Take me to the bridge to reimagine contract drafting

Posted on Wednesday, May 14, 2014, by Noric Dilanchian

Drafting contracts to treat risks is institutionalised traditional knowledge. In contrast, drafting contracts to support the competitive positioning of clients requires new know-how not taught in the institutions of law schools, law firms or in-house legal departments.

Traditional knowledge focuses on implementing or responding to regulations, conventions, policy and compliance needs.

New know-how relevant to professional services delivered offline or online requires the contract drafting process to be reimagined.

Fortunately there’s a bridge from traditional knowledge for contract drafting to relevant new know-how. The bridge is what contract law and new know-how teach us about the concept of intention. As James Brown raps - "Shall I take 'em to that bridge?"

Under contract law five often cited elements of a contract include an intention to create a legal relationship, an offer, an acceptance, consideration and terms. Whereas “intention” appears in only one of those essential theoretical elements, in practice it is also a springboard to the other elements.

The Oxford Dictionary defines intention as “a thing intended; an aim or plan. A plan or springboard exists to at least some degree when a party makes an offer, accepts an offer, and sets the consideration and terms.

Reimagining a contract as a forecast by parties of their intentions takes us to the intention bridge which joins institutionalised traditional knowledge from contract law to new know-how from areas outside outside law.

Crossing the bridge leads legal minds to an epiphany, the realisation that many areas of knowledge are involved in forecasting and searching for intentions. The unique value of contract law is that it alone makes forecasts and intentions legally binding.

A search for terms such as “business planning”, “strategic planning” and “business modelling” immediately leads to entire libraries of literature in management, organisational and commercialisation theory discussing analogues for intention. Moreover, the way this literature deconstructs intention has enormous practical value for business. For example:

  • in management consultancy and MBA courses there is discussion of mission and vision statements, aims, objectives and key performance indicators and all the forgoing can be mapped into workflows, timelines, project management documentation and definition of clear business functions, processes and procedures;
  • from the open innovation thinking of Prof. Henry Chesbrough emerged clearer understanding of how to design a business model; and
  • in the writing on customer-centric methodology by Steve Blank there are useful concepts such as working with a business model canvas, producing a minimum viable product and applying metrics to monitor progress.

To acquire the new know-how, the legal contract drafting process needs learning from areas of knowledge and competency outside of law. The approach is fundamentally multi-disciplinary. Some areas are overviewed below.

  • Strategic planning This is a vast, useful and ever-evolving body of knowledge. Economist, Joseph Stiglitz in The Innovation Enigma observes that "A lot of intellectual effort is devoted to devising better ways of maximising advertising and marketing budgets. But standards of living might have been raised even more if all of this innovative talent had been allocated to more fundamental research – or even to more applied research that could have led to new products." Such research can be part of strategic planning. For that it is useful to be familiar with literature in economics, business management, commercialisation, innovation studies and lean development.
  • Project management This too has a substantial body of knowledge. It differs sector by sector, transaction type by transaction type, and case by case. Generic project management is useful. Contract drafters need more. They need to customise project management to suit the category or situation-specific needs of various types of contracts. To illustrate, project management requirements differ for a contract to buy or sell a business from a contract to engage a C-suite employee to a shareholders agreement. For each, contract drafters need to apply suitable but different workflows and processes and be aware of the relevance of different business systems.
  • Operational planning This involves understanding business processes, business functions, offerings and competency fields. Here too there are sector, industry and situation-specific differences. Customising a contract to deliver business model innovation requires a contract drafter to understand historical modes of operation and proposed better or emerging future modes of operation.
  • Records management, document management, knowledge management and content management There are ongoing needs in trade and commerce for faster access to appropriate documents and better document taxonomy, design and retrieval. Clients appreciate supply to them of a combination of documents in a timely or just in time fashion. For a contract drafter, to get there requires access to a database of template contracts and related documents segmented or searched by practice area, type, format and bias. For greater speed of understanding and copy/paste processing, it also requires standardisation of agreement layouts, clause headings, wording and styles.
  • Visual presentation Visualisation is a hot topic in legal IT. As discussed in Wings for the Mind there are many tools for visualising or sketching legal work - outliners, mind mapping, timeline and text editor apps. Also, tables, graphs, spreadsheets and diagrams used in contractual transactions help overcome the communication limitations of text, which despite its limitations and mounting unmanageable volume continues to dominate legal education and training and the way law is represented and communicated.

Confirmation that the new know-how approach can work for contract drafter is provided by the Australian Business Excellence Framework issued by Standards Australia in 2002. It is also provided by the author’s international experience as a contract drafting trainer. This has been in numerous workshops with managers and lawyers from a wide range of Common Law, Civil Law and mixed jurisdiction countries. Due to run of the mill law-dominated perceptions about what is involved in “contract drafting”, most register for such workshops to improve their legal drafting skills. However, many graduate to learn what they did not expect to learn, ie that equally vital issues exist beyond law which can be addressed by skilled knowledge workers with an approach designed to gather proper instructions to reflect more fully the intentions of the parties to a contract.

A regular stream of legal books, seminars and workshops provide training on clause wording and plain language. They provide basic and essential knowledge for contract drafters to clarify intentions and develop secure and effective contracts. However, they rarely recognise that even greater value can be architected into contracts before formal drafting begins. Issues resolved and values locked in before formal drafting begins can relate often to the roles and duties of contracting parties and related stakeholders, who bears which risks, and what is the nature and trigger for payments. In the early stages a contract drafter explores and tests intentions, identifies stakeholder interests, sets expectations, sketches, shapes and negotiates deals. In later stages the drafter normally writes clauses or customises a template or precedent agreement.

Early stage work for contract drafting is especially important when the need is business model innovation and modelling a contract that achieve this. Business model innovation can be achieved in many ways with contracts, eg the way products or services are charged, paid for and delivered. A well-known example is Apple’s charging, pricing and delivery mechanisms for music via iTunes. The operations of iTunes is not just a technology or business practice innovation in the last and current decade, it is a contractual one as well, involving a regularly updated “I agree” click-wrap contract on downloading or upgrading iTunes.

At annexium.com we are focused on integrating new know-how with traditional knowledge, especially to make more predictable estimation of contract drafting time and costs and to reduce for clients and lawyers the risks of inadequate contract terms and conditions.

It’s a huge job. Being on this path, Annexium is here to partner with members to make contract drafting better and faster. For very few people would legal work and contracts come first to mind for innovation. Annexium is changing that perception by reimagining the contract drafting process and providing members with technology and an ecosystem to secure higher level benefits from drafting work and contracts. 

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Image: Signature of the contract for construction of the Sydney Harbour Bridge.

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