Abolish mandatory contract review by the legal department

“The Law Department must review and initial all contracts!”  More likely, the bureaucrat announcing this retrograde edict would lurk behind the passive: “All contracts shall be reviewed and initialed by the Law Department!”

Regardless of writing style, the mandate perverts the role of the in-house lawyers.  It casts them as final judges on business terms, instead of legal representations and risks, which propels integration of lawyers into the business too far.  It forces lawyers into the role of police, holding up their hand and saying to executives: “Stop!”  It floods the department with stultifying make-work when the vending machine rental agreement has to have a lawyer’s X.  It inevitably spawns criticism of delay, that “legal is a black hole where the contract goes in and nothing comes out.”  It leads law departments to invest in databases for tracking and controlling contracts.  And mandatory contract approval hobbles other counseling that adds more value – the urgent drives out the important.

Better to set guidelines for law departments to review contracts selectively, such as by type, by vendor, by dollar amount committed, by level of approving business executive, or some combination of these risk factors.  A company should apply its legal resources, inside and outside, to the activities that bring the most return, not rigidly decree an across-the-board standard that perverts the attorney-client relationship. [See also my post of March 18, 2005 on whether the law department should manage contracts.]

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