While drafting any contract there’s always a palpable tension between the lawyers and the business stakeholders to finalize the “Perfect Contract” from each other’s perspective.

Any such draft satisfying both sides to perfection, most often comes out to be an unimplementable tome, filled with illegible legalese, contradictory terms, complex SLA’s with measurables so complicated that the business teams often do not understand nor bother to use them later, the clauses happen to be so inflexible that any minor change requires to execute additional amendments, etc.

That said, let’s agree that the tension between legal (to achieve prevention of any harm to the underlying business organization i.e loss prevention) and the business stakeholders (to achieve business objective success profitably i.e. value creation) is very healthy.

The question is how can we keep contracts focussed on - business objectives, problem solving, making them more understandable, making them less complex/lengthy, lowering legal costs while drafting and then later interpreting them back, keeping them culturally contextual.

In general, ensure that the contracts focus both parties towards problem solving, in an environment of positivity.         

Drawing from the above perspectives, practitioners have come up with certain Simplification techniques, that are under discussion i.e “Lean Contracting” and “Visualization” of contracting clauses for better layman understanding.

Scottish approach: Contracts should emphasize free market economics rather than legalities. Minimalist approach that includes:

• Goods or services and their price
• Intellectual Property Rights (including indemnification)
• Terms implied by law but not written into the contract

Examples of Lean Contracting Clauses -

"We have therefore agreed upon the essential elements of our contract. Rather than incur time and expense negotiating and recording in writing other non-essential terms & conditions of our contract, we have agreed to allow the general law to regulate such matters implying such terms as it may." 

Reference: Template - Pathclearer Supply Agreement (Clause No. 5)

“[Commercial Affinity] is the attractive force that keeps the parties together. It results from the desire by each party to continue doing business with the other because it is economically sensible to do so…. [If they can’t satisfy each other’s needs], they just walk away from the relationship.”

Reference: Weatherley, 2005

“There is no minimum duration for this agreement. We will simply continue to do business with each other for so long as it remains mutually beneficial to do so. …”

Reference: Template - Pathclearer supply agreement (Clause 4)

Examples of Legal Visualization -

Reference: https://foundation.wikimedia.org/wiki/Trademark_policy

Reference: Passera, S., Haapio, H., Curtotti, M. (2014). Making the meaning of contracts visible - Automating contract visualization.

While the above techniques exist, it’s broad acceptance by the business community remains at bay. Globally, various legal codes exist under which clauses have differing interpretations. In today’s Glocalized economy we need broader collaboration and a trust environment where organizations can focus their efforts on problem solving and not waste their efforts in decades wasted in litigation. Hope we see those days sooner, than later!   

RELATED TOPICS:#SimpleContract,Gaurav Kumar