“This Agreement Allows”

I signalled in this post that my task of compiling guidelines to the building blocks of contract language is largely done. But it will never be over, and here’s an example of that.

I recently encountered the formula this agreement allows. That sent me to EDGAR, where I found the following examples:

As a general form of contract, this Agreement allows the parties to contract multiple projects or services through the issuance of Statements of Work without having to renegotiate the basic terms and conditions contained in this Agreement.

This Agreement allows for up to three (3) shipping destinations per batch of Product.

This Agreement allows a period of seven (7) days following Employee ’s signature on the agreement during which Employee may revoke this Agreement.

RUTGERS understands and acknowledges that this agreement allows FIRM to disclose to COMPANY information otherwise protected by the attorney-client and/or work product privileges, which privileges shall be maintained and protected under the “common interest” doctrine.

Why was I particularly pleased to encounter this agreement allows? Because This agreement allows Acme to is yet another messed-up alternative to Acme may. The fourth edition of MSCD lists in table 4 more than a dozen wordier and less-clear ways of saying Acme may. Spotting instances of this has been something of a hobby; see for example this 2017 post. I would have liked to have added this agreement allows Acme to to the list, but that will have to wait until the fifth edition.

I also searched on EDGAR for this agreement permits, but the examples I found don’t grant discretion. Instead, they allude to the possibility of discretion being granted elsewhere in the contract:

Whenever this Agreement permits or requires the Funds to give notice to, direct, provide information to State Street , such notice, direction, or information shall be provided to State Street on the Funds ’ behalf by any individual designated for such purpose by the Funds in a written notice to State Street.

… or in the event that this Agreement permits any determination by the Owner Trustee or is silent or incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice …

To the extent this Agreement permits any additional acquisition of shares of Common Stock by Piton or any other Stockholder , Piton and the other Stockholders further collectively represent that …

In this context too I’d use Acme may, as in If under this agreement Acme may. I don’t think anything is gained by limiting use of may to contexts where discretion is granted, but I’ll mull that over.

Reasons Not to Hire Me to Help You with Your Contracts

I divide my time between giving seminars and helping companies upgrade their contract templates. Here are some reasons why you might not want to hire me for the latter service.

“Our templates are great.”

Actually, it’s likely that in terms of what they say and how they say it, your templates are somewhere between a train wreck and in need of significant help. That’s the case no matter exalted your company. But there’s a quick way to give your templates a stress test: I’d be happy to give you some general comments at no cost.

“Our templates are good enough.”

We’re all familiar with the idea of making do. But I suggest that when it comes to your contract templates, it’s shortsighted to skimp—they’re too important. Besides, you might not be equipped to assess your templates objectively.

“We can handle the job ourselves.”

I’m sure you can, but probably nowhere near as well as I can. That’s because you and your colleagues have day jobs. I don’t—I’m one of that elusive breed, a contract-drafting specialist. (See this blog post for more about what I mean by “contract-drafting specialist.”)

“We’ll get our outside counsel to do it.”

Generally, law firms are in the business of getting the deal done. They’re driven by expediency—making contracts clearer and more efficient isn’t a priority. And even if it were, it’s unlikely that a law firm would be equipped to make that happen. And they would presumably charge a nontrivial amount of money.

Of course, there are exceptions. If your outside counsel has done good template work for you, consider yourself fortunate. But experimenting with a law firm instead of hiring me? Color me dubious.

“Fixing our templates wouldn’t be that complicated.”

Actually, my writings all go to show that expressing transactions in contracts is in fact complicated and that you need more than good intentions to do the job effectively. For a cautionary tale, see this blog post about GE Aviation’s template initiative.

“We can’t afford you.”

Compared with the drain on time and resources caused by dysfunctional templates, my fees are modest. Besides, the only way to determine whether you can afford my fees is to ask what I’d charge.

“We don’t have time to fix our templates.”

You might not, but I do. And if you put me in charge of the process, you’d get it done way faster than you would otherwise.

“We can’t handle the change involve in overhauling our templates.”

Yes, change is hard. But the pain in short-term; you quickly start reaping the rewards. And I now work with clients to figure out what change is required, so it comes as less of a shock; see this blog post.

“It’s not in our interest to be seen as not up to the task of fixing our contracts.”

I get it—you think that bringing in an outsider might be seen as a sign of weakness. But it’s no more a sign of weakness than calling in a plumber is a sign of weakness. You know what really is a sign of weakness? Crappy templates.

Geneva “Drafting Clearer Contracts” Seminars on 9 and 10 April 2018

I’m pleased to announce that on Monday, 9 April 2018, and Tuesday, 10 April 2018, I’ll be back in Geneva, Switzerland, to give “Drafting Clearer Contracts” seminars. My host will be the Geneva office of the global law firm Orrick.

The Geneva seminars are always fun: beautiful premises, a small group (no more than 14 people), a particularly civilized lunch …. I hope to see some of you there. For full details and registration, go here.

And I’m currently exploring adding other seminars elsewhere in Europe. If you’d like to discuss having your organization host a public “Drafting Clearer Contracts” seminar in return for having your personnel attend at no charge, contact me. Companies that have acted as host include Maersk Line, SAP, and ABB.

(I snagged the photo from the website promoting Geneva tourism. I thought they wouldn’t mind; if I’m mistaken, let me know.)

If the Expectation Is That Your Lawyers Understand Your Contracts Better Than the Business People, Something’s Wrong

I routinely encounter the assumption that lawyers understand contracts better than others, and that the challenge is for lawyers to help everyone else by making contracts clearer. For me, that sets alarm bells ringing.

Consider this in terms of my usual framework, which divides contract drafting into the tasks of determining what you say and determining how you say it.

What You Say

As regards determining what you say in a contract—in other words, determining what the deal is—the purely legal part of contracts consists of (1) figuring out any legal framework (whether derived from caselaw or statutory law) that applies to the transaction and (2) establishing the rules for resolving disputes. (For more about that, see this 2011 post.) I assume that in most transactions, the business part occupies more attention than the legal part. But whatever the imporance of the legal part for a particular deal, the business people have to understand what’s going on. So if in fact only the lawyers understand the entirety of the deal, something is amiss.

I expect that some of you might be thinking, Wait, clients are only too happy to leave some legal stuff to lawyers! A popular candidate for that would presumably be the limitations-of-liability provision. But I would award the limitations-of-liability provision the prize for least-understood boilerplate: I have the sense that most deal lawyers have only a tenuous grasp on what they’re trying to accomplish with that litany of consequential losses, indirect losses, etc. (I discuss this in my recent post about GE Aviation’s template initiative, here.) I offer the following hypothesis: if clients are willing to consign something to the lawyers and wash their hands of it, it’s because lawyers have bollixed it.

How You Say It

I suspect that most of those who feel that lawyers should make contracts clearer are referring to the how-to-say-it part of contract drafting: that the difficulty lies not with the deal but with how the deal is expressed. That concern is justified. But it’s not that in expressing the deal, lawyers are able to call on inscrutable skills. Instead, the problem is that traditional contract language is a semiliterate stew of archaisms, redundancies, random verb structures, and a host of other glitches.

Furthermore, it’s not as if lawyers are somehow equipped with a magic wand that allows only them to make sense of traditional contract language. Instead, some accept it—are co-opted by it—because it’s all they know. Others might be aware of the dysfunction, but they’re trapped in the copy-and-paste system. Either way, lawyers too pay a price for the shortcomings in traditional contract language.

The Upshot

So if there’s a sense that your lawyers understand the deal better than the business people, either your lawyers aren’t doing a good job of explaining the legal component of your transactions or they’re expressing the deal in the dysfunctional prose that characterizes traditional contract language. You might want to do something about that.

And more generally, it would be for the best if lawyers were to loosen somewhat their grasp on contracts, so that contracts are more clearly recognized as the responsibility of different constituencies.

What Kind of Change Should We Seek in Contracts?

I noticed that Tim Cummins, head of the International Association for Contract & Commercial Management (IACCM), mentioned in this post on his blog my recent post about GE Aviation’s template initiative (here). I’m pleased that Tim thought it worth his time to read it. Three thoughts:

Some Stuff Is Complex

Tim again lumps me with traditionalists, saying, in referring to me, “he also bows to traditional thinking when he suggests that because contracts deal with complex matters, they must therefore themselves be complex.”

Generally, Tim should ask some traditionalists what they think of my writings. No bowing is involved! Just to be clear, I don’t say in my post that all contracts must be complex. Instead, I say that contracts are necessarily as complex as the transactions they express, and plenty of transactions are complicated, so it’s unrealistic to expect that you can make all transactions, and therefore all contracts, simple enough for a high-school student to understand. I think that’s a pretty mild statement to make, and I arrived at it based on my own experience. I’d be interested to hear what others think.

Could transactions be simpler? Doubtless. But you have to distinguish complexity from obfuscation. We live in a complex world, and some transactions have complexity baked into the deal terms. It’s not something grafted on by cunning lawyers.

Why Obfuscation Persists

Tim suggests that obfuscation in contracts is a result of the legal profession’s tendency to operate as a guild rather than a competitive market. I’m willing to believe that’s a factor, but another powerful force is simple inertia.

Contract drafting currently relies on what I call “passive drafting”—you draft contracts by copying, on faith, from precedent contracts of questionable quality and relevance. Incoherence in a contract can get endlessly replicated without any venality on the part of the drafter. Improving your contracts requires dismantling and retooling them. That’s challenging if the deal machinery is whizzing around at a thousand revolutions per minute.

What’s the Fix?

Like me, Tim is eager to rid transactions of the dead weight of traditional contract drafting. But he wants drastic change, whether it’s in the form of “emojis, text-talk, graphics and videos” or (according to this 2015 post) “programmable contracts.” For most of the transactional world, those solutions are unrealistic to the point of being irrelevant.

That’s why I aim for something more practical but nevertheless revolutionary:

First, draft contracts using prose that complies with a comprehensive and rigorous set of guidelines. (I wrote A Manual of Style for Contract Drafting with that in mind, and I think it now fits the bill.)

And second, create a library of automated, customizable, and annotated templates of commercial contracts, so people have a convenient and cost-effective alternative to passive drafting. With a curated set of templates, you could address many different deal scenarios; you could strike a suitable balance between explicating the deal and achieving party objectives, on the one hand, and legalistic risk-aversion, on the other hand; and you could ensure that clear, concise, and consistent prose is used throughout.

Let’s see how that second task goes.

What Does Glenn West Mean When He Says You Should Make Sure Your Contracts Say What You Meant?

I find it convenient to divide the world of contract drafting into deciding what you want to say in a contract and deciding how you want to say it. They’re not distinct tasks, but rather two ends of a spectrum, with blurring in the middle, because how you say something can unexpectedly affect meaning.

I focus on the how-to-say-it part, with occasional forays into boilerplate topics like governing law, force majeure, and indemnification. A savvy commentator on the what-to-say part is Glenn West, a partner at the law firm Weil. (That’s him in the photo.) Glenn has written about many deal issues; I’ve mentioned him in a bunch of blog posts.

So I of course checked out his most recent post on Weil’s Global Private Equity Watch blog. The title is A New Year’s Resolution for Deal Professionals: Make Sure Your Written Deal Documents Say (And Will Be Interpreted to Mean) What You Meant. In it, Glenn points to recent court opinions reinforcing the notion that courts interpret contracts to mean what they appear to say, not what you might have thought they say.

That’s a worthwhile reminder, but it raises a big question. Yes, you should make sure your contracts say what you mean, but no sane and sober drafter ever says to themselves while drafting a contract, I’m going to make sure this contract doesn’t say what I mean! Instead, any disconnect between what you say in a contract and what you mean will be inadvertent.

So “Make sure your contracts say what you meant” is an invitation to a conversation. Acting on it requires guidance. Glenn isn’t in the business of providing that sort of guidance. Mastering the how-to-say-it part of contract drafting requires devoting endless hours to a worm’s-eye view of contract language. No one with a day job, and certainly no titan of BigLaw, has time for that.

When Glenn tells you that you should make sure your contracts say what you mean, in effect he’s leaving you at the gates of the how-to-say-it world. While you’re there, you might see me frantically waving, trying to catch your eye.