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Don’t just simplify your contracts

January 8, 2018

It’s not just about simplifying contracts …. it’s about using contracts to simplify business.

Many people in business are frustrated because contracts are too long, or too complicated, or take ages to negotiate. So they demand ‘simplification’, which often means ‘Why can’t it be one page?’

What these demands fail to recognize is that contracts are a reflection of overall business complexity. Certainly there are aspects of them that can be simplified through better design or drafting, but the majority of the content is driven by policies or practices that are outside the control of the contract author. Examples are the terms that finance, risk management, HR, business operations and product management may require. In my experience, these groups often demand the inclusion of multiple pages of text that reflect their fears, concerns and past exposures.

So does this absolve the contract drafter from responsibility? In my opinion, it does not. It actually provides the drafter with an opportunity to deliver real and measurable value to the business, by challenging all those interest groups (or stakeholders) about the complexity THEY are imposing on the business. It is actually these groups who are undermining ‘ease of doing business’ and creating avoidable cost and delays.

A growing number of IACCM members are awakening to the point that the legal, contracts or commercial function must do more than oversee compliance with rules – it must actually challenge those rules or policies and ensure those which remain are implemented in the simplest way possible. Good contracting is actually about testing and improving overall business performance and eliminating the friction points and delays that cause so much frustration.

We don’t have to be the villains and the fall guys; let’s put pressure on the real creators of complexity.

 

 

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