I used to represent a now defunct hedge fund that had a whip smart general counsel. Her standards were high and she prized speed and competence. At one point, I was helping her get licenses to a bunch of algorithms. I drafted the first version of the license agreement, sent it to opposing counsel and a week later, they sent a revised version back. My client called me instantly, and said, with contempt, “No redline.” I understood what she was saying and how she felt. One thing that drives me up a wall is when we get back a revised contract from opposing counsel without a redlined version showing their changes. Not long ago, one of my beloved clients deleted the redline before forwarding my email with the revised draft to the other side. And I felt sad. So I thought I would answer this question:
What’s a redline and why should I use it?
A redline is a copy of a document that shows the changes made to it since some previous version. They can also be called blacklines or comparisons. You can run a redline in a few different ways. You can use special software like we use in law firms like Deltaview. Second you can use track changes in the Review tab in Word which racks up the changes as you make them IF you remember to turn it on. And Microsoft Word also has a comparison feature that will compare two documents. My favorite by a mile is Deltaview. I like to send both a redlined version and a clean or plain version for two reasons. First, I want people to be able to see what I’ve done very clearly. Second, I want to encourage the other side to make the next round of changes in the plain version.
Here are five reasons why you should always send a redlined version when sending revised drafts.
1. Clarity. To show the changes you made, make a comparison and clearly show all parties what you did to the document.
2. Fairness. Every contract is an agreement between two or more parties. Being clear and open about your changes is fair.
3. Efficiency. Most of the time, things worth trying are worth getting done. Showing people what you did clearly is efficient. Making them try to figure out the changes by comparing two documents side by side is slow and maddening. Slowing the process can impede or even block finishing the deal. If the time and cash costs of getting the deal done are too high, maybe the other side will walk away.
4. Agreement. Sometimes people want to sneak language into the contract to create a term the other side didn’t really see. This works sometimes but not always. Once you have a contract, the people who signed it have to do what the contract says. If one side is unaware of an obligation hidden in the contract, they probably won’t do it. So then you’re going to have to fight with them to get them to do what you snuck in. But that takes time, money and emotion. You may then have to sue them, which takes much more time, money and emotion. The court may actually ask the appropriate question, which is, “what was the intention of the parties.” If so, maybe the court will figure out the other side never actually agreed to the language you snuck in.
5. Good faith. Business deals are usually exchanges between people. Starting off a deal by making it harder on the other guy is bad sportsmanship. Trying to purposely confuse him puts the deal on an unsteady footing at the beginning. Things can only get more wobbly from there. If you start from a place of bad faith and sneaky dealing, the road to $20,000 legal briefs and vacations you cancel for your deposition may not be far behind.
So be clear, be fair, be fast. And if the other guy doesn’t operate the same way, have your lawyer run a redline and review it carefully.