Tag: Process

MSCD guidelines mostly fly under the radar. Apart from a couple of notorious recommendations—I’m talking about you, this agreement with a small a and states instead of represents and warrants—the guidelines don’t attract attention to themselves.

But sometimes traditionalists gonna traditional, so you might get a draft back with all sorts of unhelpful traditionalist comments. As I note in this 2013 post, starting in 2009 I’ve suggested that the best way to make that less likely is to tell the other side that you’re following MSCD guidelines and that you politely recommend they not waste everyone’s time by trying to make things more traditional. When I think about this, the phrase “Get your retaliation in first” comes to mind. It was coined by the great Irish rugby player Willie John McBride, in connection with the Lions 1974 tour to South Africa. (Those circumstances were rather more brutal than what I’m talking about!)

Well, the fourth edition of MSCD contains a revised version of that cover note. It starts at the bottom of page xxxix of the introduction, which is available here. If you’ve tried my cover note or one of your own, I’d like to hear how it worked out.

If you’d like to know more about the context of “Get your retaliation in first,” there’s this article and the following video:

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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.

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.

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.

In this post I critique Shaw Burton’s article in the Harvard Business Review in terms of the guidance it offers on making your contracts clearer. But it also offers a useful reminder of the benefits of overhauling your templates top to bottom.

Usually when I work on a template for a consulting client, I start by redrafting their version of the template. But that can result in two problems. First, it’s rare that a template’s problems are limited to how it says what it says. Instead, it’s usual for templates to include both dysfunctional language and dysfunctional content. Redrafting dysfunctional content can be a waste.

And second, when I give a consulting client my version of their template, I’m asking them to accept a lot of change. That’s something I discuss in this post.

A different approach would be along the lines of that adopted by Shawn and his team at GE Aviation: You revisit the basics of the transactions in question, perhaps using the existing template as a starting point but nothing more. You consult all relevant constituencies. You build a bullet-point framework, then you gradually flesh it out. That way, you’re not simply perpetuating whatever’s in the current template. And because change is accomplished step by step, it’s not as alarming as change that’s dumped on you all at once.

But a complete overhaul takes time, and it takes your personnel away from other projects. Shawn describes his initiative as “a three-plus-year effort.” That might not be exceptional: a seminar client recently told me that they spent 18 months redoing one of their templates. I suspect that such projects take a long time because those involved aren’t contract-drafting specialists (see this post for what I mean by that) and because they’re juggling other responsibilities.

Put me in charge of such a project and I’d get it done in perhaps a quarter of the time.