When to Use Your Paper

You’ve been in discussions with a potential partner or customer for a while, and now everyone is excited to finish the deal. It’s time to review some contract terms and get them signed, then it’s off to the races. Now is the time to address one critical issue – whose paper do you use? 

Why This Matters

Choosing which company’s paper to use is hugely important for several reasons, with the main ones highlighted below: 

• Accurately Describing the Relationship. The contract needs to accurately describe the services, technology and contours of the relationship generally, both through the terms included and how the agreement is structured (click-through v. signature, and any order form terms). For that reason, a vendor will often push for their own paper, which is custom-written with their business and product/service in mind. 
• Properly Allocating Accountability. The contract needs to properly address the risks each company is taking on. These risks include IP infringement, breach of confidentiality, data protection, and others. Each company has an interest in minimizing the risk they take on in certain areas, while factoring in their relative leverage and what’s reasonable in these scenarios. 

How to Decide

Ideally, in a vendor-customer relationship, companies sign the vendor's paper and it usually makes the most sense, as the contract is tailored for the vendor’s business. The caveat is these terms are usually (but not always) mostly favoring the vendor and it’s an uphill battle for the customer to pare back to middle-of-the-road terms. In some cases, as with Terms of Service, these terms aren’t negotiable at all, and terms are take-it-or-leave-it. Similarly, a company engaging a reselling partner will usually have their own paper that describes the reseller relationship, with the aim to standardize terms across their entire reseller program. 

For joint development and other partnerships, one company will often take the lead on drafting but the agreement is created through collaboration, both with stakeholders internally and between companies. This makes the most sense when the program is bespoke. 

Often, the reality is a large customer will demand to use their paper, and as a smaller company with less leverage you can’t refuse, for any or all of these reasons: 

• The customer is a much larger company (think Amazon, Salesforce, Microsoft)
• The contract value is high (this amount can vary with the customer’s policies)
• Using any other paper is a deal-breaker for the customer 
• The customer’s legal department will take a lot longer to review any paper that isn’t theirs, and getting the agreement signed earlier is important 

I've represented vendors in all the above scenarios, where the vendor has caved and agreed to the customer's paper. Sometimes, it's the only way to close a deal.

If you’re a vendor and have to use your customer paper, be prepared for extensive redlining to ensure the terms and structure align with your actual relationship. You may also have to agree to more unfavorable terms than you’d have on your own paper, and be limited in negotiating them.

While many companies are comfortable lightly negotiating on their own paper, it’s always best to have a commercial attorney review contracts provided by others, and counsel as to which terms are worth negotiating and which you should (probably) accept.

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