Randy Weber

I’ve worked with business development managers that don’t believe in creating comprehensive term sheets when putting together a deal. What they end up with is a short summary and a disjointed string of e-mails with all of the details. They say it’s faster. I say it’s lazy, it ends up taking longer, and it causes problems further down the line.

From the Harvard Law School Program on Negotiation titled “Conflict Management From the Start“:

After reaching an agreement, professionals often rely on their lawyers to draw up the official contract. Unfortunately, miscommunication between negotiators and their lawyers often leads to costly mistakes. Contract terms may not accurately represent the negotiated agreement, key deal terms could be missing, or clauses might contradict one another.

The biggest miscommunications happen when the lawyers don’t have a term sheet to work from. If you just give them a summary, some e-mails, and perhaps the other party’s standard contract, they have no idea what to do with it. What follows are a long series of questions and back-and-forth on the contract terms. All of which could have been avoided if they’d had something more structured to work with from the beginning.

I’ve done it both ways. A term sheet is always the better, faster way to go. The legal process takes far less time, you end up with a contract that covers what you expected, and you don’t get blind-sided by anything 6 months into the deal.

You can equate not using a term sheet to trying to launch a new product without having detailed written requirements. That too doesn’t work so well. Take the time to write everything out and gain agreement on it. You will be glad you did.