Today a reader suggested to me that lawyers “use complexity as a comfort blanket.” That got me to thinking about what makes contracts complicated.
First, what does “complexity” mean? I suggest it can mean two things. First, that something is sufficiently technical that it requires special training to be able to understand it. And second, that something has sufficient moving parts that it’s a challenge to keep track of them.
Contracts certainly have plenty of the first sort of complexity. With many contracts, I wouldn’t have the slightest idea what’s going on.
Regarding the second sort of complexity, this paper by John C. Coates IV suggests that M&A contracts have grown over time, and for legitimate reasons: to address new legal risks, express innovative deal terms, and cover basic issues (such as forum selection) somehow not covered earlier.
That complexity happens at the macroscale. At the meso- and microscale, not so much. Complexity suggests deliberate intent, even if the complexity is unhelpful. (Often enough complexity impedes progress.) By contrast, at the meso- and microscale, the process of deciding how to express a transaction is unwitting. One might even say witless. And the result is not complexity but obfuscation.
Given that I’ve spend many years demonstrating that traditional contract language is massively dysfunctional, you’ll just have to take my word on that. But at the mesoscale, the dysfunction is substantive too. For example, the concept known as “double materiality” is a fixture in M&A. It’s also bogus, as I explain in this 2013 blog post. And the “successors and assigns” provision is a provision looking for a purpose; in this 2013 article I explain why I’ve junked it.
The main factor driving the obfuscation is the precedent-driven nature of transactional work combined with use of word-processing to draft contracts. The result is that many contract drafters are little more than copy-and-paste monkeys. (See this blog post for more on that deathless phrase.)
But here are some other factors:
- Aversion to Risk: Which of these five words should I use in this sentence in a contract? I’m not certain of the implications of using or not using those words, and I’d rather not run the risk of getting into trouble for leaving one out. So I’ll use all five. And do I want to remove that provision I never understood? Nah—why should I stick my neck out?
- The Wizard Effect: And if I use those five words, that makes everything harder to understand. That makes me all the more valuable as a guide through this treacherous landscape. (I’m not suggesting there’s any malicious intent underlying this.)
- The Herd Effect: I’ve found the M&A bar to be particularly wary of breaking rank. It would appear to be a function of peer pressure. (See this 2016 blog post for more about the role of peer pressure in inertia.) One result is that stuff that doesn’t make sense is more likely to stay in the contract anyway.
- The Need to Appear Useful: If a lawyer isn’t able to contribute to the business or finance side of negotiations, their role is limited to “the legal stuff.” It wouldn’t be surprising for a lawyer in that position to play up the importance of the relevant issues. The result is negotiation theater (see this 2014 post) and its drafting equivalent.
- The Billable Hour: If the billable hour doesn’t encourage lawyers to draft longer contracts, it certainly doesn’t encourage them to make them shorter.
So the problem isn’t complexity, it’s obfuscation.