What Kind of Change Should We Seek in Contracts?

I noticed that Tim Cummins, head of the International Association for Contract & Commercial Management (IACCM), mentioned in this post on his blog my recent post about GE Aviation’s template initiative (here). I’m pleased that Tim thought it worth his time to read it. Three thoughts:

Some Stuff Is Complex

Tim again lumps me with traditionalists, saying, in referring to me, “he also bows to traditional thinking when he suggests that because contracts deal with complex matters, they must therefore themselves be complex.”

Generally, Tim should ask some traditionalists what they think of my writings. No bowing is involved! Just to be clear, I don’t say in my post that all contracts must be complex. Instead, I say that contracts are necessarily as complex as the transactions they express, and plenty of transactions are complicated, so it’s unrealistic to expect that you can make all transactions, and therefore all contracts, simple enough for a high-school student to understand. I think that’s a pretty mild statement to make, and I arrived at it based on my own experience. I’d be interested to hear what others think.

Could transactions be simpler? Doubtless. But you have to distinguish complexity from obfuscation. We live in a complex world, and some transactions have complexity baked into the deal terms. It’s not something grafted on by cunning lawyers.

Why Obfuscation Persists

Tim suggests that obfuscation in contracts is a result of the legal profession’s tendency to operate as a guild rather than a competitive market. I’m willing to believe that’s a factor, but another powerful force is simple inertia.

Contract drafting currently relies on what I call “passive drafting”—you draft contracts by copying, on faith, from precedent contracts of questionable quality and relevance. Incoherence in a contract can get endlessly replicated without any venality on the part of the drafter. Improving your contracts requires dismantling and retooling them. That’s challenging if the deal machinery is whizzing around at a thousand revolutions per minute.

What’s the Fix?

Like me, Tim is eager to rid transactions of the dead weight of traditional contract drafting. But he wants drastic change, whether it’s in the form of “emojis, text-talk, graphics and videos” or (according to this 2015 post) “programmable contracts.” For most of the transactional world, those solutions are unrealistic to the point of being irrelevant.

That’s why I aim for something more practical but nevertheless revolutionary:

First, draft contracts using prose that complies with a comprehensive and rigorous set of guidelines. (I wrote A Manual of Style for Contract Drafting with that in mind, and I think it now fits the bill.)

And second, create a library of automated, customizable, and annotated templates of commercial contracts, so people have a convenient and cost-effective alternative to passive drafting. With a curated set of templates, you could address many different deal scenarios; you could strike a suitable balance between explicating the deal and achieving party objectives, on the one hand, and legalistic risk-aversion, on the other hand; and you could ensure that clear, concise, and consistent prose is used throughout.

Let’s see how that second task goes.

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.