Rogue contracts: what they are, why it happens

In April 2021 we hosted the Uncertain Decade Summit—our 24-hour virtual event filled with networking opportunities and eight skill-based workshops for legal techies in the UK, New York and Sydney. One of the interactive workshops was hosted by Ironclad. The 30-minute workshop discussed rogue contracts: what they are, why it happens and how you can implement best practices and measures to encourage creative contractors to stay on the right path. 

Leading the talk was Sara Lin, Customer Success Manager at Ironclad, and two fantastic panellists joined her; J. Bennett, Senior Vice President of Operations and Corporate Development at Signifyd; and Kirk Simmons, Head of Legal at Canva

They gave some invaluable insights into the world of rogue contracts, so to watch the whole discussion, click on the video below! Fancy a read, instead? Here’s Legal Geek’s quick summary of the conversation’s highlights and some of the key takeaways.

So, what is rogue contracting, and why does it happen?

To put it simply, rogue contracting is when internal business partners negotiate their terms but leave legal and their processes out of the picture. But why does this happen?

“These ‘business vigilantes’, as we might call them, may circumvent legal mainly because they may perceive them as this tower of ‘No'”, says Sara. “They may want to do it themselves, whether it’s out of urgency, ease, or they’re just a renegade—who knows”. 

And since remote working and asynchronous communication are now the norms, the risk of rogue contracts is increased. “If and when something goes wrong, legals are expected to resolve the mess and often without much context”, says Sara. 

“The point where legal learns about this random act of contracting is when something goes wrong, or discussions have veered off course”—and it happens to the best of us. 

Watch a recording of this session

It happens to the best of us. 

Rogue contracts are easy to come by—and both Bennett and Kirk shared their most memorable experiences with them. 

Canva, an online platform designed to empower the world to design, has fifty-five million monthly active users, over 1500 employees and an estimated valuation of USD 15 billion. When Kirk joined the company early on, they didn’t have a legal team—and so there was the odd or frequent incident of rogue contracting. 

“On my first day, I sat down for lunch and saw there was a curtain up in the lunchroom”, Kirk says. “I asked a colleague what was behind it, and they said casually, ‘Oh, it’s just a bouldering wall to go climbing’. But it was situated near the beer tabs, so it presented a workplace risk in my mind, and I couldn’t find a contract for it.”

“It just required more time to work it out”, says Kirk. “I think the whole reason why people choose to engage with rogue contracting is to save time—but actually, it ends up costing more once it’s found out”. 

Sneak peek of the solutions…

There are plenty of contracts that can go rogue, from vendor agreements to high-volume urgency contracts. Bennett gave really great insights into how Signifyd—the 2 billion valued company that offers a commerce protection platform for sellers in a Card-Not-Present environment—identified the need for better contracting. 

“The pain-point for us was transparency”, says Bennett. “And when teams are dealing with their primary clients, transparency is crucial. We all focus on this kind of client-centred approach to what we need to do”, he says.

“And one of the primary things that we try to do is self-service whenever possible and have the smallest number of touches with your client whenever possible with the correct answer at the culmination of that.”

“So, with those kinds of design principles, you’ll end up with people feeling more empowered and able to understand what’s going to happen”, says Bennett. “There’s enough anxiety in a big sales deal as it is—but the more you can say that legal’s with you, you know what the process is and what’s going to happen, the better. That’s what Signifyd aspires to do.”

And there’s plenty more where that came from!

So, what are some of the other ways that companies can improve their contracting by using Ironclad? Well, you’re just going to have to watch the whole video to find out!

Both Bennett and Kirk gave some really exciting examples of how you can tackle this—from gamifying the rollout to how to self-service in a way that saves time. 

But let’s finish off with a quick glimpse into our speaker’s approaches to rogue contracting: “Contracts are a meeting of the minds, but you need to win hearts first”, says Bennett. For Kirk, it’s all about following the three Fs: “Discourage rogue contracting, but do it by ensuring your contract process is frictionless, fast and fool-proof.”

Watch the video now to get the whole scoop!  

Ironclad is the digital contract management software company that allows companies to design and deploy any complex contract within minutes.