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Contracts and the Law

June 6, 2013

In a succinct blog, Ken Adams reminds us of the importance and the limitations of the law when it comes to its role in contracts.

The summary Ken provides is important because it illustrates the many things that the law does not do – and by deduction, things that you cannot assume a trained lawyer will address (though of course some will). The law does not impose any duty of common sense or good business judgment. It does not create a duty of clarity. It does not mandate that records or understanding must be complete. In other words, the law is all about making judgment based on established principles of equity and legality.

Ken’s observations reinforce the point that a traditional lawyer is but one stakeholder in the process of constructing a contract. They bring invaluable, but narrow, perspective and insights, largely focused on ensuring enforceability of rights. Of course a business may choose to expand this role and demand that its lawyers also apply wider skill and knowledge – but then it must be clear about that scope and what it considers ‘success’ will look like. Often, the role and expectations of the law department are extremely vague and depend on the perceptions and whim of the individual attorney.

This confusion helps no one. Lawyers are frustrated because they feel that the business people are abdicating responsibility for making business judgments. The business people are frustrated because they feel the lawyers are reluctant to give expanded opinions. Once upon a time, the list in Ken’s blog was a good reflection of the type of contract review lawyers would undertake. Today, they engage far more – but too often in an unpredictable way; and that helps no one.

  1. Owen Davies permalink

    In today’s competitive and fast changing world, contracting is not just about getting rules on paper and compliance, it also structures things from a relationship management perspective (so that it attempts to govern unanticipated movements/changes and innovation in such a way that a renegotiation can run in parallel with a delivery so that it evolves. This is the challenge we face and its not the lawyers who have the sole vision on this contractual evolution.

    • Owen, I agree completely with your observation – and of course ‘the business’ should not seek to abdicate its responsibilities for proper contracting to the lawyers. Not only is this true in their construction, but also – as you point out – in their management and their interaction with other key elements, such as relationship management.

      IACCM’s successful work on ‘relational contracting’ is a case in point – where we focus contracts on providing a governance framework that reduces the probability of ‘legal’ issues arising and therefore offers a proactive approach to risk management and reduction. While we find many lawyers who acknowledge the value of this approach, it is not something where they feel they are – or should be – experts.

  2. Tim: I’m pleased that you were able to build on my bare-bones post. In the following 2011 post I too considered the role of lawyers in creating a contract: Ken

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