In the world of commercial contracts, redlining is a critical process for making proposed edits and adding commentary to draft agreements. Done correctly, redlining can streamline negotiations and foster more productive discussions, leading to clear and concisely written agreements. However, when mismanaged, redlining can potentially lead to misunderstandings, delays, contentious interactions, and less favorable business outcomes. Here are 10 best practices to consider the next time you need to redline a draft contract which are designed to promote a smooth and constructive negotiation process.
1. Understand the Purpose of Redlining
Redlining is not just about making changes; it's about clear communication. With each round of edits, the goal is to convey your concerns, preferences, and requirements in a way that is understandable to all parties involved. By doing so, you are more likely to reach a mutual agreement that satisfies all stakeholders.
2. Use Redlining Features Consistently
When making edits to an agreement using word processing software, it is important to leverage the features of this function effectively and consistently. For example, ensure the “track changes” feature is selected in order to make your edits visible, and never make a change that is not visibly tracked for the other party. Likewise, utilize the comment feature to respectfully explain the rationale behind your changes or to confirm your interpretation is on target. Providing a little business justification goes a long way. Finally, if the parties are using specific colors for different types of changes, make sure to follow these conventions to avoid confusion.
3. Be Concise and Precise
The most effective edits use targeted and specific language. Vague or overreaching changes can create confusion, leading to multiple and unintended interpretations, as well as the possibility of disputes. When adding comments, be brief but clear in your explanation as to why a change is necessary, referencing specific clauses or business concerns to support your request. Finally, avoid making format-related or phrasing changes simply to suit your own personal preferences. Working with the form in front of you saves time and preserves good will.
4. Prioritize Changes
Highlight or annotate your changes to distinguish between critical points that are deal-breakers and minor adjustments that are negotiable. If possible, focus your redlines on the most important issues first. Addressing critical points early can help keep negotiations on track to meet targeted closing deadlines.
5. Maintain a Respectful and Professional Tone
An obvious point, but one worth emphasizing – aim for a neutral, professional tone in your edits to help promote constructive dialogue with the opposing party. Confrontational, emotional or aggressive language will only serve to undermine the negotiation process. Similarly, by acknowledging your counterparty's perspective and showing respect for their position – even if it came across as adversarial – you will encourage greater collegiality and a cooperative atmosphere, which is more likely to lead to preferred outcomes.
6. Ensure Internal Alignment
Before sending a redlined document to your counterparty, take the time to ensure that all relevant business team members on your side have reviewed and agreed with your proposed changes. Aligning during the redlining process can prevent confusion and mixed messages from being shared during actual negotiations.
7. Provide Context and Alternative Language
Sometimes, a redlined edit can be confusing without additional context included. It is always best to provide background information or a rationale, where necessary, to support your proposed changes. Likewise, rather than just striking out provisions, try to offer alternative wording or positions as a compromise as this demonstrates a willingness to negotiate and find mutually acceptable solutions.
8. Review for Errors and Clarity
Since redlining can create visual clutter in a document, carefully review your redlines for any errors or ambiguities that could lead to misinterpretation before sharing with the other side. Your editing suggestions should help to enhance the clarity of the contract, not complicate it or create ambiguity.
9. Mind the Versions
Each time someone shares edits, a new version of the contract is essentially created. It is important to maintain strict version control to ensure that all parties are working on the most current document version. Failing to do so can not only cause delays, but quite likely provoke ill will when the counter-party realizes that they have been working on the incorrect version because of an improper naming convention or just poor organization. Saving an auditable trail of prior versions is also a good business practice.
10. Follow Up Appropriately
Upon receipt of the counterparty's redlines, respond promptly to keep the negotiation process moving forward, or if you are unable to respond right away, always communicate promptly with an estimate of when you will be able to respond. Also, ask for clarification if you don't understand a change made by the counterparty, even if it means picking up the phone.
Effective redlining is an art that balances assertiveness with collaboration. By following these best practices, you can make the negotiation process smoother, more efficient, and less contentious. Remember, the ultimate goal is to reach a fair and mutually beneficial agreement. Happy negotiating!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.