Designing Contract Review Comments: Writing Separately for Internal Readers and the Counterparty

Hello, I'm Noriaki Asato, Representative Attorney at LegalAgent.

In the practice of reviewing contracts, how the accompanying comments are written affects usability as much as the proposed revisions to the clauses themselves. In particular, if the explanation for internal readers and the text presented to the business partner are made identical, the progress of the work tends to stall.

Internal comments candidly convey the nature of the underlying risks and the grounds for judgment. Comments for the counterparty, on the other hand, are negotiation text intended to lead smoothly to agreement. Because the two serve different purposes, the manner of expression is clearly switched even when dealing with the same clause.

Internal Comments Should Set Out the Material for a Decision

The role of internal comments is to share clearly why the clause is disadvantageous, how much damage could arise and what options the company can take. For example, where liability for damages is unlimited, simply writing "please set a cap" leaves the people on the ground unsure how to decide. Present examples of options that can be considered, such as the concern that the company may bear liability disproportionate to the contract amount, a proposal to limit liability to ordinary damages, a proposal to cap it at the contract amount or several months' worth of fees, or a proposal to make willful misconduct, gross negligence or breaches of confidentiality exceptions to the cap, and thereby prompt an internal decision.

Internal comments are material that allows business heads and management to understand the risks correctly and decide what negotiating stance to take. Candid and specific explanations are required.

Comments for the Counterparty Should Be Negotiation Text Aiming for Agreement

In comments sent to the counterparty, the expression is carefully changed even if the point is the same. Even if the content was assessed internally as "involving excessive risk for us," sending it to the counterparty in those terms can make negotiations harder to advance.

In text for the counterparty, convey the request so that they will consider the revision while adding the reasonable rationale behind it, for example: "In light of the scale of the transaction under this Agreement and the allocation of risk between the parties, would you kindly consider a revision that sets a certain cap on liability for damages?" In contract negotiations, merely asserting legal correctness one-sidedly does not lead to agreement. It is important to choose words the counterparty can readily accept and to convey the revisions your company needs.

Separating Recipients Makes Work on the Ground Run Smoothly

Separating internal comments from comments for the counterparty makes it easier for business divisions to understand what is to be decided internally and what is to be conveyed to the counterparty. Having draft comments that can be sent after confirming the policy internally also reduces the back-and-forth of rewriting the text.

Particularly when sales staff or business heads conduct negotiations directly, they are often unsure whether legal's comments can be sent to the customer as is. If overly candid internal deliberations are mistakenly passed to the other side, it could affect the relationship. When asking outside attorneys for a review as well, specifying that the "internal risk review memo" and the "draft comments to present to the counterparty" be delivered separately makes clear how to use them once received.

Specifying the Purpose When Using Generative AI

When conducting contract review using generative AI, it is likewise important to specify clearly the purpose of the output comments. If you simply instruct it to "please review this," it tends to generate ambiguous text that cannot be identified as either for internal review or for external presentation.

When using AI, give specific instructions such as "for internal legal judgment, concisely describe the anticipated risks and reasons," "draft this as a polite request that can be sent to the counterparty as is" and "classify the importance as high, medium or low." However, the premise is that comments drafted by AI must always be checked by an attorney or legal staff member with their own eyes. Especially for text sent externally, delicate adjustment of nuance based on your company's position and the relationship with the counterparty is indispensable.

Contract Review That Includes Comment Design

The role of contract review is not limited to pointing out errors in the clauses. Explaining the background so that the company can reach decisions internally that people are satisfied with, refining the wording so that it can negotiate constructively with the counterparty, and supporting the progress of the business are all part of a single job.

At LegalAgent, we regard contract review comments not as mere legal formalities but as practical text that supports a company's decisions and negotiations. I think that simply writing separately for internal readers and the counterparty can reduce the burden on staff of rewriting explanations. The arrangement of requesting reviews with recipient-specific comments on an ongoing basis is explained under Legal Outsourcing.