Drafting commercial contracts is a complex, labor-intensive process that requires balancing careful attention to detail with a solid understanding of the big picture of the business agreement.

Concerns can vary across different types of contracts, including long versus short contracts. The obstacles to negotiating one large, complex commercial agreement such as a master services agreement are different from those that accompany a high volume of short, low-complexity contracts such as non-disclosure agreements.

Here are nine challenges that are common in commercial contract negotiation and creation.

1. Identifying and Mitigating Potential Risks

At its core, every commercial contract is designed to mitigate risk. Negotiators must proactively anticipate and address potential legal, financial, and operational risks stemming from the business arrangement.

Legal teams must draft clauses addressing common obstacles to contract performance, such as undelivered goods or services and late payments. However, they must also anticipate and address a range of more unpredictable events, such as force majeure or shifts in the broader economic or regulatory landscape.

2. Balancing Comprehensiveness With Clarity

Given the array of risks that can affect a business relationship, there’s a risk of omitting critical terms or clauses, leading to future disputes and business losses. In response, lawyers tend to create ever-larger agreements over time, aiming to address every possible contingency.

These lengthy contracts pose their own challenges. Overly complex language or fragmented clause provisions can make it difficult for all parties to understand and agree with each other about the substance of the agreement. Negotiators must balance the need to address all relevant details with the need for mutual understanding.

3. Time Constraints

That need for thoroughness requires a hefty time investment on the part of the legal team, who must balance meticulous attention to detail with tight deadlines imposed by clients or counterparties. The labor-intensive nature of legal review makes it difficult for lean legal teams to effectively review high volumes of contract drafts and revisions, especially during surges such as the end-of-quarter sales rush for in-house counsel.

4. Coordination With Multiple Stakeholders

One common challenge when drafting contracts is ensuring that the contract aligns with the interests and inputs of all parties involved. This involves:

Identifying and gathering input from all relevant stakeholders. For law firms, the client will typically be the main point of contact when it comes to business terms – but the negotiating team will frequently need input from multiple practice groups to address different types of legal concerns. For in-house counsel, this step may require coordinating review and negotiation with sales, procurement, finance, operations, compliance, and other teams across the business.

Balancing competing interests. Separate internal stakeholders may have conflicting priorities, on top of the different parties’ goals. The lawyers must find a way to balance these competing interests in a way that is fair and equitable to all stakeholders and parties, or else risk failing to reach an agreement.

Incorporating feedback into the contract. The contract should reflect the input of the stakeholders, while also ensuring that it is legally sound and enforceable. This can be a challenge when business stakeholders make demands that conflict with legal principles or regulations.

Communicating clearly and promptly. All parties should have a clear understanding of the terms of the contract and their rights and obligations. Given that deals often have tight deadlines, this requires efficient, clear communication of changes to all parties.

5. Version Control  

Keeping all of those parties and stakeholders on the same page throughout the course of the negotiation presents its own challenge. Lawyers have to incorporate revisions from counterparties, clients, and team members without creating inconsistencies.

It’s vital to ensure that all parties are reviewing the same base version of the contract at any given time. If each party or stakeholder is looking at a different version of the document, they may end up talking past each other, and negotiation may break down due to miscommunication.

6. Compliance With Internal Standards

Many businesses and even law firms struggle to make sure that all contracts use templates and clause language that are approved by the legal team. It can be difficult to ensure that everyone uses the most up-to-date templates to create new contract drafts, especially if they’re starting from a prior agreement that was created before the most recent version of the legal team’s template for that agreement type.

In addition, counterparties often request clause language that conflicts with the company’s or client’s internal policies, which requires careful negotiation to avoid scuttling the deal.

7. Compliance With Regulations and Industry Norms

On top of internal standards, the legal team must keep up with jurisdiction-specific legal requirements, industry-specific standards, and other external regulations and expectations. Business stakeholders on both sides of the table may be unaware of these requirements, so it’s up to legal counsel to uphold them.

8. Ambiguity in Language

Lawyers must draft clear, precise clause language to avoid multiple interpretations. Ambiguous contract language can lead to later disputes and even litigation, the outcome of which hinges on a judge’s interpretation of those ambiguous terms.

As an added challenge, lawyers across the table sometimes intentionally make terms difficult to interpret in order to obscure provisions they know the other side won’t accept.

9. Drafting Enforceable Clauses

Legal teams also need to avoid contract terms that might be considered void or unenforceable by courts. If a court nullifies a particular contract provision – or the entire contract – that defeats the entire purpose of negotiating and drafting it in the first place.

Overcoming Challenges to Contract Drafting

That might seem like a daunting list of challenges to overcome, but it doesn’t have to be. Using tools purpose-built to facilitate contract drafting can effectively alleviate many of these obstacles, empowering legal teams to focus on the substance of every agreement, rather than operational hassles.

BoostDraft is a tool that makes contract drafting more efficient by automating rote work and helping teams quickly clear hurdles such as undefined terms and other drafting errors. Best of all, you can get started reaping those benefits in just a few minutes.

Ready to see how you can overcome common contract drafting challenges with BoostDraft? Schedule a demo today!