Contract Negotiation Preparation: How to Improve Outcomes Before the First Redline

TL;DR - Laura Frederick, Hebe Doneski, and Adrienne Valencia Garcia explored why and how to prepare before negotiations begin. They covered separating legal risk from enforcement risk, planning for failure modes with the business team, whether contract remedies actually work in practice, how to model a deal across its full lifecycle, and how to build and use fallback playbooks. 

Preparing for contract negotiations can lead to better outcomes. The challenge many lawyers face is how to approach that preparation in a way that actually improves results. That was the focus of a How to Contract webinar hosted by Laura Frederick and featuring Hebe Doneski, General Counsel at Symmetry, and Adrienne Valencia Garcia, Deputy GC at Somos. The speakers explored issues and strategies that lawyers and contract negotiators can use to improve their deals before the first redline gets exchanged.

The webinar started by acknowledging the importance of negotiation prep, but like so many things, the devil is in the details. What exactly does that look look like in the real world and what happens when they don’t do it?

Hebe said she spends most of her preparation time understanding the business deal. She pays unusual attention to how royalties are calculated, how measurable obligations are defined, and what the business person actually wants to accomplish. She uses AI to fact-check her understanding by typing the business person’s explanation into the tool and reading the result back to them. She also recommended bouncing a clause off a thought partner outside the deal, such as an accountant, to test interpretation.

Adrienne described what unprepared looks like in practice. The lawyer struggles to understand what is happening, so they start focusing on theoretical concerns or worst-case scenarios. They do not know where the business is in the deal cycle, whether there is a term sheet, or whether commitments have already been made. The unprepared lawyer ends up reading the contract line by line in the room. “You can hear the collective groans of just torture,” she said. Laura added that first impressions set the tone for the rest of the negotiation, and showing up unprepared can damage the deal team’s credibility before the conversation even starts.

The speakers distinguished between two types of contract risk that affect how lawyers should prepare. Legal risk involves how a court would interpret a provision. Enforcement risk involves what the parties can actually do under the contract to influence the relationship.

Hebe defined legal risk as how a court will interpret or enforce a provision if the contract is tested. She said transactional lawyers never want to see their contracts tested, but she still pays close attention to the dispute resolution mechanism. She prefers arbitration to litigation because the process suits business people better and is confidential. She said lawyers spend too much time wrangling over choice of law, which in her view does not matter nearly as much as the forum. Jury waivers deserve attention if arbitration is off the table.

She defined enforcement risk as what a party can do under the contract to affect how the relationship goes. She told a story about a software implementation where the customer kept changing requirements. She wrote a clause that let the vendor stop the project if the client had not finalized specifications by a certain date. The client thought this was great because it meant they could stop paying. When the date arrived, the client did not want the project to stop. Everyone got in a room and finalized requirements.

Laura framed enforcement as a so-what question. A counterparty has to deliver something by a certain date. They do not. So what. Are you going to terminate the contract. Declare them in breach. How are you going to prove it. Do you have documentation along the way.

Adrienne said lawyers can differentiate themselves by being intentional and customizing rather than copying and pasting prior drafting. She described receiving a paper with indemnification obligations running from letter A through L and M, most of which were nice-to-haves unlikely to happen. Being able to ask how likely something is to happen and whether it has happened before moves things faster and shows business acumen alongside legal acumen.

The speakers discussed how identifying what is most likely to go wrong before drafting starts can produce stronger contracts than reviewing a document section by section.

Hebe said lawyers do their clients a great service by thinking about the end before the beginning even arrives. She gave an example from reseller agreements. If she needs to terminate a reseller relationship, she cannot just drop the vendor because she has downstream customers to support. She always negotiates a tail period that lets her support those customers without them knowing the upstream relationship ended. She also asks the business team uncomfortable questions during preparation, like what happens if the product does not sell and whether they are prepared to give up a prepaid royalty.

Adrienne shared advice she received from a business client. “Don’t be afraid to swim across lanes.” She said lawyers can get too focused on whether something is or is not a legal issue, when approaching it with genuine curiosity surfaces gaps. Laura added a useful reframe for these conversations. Instead of asking what could go wrong, ask the business team what they want to happen if a scenario occurs. That pulls practical answers out of the business team instead of triggering “stop being such a lawyer” pushback.

Adrienne said understanding failure modes informs how you approach the contract. Once you know what the business wants and what the failure modes are, you can notice where the contract is totally silent and propose something. She also stressed aligning with the business team so they can have some of those conversations behind the scenes, creating a baseline of understanding before the next negotiation session.

The speakers walked through several examples of remedies that look strong in the contract but fall apart when they are actually needed.

Hebe told a story about an acquisition where every target-company contract had a non-assignment clause. The lawyers were ready to walk away. The business asked what the counterparties could actually do if the contracts were assigned in violation of the clause. They could terminate and the company would lose the revenue. The business said the counterparties could not drop the product. Not a problem, they said. The deal went forward. A clause Hebe had been taught her entire career was toxic turned out to be toothless because the counterparties could not actually exercise the remedy.

She used similar logic on a code of conduct provision last week. Instead of fighting over it, she offered termination as the sole remedy. Both sides knew termination was unlikely. The provision was agreed on redlines without further discussion.

Adrienne flagged service level credits as a remedy that looks strong on the page but falls apart. The financial penalty was never going to be enough to motivate the vendor. What actually drives vendor performance is wanting the renewal, Hebe added. Adrienne also flagged audit rights as overengineered in many contracts. A once-per-year right during business hours is usually enough.

Laura raised suspension and set-off as two remedies she considers underused. Suspension lets a vendor stop performing without terminating. She said it is way more powerful than termination because it is scary for the customer. Set-off lets the customer deduct amounts from invoices. Adrienne warned that set-off triggers vendor pushback because it impacts revenue recognition. “That’s the holy grail,” she said. “You want your business person’s attention, see how you can tie your position to impacting revenue recognition.”

The speakers discussed how to think about a deal across its full timeline, from implementation through steady state, renewal, and exit.

Hebe said lawyers need to spend time in the commercial documents that they often do not see unless they ask for them. Order forms, schedules, statements of work. Those documents tell you how the relationship will play out over its entire lifecycle. She walks through three phases. Implementation, where the questions are about requirements, milestones, and payment triggers. Steady state, where service levels and ongoing performance matter. And renewal, which can get buried in ancillary documents.

She defended automatic renewal as useful when the alternative is customers getting suspended for non-payment because they forgot to renew. She had an extended argument with an AI tool recently because counterparties were running her contracts through AI and getting flagged on auto-renewal even when the customer could cancel with notice. The AI told her companies forget to calendar these events. Hebe pointed out that is exactly the problem auto-renewal solves.

Adrienne pushed back with the other side. Auto-renewal can trap customers paying for services they no longer need, especially when the notice contact has left the company. The pricing escalates at each renewal term and nobody is keeping track. Both agreed the answer is fit for purpose. The provision needs to match the service.

Adrienne also flagged assignment consent provisions as a double-edged sword. They look fine in isolation but can derail a divestiture or acquisition because tracking down hundreds of consents takes time the deal may not have.

Laura added that lawyers often think about termination but do not think about what happens next. Requiring transition services when they are needed is an important part of lifecycle planning, especially for bigger systems that cannot be replaced the next day.

The speakers discussed how pre-drafting concession language and organizing it into a playbook can change how a negotiation plays out.

Hebe said she maintains a playbook with good, better, best options for commonly negotiated provisions, even as a legal team of one. She used AI to mine her last 18 months of contracts for variations, then picked the ones she liked best. For larger teams, she said getting everyone in a room once a year to review fallback language is a valuable exercise. It took a lot of time, she said, but it got everyone on the same page. She also mentioned that she has a separate clause library with commercial terms that the business team can self-service.

Laura said she loved this approach but warned about the risk. Handing junior lawyers a list of past concessions without context is a disaster. They will accept terrible terms simply because they appear in the playbook. The playbook needs good-better-best annotations and some “never agains.” Hebe agreed and said that is why you need to look critically at what you have done before. “I’ve absolutely had the reaction, ‘Who, what idiot wrote this?’ And, ‘Oh,’” she said.

Hebe added that she checks with stakeholders when she thinks she is pushing the envelope. She checks with the CFO for anything financial. She does not put envelope-pushing language in her playbooks, or if it is there, it has an approval requirement.

Adrienne told a story about an in-person negotiation. Both sides had agreed in advance to a particular important provision. When the topic came up, the other side rejected it on the spot. “That is a deal breaker,” they said. Her business lead said, “Then I think we’re done. Everybody take your laptops. We’re leaving.” Three lawyers sat stunned, then closed their laptops and walked out. The two business leads found each other later for a private conversation. The group regrouped the next morning and finished a substantial deal in a day and a half.

Laura said she has seen the same thing many times, where everybody agrees up front and then at the last minute someone throws a wrench in, whether it is a real new issue or a planned power play. She said she loves watching skilled business people handle those moments, because at the end of the day, the decision about whether something is truly a walkaway is a business decision, not a legal one.

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Here are five practical strategies that you can apply to your contract negotiations today.

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