form your view.

One way of doing this is by organising a workshop at which the relevant disciplines (financial, product, account management, sales, CS, etc.) come together. At that workshop, you put forward a summary of all the key terms of the deal. These get discussed, and people get familiar with the impact of specific terms and the alternatives that are available, and eventually your view of the deal emerges.

Once you have your view (operational, financial, legal), you can go back to the proposed contract and review it.

This might seem like an additional or unnecessary expense. It isn’t. In fact, the opposite is true: it saves you money. It saves money (and internal resources) because there’s less to-ing and fro-ing and the contract gets closed much more quickly.

8 October 2024