Just in time for Christmas, the January–February 2018 issue of the Harvard Business Review offers us a lump of coal in the form of an article entitled The Case for Plain-Language Contracts (here). It’s by Shawn Burton, general counsel of GE Aviation’s Business & General Aviation and Integrated Systems businesses. It describes “a three-plus-year effort to promote plain-language contracts at GE Aviation’s digital-services business.” That effort started in 2014.
The premise is unobjectionable: “For the most part, the contracts used in business are long, poorly structured, and full of unnecessary and incomprehensible language.” Sure, using clearer language in contracts allows you to save time and money, be more competitive, and avoid assuming unnecessary risk. And no doubt overhauling the contracts used by GE Aviation’s digital-services business yielded many benefits. But as a guide to how to make business contracts clearer, this article ill-informed.
First, the article is unrealistic in the standard it sets: “If a high schooler can’t understand the entire contract, it ain’t good enough.” Contracts are necessarily as complex as the transactions they express, and plenty of transactions are complicated. Perhaps the transactions that GE Aviation’s digital-services business enters into could indeed be understood by a high-school student, but it’s misleading to suggest that that standard could be applied broadly. I discuss that in this recent blog post. Furthermore, it appears that the resulting template clearly flunked the high-school-student test in at least one respect, as I discuss below.
Second, the article lumps risk assessment and relevance in with clarity. The starting point for Shawn’s initiative was seven templates. The average length was 25 pages; the longest was 54 pages. Boiling them down to one five-page contract must have involved cutting provisions wholesale. That goes beyond saying stuff clearly.
And third, Shawn’s approach is that of someone who hasn’t been immersed in commercial contracts. (Until he became GC in 2013, he worked in labor and employment.) The article mentions by way of background plain-language initiatives that have nothing to do with contracts. And it appears from this GE report that for guidance, Shawn consulted authorities on general legal writing, presumably works such as Richard Wydick’s Plain English for Lawyers:
Burton [then general counsel of Digital Solutions] harked back to his law school days when he studied Plain Language, a way to condense the written word to the clear basics. He dusted off his textbooks and, with the help of his GE language commandos, used it to write a new contract.
That’s not promising. Contract language is limited and stylized, and often a lot is at stake, so contract language is subject to considerations very different from those that apply to, say, litigation writing and memo writing. Furthermore, I can think of a handful of directly relevant works Shawn could have consulted. (Let’s not be coy—what I really mean is that he could have consulted A Manual of Style for Contract Drafting.)
Shawn’s naiveté is on display in the examples of the reworked contract included in the article. Here’s one sentence, described in the article as “containing 13 very understandable words”:
During the contract term, we will comply with all of our legal obligations.
Leaving aside use of the first person and, it follows, use of will to express obligations, I suggest that “During the contract term” is expendable: unless it’s specified otherwise, a contract provision necessarily applies only during the term of the contract. (For more on that, see MSCD 13.254 or this 2007 blog post.) And “all of our legal obligations” appears to be an awkward way of saying you’ll comply with the law. For one thing, the word obligations is so associated with contracts that some readers might assume that this sentence refers to contract obligations.
Here’s another “after” extract:
Your and our total compensation obligation under this contract cannot exceed twenty-five percent of the amount FES has billed you in the last twelve months for the applicable service, and neither of us have any compensation, contribution or other obligation for consequential, punitive, incidental, indirect or exemplary losses (including, but not limited to, profit or revenue loss, capital costs, replacement costs and increased operating costs).
It raises a number of questions:
- “Your and our total compensation obligation”? What a wretched buried-verb combo! See MSCD 17.7. Say instead something like “Neither of us is required to pay”.
- Does “Your and our” mean that the limit applies to the aggregate of the, uh, compensation obligation of both parties? Or does it apply to each party’s compensation obligation considered separately?
- Why “cannot exceed”? The word cannot expresses physical or mental inability; that’s out of place here. See MSCD 3.293. As always, the question is, What category of contract language should this be? See MSCD chapter 3.
- Why use words to state these numbers? See MSCD 14.1.
- So the GE Aviation entity is referred to using both “FES” and the second person (“our”)? A basic rule in contracts is that you shouldn’t say the same thing two different ways, as that invites confusion and gives the reader more work to do.
- Using “including, but not limited to,” is a bad idea. See MSCD 13.353 or my recent article with Vice Chancellor Laster of the Delaware Court of Chancery, When Contracts Seek to Preempt Judicial Discretion (here).
- Regarding “consequential, punitive,” and so on, any high-school-student exposed to that would be rendered a gibbering wreck. Such limitation-of-liability incantations are a strong candidate for most-misunderstood contract provision, commercial-contracts category. I recommend doing something different. See MSCD 13.161 or this 2010 blog post. Shawn’s article says that the law firm Weil vetted the new template; it so happens that Glenn West, a Weil partner, is author of the article on the pitfalls of the standard “consequential damages” litany (here).
- Black’s Law Dictionary says “exemplary damages” means the same thing as “punitive damages”: why include synonyms in the litany?
Here’s the third “after” extract:
If an arbitrator finds that this contract was breached and losses were suffered because of that breach, the breaching party will compensate the non-breaching party for such losses or provide the remedies specified in Section 8 if Section 8 is breached.
It raises the following issues:
- The “after” version is described as “clearer and much more concise.” That’s not so—instead, it’s entirely different! The provision it replaces is a clunky indemnification provision that in effect says that the customer will be liable if various matters arise, regardless of whether the customer was somehow at fault. The “after” version just says that the breaching party will be liable for breaches.
- Why bother saying that that the breaching party will be liable for breaches? That’s the way contract law works, whether or not you say so in a contract.
- Use of the term “non-breaching party” can have unintended consequences. See MSCD 2.123.
- Using such instead of those is a hallmark of dysfunctional traditional drafting. See MSCD 13.179.
- Using a capital S in the word section in cross-references is inconsistent with the recommended practice in general English usage. See MSCD 17.34 and The Chicago Manual of Style.
The moral of this story is that optimal contract language requires more than enthusiasm. “Better” is easy; “best” requires serious application. If that weren’t the case, I’d feel a bit of a chump for having devoted much of the past 20 years to researching the building blocks of contract language.
This isn’t the first time I’ve encountered a company that has ingenuously patted itself on the back for having overhauled a contract. See this 2014 blog post for my critique of IBM’s cloud-services contract, which had been rolled out with some fanfare. On rereading that post, this caught my eye: when it comes to contract language, “If you’re not a specialist, you’re a dilettante.”
So I find myself in the unusual position of taking issue both with traditionalists (most recently in this post and this post) and with people who think they’re at the forefront of the push for clearer contracts. In both contexts, my message is the same: contract language is tricky, and a lot is at stake, so for optimal contract language you need standards.
That I’m the author of the only comprehensive set of guidelines out there—A Manual of Style for Contract Drafting—doesn’t mean I’m writing this in a fit of pique. Promoting one’s ideas requires pointing out the shortcomings in other ideas, particularly when they’re broadcast from atop a soapbox as prominent as the Harvard Business Review.
(This isn’t the first time I’ve written about GE Aviation’s effort; see this blog post from earlier this year.)
16 thoughts on “Optimal Contract Language Requires More Than Enthusiasm: My Critique of Shawn Burton’s Article in the Harvard Business Review”
I applaud your nous, Ken, on taking on the “establishment”. Talk about “equality before the law”- good on you for holding everyone accountable.
Thanks, Melissa. On reflection, I’m not sure there’s an “establishment.” Broadly speaking, there are traditionalists and there are law firms and companies open to doing things differently. I’ve offered critiques of drafting in both groups.
It does require a bit of nerve to offer this sort of critique. I’m sure Shawn Burton thought he was doing his bit for the legal profession with his article; he probably won’t be thrilled to see that I’ve challenged him. But an efficient marketplace of ideas requires candor, and that’s what I attempt to offer. The test, for me, is whether what I say makes sense, and whether I’ve avoided being a jerk. I can’t also take bruised feelings into account.
I’m able to continue doing what I do because enough companies and law firms realize that I’m not out to get anyone, that I’m simply trying to show people the value of a rigorous set of standards for contract language.
I agree, Ken. To come out with the best outcome, we need robust debate. I’ll be interested to see whether Mr Burton engages.
Keep up the good work
Neatly put, and without rancour. (Or if there is a bit, it’s well restrained.) Shawn Burton’s defence/defense would be interesting, I’m sure. Perhaps you’re a bit tough on ‘such’, which can be useful to make a back-reference specific (though I know many disagree). You mention that one clause is not so much ‘clearer and more concise’ but completely different in meaning. Is that perhaps also true of the whole revised contract? In other words, is it less of a translation effort and more of a wholesale updating and reworking that has ditched a lot of outdated stuff? The new thing may not be as concise and clear as you’d like, but could you say whether you think it would be good enough to achieve its intended goal of being effective between the parties or, if it came to it, in the courts? Or would some of the text be so poor as to lead to trouble between the parties and derision from the judges? The examples of not-so-good drafting you offer don’t seem to tick those boxes, though I’m no expert on contract law.
Hi Martin. It’s rare that a target of one of my critiques gets back to me. Mostly, there’s little they could say.
Yes, I expect that the new GE Aviation template is for the most part an entirely new document. That makes the idea of “before” and “after” comparisons of uncertain value.
Is the new template “good enough”? For reasons I discuss at https://www.adamsdrafting.com/good-enough-and-stratification-of-the-legal-market/, it doesn’t make sense to accept dysfunction in templates on the grounds that the templates are good enough. And it certainly doesn’t make sense to offer “good enough” as a model to emulate.
As regards problems the new template might pose, I can’t offer an opinion without seeing the entire document. But people get into fights over traditional limitation-of-liability language, and that might happen in this case. More generally, the risk of dispute isn’t the only problem posed by dysfunctional language. There’s also time wasted in reviewing, negotiating, and interpreting it.
Ken — you’re the acknowledged expert in this field. I highly respect you and your work, but i disagree with a fundamental premise in your critique. At their core, Contracts are business documents and if they are overly complex and unintelligible, the ability of the business people to understand and therefore meet their obligations is happenstance at best. You are certainly correct that some transactions are complex, but most are not. Having been in the trenches in house for 25 years, i’d hazard a guess that 85% of all transactions are the subject of a normal, run of the mill type: sale, purchase, lease, loan, distribution, NDA, consulting, services, & employment. Even M&A transactions today are relatively standardized with well-known and acknowledged “areas” of discussion. There simply is no need for the turgid and overly lawyeristic jargon in most legal documents. Yet, complexification and ambigufication is the hall mark of many overworked efforts at linguistic mastrubation. We owe our business customers de-complexification and anti-ambigufication — what we in the real world (aka NOT LawLand) call simplification and clarity.
Some of your criticisms are surely accurate, but for the reasons above, and others, I applaud the IBM and GE Aviation efforts to be more relevant to their customers and more focused on the business of business than the business of law.
For many years I’ve deployed a fairly straightforward set of drafting rules (not as comprehensive as your superb Manual, but a bit more deployable in the trenches):
No embedded subsections – use outline format
No legalese (e.g., hereinafter, wherefore, for the avoidance of doubt)
No double negatives
No long sentences
No unusual words where a word in common usage will suffice
Use one word instead of long phrases whenever possible
Limit acronyms & defined terms – and define in context of first use (if you have a definition section, it should be at the back and serve only as an index)
No defined terms in a definition of another defined term
The point of a well-written contract is that the parties understand and agree on obligations and consquences — not to win the argument later in court in a dispute. Lawyers in LawLand often confuse and perhaps equate the latter objective with the former. That’s both a shame and fails to fulfil the true contractual purpose of the customer. After all, the best legal problem is the one you never have.
Hi Jeff. A few points:
I’m not about to guess what proportion of transactions involve complexity that would be beyond the reach of a high-school student. All I know is that in my consulting gigs, I sporadically find myself working on a patent license agreement, say, or a security agreement, where my first order of business is to get a subject-matter specialist to explain to me what the heck is going on. And even confidentiality agreements can contain provisions that can seem mysterious. So the high-school-student standard can’t be applied across the board.
In saying “There simply is no need for the turgid and overly lawyeristic jargon in most legal documents,” you’re referring to dysfunctional prose. That has nothing to do with transaction complexity, which can be expressed clearly while remaining complex.
In my posts I acknowledge that the new IBM and GE Aviation templates are presumably big improvements on what came before. But as I demonstrate, both fall short. I thought it appropriate to say so, seeing as both initiatives were offered to the world as examples to emulate. I don’t want “better,” because that still leaves plenty of room for confusion, wasting time and money, and assuming unnecessary risk. I want “best.”
In both cases, the problem was that those involved underestimated what it takes to draft clear contract language. I suspect that you do too.
Perhaps — but then again, you may well underestimate the value of “best” in light of the cost of bespoke drafting for everyday usage. Companies neither can nor should deploy resources for best, when fit for purpose will suffice. And that’s the very real world in which my team and I live every single day. It’s the very same real world IBM and GE Aviation are adapting to — and while their efforts, like all efforts, can and should continuously improve — better is a step in the direction of best. These efforts, and those like them throughout #NotLawLand should be applauded, not pilloried.
I’m hopping that we can agree to meet somewhere on the spectrum to design “fit for purpose” standards for that everyday use. Best, like zero defects, is a goal, not a destination.
My notion of “best” isn’t some abstraction. It’s readily achievable. I’m not suggesting that what’s required is perfection. Instead, what’s required is that one acknowledge that there are standards for the building blocks of contract language and that one make an attempt to comply with those standards.
The IBM and GE Aviation templates fall short because the people responsible were unaware of the complexities of contract language. It’s not as if we’re talking about elusive expertise. For one thing, MSCD has sold tens of thousands of copies. (Have you read any of it?) And if you google standard contract usages, I crop up alarmingly often.
So the idea of “good enough” doesn’t make sense when applied to contract language. That’s something I discuss in this blog post: https://www.adamsdrafting.com/good-enough-and-stratification-of-the-legal-market/. I also touch on it in this LinkedIn article: https://www.linkedin.com/pulse/what-level-dysfunction-your-contracts-acceptable-ken-adams/.
As regards my pillorying anyone, note how another commenter observed that this post is “without rancor.” Your objection is presumably that I’ve pointed out these shortcomings at all. Well, analyzing weaknesses in contracts can help improve standards of contract drafting. And any organization that offers one of its templates as an exemplar of modern contract drafting can hardly complain if I critique it.
With your two references to the “real world,” you seem to suggest that it’s something I’m not familiar with. In fact, over the past dozen years I’ve given hundreds of seminars, including many seminars to real-world companies during which we discuss their real-world contracts. I do consulting work for real-world companies. And I’ve engaged with hundreds of readers on the subject of their real-world drafting issues. I operate in the real world—that’s what drives my work.
You and I are not going to “agree to meet” anywhere. You’re satisfied with your half-page set of drafting rules, implying that MSCD—all 584 pages of it—is irrelevant. I’m not going to challenge you on that here: MSCD, a couple of thousand blog posts, and dozens of articles have already done that work for me.
I believe that Harvard Business Review has a feature called something like “Defend Your Work” near the front of every issue, where it publishes short critiques of last issue’s articles, and gives the author the opportunity to respond. You might check it out!
Hmm. Interesting idea, but I think I’ll pass. Publishing something there too might seem a little stalkerish. And if Shawn were inclined to respond, he could do so here.
I don’t draft contracts for living, so maybe that lessens the value of my input. I have, however, spent 35 years litigating contracts and examining lawyers and business people involved in their creation. Perhaps that may result in some of these thoughts being of value.
1. Simplicity and ease of understanding are useful objectives for those writing contracts because it helps those who need to perform them understand the what to do and why associated with the contract. And it surely helps those interpreting the contracts if a dispute arises. Perhaps only by coincidence, most simple, easy to understand contracts do not end up in litigation.
2. Lawyers tend to use language that is “legalese.” For example, a discussion about consequential damages implies the author is familiar with the law of the relevant jurisdiction about consequential damages. From experience, this is never true. I have never (at least not that I can recall) examined a lawyer who authored a contract who had read any case law interpreting jargon used in the contract.
3. Examples help illustrate the intent of the parties at the time they actually entered into the contract.
4. It is frequently the case that those who end up “owning” performance of a contract years after it entered had no involvement in its creation. Thus, clarity of who does what by when is critical so that performance neither falters nor is exaggerated.
Separate from these points, I would also like to add that best should never become the enemy of better, just as better should not be a one-time goal. Continuous improvement and constant learning should be in the DNA of every organization. And debates about “best” should be left to college debate teams. In the real world, we should focus on being better, always being better.
Hi, Patrick. Regarding simplicity, I’ll repeat the point I made in my post: a contract can be made as simple as the transaction it expresses, and no simpler.
Regarding making contracts clear, bear in mind that everyone benefits, including those who do the drafting and negotiating: lawyers are among those bamboozled by traditional contract language.
Regarding “better” and “best,” I could have expressed it more clearly. It’s a matter of whether you have standards or don’t have standards. There’s no sign in the IBM and GE Aviation templates of standards for the building blocks of contract language. So it’s all well and good to talk about “continuous improvement” and “constant learning,” but those responsible for these templates ignored an entire body of learning. And they offered their work as examples for us to emulate. As such, it’s entirely appropriate for me to critique them. If the marketplace of ideas is to work, bad ideas have to take a beating.
As regards the “real world,” I assure you that I’m immersed in it.
We may be unique, but here in Michigan we regard exemplary damages and punitive damages as different.
It’s because of that sort of potential for confusion that we’re all better off using terms of art only when really necessary.
A lot of this critique is about useless words,basic strunk and white. That applies whether you use fancy words or simple ones.