A competent commercial or contracts function should be taking a much more holistic view of the risks posed by their contract terms and policies. The fact that something is legal does not make it desirable. The fact that I can do it does not mean that I should do it. So the key test is to understand likely market impact and whether the results will support broader business goals and strategies.

A technique that some companies employ is to undertake a holistic stakeholder analysis – how will this term or policy be perceived or acted upon by the various stakeholder groups – customers, competitors, suppliers, stockholders, executive management etc. A technique that can be used (and presumably was not by the companies in the court proceedings cited above) is to imagine the press article that may result.

In the end, terms and conditions should at the very least not undermine your organization’s core value propositions or market image. If you represent yourself to be ‘easy to do business with’, this has certain implications on your contract standards and policies. If you contend that your company is ethical or operates with integrity, this also suggests standards of fairness and balance in your terms and conditions. Sometimes this is not so much about the terms themselves, but may be in the way they are applied, or the overall governance and appeal systems that are offered.

Of course, the forward-thinking contracts group goes beyond these simple assessments of ethics and balance and starts to look at ways that differentiated terms may proactively enhance company brand. They imagine the press article (or advertisement) that highlights positive reasons why terms and conditions create a reason to do business. And with unbalanced, risk-averse behaviors on the increase, there is potentially plenty of scope for the creative contracts group to identify areas of potential competitive advantage.

Great post, and while I tend to agree with your assessment, what framework(s) would you suggest for understanding whether contract terms are “reasonable and fair” or “friendly”? How should companies differentiate between thoughtful consideration of risk and “burdensome”?