According to recent data from World Commerce and Contracting, 48% of companies are interested in simplifying their contracts. That’s a significant minority of the whole global corporate landscape.
What's wrong with complex contracts?
Contractual complexity is bad for business. End of.
But if you want to know the impact it has, then Simpler Contracts by Design (an article by World CC) states that contractual complexity leads to additional risks and avoidable costs because it:
- lengthens negotiations and delays the process of doing your deal – complex contracts take more time to discuss, finesse and finalise
- increases errors, ambiguities and inconsistencies – as we have seen in many English law cases
- reduces trust and erodes goodwill – ‘the small print is where they hide the nasties’
- increases the risk of friction during the project and claims or disputes afterwards – complex contracts are harder to read, understand and use… including all the practical processes within them!
As a tool to help you do business, complex contracts don’t succeed.
You and your clients want certainty of: outcome, process and cost. Complex contracts don’t give you this. Even if you could read, understand and use them… they do not clearly state the outcomes that you can expect. They glue up the pre- and post-contract processes. They are obscure in payment terms and total costs payable.
What should you do?
Nothing? You can continue to use whatever contracts you have. If you think they are perfect, then submit them to be assessed against the World CC Better Contract Design Mark.
Something? You could review whether your contracts are having any of these negative effects on your business. Decide which aspect of certainty is key for your contracts, and change the contract elements first.
Everything? Get expert help with simplifying your contracts. Recent clients have said that their simpler contracts have reduced the time taken to get the paperwork sorted and signed, with fewer queries, and they have confidence in what they are doing.