Regular readers of this blog will know that I’m a fervent booster of using document assembly to draft contracts. I keep banging on that drum for two reasons: First, document assembly represents the only way to put mainstream contract drafting on a rational footing in terms of economics and quality. And second, every so often I see a clear sign that document assembly is continuing to creep out of the tech ghetto and into the mainstream.
The latest such sign is the WSGR term sheet generator, a free online service offered by Wilson Sonsini, the prominent Silicon Valley law firm. (I learned about it first from Ron Friedmann’s Strategic Legal Technology blog.) Here’s how Wilson Sonsini describes the WSGR term sheet generator:
This tool will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents.
The WSGR term sheet generator is an exercise in marketing. Wilson Sonsini isn’t really offering substantive expertise, as there’s no mystery to the components of venture-capital term sheets. Instead, they’re making it much easier for entrepreneurs and dreamers to rig up a basic term sheet that covers what it should and is internally consistent.
What does Wilson Sonsini get out of that? For one thing, great marketing exposure. And any serious entrepreneurs and VC types who use the term sheet generator might be favorably inclined to retain Wilson Sonsini. In this regard, Wilson Sonsini is simply following the lead of Linklaters, which has for a number of years offered a term sheet generator for bank lending.
What do Linklaters’ and Wilson Sonsini’s systems have in common? Both are powered by DealBuilder, developed by Business Integrity. Regular readers will be aware that I’ve long been a fan of DealBuilder. The fact that Wilson Sonsini elected to use DealBuilder for the WSGR term sheet generator can only serve to reinforce DealBuilder’s reputation as the market leader for logic-driven document assembly.
Despite the limited aims of the WSGR term sheet generator, it has some broader implications. From the perspective of the user, the only difference between the term sheet generator and a document-assembly questionnaire for drafting a contract is the number of questions that you’re asked. If you think that the WSGR term sheet generator results in greater efficiency, consistency, and quality, you’d reap those benefits, but to an exponentially greater extent, with a document-assembly system for contract drafting.
But two obstacles stand in the way of moving from something like the WSGR term sheet generator to a broad-based document-assembly initiative for drafting contracts.
For one thing, contract language is very different from the bullet-point nature of term sheets. The language of mainstream contract drafting is dysfunctional, so anyone using document assembly for contract drafting faces a serious garbage-in, garbage-out problem.
And to be game-changing, a document-assembly system would likely have to be hosted not by a law firm but by an independent vendor.
To really reap the benefits, you would want to take the answer file for the term sheet as the starting point for drafting the contracts. That would be a huge gain in efficiency.
I am not sure I understand your last point that to be game-changing the system would have to be hosted by an independent vendor.
Doug: Sorry for being cryptic, but I didn’t want to use this post as an excuse for getting on one of my hobby-horses. But since you ask, here’s a relevant paragraph from the “Dysfunctional Drafting” article that I link to in the post:
And even if a law firm does implement such a system, it’s likely that it would make the system available only to its clients rather than to the world at large.
So economies of scale plus a broader potential audience mean that an independent vendor represents a more likely route to bringing broad-based, high-quality document assembly for contract drafting to the legal market.
Ken
Ken,
I'm new to your blog so forgive me if you've covered this elsewhere, but I'd like to hear your thoughts on the role of conflict of interest issues in keeping law firms relatively small–and thus from enjoying economies of scale. I've thought for some time that for a firm to have a large enough market to enable it to profitably automate and standardize its contracting processes, it would need to be free from conflicts of interest rules. Therefore, an independent vendor that doesn't form an attorney-client relationship with its customers is the only type of firm that could bring "broad-based, hight-quality document assembly for contract drafting to the legal market."
Brian
Your last comment, Ken, is in line with Richard Susskind’s in his new book, “The End of Lawyers?”
John
Ken, what is your feeling toward, and how does this relate to, standardization initiatives? Let’s face it: true efficiency lies in standardization. Ask the people who now use the ISDA swap agreements, or any maritime lawyer employing the world standard ship chartering (leasing) documents that have been around for eons. Even your standard form residential house sale agreement is an example. I have long felt that where “market” terms exist, document standardization should be easy, and that it really is only the preservation of lawyers’ incomes that stand in the way of true efficiency. We don’t need a building block approach, we need a researched collection of the market provisions in a sector or industry that leads to the development of stnadardized documents.