[Updated 16 August 2020]
I saw in a discussion on the LinkedIn “Contract and Commercial Management” group a reference to “leaving the law bit to the lawyers.” That got me wondering what, when it comes to deciding the terms of a deal and expressing it in a contract, “the law bit” might consist of.
By my reckoning, the law bit consists of two components:
The Legal Framework
The first component is the framework derived from caselaw and statutory law:
- The default rules that apply if your contract is silent on a given matter (for example, what law governs the contract or when a notice is deemed received).
- What you have to include in your contract for your transaction to work as planned (for example, the investor representations that are necessary if a securities offering is to qualify under a certain exemption from registration).
- What you should include in your contract to protect yourself against the consequences of future violations of statutory law (for example, unlawful disclosure of personally identifiable information).
- What won’t work in a contract because it’s against public policy (for example, an overbroad noncompetition provision or a usurious interest rate).
If this component falls within the ambit of lawyers, it’s because lawyers are presumed to be in the best position to know what the law is (if it’s clear) or figure out what it is (if it’s murky).
Optimal Management of Disputes
The second component is optimal management of disputes. This relates to how you handle governing law provisions, forum selection provisions, arbitration provisions, and other provisions that touch on how any dispute between the parties is to be handled. For example, should disputes under a given contract be handled by litigation or arbitration?
If this component falls within the ambit of lawyers, it’s because lawyers handle litigation and so are assumed to be in the best position to know how to draft a contract so as to handle optimally any dispute that materializes.
The first component might overlap with the second component. For example, under caselaw or statutory law, courts of only a few states might have jurisdiction to adjudicate a dispute between the parties. The parties could supplement that by agreeing on which of those states should actually adjudicate any dispute.
Who Makes the Decisions
Leaving aside the effect of unauthorized-practice-of-law statutes, decisions regarding the law bit could, to a greater or lesser extent, be handled by people other than lawyers. (That could mean some combination of contract-management personnel, project managers, and businesspeople.) To the extent the first component—the legal framework—is clear, it would be reasonable to expect that nonlawyers could determine how it should be addressed in a contract. It would be odd to hold people to the notion that ignorance of the law is no excuse, while at the same time insisting that the law is too complicated for them to expect to make decisions for themselves.
As regards the second component—optimal management of disputes—it’s been my experience that many deal lawyers have no special expertise relevant to assisting clients in making these decisions and generally aren’t inclined to agonize over these these decisions. In fact, the glitches in the dispute-resolution part of contracts suggest that few lawyers have a clear grasp of what’s going on. (For example, see these three posts about governing-law provisions and this post about consent-to-jurisdiction provisions.) So as compared to deal lawyers, having nonlawyers taking the lead on these matters might not be problematic, depending how knowledgeable they are.
What about the stuff that falls outside the law bit? That’s the purely business component—I’ll call it “the deal.” It’s standard for a business person to take the lead in negotiating the deal.
Who Does the Drafting
Regardless of who makes the decisions expressed in a contract, it’s standard for lawyers to do the drafting. That reflects the lawyer’s longtime role as scrivener, but there’s no reason why that should immutably be the case. There’s nothing inherently legal about expressing a transaction.
Yes, it’s often challenging making sense of the implications of contracts terminology, but that’s largely because lawyers have managed to add layers of unnecessary complexity. Clearer alternatives, as outlined in MSCD, are a lot simpler.
The result is that there’s no reason why those with a law degree should be better equipped to handle drafting. I’ve encountered nonlawyers with semantic acuity and deal smarts that would put many lawyers to shame.
So, to summarize: As regards who makes the decisions, the deal is often handled by lawyers, but doesn’t have to be, as there’s nothing legal about it. One component of the law bit—the legal framework—is usually handled by lawyers, but the more straightforward aspects could readily be handled by nonlawyers. And as regards the other component of the law bit—optimal management of disputes—it’s not clear that nonlawyers would do a worse job than lawyers.
As regards the drafting, we should let those with the relevant skills do the drafting, regardless of what hat they happen to wear.