In the interests of balance, I ought to explain not just why you should simplify your contracts but also provide some of the arguments I have heard against the idea.
Here are the five most popular excuses I have heard for keeping to the norm of complex, one-sided paper-based contracts:
- It’s far too short – it cannot cover everything. Agreed. But then neither does a 50,000 word JCT contract plus its 50,000 word schedule of amendments; or a massive bespoke contract for a windfarm. Should your contract even attempt to close every single loophole or should it act as a framework that enables and encourages the parties to work together?
- It relies on trust. Agreed. But why would you want to enter into a contract with a company you don’t trust? Contracts can either enhance the existing trust between companies or create a culture of mistrust eg by micro-managing every possible eventuality or act. In my area of expertise – construction – there is a term implied into every single contract that requires the parties to co-operate and, increasingly, to act in good faith. Where parties have to work together over a long period on a complex project, trust is essential to success. So why not start as you mean to go on?
- It’s too basic and a legal nightmare. Not for all possible uses. Whilst it might be true for multi-million pound deals needing bank approval, £33bn of UK construction projects start without any contract. One up from no contract are works which rely on either a bad letter of intent, or on a DIY-contract. Many SMEs and micro-enterprises don’t have the resources to read, adapt or understand lawyerly contracts. Why not allow these transactions, which fall between the cracks created by expensive standard forms, to have something which is fit for their purpose?
- Surely the devil is in the detail? Agreed. But the most relevant detail for most projects is not the legal terms (whatever lawyers might think) but in the commercial, operational and technical details ie the works documents, the pricing schedule, the quality control systems and so on. The terms which cause the most friction are those relating to day-to-day issues which lawyers tend not to focus on such as payment provisions, change mechanisms, late delivery. Why not cut through some of the boilerplate and allow the users to see the processes so they can tailor them to suit their needs?
- Because we have always done it this way. Really? The first contracts were very short (whether on clay or papyrus). The first JCT contract was a mere 25 pages. Users regularly request simpler and simpler versions. Why not listen to what users want rather than act like copy & paste monkeys?
What should you do?
Decide which side you relate to most: complex, one-sided and (largely) paper-based contracts or simple, trust-enhancing and digital contracts. They don’t have to be just 500 words… I’ll let you have up to 5 pages!