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Contracts as instruments of pain

June 20, 2016

Back in medieval times, the routes to a healthy mind and body were simple. Regular bleeding ‘to balance the humors’ could be accompanied by periodic flagellation, to encourage self-reflection and atone for bad thoughts or behavior.

When it comes to contracts, those medieval instincts have maintained a curious hold. The prevalent approach remains that they should first and foremost be instruments of pain and retribution. First we will extract all the blood we can (through aggressive price negotiation) and then we will apply instruments of torture (through maximised risk allocation).

Medicine has made massive progress over the years – and the digital age promises truly revolutionary change. It’s time for those who practice the dark arts of contracting to step back and see what we can learn.

First, medical practitioners have long understood that it would be far smarter to avoid problems than to treat them. Research is dedicated to understanding causes and to promote better ways of living. Technology – and especially artificial intelligence – is now being applied in a way that transforms insights because of the scale of analysis that can be undertaken. It is enabling understanding not only of cause, but also of likelihood – so individuals can better assess their propensity for medical problems. When it comes to diagnosis, digital devices are already actively monitoring our condition and in countries without well-established (and therefore more change-resistant) medical practitioners, are rapidly transforming the delivery of health care. Finally (at least for this example), doctors have recognised that ‘one size fits all’ treatment regimes often do more harm than good. Blood letting is no longer a universal solution. Indeed, technology now supports highly customised treatment and remediation plans suited to the conditions and preferences of the patient. As a result of all these changes, success rates will soar.

Similar results could be achieved with contracts and trading relationships. For example, we could be undertaking mass analysis of causes of ‘ill-health’ in contracted relationships. We could be applying diagnostic monitoring to predict when ¬†things are likely to go wrong. We could be developing treatment plans in the form of appropriate relationship models and terms and conditions, using technology to overcome ignorance and to eliminate the unhealthy fixation on standards and compliance.

Back in medieval times, most doctors (at that time largely self-anointed since there was no professional standard) were doubtless aware that their remedies did not work. But their continued employment depended on maintaining the myth that they knew what they were doing. It is time for contracts experts to step back and ask searching questions about our commitment to professional standards and the remedies and solutions that we apply. Far too often, they do more harm than good. And the sad thing is, many of us know that to be true.

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