Everyone is tired of long, dense, and full of legalese contracts
Due to technological advances, boosted by COVID's pandemic, our time is increasingly disputed. Social distance changed work dynamics: issues that would have been quickly resolved face-to-face, became numerous online meetings, chats or e-mails and are filling up our schedules.
In this ever more dynamic scenario, who has time to read endless, boring, and complicated contracts?
Unfortunately, this is the reality of most contracts. However, as the main function of a contract is to regulate the relationship between the parties, if they do not understand what is written, the document does not fulfil its purpose. In this case, instead of assisting the parties, the contract can jeopardize their relationship, which can be quite costly in the future.
The problems start at the drafting stage, which generally needs the collaboration of the areas that will use the document. Since no one has the patience to read long, dense, and full of legalese contracts, people end up not getting involved in the drafting and consequently the initial document is not as good as it should be.
The next step can also be challenging to the parties, as the negotiation of long, dense, and full of legalese contracts are also quite complicated. The length of the document, as well as imprecise text can lead to long and exhausting discussions. This misuse of the time and energy of those involved in the negotiation not only causes extra costs but can also undermine the relationship of the parties.
It is not all, though. Maybe the biggest challenge is during the management phase. To be able to do their job safely, contract managers are obliged to seek advice from lawyers, as the application of certain clauses is not always clear (ex: triggers to apply penalties, expiration of certain terms, form and consequences of early termination, etc).
Finally, the use of confusing contractual language also increases the risk of litigation, as the lack of clarity and ambiguity tend to generate disputes.
All these difficulties in drafting, negotiating, and managing contracts generate enormous inefficiency for companies, which mainly translates into unnecessary costs.
In a recent Harvard Business Review article, Shawn Burton, general counsel of GE Aviation's Business & General Aviation, advocates the use of clear and plain language in contracts:
"A contract should not take countless hours to negotiate. Business leaders should not have to call an attorney to interpret an agreement that they are expected to administer. We should live in a world where contracts are written in accessible language - where potential business partners can sit down over a short lunch without their lawyers and read, truly understand, and feel comfortable signing a contract. A world where disputes caused by ambiguity disappear."
In said article, Burton explains that he implemented the plain language methodology in GE Aviation's digital-services business contracts in 2014, and ever since more than 100 contracts in simple language have been signed, with the following result:
"Those agreements took a whopping 60% less time to negotiate than their previous legalese-laden versions did. Customer feedback has been universally positive, and there hasn't been a single customer dispute over the wording of a plain-language contract."
Burton also mentioned that countless companies have already saved time and money by using plain language. According to him, the book "Writing for Dollars, Writing to Please: The Case for Plain Language in Business, Government, and Law", written by Joseph Kimble, one of the main proponents of this initiative, offers several examples, such as:
(i) a tourism company introduced simple guidelines to help its customers install their systems, reduced 70% of annual calls to its help desk, generating savings of more than US $ 2.4 million per year;
(ii) a clinic that simplified its invoices in 2008 and started to receive US $ 1 million more per month; and
(iii) the Veterans Benefits Administration (VBA) every year sends a letter asking veterans to update their list of beneficiaries. If a veteran dies without a valid beneficiary listed, VBA personnel must locate and identify one. The office had a response rate of about 43% to its letters. However, after it was rewritten in plain language, the response rate increased to 65% and VBA saved about $ 4.4 million in staff time.
In addition to significant savings, we believe the use of plain contract language can generate a paradigm shift in the perception people have of lawyers in general. Instead of being seen as obstacles to business, lawyers that use plain language will start to be seen as true partners and business facilitators by everyone.
Also, instead of perceiving the legal department just as a cost center, the C-level will see it as a value generator (through savings). At the end of the day, the result will be a huge gain in efficiency as the team will have time to focus on what really matters.
But attention: it is essential to clarify that plain language is not a synonym of superficiality. If it needs to be executed, the contract must withstand. Therefore, the contract must always provide legal certainty to the parties. This premise is mandatory and non-negotiable. Otherwise, there would be no point in having a plain language document that can be understood by everyone.
We believe that contract simplification is a path of no return. It is good for companies, it is good for people who negotiate, manage and enforce contracts and it is good for modern lawyers, who generate more value to their clients. This is the classic win-win situation. Thus, it is up to us, lawyers, to lead this positive change and put contract simplification more and more into practice.
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