Business asset or the preserve of specialists? The future of contract design and drafting
Last week, one of my blogs included observations on the way that attitudes to contracts are changing. In response, drafting guru Ken Adams challenged my suggestion that these shifting attitudes will lead to fundamental changes in contract design. I think his implication is that change, to the extent it happens, will not significantly impact contract structure, but will simply move from undisciplined pedantry to an alternative and more rigid style of authoring, based on his style guides.
The challenge is valid. Legal form is long established and the profession is slow to change, especially in areas where the resulting benefits are uncertain. So on what basis do I believe that change will occur?
There are a number of dynamic forces:
- Social pressure – people are demanding greater clarity. Indeed, even the CEO community now believes that a reputation for honesty and integrity is fundamental to business success and this is affecting approaches to terms and conditions..
- Generational pressure – new approaches to communication, intolerance of complexity New technologies and media have resulted in the expectation that communication is clear and honest.
- Technology – analytics are demonstrating the relative importance of different risks and the consequences of those risks. High among them: inefficiency and ineffectiveness of ‘traditional’ contracts which then damage financial performance.
- Pressure on lawyers to perform – as with medicine, there is an increasing focus on prevention – from contracts as a source of risk to contracts that manage risk.
So those are among the forces. Where is the evidence that this is actually leading to change? Here are some examples. Law schools, even law firms, are now actively working on new approaches to contracts based on artificial intelligence and the need for machine readable data. General Counsels are wanting to know the precise link between contract terms and economic impacts. Cross-industry groups are working to establish industry standards and to escape the inefficiencies and delays created by the ‘battle of the forms’. In-house legal groups increasingly appreciate their role is to enable the business, not to sit in judgment on it. There is growing acknowledgement that recourse to the courts is no longer relevant for many forms of agreement and therefore strict ‘legalese’ is unnecessary. Then there is the fact that other complex documents – such as engineering drawings – are moving into the virtual world and in the process discovering that such a move saves time and money. Finally, law schools are starting to include practical programs about contracts and contract management, preparing future lawyers to work in business, not in the courts.
Ultimately, change is most often driven by economics. And the economic case for new approaches to contracting is becoming more evident and is compelling. I understand that from where Ken sits, the pressures – and reactions to them – may be less visible. Ultimately, even something as traditional and formalized as contracts cannot stand in the way of progress.