Earlier this month I felt compelled to respond to a critique by Tim Cummins of an article I had co-authored. (See this post.) Tim is head of the International Association for Contract & Commercial Management (IACCM).
Since it’s safe to assume that Tim won’t be inviting me over for tea any time soon, there’s nothing preventing me from now commenting on a more recent post on his blog, one entitled “Why Redesigning Your Contracts Is So Important” (here).
The thesis of Tim’s post is simple: As currently written, contracts are bloated, unnecessarily legalistic, and confusing. That makes them hard to read, and it leads to disputes. Tim wraps up his summary of the current state of play by observing as follows:
So my question is this. Given the frequency with which parties disagree over their contracts, why is it that we still believe that today’s approach offers an effective or efficient process for creating and recording agreements? Why do we think that generally accepted, legally-driven methods actually deliver optimum value to our business? Is it simply that we are scared to challenge tradition or are we failing to explore alternatives?
That leads Tim observe that “At last we are seeing the emergence of truly disruptive technology.” He waxes lyrical about “programmable” contracts, pointing to this post on the blog of a company called PactSafe. Here’s the business end of the PactSafe post:
- a contract knew who the parties were, and where they are located, automagically
- a contract, and all of its provisions, were connected to your core business systems, and assembled themselves based on what those systems communicate to them (self assembling)
- a contract was able to monitor obligations, rights, representations and warranties in real time (self monitoring)
- a contract was able to change its provisions to better deal with risk over time based on historical performance data (self healing)
- a contract could automate performance of certain contractually required performance issues (self performing)
- a contract could lets [sic] you live in a matrix-like robot utopia (just kidding, contracts can’t do that silly)
Now that would be pretty cool. And its [sic] really not that far fetched.
Tim says that it’s “of tremendous significance” that programmable contracts “will force a very different approach to the way that contracts are assembled,” that “to be programmable, a contract really will have to be complete and avoid doubt.”
He then goes on to talk about the importance of “redesigning” contracts, through incorporating visual elements and, presumably, using technology of the sort that prompted his post. He concludes as follows:
Ultimately, redesigning contracts is important because contracts themselves are important. They must address the needs of today’s more complicated business environment and recognize that the world of instant information via portable devices demands a radical shift in conventional thinking.
Given that my own work is based on the notion that traditional contract drafting is dysfunctional, I’m not about to suggest that Tim’s critique is unjustified, although I would quibble with some details. And including “visualizations” such as flow charts in contracts can be useful.
Instead, what I find disconcerting is how Tim writes off what I’d call “text-based” contracts and appears to hitch his wagon to technology such as programmable contracts. I see three problems with that.
First, Tim makes a big deal out of that PactSafe blog post. It’s a bit of speculation that can’t reasonably be used to augur a new order in contracts. I’ve seen nothing to suggest that programmable contracts will become a reality in commercial contracting any time soon.
Second, whatever the ways in which information technology is used to make contracting more efficient, the terms of the deal will ultimately be devised by us humans. Unless we articulate deal terms more clearly, feeding them into technology will only create a garbage-in, garbage-out problem.
And third and most importantly, Tim’s approach reminds me of a mother who declines to accept medical attention for her sick child, preferring instead to put her faith in divine providence.
That’s because the current dysfunction is hardly immutable. Clearer contracts are within reach of any company that is sufficiently interested. After all, we have guidelines for what constitutes clearer, more modern contract language. (I should know—I wrote them!) And the notion of companies using a style guide to ensure consistent usages across its contracts is catching on. (Go here to see my post about the Adobe Legal Department Style Guide.) Furthermore, automated contract creation, using ContractExpress or comparable software, offers companies a way to scale clear and modern contract language—we don’t have to pin our hopes on speculative technology.
So companies have available a framework for greatly improving their templates. If you secure suitable expertise, the work required can be done quickly and cost effectively. The biggest obstacle is simply inertia. In that regard, Tim’s constant blame-the-lawyers refrain is a cop-out. Generally, the lawyers responsible for a company’s commercial contracts are in-house lawyers. If companies can’t ensure that their lawyers bring a more modern approach to bear on contracts, companies have no one to blame but themselves.
So improving contract language is achieved by grappling with intricate detail. But in his writings, Tim has instead demonstrated a preference for generalized exhortations to do better. This latest post offers just another example of Tim’s bemoaning the current order and offering in exchange only pie-in-the-sky.