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Contract redesign is great – but it needs conventions

February 14, 2020

Contract redesign is an exciting and massively beneficial movement. Digitization has enabled new thinking in both the form and the purpose of contracts. We have entered an era where trading relationships are not just proliferating, but also need to be adaptive to shifting values, volatile markets and constant innovation. To support these demanding conditions, contracts are assuming a new and dynamic role, facilitating understanding and performance – which means design for users and clarity of communication.

These are not the attributes associated with traditional contracts and their related documents which, with few exceptions, are designed by lawyers, for lawyers. In the background, obscure structures and terminology are justified by the overhanging threat of litigation and legal precedent. In reality, a tiny fraction of contracts are litigated and there is no evidence to support the contention that judges cannot cope with documents designed to provide clarity. Indeed, it is the very lack of clarity that contributes to disagreement and dispute.

Momentum for change is rapidly increasing as businesses and governments start to recognize the massive savings and performance improvements to be achieved through redesign of contracts as a driver for digital services.

User-design AND usability

However, in shifting to a new and different form, it is essential that we do not overlook the core purpose of contracts and their need to interface with not only people, but also systems. A contract is not a work of art and we run the risk that we replace the artisanal approach of legal drafting with an equally artisanal approach of innovative design. Contracts have a practical purpose in defining and driving performance and to do this in a practical, affordable way depends on data interoperability.

To give an example, emojis and pictorial representations certainly make contracts more user-friendly. But in the business world, if my use of emojis or pictures is not the same as yours, I have simply created confusion and probable misunderstanding. In this example, I have replaced standardized legal convention (which is at least understandable among those with legal training, even if obscure to others) with a non-conventional approach that is subject to misinterpretation by everyone. At an extreme, it is rather like everyone inventing their own language and then becoming frustrated because no one else can understand them!

The process of exchange

Contracts do not operate in isolation. They are one component in an exchange process and must assist in making exchanges more reliable. This means that there is a need for conventions and avoiding a situation where the exciting prospects of redesign become an artistic free-for-all. That is why IACCM has invested heavily in building a contract design library that is in large part free to access and which welcomes continued contribution of new ideas and proposed conventions. And it is also why technology firms are steadily adopting a set of standardized conventions within their software that will support the expression and performance of contracts.

I would like to acknowledge the contribution of Professor Oliver Goodenough, who identified the importance of developing ‘conventions’, rather than potentially more rigid ‘standards’.

One Comment
  1. René Franz Henschel permalink

    Tim, this is a really important question. I am currently writing on it. I have found a really interesting path I look into: Software engineer and human-machine interaction specialist Larry Tesler (Applications and worked with Xerox + Apple and who actually sadly died yesterday 74 years old https://www.bbc.com/news/world-us-canada-51567695:

    This is taken from an interview with Larry:

    “In the early days of our field, when I worked at Xerox PARC, the idea of user interface consistency was new and controversial. Many of us realized that consistency would benefit not only users, but also developers, because standards could be encapsulated in shared software libraries. We made an economic argument: If we establish standards and encourage consistency, we can reduce time to market and code size.

    Later, Larry joined Apple and worked on developing the MacApp object-oriented framework, there he formalized his thinking on complexity and software:

    To sell the idea to Apple management and independent software vendors, I came up with the Law of Conservation of Complexity. I postulated that every application must have an inherent amount of irreducible complexity. The only question is who will have to deal with it.”

    Sic!

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