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.