Contract Drafting and the Tragedy of the Commons

You’re familiar with “the tragedy of the commons,” right? Individual users have open access to a resource. In using that resource, they’re unconstrained by formal rules or shared social structures, so each user acts independently according to their own self-interest. But that’s inconsistent with the common good, because through their uncoordinated action, users deplete that resource. Hence the tragedy.

The tragedy of the commons has played out endlessly over the centuries, which is why we’re destroying our planet. But let’s look at my little corner of the world. According to Wikipedia (I’m not attempting profound scholarship here), “In the past two decades, scholars have been attempting to apply the concept of the tragedy of the commons to the digital environment. However, between scholars there are differences on some very basic notions inherent to the tragedy of the commons: the idea of finite resources and the extent of pollution.”

When it comes to contracts, we’re not dealing with a finite resource. Instead, the issue is pollution. Again, Wikipedia: “In terms of pollution, there are some scholars that look only at the pollution that occurs in the digital environment itself. They argue that unrestricted use of digital resources can cause an overproduction of redundant data which causes noise and corrupts communication channels within the digital environment.” I think the second sentence neatly captures the copy-and-paste world of contracts.

So what do we do about it? In the opening paragraph of this post, I say that the tragedy of the commons is defined by the absence of formal rules and shared social structures. I like to think we now have formal rules for contract language, namely A Manual of Style for Contract Drafting.

But formal rules don’t get you anywhere without shared social structures. The good news is that in the digital environment, you don’t have to replace the polluted resource. Instead, you can create a parallel resource, leaving the polluted resource for whoever wants it. But consistent with the tragedy of the commons, creating a viable parallel resource is beyond the reach of any one user (whether an individual or an organization). It’s even beyond the reach of volunteer users who band together, because they’re unlikely to have the necessary expertise. That’s why crowdsourcing is unlikely to ever create a reliable and abundant parallel resource.

In the past 20 years, I’ve only encountered one other person in 20 years who has been willing to think seriously about creating a reliable and abundant parallel resource. It appears that those calling the shots in the contracts ecosystem are unwilling to rethink what contracts should look like. That would require expertise and content—both old-fashioned, labor-intensive notions. And it would require change, which is especially scary. So instead, the legal profession looks to technology to save the legal profession from itself. Hence the current artificial-intelligence-and-contracts frenzy. But even in the best of circumstances, AI can only help you understand messy contracts. It isn’t a route to clearer, more reliable, more cost-effective contracts.

The only solution is to circumvent the tragedy of the commons by rethinking incentives. What incentive might encourage someone to build a parallel contracts resource? And what incentive might encourage users to switch to the parallel contracts resource?

Some unsolicited feedback I received from a reader yesterday offers an answer to those questions:

I think your Contract Boilerplate page is beneficial. I would pay to have access to a reliable clause bank, which might be easier to develop than a full-fledged template library because of the uniqueness of different types of agreements. A quick comparison between your clauses and the ones offered in Practical Law’s clause library is night and day.

If you offer users a resource that saves them enough time and money and offers them much better quality, some of them will be rational enough to be willing to pay for it. It follows that anyone who builds a suitable resource would make money doing so. It’s not complicated, but it requires longer-term thinking than that required for tech-driven solutions.

So I’ll continue looking for anyone who wants to join me in building a parallel contracts resource.

(I’m at the stage where I say the same thing umpteen times. For a slightly more detailed exploration of my parallel contracts resource, see this April 2022 post.)

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.