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Context is the background information that helps AI understand your situation and make appropriate recommendations. Without proper context, you’re essentially asking the AI to negotiate blindfolded.

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The Big Four Context Elements

Every legal prompt needs these four pieces of context. Think of them as the facts section of your brief – they set up everything that follows.

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1. Party Position

The AI must know which side you’re on. This single piece of context changes everything about how the AI approaches the document. Always specify:
  • Your role: “I am the vendor” or “We are the customer”
  • Your entity type: “We’re a startup” or “We’re a Fortune 500”
  • The relationship: “They’re our client” or “This is a potential partner”
Why it matters: The same indemnity clause looks completely different depending on whether you’re giving or receiving the indemnification.

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2. Leverage Level

Leverage determines how aggressive you can be with changes. Be realistic about your negotiating position. Low Leverage Situations:
  • “They’re our biggest customer”
  • “Competitive RFP with 10 other bidders”
  • “We desperately need this deal to close this quarter”
High Leverage Situations:
  • “We’re their only approved vendor”
  • “They approached us, not vice versa”
  • “We have unique technology they can’t get elsewhere”
How to use it in prompts:
  • Low leverage: “Minimize changes, use qualifiers instead of deletions”
  • High leverage: “Push for our standard terms where possible”
  • Equal leverage: “Standard commercial negotiation approach”

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3. Industry and Regulatory Context

Different industries have different norms, and regulations can make certain terms non-negotiable. Industry Context to Include:
  • Your industry: “SaaS company” or “Professional services firm”
  • Their industry: “Healthcare provider” or “Financial institution”
  • Industry norms: “Government contractors typically require…”
Regulatory Requirements:
  • Specific laws: “Must comply with HIPAA”
  • Industry standards: “SOC 2 Type II required”
  • Geographic rules: “EU data must stay in EU (GDPR)”
This context helps the AI understand why certain provisions might be particularly important or problematic.

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4. Deal Specifics

The business context shapes what risks are acceptable and what terms matter most. Key Deal Context:
  • Deal size: “10Kpilot"vs"10K pilot" vs "5M enterprise deal”
  • Contract length: “3-month trial” vs “5-year commitment”
  • Strategic importance: “Testing new market” vs “Core business”
  • Timeline pressure: “Must close by month-end” vs “No rush”

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Secondary Context Elements

These aren’t always necessary, but can significantly improve results in specific situations.

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Risk Tolerance

How conservative or aggressive should the approach be?
  • “We’ve never done business in this industry before – flag everything unusual”
  • “Standard commercial deal – focus only on material risks”
  • “Board visibility on this one – need extra conservative approach”

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Relationship History

Past interactions influence current negotiations.
  • “Existing customer for 5 years, generally reasonable”
  • “First deal with this company, setting precedent”
  • “Previously difficult negotiator, expect pushback”

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Internal Constraints

Sometimes you have non-negotiable internal requirements.
  • “Legal approved standard terms – no deviations without escalation”
  • “Insurance requires minimum $5M coverage”
  • “Company policy prohibits uncapped liability”

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How to Layer Context Effectively

Start broad, then get specific. Here’s the right order: 
1. Party and document type
2. Industry and regulations  
3. Leverage and relationship
4. Specific constraints or requirements
Example of Well-Layered Context: 
We're a Series B SaaS startup (vendor) reviewing an MSA from a Fortune 500 bank (customer).
Industry: Financial services requires SOC 2 and enhanced security terms
Leverage: Low – they have standard paper, we're competing for the deal
Constraints: Can't accept uncapped liability per our insurance requirements
Timeline: Need to respond by Friday

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Context Mistakes to Avoid

  • Too Much Story Don’t include the entire history of the negotiation. Focus only on what affects the current review.
  • Contradictory Context “We have no leverage” plus “Push hard for our terms” confuses the AI. Be consistent.
  • Missing Critical Context Forgetting to mention you’re in healthcare when reviewing a BAA makes the output useless.
  • Assuming AI Knowledge The AI doesn’t know your company’s standard positions unless you tell it. Don’t assume context.

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Context for Special Situations

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Multi-Party Agreements

  • Identify all parties and relationships
  • Clarify your obligations to each party
  • Note any conflicts of interest

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Amendments

  • Reference the original agreement terms
  • Explain what’s changed in the relationship
  • Note any issues from the original contract

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Regulated Industries

  • List all applicable regulations
  • Note any recent enforcement actions
  • Include industry-specific requirements

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Quick Context Checklist

Before sending any prompt, verify you’ve covered:
  • Who you are in this deal
  • What type of document this is
  • Your leverage level (honestly assessed)
  • Relevant industry/regulatory requirements
  • Any specific constraints or must-haves
  • Timeline or urgency factors

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The Context Test

Read your prompt without the document. Could another lawyer understand:
  • Which side you’re representing?
  • What kind of deal this is?
  • How aggressive to be?
  • What regulations apply?
If not, add more context.

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Remember

Context isn’t just helpful – it’s essential. The difference between “review this NDA” and “review this mutual NDA as a startup sharing our IP with a potential competitor, we have low leverage but need strong confidentiality protection” is the difference between generic advice and useful, actionable guidance. The two minutes you spend adding context saves twenty minutes of revision later.