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Distant or together? Contracts narrow the divide

March 30, 2020

While physical distance can easily translate to a sense of separation and division, the current pandemic is also creating some remarkable instances of unity and togetherness. Unlike traditional wars, on this occasion humanity has a common enemy and also, because of our networked world, a shared awareness of its effect.

IACCM’s research is revealing the scale of impact on contracts. Many simply cannot be performed in current conditions, yet at the same time – in spite of such uncertainty – there are many new agreements being created. The picture varies by industry and by geography.

A shared understanding

Some doubtless assume that the extensive focus on contracts and contract performance indicates a level of contention and adversarialism, as parties battle over rights and responsibilities. I have no doubt that this is sometimes the case – but the information we have suggests that is the exception rather than the norm.

The beauty of contracts is that they create a framework under which we can establish mutual understanding. It is true that they are often far from perfect – sometimes they reflect the use of power to impose unbalanced terms, others may be based on templates that are ill-suited to their purpose. But overall, as the Nobel prize awarding committee observed back in 2016, “Modern economies are held together by innumerable contracts”.

An end to obscurity?

Today, as we face many more months of physical distancing, the role of the contract for business and society becomes even more important. Perhaps we will see not only recognition of how much contracts matter, but also how much easily understandable contracts matter! The Nobel committee also spoke about ‘the pitfalls of contract design’. These include the fact that they are too often obscure in both form and word. The absence of design standards creates a level of complexity that is entirely avoidable and now, unable as we are to engage in physical meetings, it would seem a good time to create a shared determination to improve.

Faced by such changed conditions for all business operations, IACCM has been busier than ever in working with members. Many of our programs are focused on creating shared understanding and methods – for example, the impact of coronavirus on contract terms, tips on how to conduct virtual negotiations and geographic and industry impact analysis. But shining through has been the scale of demand for on-line contract design and simplification workshops and services – indicating the extent to which many practitioners appreciate that good contracts truly do narrow the divide.

Contracts – bringing us together in a time of coronavirus.

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