Lengthy contracts will cause the heat death of commerce

heat deathThere is a theory, partly attributed to the nineteenth-century scientist Lord Kelvin, that the increasing entropy of the universe will eventually lead to its heat death.

IP Draughts is currently conducting experiments that may lead to a new theory of commerce: that the increasing length of contracts will eventually lead to the heat death of the business world. A time will come when all available energy for business activities is diverted into the negotiation of overly-complex contracts; when the underlying business activities must inevitably cease, modern civilisation will freeze, and we will revert to an agrarian economy in which concepts such as intellectual property become meaningless.

On IP Draughts’ desk is a draft publishing agreement that he has been asked to sign. It is for the fourth edition of one of his books. His contact at the publishing house has helpfully highlighted the changes that are proposed over the contract that was signed for the third edition. According to a word count, the new contract will comprise 5,645 words, compared with 2,613 words for the previous version.

IP Draughts wonders how often there is litigation in relation to publishing contracts for legal texts. He has not heard of any, and the small sums of money at stake make litigation seem unlikely as a cost-effective strategy. So why does a publisher feel the need to more than double the length of the contract, and in the process incorporate aggressively one-sided terms?

Could it be that the publisher is now employing in-house lawyers, who are asked to review the company’s existing contracts? And that many lawyers, if not given clear direction and instructions, will tend to add clauses to protect their client’s interests, leaving it to others to decide on whether the overall balance of the document is commercially appropriate? And that many clients are not that interested in contracts, and will tend to follow their lawyer’s recommendations?

IP Draughts has no information on whether this has happened in the present case. He does, however, recall that another legal publisher who presented a contract to him recently had also revised their standard contract, but had clearly taken a policy decision to simplify their template and make it more even-handed. IP Draughts knows which publisher he is more inclined to offer new projects to.

Someone once said that to understand all is to forgive all. (The internet is divided as to whether the first author of this piece of wisdom was Voltaire, Madame de Staël or Evelyn Waugh.)

Viewed as a paper exercise, and from the perspective of protecting the publisher, one can understand the motivation behind many of the revisions in the current draft contract. But do the revisions result in a better contract? Consider the following example. First, the previous wording, and then the new version.

If in the Publisher’s view the Work as delivered requires amendment to become acceptable they shall give the Author the opportunity to make such amendments. If the Author is unable or unwilling to do the work him/herself …

If in the Publisher’s sole view the Work as delivered is not professionally competent and/or does not conform in nature, scope, length, format and style to the specifications agreed with the Publisher and/or with any synopsis or proposal or other material upon which the Work was commissioned or acquired and/or does not comply with the warranties given to the Publisher hereunder the Publisher shall give the Author the opportunity to make such amendments or to make arrangements for this to be done at the Author’s sole expense. If the Author is unable or unwilling to do the work him/herself …

There seems to be a blizzard of new words in the second version that don’t add much to the basic obligations of the clause. Leaving aside general drafting issues such as the sentence length and complexity, a few points jump out:

  • IP Draughts is not sure what the difference is between a “view” and a “sole view”.
  • Surely the Work either complies with the specifications or it doesn’t. Why is it useful to pick out “nature, scope, length, format and style”?
  • The drafter has not covered himself in glory by leaving in the words “such amendments”. Here, “such” links back to the word “amendment” in the first line of the old version – a word that doesn’t appear in the new version.
  • If IP Draughts were being really picky, he might change the word “view” to “opinion”, and “amendment” to “revision”.

Usually, IP Draughts is a hired hand, reviewing contract terms for someone else who takes the commercial decision on what is acceptable. In this case, he is the principal, and he strongly dislikes being asked to sign a contract that is more than twice the length of the previous version, contains many provisions that worsen his contractual rights and obligations, and contains indigestible prose.



Filed under Commercial negotiation, Contract drafting

12 responses to “Lengthy contracts will cause the heat death of commerce

  1. “Sole view” clearly means that if they are in two minds about it, then can’t invoke the requirement that the Author revisit the work. Easily testable in court: “Mr Publisher, I put it to you that you were in two minds about this, were you not?”. Indeed disclosure may reveal an email from one editor to another saying “I am in two minds about this, should we…”.

    🙂 (in case that was not obvious).

  2. Einstein is supposed to have said, ‘Make everything as simple as possible, but not simpler’. Unless there’s an objective measure, the complaint that a contract is too long is really a statement that it’s longer than it needs to be, by a subjective standard such as ‘we managed last time with 2,613 words and nothing has changed, so 5,656 is presumptively more than needed’. Would that clients would say, ‘Write us the best contract you can in 5,000 words or fewer’ or ‘tell them we won’t sign a contract longer than 5,000 words’. That would make contract drafting into mega-twittering, which might be a good thing. ‘For the avoidance of doubt’ would *never* make the cut. I don’t believes there’s a Zeno’s Paradox of drafting: ‘No number of words can achieve perfect certainty, but the addition of more words can inch closer, ad infinitum’.

    • Through the eyes of the lawyer, advising a client from a purely legal perspective, I agree with much of what you say. But if the lawyer is taking this hands-off, non-commercial role, the client needs to take charge and decide when the commercial imperatives overrule a purely legal view. Otherwise, you end up with longer and longer contracts, as more risks are identified and addressed over time. Oh wait, that’s already happening in many areas of business!

  3. vrkoven

    Allow me to express a somewhat contrarian view, on two fronts. First, in my experience the greater sins of wretched excess in contract drafting emanate from the quiet corridors of outside law firms rather than from the hurly-burly of in-house practice. The mantra of the in-house lawyer is “just get it done,” because there is always a surplus of demand to supply in providing the legal services a company needs. Shorter is perceived as better, especially by the middle-managers who are the in-house lawyer’s daily clientele. Outside counsel are very often so paralyzed at the fear of missing something, thereby raising the risk of a malpractice claim and, even worse, raising doubts about the lofty hourly fees being charged, that they pad every document out with the most arcane drivel just to, well, to say it politely, protect themselves.

    Second, the paragraph you quoted seems evidently to have evolved from some author’s complaint that the publisher had been giving itself entirely too much unfettered discretion in deciding what was acceptable, and so the result was a statement of ostensibly objective criteria that, in sum, come to the same thing. But doesn’t it at least *look* better to have a bunch of pegs to hang one’s unfettered discretion on?

    And third, though related to a comment and not a post, please resist all temptation to use the phrase “for the avoidance of doubt.” It is seldom needed–just say the thing you want to say–and most often a thinly veiled disguise for contradicting the thing it’s supposed to be clarifying.

    • > please resist all temptation to use the phrase “for the avoidance of doubt.”
      > It is seldom needed–just say the thing you want to say–and most often
      > a thinly veiled disguise for contradicting the thing it’s supposed to be
      > clarifying.

      I use the phrase — again, sparingly — as prophylaxis against opposing counsel’s later arguing that “just say[ing] the thing you want to say” opened the door to an argument akin to expressio unius est exclusio alterius (there may be another, more-apt Latin phrase, but none comes to mind).

      EXAMPLE 1: In the Common Draft letter-of-intent provisions, one subdivision states: “[A] For the avoidance of doubt [“FOAD”], [B] a party that wishes to terminate or withdraw from negotiations may do so with a view solely toward its own interests and desires.” (Bracketed letters added.)

      Part A, the FOAD phrase, can help fend off a possible argument by opposing counsel and thus might help win an early victory in a lawsuit. Here’s the argument that opposing counsel might make about Example 1 above: By including Part B in the contract, the drafter implicitly conceded that, absent Part B, the terminating- or withdrawing party would have owed some unstated duty to the other party; this unstated duty (argues opposing counsel) is relevant to some other point in the case. If the court were to buy the argument, it might preclude, say, an early dismissal on the pleadings or whatever.

      Would such an argument by opposing counsel have succeeded? Who knows. But I “came up” doing IP litigation, and saw first-hand how litigation counsel will dream up as many “creative” arguments as they can (because all of their economic- and non-economic incentives are aligned that way). These “creative” arguments can increase the time, cost, burden, and risk of litigation.

      Returning to Example 1 above: It’s not hard to imagine that opposing counsel might try an argument along these lines. That’s a conversation I don’t want to have (to quote one of my then-students), and neither does my client. If a few extra words can help my client achieve an early victory in future litigation, it might be well worth the extra printer toner.

      EXAMPLE 2: In the Common Draft services provisions, one subdivision states: “[A] For the avoidance of doubt, [B] no party is obligated to enter into or agree to any particular Statement of Work except to the extent (if any) that this Agreement expressly states otherwise.”

      Without the FOAD phrase in Part A, opposing counsel might try to argue that, absent Part B, the parties would have been under some sort of implied obligation to enter into statements of work, and that this implied obligation had other application in the case. That’s not an imaginary possibility: A few years ago IBM had to defend against a claim by a contractor that IBM had _implicitly_ promised the contractor a certain amount of work. IBM won, but it had to spend time and money on the dispute. (Sadly, I’ve lost the cite and have been unable to find it with Google-searching.)

      • vrkoven

        For the life of me, I can’t see what is gained by putting FAOD (that’s what you really meant to write, no?) in front of the thing you really wanted to say. Was the sentence that came before it (which you omit in both your examples) so confusing? Was it even related to the FAOD sentence? And if the thing that follows FAOD is not any clearer than the sentence that preceded it, the phrase FAOD is as fatuous as it is futile. If you mean to use Thought 2 as an example of Thought 1, then say so; if Thought 2 is an extension of Thought 1, then bump them together as sentences, or separate them with a semicolon.

        Seriously, the only thing that logically follows “for avoidance of doubt” would be “have a religious conversion,” and the efficacy of that exhortation has been subject to extended debate for millennia.

    • Vance, contrarian views are very welcome on this blog. In fact, they are expected!

      I think you are accurately describing a dynamic in certain types of organisation, eg the in-house lawyer in a sales-driven IT supplier, whose approach is forged in the fierce heat of critical client feedback, versus the external lawyer in BigLaw where a different set of pressures applies. But I also think that in other types of organisation the contrast is not so obvious and that many in-house lawyers trained at large commercial law firms, and bring with them the approach they learnt in training.

      As for “looking” better, it only looks better if you can’t read and analyse the text. Remember, this is a contract that will be sent to legal authors, who might be expected to see through the chaff.

  4. Sometimes a few extra words “for the avoidance of doubt” can help to constrain future “creative thinking” on the part of opposing litigation counsel.

    Your case, though, brings to mind the young child, eager to play in the snow, whose overprotective mother insists on applying so many layers of warm clothing that the poor kid can barely move.

    • Thanks, DC. This seems to me a slippery slope – drafting as a battle of wills to anticipate and defeat the creative thinking of a future clever-dick lawyer, rather than stating the obligations clearly and simply. Several factors make this approach seem less relevant in the English jurisdiction, including the absence of jury trials, costs risk to the losing party, and so on.

  5. g2-58b332754a41970591ec13f5b1d63170

    I agree….in general I believe that less is more, and that fewer words actually give better protection. On the other hand, some client need big words and complicated sentences to feel they’re getting their money’s worth. I may prepare an excellent contract using short sentences and plain English, but I will be bucking the trend of longer and more detailed contracts… sometimes its just easiest to follow the herd.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s