The Case of the Elusive “Inclusion Rider”

During the Academy Awards show last Sunday, the “Best Actress” winner Frances McDormand unleashed on the world the phrase “inclusion rider.” That prompted a tsunami of chatter on the subject, including this by the Washington Post and this by Vanity Fair.

But I was interested in the rider itself, not explanations. So I asked around, and I asked on Twitter, but no one had a copy. I emailed one of the people responsible, Kalpana Kotagal, a civil-rights employment lawyer at Cohen Milstein, but I didn’t hear back.

I ended up having an exchange on Twitter with the Annenberg Inclusion Initiative (@inclusionists), a think tank at the University of Southern California. One of the people behind it is communications professor Stacy Smith, the other person responsible for the inclusion rider. What they told me was puzzling. They said “Lots of folks have the language,” that it’s available for industry use, and anyone who wants a copy can ask for it by emailing them, but they were unwilling to send me a copy. If they’re so keen to have the entertainment industry adopt this approach, and if they’re sending copies of the rider to “lots of folks,” why not send it to me?

The answer is to be found in this article by entertainment lawyer Jonathan Handel in The Hollywood Reporter. Here’s the relevant bit:

Smith first introduced the idea in a 2014 Hollywood Reporter guest column, but it lay mostly dormant until this year’s Oscar night. The media scholar says she’s not aware of any actors having used the rider, and entertainment attorneys say they’re unfamiliar with it. “Seen none. Have none,” says a top talent lawyer.

Yet Smith and Kotagal aren’t sharing the clauses they’ve crafted. “The language is for attorneys, actors and content creators — we don’t give it out,” says a colleague of Smith’s. “We want to avoid public negotiation,” says Kotagal, but the Washington-based attorney may also see secrecy as a ticket to Hollywood legal work. “Civil rights lawyers have a right to make money,” she notes.

So much for “lots of folks.”

I see two problems with Smith and Kotagal’s approach. First, it’s at odds with the way people create contracts in the information age. Once deal language starts being used, it starts being copied. Anyone who prepares distinctive contract language can claim copyright protection, but all that’s required to avoid a claim of copyright violation is to copy the idea without copying too much of the wording. (See my 2006 article on the subject.)

So it’s perhaps naive to think you can build a revenue stream by keeping contract language close to your chest. Instead, you get business through your expertise. Marty Lipton’s highly lucrative poison-pill legal work wasn’t based on his having access to the relevant Word templates—the documents in question quickly became public. Instead, clients sought him out for his expertise.

And second, there would seem to be a conflict between advocating that the industry adopt inclusion riders and wanting to limit distribution of inclusion-rider text. Getting the text out there might help prevent the inclusion rider from disappearing from discussion as rapidly as it arrived.

By the way, I have no reason to think that Smith and Kotagal’s inclusion rider is a model of contract drafting. In our Twitter exchange, @inclusionists said, “We had a civil rights attorney and expert on hiring and discrimination craft the language. Then, it was vetted by multiple entertainment attorneys and business affairs folks.” But what seems to be missing is any input from a contract-drafting specialist.

Another Source of Inertia in Contract Drafting: “We Don’t Give a ****”

You don’t have to be a physicist to experience the force of gravity. Similarly, I’m only a casual student of inertia, but I’ve long grappled with it.

Casey Flaherty is a serious observer of inertia. I’ve returned several times to the following in this post:

My most obvious error has been predicting the pace of change. While there is sufficient demand for change to keep me and a cadre of fellow travelers occupied … , the overall pace of change keeps being far slower than I imagine even when I update my priors to incorporate the observation that the pace of change is far slower than I imagine.

This should not surprise me.

Massive passive resistance. Agency dilemmas. Institutional inertia. Status quo bias. Loss aversion. Endowment effects. Lack of urgency. KAP gaps. The Chasm. System justification. Institutional isomorphism. Reams of academic literature explain the Planckian notion that progress does not occur when its opponents see the light but only when they lose their power to oppose—that is, funeral by funeral. I’ve not only read my Rogers, I’ve read Bill Henderson’s masterful series applying the Rogers Diffusion Curve to innovation, or lack thereof, in the legal ecosystem.

I’m inclined to add to Casey’s list another source of inertia. It’s encapsulated in my mind by the phrase We don’t give a ****. (Fill in the blank as you see fit!) Allow me to explain.

Recently I saw online an extract from a contract drafted by a global company. It exhibited traditional contract drafting (albeit a slightly modernized version), in that the prose was both clumsy and unhelpfully legalistic. This extract wasn’t an exception: it was broadly comparable with another contract drafted by that company that I had had occasion to examine.

The company in question has the resources to do things right. And they have at least a passing acquaintance with what “right” looks like. But they’re not interested. In my one interaction with them, they made it clear that they didn’t wish to hear about shortcomings in their contracts.

Why? Here’s an all-purpose explanation Casey offers in this post:

Inside counsel are really busy doing work that is mission critical to the enterprises they serve. They are overburdened and do not have the time or other resources to pursue transformative change within or outside the law department.

In this case, I don’t think that captures the dynamic, and neither do any of the more nuanced explanations. I simply concluded that the company in question doesn’t give a ****.

Studies of inertia tend to seek to explain why rational economic actors opt to stick with suboptimal results. But perhaps we’re not dealing with rational economic actors. Maybe we’re dealing with people for whom the suboptimal is acceptable because achieving the optimal is just too much of a drag.

I’m hard-wired to give a ****. My family refers to me as “the society policeman.” Waste and selfishness in the public sphere makes me uncomfortable. When I think of, say, what it took to land on the moon, I think, They gave a ****! When I think of the Swiss train system, I think, They give a ****!

Currently the zeitgeist seems to contain a big helping of We don’t give a ****. A random example: whenever I return from my travels, take an AirTrain from JFK, and find myself at Jamaica Station, I survey the grubbiness and find myself thinking, We don’t give a ****.

When it comes to my corner of the contract-drafting world, I like to assume that people would prefer to avoid wasting time and money, hurting their competitiveness, and assuming unnecessary risk, so like Casey I find a bunch of explanations for continued dysfunction. But let’s be realistic—it’s inevitable that some proportion of the inertia that afflicts contract drafting is attributable to We don’t give a ****.

Tackling dysfunction requires putting yourself out for the common good. It requires challenging the status quo. If you’re mainly concerned with doing the minimum and not rocking the boat, you’ll stay clear of tackling dysfunction, and you’ll probably do just fine.

I’m not inclined to get hung up on this. If I thought the don’t-give-a-**** contingent had the upper hand throughout the industry, I’d throw in the towel. Instead, I’m constantly reminded of the people and organizations out there trying to do better. I’ll continue to do my thing for those who do give a ****.

Does Contract Prose Matter?

Does contract prose matter? Of course it does. Even if you assume that the parties have notionally agreed on the terms of the deal, how you express those terms in a contract can determine how that transaction fares.

But many people who work with contracts don’t realize that. Some might be contract managers who regard contract prose as a lawyer thing, so they tune it out. Others might be titans of BigLaw who think that coming up with wording is something best left to minions. And still others—the biggest group, I suspect—might be copy-and-paste monkeys who think that contract prose is something you recycle rather than create.

For their benefit, here are the different reasons why contract prose matters.

Telling the Story

A deal consists of disparate elements; it’s the drafter’s job to weave them into a coherent whole. This involves following some basic rules: Don’t put the definition section at the front of the body of the contract. Generally, don’t try to group one party’s obligations in a section or article entitled Acme’s Obligations. And so on.

But the more complex the transaction, the more challenging that task is. You have to break the contract down to its constituent elements, reshape them, and rearrange them. If you do a good job, the reader understands better what’s going on. Reviewing, negotiating, and monitoring performance all happen more smoothly and more quickly.

Avoiding Unpleasant Surprises

Because contract language is limited and stylized, and because a lot is at stake, often things aren’t as they seem: you think the contract says X, but someone argues that in fact it says Y.

This sort of problem arises when you indulge in, for example, the notion that efforts variants involve different degrees of onerousness, or the notion that it’s helpful to say indemnify and hold harmless. When legalistic hairsplitting is at odds with semantics and logic, things get ugly.

Confusion also lurks in the many forms of ambiguity that can afflict a contract. Ambiguity of the part versus the whole; syntactic ambiguity; ambiguity in reference to time; and so on. See this article for an overview. Being able to spot this kind of ambiguity isn’t a skill that comes naturally. Instead, it requires that you train yourself. (A Manual of Style for Contract Drafting is the best resource for that.) It’s a skill that pays off, because ambiguity routinely causes disputes.

Dispelling the Fog

Even if they don’t directly result in a dispute, the shortcomings of traditional contract prose—bollixed verb structures, redundancy, archaisms, rhetorical emphasis, and so on—create a fog that makes it harder to figure out what’s going on. So everything takes longer. And the fog makes it harder to spot and root out sources of confusion.

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So if you care about not wasting time and money, contract prose matters. If you care about being more competitive, contract prose matters. If you care about reducing the risk of contract disputes, contract prose matters.

The only time contract prose doesn’t matter is when contracts themselves don’t matter. I wrote this LinkedIn article about whether contracts matter. It might be that we’re at risk of contracts not mattering, simply because for some of us the rule of law doesn’t matter.

Changing Your Templates: Slow and Steady or All at Once?

A participant at a recent “Drafting Clearer Contracts” seminar sent me an email saying how much they had enjoyed the seminar. They went on to say that “incorporating the concepts into our templates and drafting will require a slow, steady cultural change.”

Regardless of whether cultural change has to be slow and steady, I suggest that it doesn’t reflect reality to think that you can change your contract templates gradually.

Invariably, traditional templates use dysfunctional prose. Fixing that requires addressing many aspects of contract language—verb structures, archaisms, redundancy, defined terms, ambiguity, rhetorical emphasis, layout, arrangement, and so on. It’s not realistic to expect that you can limit your scrutiny to a selected topics and leave the remaining dysfunction untouched: once you start pulling at a thread, the fabric of dysfunction starts to unravel. And there’s substantive change to consider on top of that. So meaningful change in your templates either happens all at once or it doesn’t happen at all.

Only in one sense can change be gradual. That’s when you redo your templates one, or a few, at a time. That’s probably how you’d have to handle it anyway.

What about the cultural change that the seminar participant mentioned? Ideally, it would be irrelevant. Your templates and your contracts process should establish the reality on the ground, with your contracts personnel adapting to that. If you’re allowing a group of people with different experience, different aptitudes, and different training call the shots, you have mob rule.

I’ve written often about how you go about effecting change, once you’ve decided that you can tolerate change. Want your in-house lawyers to redo your templates? They’ll probably take too long, and it’s unlikely that they have the necessary expertise. Want your law firm to redo them? They’ll probably charge to much, and it’s unlikely that they have the necessary expertise. You need a contract-drafting specialist; I’m one of those. (See this blog post for more about that, and see this blog post for what I think about your reasons not to hire me.)

The Adams/Cummins Debate on Sweeping Away Traditional Contracting: Ken Says “No”

Tim Cummins is the head of the International Association for Contract and Commercial Management (IACCM). Over the years I’ve discussed with Tim the future of contracting. After a recent exchange of emails, we decided try a more formal approach. We agreed to address on our respective blogs the following proposition: We want new technologies to sweep away traditional contracting, so we can have faster, more efficient, and more cost-effective contracting. In this post on his blog, Tim gives a hearty “Yes” to this proposition; below, I give an equally hearty “No”! We invite you to chime in, whether on Tim’s blog, my blog, LinkedIn, or Twitter.

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For most companies, the contracts process is a problem. It’s too slow, too expensive, and too often it results in disputes and other unsatisfactory business outcomes.

Tim Cummins and I agree that change is desperately needed, but we have different ideas about what that change should look like. Tim wants cutting-edge technology to sweep away the old order. I want change that’s driven by human expertise, with technology—and relatively unglamorous technology at that—only helping to scale up that expertise. So I say “No” to the proposition under debate.

The Problems

Let’s start by considering the different stages in the contracts process and the problems associated with each.

  • Drafting: Contracts use archaic, bloated, legalistic prose; drafters rely on misbegotten conventional wisdom; deal terms don’t make sense, express inefficient deal mechanics, or are too one-sided; and contracts are cumbersome because drafters are too risk-averse.
  • Reviewing counterparty drafts: It’s time-consuming, and it’s made worse by drafts exhibiting shortcomings listed in “Drafting,” above; and improvised review has the potential for human error.
  • Negotiation (before and after drafting): It’s time-consuming, and it’s made worse by drafts exhibiting shortcomings listed in “Drafting,” above; and lawyers are prone to “negotiation theater”—haggling over legal issues that are peripheral to the deal.
  • Signing: It’s an administrative nuisance.
  • Monitoring performance: It’s an administrative nuisance, and it’s made worse by drafts exhibiting shortcomings listed in “Drafting,” above; and improvised monitoring has the potential for human error.

Not a Technology-Only Solution

It’s clear from this summary that the biggest source of dysfunction in the contracts process is shortcomings in what contracts say and how they say it. And the harsh reality is that because of an insurmountable garbage-in-garbage-out problem, technology can only ever play an ancillary role in fixing that.

The technology that Tim appears most interested in—artificial intelligence, natural language processing, advanced analytics—can tell you how contracts address specific issues, but it can’t tell you what’s clearest and what makes most sense for a given transaction. Good luck drawing any conclusions about the implications of, say, efforts provisions or the phrase represents and warrants from letting technology loose on a bunch of contracts.

The Foundation

Instead, we need to offer a new model, one based on old-fashioned expertise.

The first step toward a rational contracts process is implementing comprehensive guidelines for clear contract prose. My book A Manual of Style for Contract Drafting, now in its fourth edition, is the only work that fits the bill. It’s aimed at an international readership, it has sold tens of thousands of copies, and no one has seriously challenged its authoritativeness. If you make decisions regarding contract language without consulting it, it’s likely that you’re copy-and-pasting, relying on flimsy conventional wisdom, or improvising. That’s unlikely to lead to optimal contract prose.

But a comprehensive set of guidelines for clear contract prose isn’t enough. In a copy-and-paste world, it’s unrealistic to expect those who work with contracts to stop the contracts machinery, dismantle it, retool it, then put it back together. Furthermore, it’s unrealistic to expect countless companies and law firms to each tackle that task and devote to it the necessary resources. And they wouldn’t have access to the necessary expertise—contract drafting is best left to specialists. There are precious few of those, as I explain in this post.

Template Library

But I’m not about to recommend that we train an army of contract-drafting specialists. Instead, what’s required is a public, subscription-based library of templates prepared by contract-drafting specialists who follow a comprehensive set of guidelines and are assisted by subject-matter experts. If automated, the templates would allow a considerable amount of customization. (Technology for automating templates has been around for years, in various forms.) No such library yet exists, at least not one as ambitious as what I have in mind.

Instead of just building templates, parking them online, and waiting for people to use them, it would make sense to work with companies, law firms, and trade groups to identify where there’s a real need for templates that would allow them to quickly create contracts that are clearer, more relevant, and more cost-effective than anything they could build on their own.

Such a library would also make ancillary technology more effective. For example, technology aimed at speeding review of counterparty drafts has to be told what to look for. That information could readily be gleaned from templates in the library.

Prospects for Change

It would be rash to assume that any initiative to improve contracts would bring sweeping change to what is a precedent-driven corner of a notoriously conservative profession. In any process of change, the laggards might well outnumber the adopters. But give people something that makes their lives easier, saves time and money, makes them more competitive, and reduces risk, and there’s a good chance they’ll use it.

Contract managers should consider being more assertive about seeking change this kind of change. I’ve noticed two recurring themes in commentary coming from the contract-management community: first, that lawyers are responsible for screwing up the contracts process, and second, that technology will save us. Both threads are present in Tim’s post in favor of the proposition under debate.

Those themes suggest that the contract-management community has ceded to lawyers primary responsibility for what’s in a contract. That’s unwarranted. Yes, lawyers might have some additional years of education, and they’re notorious for poaching on others’ turf. But nothing about contracts mandates that lawyers call the shots. (See this blog post.) Contract provisions that require lawyer expertise—primarily those addressing dispute resolution—tend to be a peripheral part of the deal. Anyone who is familiar with deal mechanics and is an informed consumer of contract language can call the shots, whether they’re a lawyer or a contract manager.

If the contract-management community would like to take greater responsibility for contract language without succumbing to the dysfunction of traditional contract language, a template library of the sort I have in mind would be the way to go.

The Difference Between Selling Widgets and Buying Widgets

You’re general counsel of Widgetco, the world’s leading supplier of widgets. When anyone needs widgets, they come to you!

But you’re also a big buyer of widgets. The primary raw material for widgets is … widgets!

You have one contract template for selling widgets and another for buying widgets. How do they differ? Bear in mind we’re not talking about, say, computer equipment—just widgets.