Skip to content

Business asset or the preserve of specialists? The future of contract design and drafting

April 15, 2015

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.

 

 

2 Comments
  1. Tim: Thank you for supplementing your previous post. Just to clarify:

    First, I’m acutely aware of the conspicuous waste in how contracts are currently handled, and I’m aware of the desire for change. And in my corner of the contracts world, I continue to push aggressively for change. But I’m also aware of massive inertia. I like to think that the desire for change will prevail over inertia, but I have no way of predicting how quickly that will happen. Based on my experience over the past fifteen years, I feel confident in saying it will happen more slowly than you and I would like.

    And second, I’m not such an egomaniac as to think that the change I’m agitating for is the only kind of change there is. Instead, my point is simply that to effect change, you need more than a desire for change. You also need a blueprint for the change you want to effect and how to effect it, the more detailed the better.

    By the way, as regards whether “legalese” is necessary, it depends on what you mean by “legalese.” If you mean the impenetrable legalistic stuff, it’s never necessary. No one really understands it, not even the lawyers who draft it.

    Ken

  2. Ken Adams permalink

    Tim: Thank you for this follow-up. Just to clarify:

    First, I’m aware of the conspicuous waste in how contracts are currently handled, and I’m aware of the desire for change. And in my corner of the contracts world, I continue to push aggressively for change. But I’m also aware of massive inertia. I like to think that change will prevail over inertia, but I can’t predict how fast that will happen. Based on my experience over the past fifteen years, I’m confident that it will take longer than you and I would like.

    And second, I’m not such an egomaniac as to think that the change I’m agitating for is the only kind of change there is. Instead, my only point is that a desire for change isn’t enough: to effect change, you need a blueprint for the change you’re seeking and how to accomplish it, the more detailed the better.

    By the way, regarding the need for “legalese,” it depends on what you mean by “legalese.” If you mean the impenetrable legalistic stuff, it’s never necessary, as no one understands it, not even the lawyers who draft it.

    Ken

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: