This article will discuss three trends in contract drafting being employed to an increasing degree by leading procurement organizations:
Trend One - Business English is Replacing Legalese. Consider a sentence which reads like this:
"Notwithstanding the foregoing, the rights granted to XYZ Corporation shall heretofore inure to its Affiliates, as such term is defined herein, but not in any such manner which shall impede Corporation's ability to enjoy such rights heretofore."
Really? Now fill a 25 page contract document with similarly-constructed sentences, and you've ensured the Sales EVP won't sign the agreement without having their attorneys tear it apart.
So where did "legalese" originate? Some has evolved throughout the history of contracting. Case law precedence has been built around certain legal terms (such as "indemnification") which has ongoing merit.
But some words like "hereunder" or "therein" may have developed for another reason...money.
Long before we had the Xerographic process or even printing presses, copies of legal documents were made by a group of well-paid persons called "Scribes". A royal or their attorney might dictate or write a contract, and then the scribe would create a clean copy (and often additional copies for the benefit of other parties). Guess how scribes were paid? That's right, by each line of text. Scribes were not cheap either, due to the expectation for perfect documents. Errors could not be erased or whited out, and the scribe would typically begin a page again whenever an error occurred. Standards existed for the size of their text (similar to today's font sizes), and they were paid for every line of text they wrote on each copy.
So which takes up more space, scribing "in this agreement" or "herein"? It didn't take the attorneys too long to figure out how to get more words into a line of text by consolidating phrases into single words. The rest is history. And the problem has been compounded further by some attorneys who want/need their clients to rely on them to interpret legal documents.
But leading companies and their attorneys are beginning to move away from legalese towards more-understandable Business English. Some procurement groups are also learning that by making agreements be clear and understandable, some of their suppliers are turning them around more quickly; often signing contracts without involving a time-consuming and contentious legal review.
A few years ago, Strategic Procurement Solutions did a P2P Efficiency Review for one of the largest consumer goods manufacturers in the world. That company's executive team and general counsel's department had embraced the concept of making contracts understandable. For example, here are a couple of sentences from one of their legal documents:
* "Don't modify the materials or use them for any other purpose; if you do, you'll be violating our intellectual-property rights."
* "We may terminate this agreement at any time and without notice to you if, in our sole judgment, you breach any term or condition of this agreement."
Note that you don't see "herein" or other legalese in either of the prior two sentences.
Now I'm not suggesting that all contract language can (or should) be made this simple. But if your own counsel won't draft a sentence that can be read and understood by non-attorneys, they may be seeking to guarantee their own employment rather than helping procurement put good working agreements in place with our suppliers.
Trend Two - Shorter Can Be Better than Longer. During my career,I've worked with many great attorneys; both in directing all contracting management for two different Fortune 25 companies and subsequently in helping many corporate and governmental clients improve their contract template and fallback clause libraries. This first type of attorney works alongside procurement leaders to make supplier deals come together with intelligent protections.
But a second type of attorney seems only to have listened to law school professors who said their main job is to protect clients from all risk. When placed in an environment (especially as external counsel) where they can bill by the hour, this unfortunate combination of perspective and re-numeration often results in contract documents that are far too long and complex; mysteriously-formatted so as to require frequent amendments whenever business conditions change. Do any of our readers have this second type of legal "support"?
It's my theory that waving words under the nose of this second type of attorney is like waving a red flag under the nose of a bull. As soon as opposing counsel sees a complex or overly-long contract draft, the battle begins.
So here's a question. Is it better to have a short contract which says, "ABC Company's maximum liability under this Agreement shall be $100,000 (USD)" or to have three pages of language putting non-defined restrictions on different types of liability? The first group of attorneys is beginning to trend towards the former while the second group remains strongly fixated on the latter.
As one of our clients recently said about an external attorney their company had paid to draft contract language, "Last week, we paid her to re-write language we had paid her to write in a nearly identical contract two months ago!"
Trend Three - The Rule of Ten. If we return in history... back to the days of our friends the "Scribes"... a trend emerged to resolve unclear handwritten numerical values. We still see that methodology today on our personal checks, which contain a space for the handwritten value of the check (for example, "One-Thousand, Nine-Hundred and Fifty Dollars & 50/100") and another space where we write "$1,950.50". This duplication of value allows the check processors at a merchant bank to accurately process the claim, even if the account holder's handwriting wasn't perfectly-clear.
This methodology continued past the days of scribes into the modern era. Typewritten documents were made with carbon paper copies which marred corrections (even when correcting typewriters were developed). Thus the second or third copy could not be clearly-read, even if a correction had been made to the first copy.
But today we have computers and printers which do not require the redundant statement of numerical values. They clearly print numbers. For that reason, as well as ease of reading, the Rule of Ten has been adopted by many attorneys and contracting professionals. This principle says that if a numerical value is ten or below, it should be spelled out in letters (for example "nine"). But if the numerical value is above ten, it is stated with numerical characters (for example, "€968,005.56"). Using the Rule of Ten makes contracts shorter and easier to read, and still provides complete accuracy.
Lots of other beneficial trends are taking place with Business-to-Business (B2B) and Government-to-Business (G2B) contracts. Feel free to email us to learn more about those trends.
Strategic Procurement Solutions help clients in the private and government sectors optimize their Contracting Management practices. We work with procurement leaders and their legal counsel to develop template agreements, clause libraries and fallback language. We also evaluate contracting management processes, CLM system utilization, and techniques. Our skilled instructors train procurement audiences with onsite workshops like Strategic Contracting™ (2 days) and Innovative Trends in Technology Contracting™ (2 days). More information can be requested at [email protected] about these or our other services.