Law firms could take a number of steps to put their contract drafting on a more rational footing. They could adopt a contract-drafting “house style” that recommends usages to employ and usages to steer clear of. They could offer rigorous training. And they could implement a centralized template initiative, maybe even one that makes use of document-assembly technology.
But in the course of giving in-house seminars at law firms in the past couple of weeks, I was reminded of the obstacles that law firms face in implementing such measures.
“Our workload is too varied and unpredictable”
It’s likely that any given law firm is called on to draft a broad and unpredictable range of contracts. Some of those contracts might relate to transactions that the law firm handles routinely; others might relate to transactions that come along only sporadically. (By contrast, a company that sells widgets can expect to use a limited set of templates hundreds or thousands of times a year, with those transactions representing the bulk of its contract load.)
The broad range of contracts a given law firm is asked to draft doesn’t preclude a centralized template initiative. Instead, it goes to the cost-benefit analysis. The odds are that any given law firm drafts some kinds of contracts often enough to warrant some measure of commoditization. That might be limited to preparation of annotated templates in Word, but something more elaborate would probably be called for, such as the document-assembly tool QShift. Or even DealBuilder, which the biggest U.K. firms and an increasing number of U.S. firms are using. That’s because any law-firm template would likely be used in a different kinds of transactions for different clients, so you’d want to have built-in adaptability.
For a template initiative to have a real impact, a firm would have to commit meaningful resources to creating it and, just as importantly, maintaining it. On the other hand, you don’t want to go overboard, as it would be fatal to outstrip your lawyers’ appetite for change.
“Our rainmakers don’t want to subsidize other partners’ contract drafting”
The way law firms are structured, with partners acting as separate profit centers, can hamper rigorous template initiatives. Any given partner might bridle at the firm’s devoting resources to such an effort, in that doing so would represent an unduly liberal spreading of the wealth. Companies are less subject to such constraints.
How this would play out would depend on the firm. Some firms are resolutely eat-what-you-kill; others are more all-for-one-and-one-for-all.
“Our star associates don’t want to draft templates”
At law firms, deal work tends to take priority over work on practice-management initiatives. Even if associates are given billable-hour credit for time spent preparing template contracts, it’s likely that they’ll think that that sort of work isn’t where the action is, as compared with doing work that generates revenue, namely deal work.
Perhaps the best way around this would be to use practice-support lawyers. They’re a standard feature of U.K. firms, but they’re not much in evidence at U.S. firms.
But just because a firm has a transactional PSL on staff, it doesn’t mean that the PSL is engaged in drafting templates as part of a centralized drafting initiative. For example, I’ve spoken with one New-York-based PSL whose role seemed to be limited to performing miscellaneous stray tasks.
And it isn’t enough to simply hire some deal lawyers and call them PSL lawyers. Compared with doing deals, working on practice-management initiatives requires a different set of skills and a different temperament.
“Our partners don’t want anyone telling them how to draft”
Adopting a drafting “house style” or implementing a centralized template initiative would only work if most partners supported it. And supporting it would involve the partners’ sacrificing a significant measure of autonomy in how they draft contracts. That would likely be a hard sell: most lawyers think they write well (that’s something I discussed in this post), and by extension partners tend to think highly of their drafting skills.
You could attempt to overcome this obstacle by gently suggesting to your partners that contract drafting is more complex than they imagine and is ripe for commoditization. (Slip them a copy of the second edition of MSCD!) And you could also suggest that treating contract drafting as a craft rather than a commodity hampers competitiveness and ensures a mediocre product. Try to put a dollar figure on the benefits of change—that has a wonderful way of concentrating the mind.
“We do our own training in contract drafting”
In this article I discuss who is best equipped—law-firm partners or outside experts—to provide CLE training in contact drafting. You won’t be surprised to hear that I think an outside expert can provide valuable perspective.
But even if you bring in an outside expert, some awkwardness remains. Unsurprisingly, senior lawyers don’t have the time or inclination to participate in my seminars, even though most of what I have to say would come as a surprise to them. Junior lawyers who attend my seminars always ask how to deal with the partner who asks them where on earth they got their newfangled ideas; I discussed that in this post. That’s why it’s good to get even a modest measure of institutional buy-in.
On a related note, I was recently reminded how Jones Day had—and might still have—on call a writing expert, Jane Richmond. Lawyers would send her a draft and she’d get back with her comments. When a major law firm engages someone to serve in that sort of capacity with respect to contract drafting, that will be a sign that we’ve started to move beyond the drafting-as-craft paradigm.
“Do we have the necessary expertise?”
The dysfunctional state of mainstream contract drafting means that it would be rash for any given firm to assume that its lawyers—and in particular its associates, who would do the bulk of the work—are capable, on their own, of compiling a house style for contract drafting or producing clear, efficient, and rigorous templates. I suspect that not many law firms are prepared to recognize that.
“I’m not sure we have the stomach for such initiatives”
Looked at cold-bloodedly, it should be something of a waste of resources for individual law firms to attempt, in splendid isolation, to put their contract drafting on a more rational footing.
Assisting clients with strategy and negotiation is where deal lawyers add value. By contrast, there’s nothing proprietary about coming up with the verbiage to reflect the deal, as any given deal closely resembles countless deals that have preceded it. That’s perhaps the core reason why law firms tend to be half-hearted about template initiatives and why such initiatives tend to die a lingering death.
It would make sense for law firms to outsource preparation of templates to a vendor offering a library of state-of-the-art annotated document-assembly templates. That might sound outlandish, but outsourcing of that sort already happens—witness, for instance, use of the ISDA master agreement.
Expanding such outsourcing to cover a broad range of business contracts and entity organizational documents would be a simple matter from the standpoint the technology, rigorous drafting usages, and transactional expertise required. Using such a service would provide junior lawyers with ongoing exposure to rigorous contract language and, by means of annotations, ongoing training. As a result, they’d be better prepared to do whatever additional drafting is required. But more to the point, such a service could boost profitability by allowing for premium billing and by allowing more work to be squeezed into a finite number of hours,
Of course, no such service exists. The principal obstacles are cultural, but they’re imposing ones. I expect that in coming years we’ll see whether they can be surmounted.
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This means it contains general terms and conditions (such as provisions relating to payment netting, tax gross-up, tax representations, basic corporate representations, basic covenants, events of default and termination) but does not, by itself, include details of any specific derivatives transactions the parties may enter into. The ISDA Master Agreement is a pre-printed form which will not be amended itself. However, it also has a manually produced Schedule in which the parties are required to select certain options and may modify sections of the Master Agreement if desired. The Master Agreement would be modified to the extent the modification is mentioned in the Schedule.