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Contract templates: we must do better

March 1, 2018

According to IACCM’s most recent benchmark survey, some 92% of corporations operate with standard template agreements. In the traditional ‘battle of the forms’, the buyer templates are generally the winner. That typically means that both sides lose.

Why are templates a problem?

Templates exist because they supposedly bring greater efficiency to the process of agreeing terms and conditions. To a degree, that is of course true – it would make little sense to start every transaction with a blank sheet of paper. But unfortunately the complexities of the contracting process have often been ignored when designing templates and they have become symbols of power and authority, rather than carefully considered business interest.

Most templates are produced by law firms or legal departments and are based on classical legal theories over the allocation of risk (that is, we want as much as possible transferred to the other party). Variations from the template are typically discouraged. As a result, there is often little or no feedback regarding the impact that the template has in the market – it’s a case of ‘no news is good news’.

Procurement templates are frequently either generic in nature, or fail to reflect the terms that would be most appropriate for a specific type of acquisition. However, because ‘deviations’ are discouraged, no one has authority or interest in tackling these deficiencies. The supplier’s sales staff similarly prefer to yield to the customer terms because they want to close the deal.

The consequences are becoming more visible

The data generated from new technologies is starting to make the consequences of today’s approach more visible. For example:

  • Non-legal staff often have no sense of what the templates cover. In one instance, product development teams thought that an NDA was all they needed to cover joint R&D projects.
  • Templates encourage ignorance. In a recent IACCM project, we discovered that more than 60% of procurements were using the wrong template – staff believed that using the most extensive and complex version would reduce risk.
  • Templates encourage lack of awareness. In another project, we found that the types of acquisition being made by an organization had shifted dramatically, moving from goods to services. The templates had not adjusted and reflected business needs from almost 10 years ago – over 50% of the contracts were deficient in the terms being applied.

What needs to change?

In a blog this week, Ken Adams and I debated contract design and the role of automation. That is certainly part of the story. But the issue of templates is much bigger because it is actually about business attitudes and behavior. At its heart is the need for lawyers to abandon classical legal theory and eliminate the battle of the forms. This means an acceptance that the key purpose of contracts should be to safeguard the likelihood of success, rather than focus on the consequences of failure.

Both buyers and suppliers need to step up to the plate on this issue. Templates can be effective only if they are balanced in their allocation of risks and appropriate to the nature of the transaction or acquisition. In this context, it is clear that suppliers generally have a much better understanding of the issues that need to be covered in the contract, but buyers are rightly concerned that if they accept the seller’s terms, their interests will not be protected.

That is why initiatives such as the IACCM contract principles should be welcomed. Equally, we are increasingly being asked whether – as an association – we will be prepared to provide a ‘stamp of approval’ to indicate that terms have been reviewed for their balance and suitability. It is clear that other independent entities – for example, Thomson-Reuters – could fulfil a similar purpose. But at its heart, real change depends on a shift of attitude – a recognition by the lawyers who ultimately control templates that today’s practices not only bring inefficiency, but actually often increase risk.


  1. Just thought you might be interested in the next generation legal document drafting application (i.e. not document automation, but a wholly new drafting environment) that we’ve been working on for the last 6 years:

    The concept is to model contracts explicitly, eliminating all the “Word Processing” that goes into developing contracts, allowing granular (clause level) tagging, reuse, and analysis, and providing a tool that allows concepts like Contract Design to take root.

    • Thank you Simon – can we arrange a demo? Sounds very interesting.

      • Yep, couple of ways to see what it does:
        A) Head over to and watch the introductory video of its features.
        B) Sign up on the site there and it’ll send you an email to a fully featured version with a time limited trial. It should come with a sample document that you can just load from the “recent files” list so you can just get in and start playing around.

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