Let’s go straight to docs
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Negotiation Anatomy™
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Something only a private practice lawyer would think to say, usually as a reaction to a perceived lack of time or resources.
“Oh cripes that time line is hyper-aggressive, and this could all go totally pear-shaped. We don’t have time for a term-sheet; let’s just crack on and go straight to docs.”[1]
Look: if you are doing something easy and homogenous like an NDA, maybe there is some sense in that — though none in engaging a private practice lawyer to advise you on it in the first place, of course. (What are you, mad? Go OneNDA!)
Whenever engaging external counsel does make sense, dispensing with a termsheet is a charter for utter disaster.
The main points of any commercial arrangement are generally few, easily articulated and well-suited to the clipped, tabular timbre of a termsheet. There they can be haggled over, refined and beaten to a fine copper plate in the abstract, by the principals, quickly, without ceremony and without lawyers. These women and men should know their onions and therefore should trust themselves to agree commercial terms without legal help: it’s their money, after all.
It is a sacred, but oft forgotten rule: the business owns legal issues. There’s even a Latinism for it: Ignorantia juris non excusat.
If the business faces up to its sacred responsibility, then by the time the legal eagles get a look in, the heat will have dissipated, the merchants’ minds will have met, the commercials will be settled and everyone — other than the legal eagles — will just want to get cracking with whatever business they have resolved to do. Yes, yes, yes: there is the inevitable pettifoggery and verbiage that we must go through “to dot the i’s and cross the t’s” so, sure: let’s hand it over to the lawyers, but let’s put a rocket under them.
Each principal will, therefore, commend the “legals” into its counsel’s care with the following words:
“Look, just get on with it, would you? I am not paying you to fiddle around in the weeds. Make sure the termsheet is adequately reflected and we haven’t missed anything obvious, but in any weather be sharp about it. Do not dilly dally.”
This will disappoint most legal eagles — like all performance artists, lawyers like to be the main event — but still it must be the critical path.
“Going straight to docs” is a deal counsel’s high wire act, only it is her client who must do without a safety net. To be sure, the first cut of a trust indenture may capture all the key commercial elements, but it probably won’t, and even if it does they will be scattered like dandelion fronds throughout its 290-page heft.
A 290-page heft which, to find them, one must thereby read, in toto. The modern rechtsadler knows but one way to review a legal contract: she must start at the beginning and work her careful way to the end. Should she meet an indemnity, limitation, exclusivity or a cavalier warranty on the way — however ill-judged, insignificant or uncalled-for — or even a typo, she will be drawn to it, as is a moth to a lamp. She will have to address it. To hell with the main commercial terms: this existential juridical risk must be addressed, and now.
Whereupon, principals: strap yourselves in for six months of torture as the performance art grinds on: every definition, cross-reference, representation and scheduled form of drawdown request notice will waylay progress, so much so that the lawyers may never make it to the gritty commercial terms. They may never even find them. Most likely, they will never even know what they are.
A good termsheet is a discipline: a cocktail napkin; the contextualised essence of whatever the turgid entropic mass of final verbiage will, in its perverse and circuitous manner, eventually reflect.
Never go “straight to docs”.
See also
References
- ↑ Imagine a privately-educated, Oxbridge-graduated north-London accent saying “pear-shaped” and “crack on” if you please.