What and who are contracts for?
Recently I conducted a very unscientific survey on social media, asking non-lawyers about what a contract is for, and for comments about their experiences with contracts. For most people, a contract is a long, written document with a lot of information no one understands. They’re afraid to sign them because they don’t understand them. They do want something that spells out an agreement, something to help everyone remember what they agreed to, and they want to be able to count on each other to perform. Almost all of them talked about contracts as a way of preventing conflict and especially not wanting to ever go to court. They want their contracts to be understandable. They want to be able to look back and remember what they were trying to accomplish in the first place.
Because I am known for my work in contracts, I often get queries from the web. This query is a good example:
“We know many attorneys but none that are able or willing to write fair, balanced contracts that spend more time on making sure the agreement is easily understandable and has a comprehensive conflict resolution process that avoids litigation.”
A common statistic thrown around the legal community and the internet is that 90% of people don’t read a contract before they sign it. For example, do you read your car rental agreement? And who actually reads terms and conditions before checking the box? A couple of years ago, a story made the rounds about how 22,000 users had clicked the box and agreed to clean toilets and pick up animal waste in exchange for wi-fi service. Most users had just clicked without reading. When someone actually did read the T&C, he discovered a reward and the unusual terms. The company blog post explains more.
After almost 30 years of being a lawyer, teaching business law and training lawyers in contracts, I have seen many long, complex contracts that make no sense to me. I’ve seen contradictory clauses and fragments clearly left from prior uses of a template. Once, I offered a contract drafting class with some clever clauses involving Mickey and Minnie Mouse. I was pretty shocked when a potential client brought in a contract for me to review and some silly Mickey and Minnie language was in their contract.
A lawyer once told me that it was his job to make sure that his contracts were hard to understand. “That way, I can argue for whatever my client wants when the deal falls apart,” he told me. I pity the parties who have to live with his contracts after they sign them.
But we are stuck with that, aren’t we? The best we can do is try to avoid the worst mistakes, right? As lawyers, we have been taught to see contracts as documents that a judge will interpret when things fall apart. Contracts have to be complex and complicated, don’t they? Not so fast.
Proactive and Preventive Law
A worldwide movement is focused on the user experience of contracts, seeking to make contracts relevant, readable and even focused on the well-being of all the parties. Proponents of proactive law point out that contracts are meant for people, not judges.
One of the champions of the movement is Finnish legal consultant, lawyer and contract innovator Helena Haapio. Inspired by the preventive law movement of Louis Brown, Haapio has written, spoken, and practiced extensively on the topic.
Both preventive law and proactive law emphasize the lawyer’s role as a planner helping clients to achieve their objectives. In the practice of preventive law—as well as in the literature dealing with it—risk management and dispute avoidance often come to the fore. While these elements are important, the supporters of proactive law do not want to be associated solely with a message toward problem prevention, dispute avoidance, or risk management. To use the medical analogy, the idea is not only to prevent ill-health but to promote wellbeing. The goal is to embed legal knowledge and skills in clients’ strategy and everyday actions to actively promote business success, ensure desired outcomes, and balance risk with reward. —Helena Haapio, “Introduction to Proactive Law: A Business Lawyer’s View, Scandinavian Law“
So how can lawyers shift from the perspective that contracts are for future litigation to living documents that support the ventures our clients are undertaking?
Several legal trends are shifting the traditional, stodgy approach to contract drafting and negotiation.
Why do so many contracts still use archaic, repetitive language, and include legal jargon?
When I was in law school over 30 years ago, plain language drafting was already seen as the professional standard. There are national and international standards, organizations, books, and experts about plain language.
Cheryl Stephens is one of the pioneers of the plain language movement. I asked for her comment: “Contracts are supposed to document a meeting of the minds, which is impossible when at least one party doesn’t even understand it. And I have met many lawyers who don’t even know the effects of the material they put in contracts. Plain language revision is a first step: not only to make the meaning clear, but also to expose the logical disconnects, gaping holes, and other deficiencies in the material. Unfortunately, few lawyers want to take the time to ensure that a contract is understandable. And I think fear of change is their downfall.”
Values-Based and Conscious Contracts
Values-based contracts (also known as collaborative contracts), Conscious Contracts, and integrative contracts are a hot topic. Of more than a dozen topics I teach, I am asked about this more than any other and have taught it to law societies, corporate lawyers, big city, small town, and rural lawyers on five continents, so far. Many clients find the approach to be more attractive than the usual adversarial process. They are often sought out by those involved in the growing area of conscious business, Conscious Capitalism, impact investing and social entrepreneurship, who are looking for a lawyer who understands their long-term goals and missions.
Values-based contracts have many components. I won’t go into detail about all of them, but I hope this outline gives you a sense of how they work.
The Mindset Shift
Most lawyers think of contracts as just documents, but a values-based contract (VBC) is both a process and a document. The process is built on a relational mindset. The document is an outcome and memorialization of the process.
With our adversarial mindsets, lawyers can approach contracts like a wargame that requires a strategy to dominate the other. We talk about “winning the deal,” which generally sets up a hostile environment over the life of the contract.
In the VBC, the goal isn’t to exploit the other but to create a trusted relationship that fulfills the needs and interests of both parties. A contract isn’t a competition, but an alliance meant to benefit all the parties. The content, language, and tone should reflect that.
Creating or Strengthening Trust
At the beginning of the VBC process, the parties sit down together and have a conversation about what is really important. Lawyers can facilitate these conversations by encouraging openness, but the relationship belongs to the parties. My role includes coaching my client to have the hard conversations in the beginning before they’re deep into a relationship that blows up.
They talk about their visions for the world, their purpose in creating this particular agreement with these particular people, their values, and other big-picture conversations. These conversations establish a touchstone for trust, an experience of what it is to work together, and a place to return when things get tough later.
Other conversations that may be relevant include the strengths of each party, their needs and resources, their comfort level with risk, their reactions to conflict, and how they like to work with others.
These conversations offer an opportunity to test the relationship for alignment and create a foundation for sustainability while identifying potential pitfalls. Can these parties work together? Should they join forces in the common mission of the contract? They don’t just cover Who, What, How, and When, but also Why.
This touchstone becomes the core of the contract.
The parties then negotiate terms in alignment with their stated purposes, values and principles. Their goals are transparent. It is clear what each will get out of the relationship and what they’re willing to give. In those cases where someone really is trying to take advantage, that becomes clear, too.
A Bespoke System for Addressing Change and Engaging Disagreement
Once the parties have the relational conversation, most want to find a way to maintain that level of relationship and trust. The next step of the process is to create their own system for “Addressing Change and Engaging Disagreement” (ACED, also known as Peace Pact or Harmony Clause) that aligns with their values and forwards the mission.
When change occurs or a conflict arises, the ACED provides a structure for engaging in problem-solving, not arming for war. Clients generally know that it is in the best interests of both parties if resources are focused on business, not conflict.
Fulfilling the structure of the ACED is a pre-condition to filing a lawsuit, that is, a to-do list about what to do when something changes or one is upset. (This is based on legal theories similar to arbitration and mediation in contracts.)
This is a VUCA world—Volatile, Uncertain, Complex, and Ambiguous. Change happens. These contracts are not intended to be thrown in a drawer and pulled out when someone is angry. They’re working documents, more like constitutions that get amended when circumstances change. The VBC recognizes that when something changes, the parties can adjust their course and can problem-solve together.
An ACED can be very personal or more arms-length, depending on the circumstances. The ACED helps in preventing conflict and resolving those conflicts which arise as quickly as possible. Because it is created by the parties, it makes sense to them. It can be as simple as scheduling a meeting or seeking advice. For two Buddhist organizations, I drafted an ACED which had sitting in meditation together as its first step.
The best resource to learn more about this type of contract is a book by Linda Graham Alvarez, Discovering Agreement: Contracts that Turn Conflict into Creativity, first published by the American Bar Association in 2016. The website ConsciousContracts.com includes links to many articles from magazines which go into more detail.
These are not your father’s contracts. “Writing a conscious contract was a life-changing event for me. It required me to undo all the posturing—looking for that position of strength in each paragraph—and forced me to actually think deeper about our weaknesses and strengths and, more importantly, how do we handle our emotions and seek a mutually beneficial relationship, designed for success,” said one client, Ric Coven of Breiting, a privately held brand management company that includes, among others, a coffee roaster and real estate development company.
Even the way they’re approached is different. In Perth, Australia, I worked with a group that included lawyers, service providers, and people with disabilities and their family members. The workshop teams were actual clients and actual companies providing services. Each group was facilitated by a lawyer. This is some of the feedback about values-based contracts from that workshop:
- I think it forms the foundation of a good working relationship between both parties. By understanding each other’s values, it lends itself to better relationships when things work and how to deal with things going wrong.
- It established the principles of shared understanding and trust.
- It helped to “know” the other parties quite well and to feel comfortable that you have similar values before entering a contract. I like the building of relationship aspect and the idea of working together instead of a “breach of contract.”
- Values become an important focus for the relationship of the contractual parties.
- Contracts will be individually tailored to the person.
- Simplicity, clear understanding for both parties from the beginning, and the opportunity to discuss the strengths and weaknesses of both parties.
- The contracts are then individualized to suit both parties, which is great, not the one size fits all approach as now.
- It sets real boundaries and creates a working partnership about what each party believes, how issues will be dealt with and what to do when conflict arises.
Legal Design and Design Thinking
Legal design and design thinking are terms that cover a lot of ground, from font selection and document design to infographics and the process of coming to an agreement. They are being used in many areas of law, including the contract negotiation and drafting process.
Stefania Passera is a designer who specializes in contracts. She and Helena Haapio have been offering interdisciplinary “Legal Design Jams” which challenge people to rethink contracts and prototype new approaches. I like this quote from her website:
As an information designer, my job is to solve complex communication problems. Contracts seemed to be a genre of documents in dire need of a user-centric makeover. We can pick any contract, and, at a glance, they just look and feel and read the same. This, from a design point of view, makes no sense: why so much sameness in different documents for different users with different needs and skills, produced by different organizations to regulate different transactions with different goals? At best, we are foregoing the opportunity to create a meaningful touchpoint and build positive relationships and experiences with suppliers and clients. At worst, we are leaking economic and relational value!
About seven years ago, South African commercial lawyer Robert de Rooy was concerned about the complexity of contracts and their inaccessibility to a large percentage of the population. He began developing, researching, and advocating for contracts for illiterate people to independently understand contracts, guide behavior, and improve the relationship between contracting parties. He soon developed the world’s first comic contract, using pictures to help people better understand agreements. Rob’s Comic Contracts grew from the work of preventative and proactive law, approaches led by the late Professor Louis Brown, and Professors Tom Barton (USA) and Helena Haapio (Finland).
“Contracts are documents written by lawyers for lawyers, and if you are someone of low literacy, it is virtually impossible to understand,” Rob has said.
Comic contracts may sound like a crazy idea, but visuals are making their way into law practice more and more. Infographics, charts, legal design, and even emoticons are finding fertile ground in the legal profession. In 2016, Rob’s Comic Contracts won the prestigious innovation award given by the International Association of Contract and Commercial Management (IACCM) and in 2017, Comic Contracts were featured in Fortune Magazine.
In 2017, Western Australia University convened a conference to explore creative approaches to contracts. The conference host had independently been exploring visual contracts in the form of comic books. Professor Camilla Baasch Andersen had worked with John Maguire, formerly the chief innovation officer and later the CEO of Aurecon. Aurecon is an engineering firm with over 7,000 employees, mostly in South Africa, Australia, and the Middle East. Named as one of the top employers in Australia, the company works on big projects like major hospitals. As engineers, Aurecon is interested in design innovation and sustainability.
Working with Dr. Andersen, Aurecon converted its employment contract to a comic book. John Maguire spoke at the conference about converting the long, dry, fine print into a series of comics that were clear, handled the issues and engaged the readers.
Visual contracts require a level of clarity and precision not required in the long text-based contracts. As they took the long and cumbersome contract apart, they became more and more aware of terms that did not fit their values or culture. They had to reverse engineer the complex lawyer-focused agreement to get back to their true intentions and needs in the contract. What did they really want to accomplish? How would this contract reflect their workplace culture and values? (And what were those values anyway? Did they ever even share those with their employees?) The contract became a tool to transform and align their culture.
If a picture is worth a thousand words, as is often said, then what were the important words that needed to be in the contract and what were the images which could replace those words? The resources below offer images and more information about the process.
This has been a survey of some of the more relational and interesting trends in contracts. Hundreds of others are engaged in some aspect of this shift in contracts from weapons and legal guidance to relational, user-friendly tools for success.
These models and tools aren’t for every contract or every client. Sometimes we want a purely transactional, arms-length agreement. For example, I don’t generally negotiate and discuss values when I am buying a meal in a restaurant at a turnpike exit. That is a short-lived relationship that fits a more transactional approach. However, if I’m entering a contract for a long-term business partnership, I want the process to reflect the connection.
While the concepts are not difficult, the application may be challenging. Conventional lawyers are not generally trained in such holistic approaches. Many lawyers have realized a world of knowledge exists outside of the legal curriculum. They’re learning new skills, new ways of doing things, and new ideas while integrating all those together with their legal skills. Integrative lawyers offer the broader perspectives necessary to blend the roles of peacemaker, adviser, coach, and consultant.
About the Author
Kim Wright is a leader in the integrative law movement and is the author of two ABA books: Lawyers as Peacemakers (2010) and Lawyers as Changemakers (2016). She was co-chair of the ABA Section of Dispute Resolution Relational Practices Task Force in 2018 and was chair of the Task Force’s Summit on Relational Practices. Contact her at jkimwright.com.
For Values-based Contracts
Short video introduction: https://www.youtube.com/watch?v=30coypdjTwE
Legal Design & Design Thinking
Stanford Legal Design Lab: http://www.legaltechdesign.com/
NuLawLab is the innovation laboratory at Northeastern University School of Law: https://nulawlab.org/
This short video by Alix Devendra challenges us to think beyond design. https://vimeo.com/328290099
Aurecon and Dr. Camilla Andersen: