Structuring Long-term Contractual Agreements

One of the most critical aspects of contract management is ensuring that Service Agreements are structured correctly to protect both parties. Early in my career, I realized that without a clear contract review process, it’s easy to overlook key terms that impact legal compliance, risk management, and business operations. To streamline my reviews, I follow this essential checklist for every Service Agreement: ✅ Scope of Work & Deliverables – Are the services, responsibilities, and timelines clearly defined? ✅ Payment Terms & Invoicing – Are the pricing, payment deadlines, and penalties for late payments explicitly stated? ✅ Service Level Agreements (SLAs) – Are there measurable performance standards to ensure accountability? ✅ Contract Term & Termination Rights – How long does the agreement last, and how can it be terminated? ✅ Liability & Indemnity Clauses – Who is responsible for risks, damages, or legal claims? Is there a liability cap? ✅ Intellectual Property (IP) Ownership – Does the agreement clearly state who owns the work or deliverables? ✅ Confidentiality & Data Protection – Does it comply with GDPR, CCPA, or other data privacy laws? ✅ Dispute Resolution & Governing Law – How will conflicts be resolved—through arbitration, mediation, or litigation? ✅ Force Majeure Clause – What happens in case of unforeseen events like a pandemic, natural disaster, or supply chain disruption? A structured contract review process helps prevent legal disputes, ensures compliance, and protects both financial and operational interests.

A contract is a business model in disguise. It doesn’t just record agreements, it structures behavior, shifts incentives, and dictates leverage. Yet too many contracts are drafted like they’re just paperwork, not strategy. The highest-level contract drafting isn’t about what happens when things go wrong. It’s about designing agreements that make it irrational for parties to deviate from the deal. Here’s how I approach it: 1. Behavioral leverage over legal leverage - Instead of relying on penalties for late payments, structure incentives where early payment benefits both sides. - Instead of generic force majeure clauses, define precise triggers to prevent misuse and ensure operational predictability. 2. Default mechanisms that drive compliance - Self-executing clauses that minimize the need for enforcement. - Conditional rights that only activate if obligations are met (e.g., equity vesting linked to defined milestones). 3. Jurisdiction as a power play, not a footnote - It’s not just about where you can litigate, it’s about where your counterparty doesn’t want to litigate. - Choosing a governing law with built-in enforcement mechanisms can turn a contract into a deterrent rather than a safety net. The best contracts don’t just protect a party’s position. They design the deal so that both sides naturally act in alignment. How often do you see contracts that are legally perfect but structurally weak? 📌 In the comments: A course on cross-border contract drafting, where contracts aren’t just written, they’re engineered for real-world power dynamics.

Procurement: Treat suppliers as extensions of your enterprise, not transactions. Procurement Excellence | 23 NOV 2025 - In complex global markets, resilient supply chains demand partnerships built on shared destiny, not just contracts. Here are 9 Steps to Create Long-Term Supplier Partnerships: #1. Transparent Communication ↳ Co-develop comms protocols e.g. QBR ↳ Clearly share expectations, goals & challenges #2. Long-Term Contracts ↳ Replace short-term with multi year agreements. ↳ Share long-term roadmaps & cost-savings initiatives. #3. Shared Performance Metrics ↳ Jointly agree and track SMART KPIs. ↳ Define escalation paths & RCA templates #4. Early Supplier Involvement ↳ Involve and recognize vendor’s contributions. ↳ Include key suppliers in product development cycles. #5. Guarantee Timely Payments ↳ Automate payment & consider early payment discounts. ↳ Audit internal processes for bottlenecks. #6. Co-Create Innovation ↳ Create supplier ideation portals & protect IP collaboratively. ↳ Fund joint proof-of-concept projects. #7. Recognize & Reward Excellence ↳Formally acknowledge & reward outstanding suppliers. ↳Bronze (Operational Excellence), Silver (Innovation), Gold (Strategic Impact). #8. Uphold Fairness & Ethics ↳ Interactions & contractual terms are mutually beneficial. ↳ Ensure cost pressures don't force unethical labor. #9. Jointly Manage Risks ↳ Jointly identify risks & develop contingency plans. ↳ Map tier-2/3 suppliers collaboratively. In today's volatile market, Resilient supply chains are built on deep, strategic supplier partnerships. Achieving lasting, mutually beneficial supplier partnerships requires: ✅️ Deliberate strategy ✅️ Centered on trust ✅️ Shared objectives ✅️ Continuous collaboration ♻️ Repost if you find this helpful. ➕️ Follow Frederick for Procurement insights. #ProcurementExcellence #SupplierCollaboration

Recently, I’ve been asked by several of my colleagues regarding the the structuring of the sale of AskBio Inc. to Bayer. Maintaining separate operating independence and control over therapeutic development after selling a biotechnology company requires proactive, legally binding structural mechanisms negotiated before the deal closes. The goal is to separate the economic ownership from the operational governance. The wholly owned operating subsidiary is the gold standard for maintaining independence. Instead of "absorbing" your company into their existing structure, the buyer keeps your company as a standalone legal entity. Key aspects are: 1. Maintain your own Profit & Loss statement. If you control your own budget and bank accounts, you retain the power to hire, fire, and invest. As we were not yet generating revenue, we negotiated a funding commitment for a period of years, where cash would be injected into the company to support product development. 2. Keep Distinct Branding and Culture: Contractually agree that the buyer will not rebrand the entity or force the adoption of their corporate HR/culture policies for a set number of years. 3. Implement "Arm's Length" Agreement: Ensure that any services the parent company provides (legal, accounting, IT) are governed by a services agreement so they cannot dictate how you operate under the guise of "integration." 4. Maintain Independent Board of Directors: Negotiate a Board for your subsidiary that includes representative from the company and the buyer, and possibly a neutral third party. 5. Create Reserved Matters List: Create a list of items that the parent company cannot vote on without your consent, such as: Changes to the R&D roadmap, discontinuation of products in development, clinical trial design and site selection, and key personnel appointments. 6. Negotiate Performance-Linked Budgets: Ensure that as long as you hit certain milestones, your funding is contractually protected and cannot be diverted to other corporate projects. 7. Require high legal standard for CRE (commercially reasonable effort efforts). If the buyer fails to put enough resources behind a drug in development, they are in breach of contract. 8. Consider a "Buy-Back" Option: Negotiate a right to buy the company or therapeutic back at a pre-set price (or for the cost of development) if the buyer decides to pivot away from your core therapeutic area. (Hard to get). Please include in comments any other suggestions. It took me three exits to figure out this list. Maybe next time I’ll get it exactly right! #biotech #companysale #therapeuticdevelopment #operatingindependence #exit #drugdevelopment #biotechnology

As a lawyer with an MBA, one of the most important shifts in how I approach contracts came from understanding balance sheets, specifically how payment terms flow directly into working capital, cash flow, and borrowing costs. I've seen how a seemingly innocent "Net 90" customer contract created a $400K working capital gap that cost a company $48K annually in interest, on revenue they'd already earned but couldn't collect yet. Here's the January payment terms audit I'd run with finance teams, not because it's "legal work," but because contracts create the financial reality the business operates within. Part 1: Customer Payment Terms (What You're Offering) What to look for: Payment terms drift: Contracts say Net 30, but AR aging shows average 52 days. You're financing their operations interest-free. Unprofitable early payment discounts: You offer 2/10 Net 30, but your cost of capital is only 8% annually, you're losing money on the discount. Large customers demanding longer terms: Your biggest customer negotiated Net 90, tying up $500K of working capital. Industry-inappropriate terms: You're in food & beverage (15-day inventory turnover) offering Net 60 terms. Part 2: Supplier Payment Terms (What You're Required to Pay) What to look for: Terms mismatch: You pay suppliers Net 30, customers pay you Net 90 = 60-day cash flow gap. Missed early payment discounts: Supplier offers 2/10 Net 30. If your cost of capital is 10%+, you should take every discount. That's a 36% annualized return. Automatic late fees: Some suppliers increase prices 5-8% if payment terms are extended beyond standard. ▪️Strategies to Align Payment Terms with Cash Flow 1. Tiered Payment Terms Based on Customer Size Don't offer the same terms to everyone. 2. Progress Billing for Long-Term Projects Instead of payment at completion: 30% deposit at signing, 40% at midpoint, 30% at completion. Or bill monthly for work completed. 3. Payment Terms Escalation Clauses Reward good payment behavior: "Net 30 for Year 1. If 95%+ on-time payment, extends to Net 45 for Year 2. Below 80%, reverts to Net 15." 4. Negotiate Longer Terms with Suppliers Ask: "Can we move from Net 30 to Net 45 if we commit to higher volume?" Suppliers may charge 5-8% more, but if that costs less than your credit line interest, it's worth it. In Summary Your January audit is an opportunity to align payment timing with business reality so you're not financing everyone else's operations on your credit line. What's your biggest cash flow challenge with payment terms? This is not legal or financial advice; consider speaking with a qualified lawyer. Get a deeper dive into this topic in this weeks edition of my newsletter—link in comments and/or featured. #PaymentTerms #InHouseCounsel #ContractNegotiation

The Backbone of Real Estate Success: How the Commercial/Contract Department Drives Development Projects Success in real estate development often hinges on elements like design and construction. However, behind every thriving project lies the Commercial/Contract department, ensuring financial stability, legal compliance, and operational efficiency. This team turns visions into reality by driving projects from start to finish. A solid legal and financial foundation is key to real estate success, and the Commercial/Contract department plays a critical role. They assess feasibility studies and benchmark them against market conditions. FIDIC contracts help manage relationships between all stakeholders involved, preventing costly surprises and safeguarding profitability. The department’s major contribution is contract negotiation. They create agreements that align with project goals while minimizing risks. For instance, PPP projects benefit from contracts that define scope, timelines, and responsibilities, ensuring smooth progression and reducing disputes. The department focuses on proactive risk management, addressing financial, operational, or legal risks early. Mechanisms like price adjustments and penalty provisions mitigate material cost fluctuations or delays, stabilizing the project and reassuring stakeholders. The department maintains financial oversight, ensuring projects stay within budget. Efficient contract management and cash flow monitoring prevent payment delays and boost profitability. The department nurtures relationships with clients, contractors, suppliers, and regulatory bodies through transparent communication. It updates stakeholders on project progress, manages expectations, fosters trust, and positions the company for growth. The department ensures that modifications are legally compliant and well-documented. For instance, in luxury residential projects, they manage design changes without derailing timelines or budgets. Despite planning, disputes can arise. The department resolves conflicts through negotiation or legal action. FIDIC contracts provide structured dispute resolution mechanisms, preventing delays and keeping the project on track. The department’s influence spans the entire project lifecycle. From financial planning to contract management and project closeout, they ensure smooth transitions through each phase, setting the stage for long-term success. The department upholds international standards, particularly those of RICS. Following RICS guidelines enhances transparency, professionalism, and legal compliance, strengthening the company’s reputation and long-term success. The Commercial/Contract department is essential in real estate development. Through financial planning, contract negotiation, and risk management, they ensure projects are completed on time, within budget, and legally compliant. Guided by RICS standards, their expertise drives progress, growth, and adaptability in an ever-evolving market.

How long should a contract be? It's an age old question in public procurement, but often, there can be a reluctance to go beyond a term of 3, 5, or even 7 years for fear of being accused of being anti-competition. In reality, the contract duration should always reflect the complexity and scale of investment, and should never be time bound by any arbitrary number of years. If the investment has an expected usable life of 10 years, then the contract should have provisions for lasting a similar period. If you are 5 years in, and with 5 to go, the last place you want to be is deciding on whether to retender (which is risky), relying on a contract modification under Art. 72, or going the tough route of a direct award under Art. 32. Recital 62 of 2014/24/EU states that, 'In particular, it should be allowed to set the length of individual contracts based on a framework agreement taking account of factors such as the time needed for their performance, where maintenance of equipment with an expected useful life of more than four years is included or where extensive training of staff to perform the contract is needed'. The rules are clear, but they really do require the contract notice to be similarly clear, and to have adequate 'future-proofing' included when it comes to the actual duration. I'd rather have 5 extension options to utilise from Day 1, than go scrambling for justifications mid-way through. If you are making a medium to long term investment, it makes sense to make a similar investment in the quality of your contract notice.

Lessons From My DAS Deals – Protecting Stadium Owners in Connectivity Agreements Negotiating technology agreements for major stadium projects is no easy task. As teams and venues plan for the future, ensuring robust wireless connectivity while protecting the stadium's financial and operational interests is critical. I recently had the opportunity to negotiate a complex Multi-Carrier Distributed Antenna System (DAS) Agreement for a new National Football League (NFL) Stadium. The agreement, structured with a major MNO as the owner and anchor licensee, is designed to optimize connectivity while securing key protections for the team and the stadium—safeguards that should be standard for any stadium owner entering a DAS agreement. Key Takeaways for Stadium Owners: ✔️ Financial Upside: Upfront signing fees, recurring license payments with escalation, and additional revenue from other carriers that join the DAS. ✔️ Owner Control Over System Design: Approval rights on all DAS infrastructure and modifications, including the major OEMs. ✔️ No Carrier Exclusivity: Open access to all wireless carriers in the market to maximize coverage and competition. ✔️ Performance & Accountability: Strict construction deadlines, financial penalties for delays, and system testing requirements. ✔️ Cost Protection: Licensees (carriers) cover all costs—design, installation, maintenance, and upgrades—without passing expenses to the team or stadium. ✔️ Future-proofing the Stadium: Commitment to next-gen wireless technologies (5G, 6G, Wi-Fi 7, etc.), ensuring long-term value. ✔️Future Monetization: Protect the owner’s rights to the future monetization of private networks and use of spectrum not controlled by the carriers. With NFL stadium connectivity evolving rapidly, ownership groups must structure agreements prioritizing technological excellence and financial security. The list above could be much longer, but it is a good start for a strong outline for any team or venue looking to future-proof their infrastructure while maintaining operational control and maximizing revenue potential. I would love to hear from others in the stadium, venue, and wireless industries—what strategies have you seen work best in structuring connectivity agreements? Please comment below.👇 #DAS #StadiumTech #VenueConnectivity

Working with agencies is an active job. If you're not holding them accountable, you risk burning piles of money in fees and misaligned incentives. Here’s one of the most common patterns we see: 👇 → The agency was great out the gate, everyone was excited... the energy was high and the promises were grand → The attention and performance are good initially, and everyone's happy! → 3-6 months go by and the attention from the agency dwindles a bit... and slowly, performance starts to slip → Months 6-12 of the contract, discontent starts to sink in → Months 10-12, the agency re-engages in trying to work for that renewal 1️⃣ Start with the “So What”: Every deliverable should ladder up to business impact. Whether it’s content development or a media plan, the North Star should always be, “How does this move the needle for the business? And how are we measuring it?” 2️⃣ Align incentives with outcomes: Contracts based on a percentage of media spend can inadvertently encourage overspending. To avoid this, make sure the agreement includes performance or efficiency targets. This keeps everyone focused on driving value, not just spend. 3️⃣ Build your KPIs into the contract: Always build KPIs into the contract to ensure alignment on goals and ROI. Make them clear from the beginning, and give yourself an out if those metrics aren’t being hit. 4️⃣ Define what "good" looks like: If you're hiring for a service like SEO, six articles might sound productive contracting for 6 articles a month might sound like you're getting a lot of content... but what's the goal? If they don’t drive traffic or meaningful business results, they’re just words on a page. Make sure you're aligned on the business goals you want these agencies working in service of and that your contracts are aligned with those goals Agree on the business impact metrics that matter most before work begins. 5️⃣ Demand transparent reporting: Accountability thrives on a regular cadence of reporting and review. For example, an SEO agency should not just deliver content but also show measurable gains like domain authority (DA) or organic traffic. Include measures in the contract that give you an out if it's clear that the objectives aren't being met Agencies can be powerful partners, but they’re not magic wands. Clear expectations, consistent communication, and results-driven contracts are the keys to unlocking their full potential. What’s your go-to strategy for keeping agencies accountable? Drop your thoughts below - I’d love to hear how others navigate this!

As contract drafters, we are always trying to balance being concise with being thorough. On one hand, we want to keep our contracts on the shorter side. Long-form contracts are overwhelming and a challenge to manage. On the other hand, we also recognize that contracts are about the details. When we are dealing with complicated subjects with high risk, we need to explain the rights and obligations exactly. One of the best ways to keep a contract readable when dealing with complex concepts is through numbered subparts of a paragraph. If you are new to contract drafting, you may be wondering how experienced lawyers decide when to use subparts and when to keep it all in a single paragraph. There's no uniform right way to set these up. Here's the way I like to do it: 1. If the paragraph has only two concepts, I don't use numbered subparts. I just write two sentences in a paragraph format. "Seller will paint the house. Seller will complete the work no later than November 1." 2. If the introductory phrase is the same for two or three sentences that are relatively short, I break it up. I start with the introductory phrase and then create a subpart for each concept but leave the sentence inline in a single sentence. “Seller will provide the following services: (a) prepare the house for painting, (b) paint the house, and (c) clean up the painting work site so it is free of garbage and debris related to the painting services.” Still no tabbed paragraphs below. 3. I will use tabbed paragraphs when there is a complex list of obligations that each has multiple subconcepts. "Seller will provide the following services: (a) Preparation: Seller will consult with Buyer on a color for Seller to use. Seller will purchase the paint and other supplies. Seller will ensure that it has the paint and other supplies no later than the Start Date. (b) Painting: Seller will use its best efforts to paint the house using the color selected by the Seller. Seller will start work no earlier than 9 am and end no later than 4 pm. (c) Clean up: When Buyer approves the completed project, Seller will clean up the work site. Seller will ensure there is no refuse on site and will carry away any garbage and painting supplies." I do sometimes make an exception to my standard approach. When we are more worried about length than we are are readability, I may condense the type of provision I laid out in #3 and use the format in #2. It may not be as easy to process, but it will typically be shorter and can result in fewer pages. I normally don't focus on that, but there are circumstances when clients want us to. Do you have a strategy for deciding your paragraph structures? #contracts #lawyers