Four Things to Consider When Choosing a Starting Contract TemplateJun 14, 2022
How can you pick the right contract template for a complex business deal?
Most companies have standard templates. When deals fit nicely in those templates, creating the contract isn't too hard.
The problem is when you have a new type or more complex transaction that requires something different.
How will you choose which template to use as a starting point?
When the answer is not apparent, I start by mapping out these four key concepts.
1. Product design – Which party does what to create the product? Is it standard off the shelf or a mix of seller and buyer input?
2. Creation – Who will create or manufacture the product, and what is its relationship to your counterparty? If the vendor is selling third-party products, is your counterparty or the original creator/manufacturer standing behind the quality and dealing with problems?
3. Delivery and risk of loss – Where and how will delivery take place? For physical goods, what Incoterm will apply, and when does the title pass?
4. End use – What rights in the product do the end-users need? Who will use the product and make warranty claims? What do we expect the vendor to do if the product breaks down?
Thinking through these things usually gives me enough information to pick the right starting template.