How to Use Counterparty-Friendly Clauses to Avoid Redlines
I once got a contract from a vendor that had a customer-friendly clause.
(The clause itself doesn’t really matter, but it was a contract for professional services on a T&M basis. The vendor quoted a number of hours and then also committed to completing the project within those hours.)
Anyway, I told this story once, and somebody said that the vendor probably got the request from a customer at one point, agreed to it, and then accidentally left it in their template, where it has been ever since.
There may be some truth to that.
But this also reminds me how entrenched our expectations are that any contract we receive will be one-sided and unfavorable to us.
When you receive nothing but one-sided contracts for years, you rightfully assume that all contracts will be one-sided.
So if you ever see a contract that isn’t one-sided, you’d be justified in assuming it was a mistake!
But there is another possibility!
When I first read that customer-friendly clause, I did a double-take. I read it and reread it a few times.
But once I moved on, I reviewed the rest of the contract differently.
I made fewer redlines than I otherwise would have.
I was no longer looking for reasons to redline as much as I was looking to find the vendor’s language to be “good enough” or “probably OK.”
This is how counterparty-friendly language can help avoid redlines.
The vendor made a concession by offering a customer-friendly clause. That made me want to reciprocate by making fewer redlines.
Here is another example:
A SaaS vendor’s contract has an autorenewal clause. The customer has to give 30 days’ notice of nonrenewal, but the vendor has to give 60 days’ notice. Is the vendor going to terminate? Probably not. But by using a customer-friendly clause, the vendor makes a small concession that helps build trust with the customer.
Small concessions can induce reciprocity and lead to outsized results!
They did a study once and found that restaurant waiters who gave diners a mint after the meal increased tips by 3%
And if they gave 2 mints, the tips increased by 14%
And if the waiter gave a mint, started to walk away but turned back and said he was giving the diners an extra mint because they were nice people, the tips went up to 23%!
Imagine if you could avoid 23% of redlines!
How?
First, we all need to start sending mints or chocolate with our contracts. (Which CLM vendor is building this feature? Also, Andes mints, please.)
Second, how can we add counterparty-friendly provisions? This doesn’t mean we have to offer unlimited liability! (The dinners still had to pay their bill after they got their mints.) Instead, we can look for ways to make minor counterparty-friendly concessions with the goal of inviting reciprocity and avoiding redlines.
Have you seen or used any counterparty-friendly clauses?
(The clause itself doesn’t really matter, but it was a contract for professional services on a T&M basis. The vendor quoted a number of hours and then also committed to completing the project within those hours.)
Anyway, I told this story once, and somebody said that the vendor probably got the request from a customer at one point, agreed to it, and then accidentally left it in their template, where it has been ever since.
There may be some truth to that.
But this also reminds me how entrenched our expectations are that any contract we receive will be one-sided and unfavorable to us.
When you receive nothing but one-sided contracts for years, you rightfully assume that all contracts will be one-sided.
So if you ever see a contract that isn’t one-sided, you’d be justified in assuming it was a mistake!
But there is another possibility!
When I first read that customer-friendly clause, I did a double-take. I read it and reread it a few times.
But once I moved on, I reviewed the rest of the contract differently.
I made fewer redlines than I otherwise would have.
I was no longer looking for reasons to redline as much as I was looking to find the vendor’s language to be “good enough” or “probably OK.”
This is how counterparty-friendly language can help avoid redlines.
The vendor made a concession by offering a customer-friendly clause. That made me want to reciprocate by making fewer redlines.
Here is another example:
A SaaS vendor’s contract has an autorenewal clause. The customer has to give 30 days’ notice of nonrenewal, but the vendor has to give 60 days’ notice. Is the vendor going to terminate? Probably not. But by using a customer-friendly clause, the vendor makes a small concession that helps build trust with the customer.
Small concessions can induce reciprocity and lead to outsized results!
They did a study once and found that restaurant waiters who gave diners a mint after the meal increased tips by 3%
And if they gave 2 mints, the tips increased by 14%
And if the waiter gave a mint, started to walk away but turned back and said he was giving the diners an extra mint because they were nice people, the tips went up to 23%!
Imagine if you could avoid 23% of redlines!
How?
First, we all need to start sending mints or chocolate with our contracts. (Which CLM vendor is building this feature? Also, Andes mints, please.)
Second, how can we add counterparty-friendly provisions? This doesn’t mean we have to offer unlimited liability! (The dinners still had to pay their bill after they got their mints.) Instead, we can look for ways to make minor counterparty-friendly concessions with the goal of inviting reciprocity and avoiding redlines.
Have you seen or used any counterparty-friendly clauses?