Last Wednesday I attended an IACCM seminar 'Risk and Compliance' at the Baker and McKenzie offices in London. The session centered around the way in which lawyers approach risk and seek to protect their clients/companies.
The IACCM's 'Top Ten Negotiated Terms' survey highlighted indemnities and limits of liability as the main issues in today's contract negotiation, which suggests that we are still focussing on limiting our liability in the event that things go wrong, rather than preventing them going wrong in the first place. See the previous post on Preventive Law for more thoughts on this topic.
The seminar looked at how to get lawyers taking a more pro-active approach to contract structure and negotiation and, if I'm honest, didn't seem to have much in the way of answers. I left feeling vaguely unsatisfied, and convinced that a better approach should exist somewhere.
Yesterday we held the first joint workshop in Helsinki for Collaborative Contracting in R&D projects, and this topic was hot on the agenda. Interestingly, the most practical solution to this very modern problem was a very old-fashioned one - trust. It seems that in an increasingly complex world, rather than trying to legislate for everything in huge and unwieldy contracts (and failing), the alternative is to contract firmly only for the core deliverables and have a much looser provision for the 'known unknowns' (thanks, Mr Rumsfeld).
This mechanism requires a foundation of trust, which will be established over a previous working relationship, and also requires that the parties are both motivated by the same outcomes (albeit for different reasons). And it is structuring the deal so that it rewards good behaviour for both parties that is the real challenge.
As always, all thoughts and comments on this topic will be appreciated!
Thursday, March 27, 2008
Monday, March 10, 2008
Why Contracts aren't in Plain English
During our recent Foundations of Commercial Contracts workshop a delegate asked why contracts used such tortuous phrases as 'for the avoidance of doubt' and 'notwithstanding the foregoing'. These phrases, he suggested, added to the popular misconception that contracts are for the eyes of lawyers, and lawyers alone.
This is an interesting point, and one that we have considered in the past. You may be familiar with the 'Crystal Mark' for plain English, that can be awarded to documents considered by the awarding body to be written in clear, jargon-free language. It is possible (at some expense) to have a contract reviewed and granted a Crystal Mark, and we investigated this possibility for a client whose contracts were to be used in dealings with consumers.
The challenge facing us was evident from an examination of the Crystal Mark Conditions. These included the following:
"You must 'indemnify' us against any legal action connected with the document. (In other words, we have no legal liability in connection with the document.)"
While the words in the brackets sought to translate the legal provision into plain English, they are actually inaccurate in their translation. To explain exactly what an indemnity means would take rather more words than they have used. And therein lies the problem.
Although clarity in drafting is essential, particularly in order to make contracts accessible to technical and commercial people rather than just lawyers, there are occasions where a legal phrase or term is just the quickest and simplest way of communicating what we mean.
Let's take 'notwithstanding the foregoing' for example. Translated into plain English, this could be expressed as 'In the following circumstances you can ignore the previous clause, and replace it with this one.' Better? I don't know. I'd be very interested in your thoughts, as we are constantly working to make our contracts easier to read and more practical documents, without sacrificing their legal effectiveness.
In the mean time, we are working on a 'glossary of legalese' to offer some translations for these words and phrases. This will automatically be made available to all previous delegates on our Foundations of Commercial Contracts workshops, but if you haven't yet attended a workshop and you'd like to receive a copy e-mail me and I'll add you to the list.
This is an interesting point, and one that we have considered in the past. You may be familiar with the 'Crystal Mark' for plain English, that can be awarded to documents considered by the awarding body to be written in clear, jargon-free language. It is possible (at some expense) to have a contract reviewed and granted a Crystal Mark, and we investigated this possibility for a client whose contracts were to be used in dealings with consumers.
The challenge facing us was evident from an examination of the Crystal Mark Conditions. These included the following:
"You must 'indemnify' us against any legal action connected with the document. (In other words, we have no legal liability in connection with the document.)"
While the words in the brackets sought to translate the legal provision into plain English, they are actually inaccurate in their translation. To explain exactly what an indemnity means would take rather more words than they have used. And therein lies the problem.
Although clarity in drafting is essential, particularly in order to make contracts accessible to technical and commercial people rather than just lawyers, there are occasions where a legal phrase or term is just the quickest and simplest way of communicating what we mean.
Let's take 'notwithstanding the foregoing' for example. Translated into plain English, this could be expressed as 'In the following circumstances you can ignore the previous clause, and replace it with this one.' Better? I don't know. I'd be very interested in your thoughts, as we are constantly working to make our contracts easier to read and more practical documents, without sacrificing their legal effectiveness.
In the mean time, we are working on a 'glossary of legalese' to offer some translations for these words and phrases. This will automatically be made available to all previous delegates on our Foundations of Commercial Contracts workshops, but if you haven't yet attended a workshop and you'd like to receive a copy e-mail me and I'll add you to the list.
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