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.
5 thoughts on “What Kind of Change Should We Seek in Contracts?”
Thanks for picking up on this.
As you know, we agree on many points. However, I need to correct the way you have interpreted the point on complexity. Nowhere do I deny that many deals are complex. What I suggest is that the role of the professional is increasingly to use advanced methods of communication to ensure that innate complexity is, so far as possible, conveyed in a simple form, understandable to users of their product.
In the case of contracts, it is incumbent on us to recognise that most people involved in implementing or managing those deals are not lawyers. That’s the point behind the work of people like Shawn Burton and many others who are on the path to simplification.
The factor you don’t mention but which is fundamental to change is automation. Digitisation is an increasing reality and business leaders do not view it as optional. Traditional contract practices are simply incompatible with digital processes and therefore they will change – indeed, are changing. Those ‘curated standards’ are starting to happen, both within organisations and across industries. I know that because at IACCM we are already working with Governments, major corporations and NGOs on developing these new approaches.
Simplified and standardised wording – ideally using your style guide – is one element of the solution. But there are other key elements, such as a readiness to accept that the written word is only one form of communication and that technology is going to enable much more versatile and user-centric production. This is not a matter of personal opinion; it’s a statement of reality – as illustrated in my blog earlier this week on the transformation occurring in contract management more generally.
Exciting times for those like you and I who have been advocates for change over so many years!
Hi Tim. I agree that it would be a good thing if contracts were seen as less of a legal function. That’s something I discuss in this 2011 post: http://www.adamsdrafting.com/what-part-of-the-contract-process-if-any-requires-a-lawyer/.
I do use the word “automated” in referring to curated templates: technology is an essential part of the process. But it’s a rather ho-hum kind of technology. That’s because the task of coming up with sensible templates requires old-fashioned humanoid expertise. Beyond that, evidently some contracts will contain a programmable element. But I don’t see artificial intelligence getting us out of the mess we’ve made.
I’ll be sure to read your post from earlier this week.
Ken, like you I read Tim’s comment about you bowing to traditional thinking as a comment about the substance of deals and whether they should be complex. From Tim’s comment in this thread, it seems he accepts that deals are sometimes complex, and he was focussing more on how the complexity should be communicated to non-lawyers. Perhaps he could have communicated his point better.
It seems to come down to not relying [just?] on traditional contractual documents with words. I accept that some business people are not good with words and that we all take in information in different ways. It amuses and frustrates me, for example, that accountancy firms sometimes use Powerpoint and spreadsheets as their preferred media for detailed text documents that would be much better placed in a Word document. I put this down to a different mindset that instinctively prefers figures or images to words
I am all for using flow-charts, examples, diagrams, etc where relevant to assist understanding, but ultimately a deal is based on words and the binding deal needs to be expressed in words. It would be great if business people simplified the substance of their deals, but often they don’t have an appetite for the hard work involved or for taking responsibility for decisions about not covering off hypothetical risks (which is where some of the complexity in contracts comes from). Am I alone in thinking that Tim’s approach sometimes sounds like commercial managers are victims of big bad lawyers, rather than the people who instruct and pay them and who should be perfectly capable of directing them in whatever way they want?
I endorse this comment.
Ken is right, Tim is right. In reviewing draft requirements I also look for simple language to describe the intended outcome, and how we will deem it to be complete. Sometimes requirements and interfaces are extremely complex and unavoidable. How we describe them need not be? To me, its about clarity. What are we trying to achieve? How do we know when we don’t have it? Or if we do? I often advocate for language in specifications that describes exactly what completion or acceptance of a task or deliverable will entail. IE’ the design report is deemed to be 50% complete upon written acceptance of the owner’s representative’. If engineering wont let me do that, I will insert what I need to in the sections engineering doesn’t own, like the scope of work section. The key of course is to ensure that the requirements to be contained in said report are clearly described, and, prior to commencement of the obligations, both parties understand exactly what it is they will do. Otherwise, how can you pay for the deliverable? How can you refuse?