14 Mar The Problem of Most Contracts
Note this post is not about hating on contracts. This is a post about contracts and the problems that I see in contracts. I believe that most people make contracts far more complicated than they should be. I also believe that most businesses and their lawyers should be thinking about contracts as much from a marketing standpoint as they do a legal standpoint.
Now I don’t want to get off on a rant here, to quote Dennis Miller, but most contract drafting nowadays spends far more time and energy attempting to justify the lawyer’s effort and fees. The result is a contract that is not usable by the very people need to use the contract– the customers. Businesses and lawyers should be looking at how the contract enables the client and their customers to get to the endpoint that is closing a deal. Anything that stands in the way, including the language in the contract, extends the life of the contract negotiation process and puts closing the deal at risk.
So using jargon, legalese, assumed understanding, or ignoring key points raised by the other party all contribute to an atmosphere of contract negotiation that is unnecessary. The thing that annoys me the most is that almost every single problem that happens in a contract drafting environment can be avoided and yet is not. I would like to take a look at a few myths that commonly come up when talking about contract language.
The first myth is the use of so-called “tested language.” Many lawyers will tell me they use legalese and other complex terms because the language in those terms “has been tested in court.” This excuse, and it is an excuse for lazy work, ignores the most fundamental aspect of what a contract should be. A contract is a written description of a business relationship. A good business relationship has a clear understanding between the parties. The purpose of a clear understanding is to ensure that the parties don’t end up in court. If a contract contains language that has been “tested in court,” then the language that is being used failed in the purpose of a good contract. The very fact that the language had to be tested in court means that it was not clear in the contract. So if the language wasn’t clear in the first contract and ended up in court, why on earth would that same language be included in a subsequent contract. It defies logic.
The other myth of contract drafting is that the legalese that we see in so many contracts is necessary to fully explain difficult concepts. Of course, many contracts may have difficult concepts included in them, but that does not mean that the use of standard English and proper grammar cannot accomplish a proper explanation of a complex idea. The fact that so much information exists about how to write properly, using standard grammar and elements of style does not bode well for lawyers who choose to use the crutch of legalese. The reason why legalese gets used, at least in my opinion, is that it is a kind of jargon that sets lawyers apart from non-lawyers. But this gets me back to my earlier point, the users of most contracts are not lawyers but non-lawyers. The contract should be written for the audience that is going to use it.
A fair number of lawyers who specialize or study the process of drafting a contract to have a number of theories about why most contracts failed to accomplish the goal of creating a clear understanding between the parties. I have my theory and it’s very different from the specialists. Simply put, it is a function of time. In essence, there are two methods in which lawyers get paid– by the project or by the hour. Each of these methods has advantages and disadvantages But in the world of contract drafting getting paid by the project encourages reusing templates which may be faulty and getting paid hourly creates the incentive to over-write a contract.
Here’s a little secret for everybody, all lawyers– even me– use templates to create contracts. In order to be efficient preparing a contract, reinventing the wheel is not the best way to do it. However simply because a template is being used does not mean it should be used mindlessly. That is often the greatest failure. If I am drafting a contract for a business-to-business relationship, I will use language intended to be used by business owners. But if I’m writing a contract for a business that will be engaging with consumers directly, the language has to be different in terms of content and tone. That is what I mean by taking into account audience.
It is the mindless use of contract templates that I believe leads to contracts that people don’t or won’t use. If a business is going to be in business very long, it will need to have clear relationships with a great many entities, their customers, their employees, and their vendors. So it makes sense to make sure that the relationships are clearly understood. If a business needs contracts but will not use those contracts because they were too complicated to understand, then what is the point of having a lawyer draft contracts that are not used.
That means having contracts that accomplish the goals of the business and do so in a way that protects the business and the other party. It does not mean that the contract can’t be simple or short or even written at all (although I do suggest written contracts). The contract should be prepared in a way to accomplish the goals. Often the goal is very simple and the contract should reflect the simple goals. But just because the contract is for a more complicated goal does not mean it should be complicated.
There is no prize for having the most complicated and misunderstood contract. There is no prize for a lawyer to have a client who does not understand the contract and can’t explain the contract to the client’s own customers without a translation from the lawyer.
Contracts should further the business, not hamper the business.
But quoting Dennis Miller again, that’s just my opinion, I could be wrong.