Improving your ability to redline a contract will save you time, headaches and lead to better results. It will improve your overall ability to draft well, and make your client love you (even more).
A redline is one party providing a draft of the proposed contract to the other party for editing. The document is passed back and forth as editing continues. In word processing software, the Track Changes tool is very useful.
Often, non-lawyers will redline the “business terms,” (e.g., term, pricing, service levels, etc.) and have the company’s attorney redline the “legal terms” (e.g., indemnification, liability, remedies.) In-house attorneys often are involved in all parts of the contract.
Here are four keys to a good redline:
Make the deal, don’t break the deal
Always remember that your job is to help your client draft an agreement that makes him money, not to sink the deal with your fear of risk or by being a “tough” attorney. If you blow up the deal without a very, very good reason, you deserve to lose your client, or maybe your in-house job.
Redline only what matters
Just because a term seems at first glance to be in need of improvement doesn’t mean you should redline it. Frankly, most contracts are very poorly written. But a redline may not be the best time to fix that, as it can slow the process to a crawl. Also, don’t worry about the other party’s edits if they are, upon reflection, unimportant. Focus on terms that are flat-out unacceptable, or unclear in their meaning.
Be considerate, and communicate generously
Consider the reaction your redline will create. For example, you’ll draw the other side’s ire if you delete large portions of the agreement without at least providing a comment explaining why you did it. A quick phone call may be very helpful to avoid confusion, or worse, hard feelings.
Take a second (or third) look
Slow down, re-read the contract, and yes, stress yourself out about getting it just right. Some details do matter. Your job is to figure out which ones.
It will make you look either sneaky or incompetent to send a redline to the other party, then get it back a short time later only to realize that you missed something important the first time and need to make new changes. Looking at the document again a day or two later will often provide surprising new insights. Another set of eyes always helps, too. If you are a solo, have a trusted colleague take a look. To provide time for this, don’t let a redline sit in your in-box. When it comes back, put it at or near the top of your to-do list.