Templates are not the solution for most legal teams. This may sound strange when coming from the founder of a company that markets document automation software in which templates are a central component. But allow me tell you a story that we have heard many times, from many different legal teams, with different variations. Usually it goes like this.
First attempt at templating
Almost invariably, legal teams tend to start from an old file, replace the client-specific information, remove the irrelevant clauses and add some additional clauses that are relevant for the deal.
Then something goes wrong — e.g. information about the previous customer is not removed, a crucial cross-reference is forgotten, or an important clause is omitted. The first time this happens it will be considered an unfortunate hiccup; the second time it happens, the team realises that it needs a standardised template, to avoid that these hiccups will happen again in the future. After all, while there is a large variety of documents to deal with on a day-to-day basis, there will be a small selection of documents that are drafted over and over again, usually between five and ten. It completely makes sense to create a nice template for those frequently used documents.
In most of the stories we hear from our customers, there was a first failed attempt at a template, usually by some well-meaning mid-level associate. That template gets used by the associate him/herself, and perhaps by one or two other people in the team. But many others in the team will not like the template, because they have different ideas about what goes into the template.
Second attempt: hotel time
Then something goes wrong again. At that point, the team will realise it needs to do a Big Templating Effort. Stories diverge at this point, but usually it is a variation of "let's force ourselves to come up with a good template". The team will allocate dedicated space and time to discuss and draft a template that everyone in the team can agree upon. Smart teams even combine the useful with the pleasant by going to a nice offsite location, such as a luxurious hotel during the weekend.
Despite the good intentions, the story usually ends in the same way: no template gets created.
The underlying reason is that contract drafting is actually very hard, because there are so many variations and subtleties to manage. Even though lawyers will tell this to their clients (e.g., to explain why a "simple" contract is never "simple" to create), they tend to forget it when they have to draft something for themselves.
In practice, having many legal experts try to agree on the best paragraph is bound to fail. Quite paradoxically, getting agreement on even innocuous clauses fails — such as an "applicable law" clause in a commercial contract. It is almost certain that someone else within the group will challenge the clause and explain why the proposed clause is actually not ideal. One example we heard, was that a partner insisted that it is not enough to say "this agreement is subject to the laws of country X", because there allegedly exists case law that interprets such clause as not excluding the international private law reference rules. So the clause should really say "... excluding its conflict-of-laws rules". But then some other clever person in the room will argue that counterparties do not understand why this cryptic wording was inserted, which will lead to extra negotiation time. Which, according to yet some other person, is actually not a bad thing, because it shows how clever we really are. And so on.
Obviously, the real problem is that "the" perfect clause does not exist. The solution is to offer multiple clauses, and have the drafting lawyer decide on a case-by-case basis which of the clauses is most suitable for a particular situation. But juggling with all these options takes time, so that the amount of options inserted into templates tends to be limited to just a few. And with just a few options available, templates will give a very strong one-size-fits-all impression, conflicting with everyone's professional pride and claims to only make tailor-made documents.
Templates are only a start
So, should you skip creating templates?
Not at all. Templates are certainly not the solution towards good legal drafting, but they are better than nothing (i.e. relying solely on old files), so they are definitely a good start. But you should not stop there.
Of course using advanced drafting software for creating dynamic templates is the ideal solution. If you are not yet ready to go there, then consider the following recommendations.
Create a uniform placeholder style
Different legal teams tend to use different styles for placeholders. Some like square brackets, so like to insert blobs, some use yellow or green highlights. Every one of those is OK, but try to be uniform.
Insert clear drafting notes to describe interactions
Good templates contain drafting notes, often in a strikingly different format (e.g., italics with a yellow background), to explain when a certain paragraph should be removed, or to explain how different paragraphs interact with each other when there are different options to choose from.
Do not skip this step, because you would be surprised how options that are seemingly obvious for the template author, are absolutely not obvious for the template user — particularly when the interactions get difficult. In our consultancy assignment for our customers, we frequently encounter these situations, where in the absence of drafting notes it is completely unclear whether a particular paragraph describes a third option to choose from, or whether that paragraph instead extends the previous option.
Good drafting software can really help to formalize templates, because authors will then have to precisely indicate how each (part of a) paragraph should interact under certain conditions. Human language can be ambiguous, so even good drafting notes are sometimes not clear enough.
Don't mix drafting notes with legal doctrine
Some lawyers include loads of footnotes in their templates, with references to legal doctrine or case law, describing why a certain clause was (not) upheld or interpreted in different ways. However, templates are not the right place to insert such comments, how interesting they perhaps are. Most lawyers do not know how to automatically remove all footnotes in one go and will have to manually remove those footnotes — creating a lot of frustration and lost time. Inserting comments in text balloons is slightly better (because such comments are easier to delete in one go), but the total amount of popup-balloons can then, well, balloon (pun intended) because of true comments inserted to, for example, remind the client of certain things.
Learn how to use MS Word
Ideally every template uses the same underlying MS Word styling scheme for headings and articles. Once again, it does not matter so much which style you use for numbering, fonts, indentation, etc., as long as you use a uniform styling across your documents. MS Word even allows you to store a single styling template (.DOTX) on a central location (e.g., a shared drive) and have all your Word-files (.DOCX) reference that styling template, so that if the template ever changes, all the DOCX files will automatically adapt correspondingly.
Treat your templates as a legal knowledge base
Over time, you will learn the weak spots of your template, e.g. unclear language, overly aggressive text fragments or missing coverage. Appoint a single person to guard all feedback from the users of your template, and ask them to consistently update the template. Your template will probably tend to grow, but at least mistakes will not be made twice.
Make templates centrally available
Even the best and up-to-date templates are useless when the template users gravitate towards the reuse of old files. Make templates centrally available, and insist that everyone uses the newest version.
This may sound like trivial advice, but in reality most users — particularly business users — will prefer to reuse a file from an old deal over starting afresh with an up-to-date template, if that old files happens to factually resemble the new deal. Be aware that no amount of threatening about all the risks will eliminate your users' inclination to be lazy. The only way that truly works is to make the use of the most recent template as easy and fast as the reuse of the old file, by automating your template in an attractive manner with simple-to-fill boxes.
Think about the playbook dilemma
When the amount of drafting notes explodes because there is so much to explain due to internal compliance rules, it is probably a good time to invest in software that allows you to draft so-called playbooks. The problem you will be facing is that essentially you can have two different ways to set up playbooks, but neither is satisfying.
A first option is to insert all your explanations within the templates themselves.
This can work if the options are still fairly limited, but be aware that you will have to repeat all the explanations in all of your templates. This can be doable if your explanations are not long (e.g., "use this paragraph only for products X and Y, and after approval of the compliance department also for product Z"), but if you also insert references to fallbacks and much more subtleties, then your explanations become longer than your template body. And don't even think about updating more than 5 templates when one of the rules changes.
A second options is to insert all your explanations within a separate document.
The big advantage of this option is that it does not clutter your template with the internal rules. This not only avoids the numbing task of having to remove all the comments at some point, but also avoids inadvertent information leakage towards a counterparty. (It is statistically guaranteed that every inhouse legal counsel will encounter a situation where a business user forgets to remove internal comments before sending a file to a counterparty, despite all the red warnings, bold text, big ugly font and thick border you use to alert them for this.)
However, the big disadvantage is that nobody consults those separate documents, even when you include some helpful hint in your template to take the time to read the accompanying document. So your well-intended document will usually gather a lot of digital dust.
Create a clause library
Most legal teams will easily tell you the "hot zone" of those 20% of clauses that tend to be contested by counterparties. For each of those clauses, you will typically want to have between 3 and 8 alternatives or fallbacks. Ideally, all those fallbacks are inserted into your templates, but they will make the template difficult to use, and will also create a lot of work when a certain clause would require updating. A probably better idea is to create a clause library with all those fallbacks, which you can centrally manage to declutter your templates.