Canadian Lawyer InHouse

41 CANADIANLAWYERMAG.COM/INHOUSE MAY/JUNE 2019 L a w D e p a r t m e n t M a n a g e m e n t tantly, it also asks if the components suppli- ers are living up to their end of the deal. Are they paying on time? Are they delivering parts on time? Are they treating Celestica fairly and following the contract terms? El- lis calls it a "trust but verify" approach. The in-house team also makes it a point of visiting all of the company's worldwide sites on a regular basis and performs a "cus- tomer performance review, where we do a deep dive on our key accounts," says Ellis. "We sit down with the account team who is responsible for, let's say, a Cisco or an IBM and ask them in-depth questions — tell us exactly what's happening in practice: How are you functioning with the customer? Are they taking care of you from an inventory perspective? How accurate is their forecast - ed demand? [It's] really working through everything with them at a painstaking level of detail just to make sure that the contract is well understood and the parameters of the recovery that we expect to make financially are being met. We work with the teams to understand what some of the challenges they're having with that account are." Ellis says this level of detail is necessary because Celestica is in business to make a profit and there is no point in renewing contracts or keeping customers or suppli - ers that cost the company money, especially when margins are so thin to begin with in the manufacturing industry. "You have to know your contract well enough that you're not just giving away things for free," he says. Knowing and understanding contracts throughout their entire lifecycle is abso - lutely vital, says Lynne Charbonneau, a Vancouver-based consultant and legal in- novator who has experience working as both in-house counsel at HSBC, where she was deputy general counsel, and as an ex- ternal lawyer. "Once you are in-house, it's much more important to think about the contract in its entirety. And it's not just a matter of diariz- ing dates that might come up, it's a matter of thinking of the life of the contract from the back end, from the perspective of op- erationalizing it, from the perspective of reviewing it at regular intervals. So, in an in-house role, particularly one where there is a broad suite of standard contracts, it's important to continue to think about the contract as a continuous obligation and whether or not changes that your business might make come back to impact the con - tents of the contract," she says. Companies that, for example, offer soft- ware updates, should understand not just what the contract says about updates but what the updates can do, says Charbonneau. "Updates are very basic and very com - mon, but if you are undertaking to provide a service over a period of time . . . there are often back-end or infrastructure changes that occur. Many of them have no impact whatsoever. But if an in-house lawyer doesn't have the kind of relationship with its client where [he or she] understands that those types of things are going on and has the curiosity to be able to investigate whether or not there might be an impact, that can lead into a bit of a danger zone," she says. Charbonneau believes mitigating possi - ble dangers is one of the key roles of an in- house legal department, and she says that "every in-house lawyer should absolutely be invested in enterprise risk management as a control function and as an advisor to the business." This means knowing every risk that flows from the execution of the contract and understanding how to put measures in place to limit those risks, and Charbon - neau says the best way to do that is to obtain and study the metrics and to ask questions about the volume of contracts and whether they're standardized or bespoke. She says businesses that use high vol - umes of standardized, repeatable contracts put themselves at higher risk of class actions than those that use lower volumes of be- spoke contracts and, as such, should review the contracts regularly. As part of that review process, Charbon- neau suggests performing a "hygiene exer- cise" and taking the opportunity to rewrite the contracts in plain language. The ben- efits of doing so include the possibility of finding "that the business actually didn't intend what was written." No matter what, she says, in-house coun- sel needs to involve itself over the lifetime of the contracts if they want to demonstrate their value to the company. "When lawyers disappear after the negotiation or the initial development of a template, for example, I think the rest of the business doesn't feel their investment in the future. So, doing this [managing the contract throughout its lifecycle] is important. It's important for the legal function to always show that it's invested in the long-term successes of the business and not just getting its work done in a factory mode. It is forward thinking that gives in- house lawyers their place as valued advisors to the business." IH You have to know your contract well enough that you're not just giving away things for free. ROBERT ELLIS, Celestica Inc.

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