Presentation and workshop on how to draft contracts that the users actually understand. Perspectives form two small countries that have had to limit transaction cost and with a contracting culture different from the Anglo American tradition. Given at the International Technology Law Association’s European conference 20 October 2017 by attorneys Kristian Foss and Carmen De la Cruz
4. An agreement...
• What is it?
• What‘s its fundamental function?
• Achievable without understanding it?
5. «I teach contract law at Harvard Law School and
I can't understand my credit card contract.
I just can't. It's not designed to be read.»
Elizabeth Warren, former Professor of Law, Harvard Law School
6. Today’s world
• More transactions
• Smaller transactions
• More complex
• More critical
24. Privileged & Confidential
Breakout (1): Contracts 2.0: a new era?
Breakout (2): Disputes 2.0: a new era?
Break-out sessions - 25 minutes
25. Privileged & Confidential
Breakout (1): Contracts 2.0: questionnaire
Statement of principle Agree /
Disagree?*
1. Customers find contracts too complex and costly.
2. Lawyers do not really see the use for or benefits of shorter, simpler contracts.
3. Customers only use contracts when disputes arise, not as practical tools in their daily work.
4. Lawyers have poor insight into how contracts could actually be used by customers after signing
(except in the case of disputes).
5. Customers would like to use contracts as a practical tool in their daily work.
6. Lawyers know how contacts should be negotiated, drafted and designed so they can be used as
practical tools by customers in their daily work.
7. Lawyers can and should make negotiations go faster, contracts shorter and the agreement process
more cost efficient.
8. Lawyers and customers are now using software tools to support negotiations, drafting and design of
clauses in contracts.
* Strongly Disagree…......................Strongly Agree
1………..2…....…....3……......4…… .….5
26. Privileged & Confidential
* Strongly Disagree…......................Strongly Agree
1………..2…....…....3………......4…… .….5
Breakout (2): Disputes 2.0: questionnaire
Statement of principle Agree /
Disagree?*
1. Unrealistic estimates of time and cost to complete are root causes of failure on technology projects.
2. Unclear scope of responsibilities is a root cause of failure on technology projects.
3. Bespoke or tailor made technology contracts (as opposed to standardised contracts) are prone to
disputes.
4. Contracts that allocate too much risk to one party are prone to disputes.
5. Poor contract drafting by lawyers causes most disputes.
6. Lawyers should have a wider, consultancy style role on technology contracts and projects to help
prevent disputes.
7. Governance and dispute resolution clauses are easy to understand and always followed.
8. Mediation is commonplace but clients now want (even) quicker and cheaper ADR procedures.
9. Where more formal dispute resolution is required, court litigation is preferred to arbitration
IS: Structured communications
FUNCTION:
Adjust expectations
If not > disputes and suboptimal outcomes
Must understand
Just imagen your poopr client
Hard to overestimate how little the normal reader understand
NOW on PBS interview Week of 1.2.2009
Read the Government Accountability Office (GAO) study on this. The GAO looked at credit cards and they said: "Nobody can understand this stuff." Are you kidding me? And understand when you've got terms that say: "In effect, we'll charge anything we want any time we want for any reason or no reason at all," what's the point of reading it?
http://www.pbs.org/now/shows/501/credit-traps.html
https://www.consumer-action.org/press/articles/new_gao_credit_card_study_highlights_anti_consumer_practices/
MORE:
Move from big bang to smaller projects
Constant imporovement and change
That means SMALLER deals
COMPLEX
Still – more systems, and things, connected
CRITICAL
We depend more and more on the services
They break down, business and society break down
We must,
if we are to serve our clients
real needs
If we don’t, someone will - eventually
Small contracting resources,
but quite large needs
How have Norway coped?
[standard form contracts]
All fabrication
Similar challanges
More experience in construction and delivery industry
Delivery industry = oil and gas = offshore
Standards much used
in Norway
In all areas.
Substantial reliance on background law
How do they messure up in size?
Anlgo-Am influence in Norway too
Getting bigger.
Must try to stall
Plain language initatives also in Norway,
but with a public sector focus.
INTRO:
Anglo American - tend to be quite monolitic
Legalize
Drafted for litigation, not collaboration
Think
- Target reader
- Adapted strucutre
Language and length
All related:
To whom is the contract directed?
Various people:
CEO? - not really - relies on his people
CFO - yes - epecially commercial terms - financial head
CTO - yes - much of the performance - technical stuff
Lower level techies - YES! - are to implement it
HR - can be - outsourcing - all types
Lawyers? NO! Just in the drafting process - and when serious problems
So why not draft according to target groups?
Do they understand legalise? NO
Not even professor Warren understood.
Is possible to overestimate lack of understanding? Hardly
Consequence:
Structure most support target groups
Language adapted to target gropu = simple - KISS!
Frame agreement – good for CEO and CFO – good intro to any reader
Then – agreements for each main delivery area/phase: Develop, consult and manage.
Within each «tower» – only text relevant for the area. Referances to General terms, if needed
EX: - Delivery description for agile option in developent: Overaching aims and party info in one doc, the core agile dev method in short separate – for developers and project manggers to understand
Standard terms at bottom – general for all
All short
Small is beautfy ful
SIZE:
Not allways a trade-off.
Can often say the same with fewer (and simpler words)
Should every consivable situationi be regulated? Maybe not.
Total contract risk may increase do to reduced readability (and reading!)
Accept som white spots, in the fringes, or make them short
WORLD WORKS
Surprise!
Lawyers trained in finding probems
Eventually believes the world is nothing but problems
Not right – most things works – one way or other