Contract drafting wars: the rise of the rhetoricians

A recent discussion on LinkedIn with representatives of IACCM – The International Association for Contract & Commercial Management – has prompted several thoughts.

First, if we are trying to improve contract drafting, who is our target audience? When preparing a talk, book or article, IP Draughts’ tries to fix in his mind a typical audience member, and to tailor his material as a kind of conversation with that person.

For example, in our annual course on IP Transactions at UCL, the target audience is English solicitors who are starting a career in IP law. People in other categories are very welcome to attend, and many do – we have patent attorneys, non-IP lawyers, overseas lawyers and licensing managers in each year’s cohort. But we try to focus our material on the needs of our target group, and mainly in the context of English law. We try to avoid having generic, international content for people of different levels of experience, that satisfies no-one.

On the subject of improving the drafting of commercial contracts, a similar question arises. If you are writing about or teaching how to make contract drafting better, or are responsible for drafting contracts, whose needs are you focused on: commercial lawyers, business managers, consumers or someone else?

Perhaps there is no single audience, and contracts need to work for multiple audiences. It can be argued that a practising lawyer has to balance several interests, including:

  • winning in court, if the contract wording comes before a judge for interpretation;
  • making the contract clear for the business managers who have to use it;
  • in negotiations, working within the prevailing idiom and respecting one’s counter-parties. This may involve not making radical changes to someone else’s draft unless there is a pressing commercial case for doing so, and sometimes living with imperfection.

Another factor that will sometimes be relevant is the legal framework for the type of contract in question. In the UK, one of the biggest issues is whether one is dealing with a business-to-business contract or a contract with consumers. In the latter case, EU laws may severely constrain both the type of contract terms that are enforceable and the way those terms are drafted. The requirement for plain, intelligible language in consumer contracts may push the drafter away from legalese and sophisticated legal concepts like indemnities and entire-agreement clauses.

Increasingly, IP Draughts thinks there is a case for treating contracts with unsophisticated small businesses in a similar way to consumer contracts. The people who run such businesses will often not have the experience to understand and cope with detailed written contracts. Some countries, eg Australia, have laws that govern franchise agreements. Franchises are an example of contracts that are sometimes entered into with small-scale, unsophisticated business people. Let’s call these people quasi-consumers, as they share many of the characteristics of consumers and there may be policy grounds for protecting them in their business dealings.

In IP Draughts’ mind, if one leaves aside contracts with consumers and quasi-consumers, there is still a vast category of general business contracts. When it comes to persuading people to improve the clarity and content of business contracts, IP Draughts sees the target audience as people who draft and negotiate those contracts, whether as lawyers or commercial managers.

What is the best way to persuade decision-makers to improve their business contracts? In IP Draughts’ view, it is to provide examples of well-drafted contracts, and provide training and guidance on how to improve contract wording. This is a focus on the nitty-gritty, the detail, and the hard work required to make things better over time. IP Draughts has also done some preliminary work on the idea of legislation, e.g. through trying to initiate a United Nations project to produce standards for international IP licence agreements.

There is more than one way of skinning a cat, or so we are told. IACCM is very interested in the subject of simplifying contracts, and has its own way of advocating this topic. Last week, IP Draughts tried to engage with them on LinkedIn, but withdrew when he felt he was being bludgeoned with statistics and examples that didn’t ring true to him, and which he felt were a kind of hard sales technique that repelled him. Tim Cummins and Sally Guyer of IACCM used the examples of indigenous peoples, and people who were illiterate, in support of their arguments for simplifying contracts. When IP Draughts mildly suggested that these examples were of marginal relevance to mainstream business contracts, he received this response from Sally:

there are somewhere between 12,000 and 16,000 indigenous businesses in Australia. The Canadian Council for Aboriginal business cites 43,000 Indigenous entrepreneurs in Canada.  According to UN data from 2018, there are 370 million indigenous people living in more than 90 countries – I don’t believe that’s marginal.  Governments and major corporations around the world have policies (and rightly so) to ensure inclusion of small enterprise and indigenous businesses – do the contracts required to support their inclusion fall into your somewhat ubiquitous definition of “regular business contracts”?

IP Draughts has now had a chance to look into some of these statistics. At first glance they seem impressive, but a closer examination reveals them to be misleading.

First, on the Australian example, it appears from this PWC report of 2018 that there are about 12,000 Aboriginal owner-managers of businesses. The number of incorporated businesses or businesses that employ staff is much smaller, and they contribute a tiny percentage of the GDP of Australia.

Similarly it appears from this Canadian report that “according to the 2011 National Household Survey (NHS), there are more than 43,000 First Nations, Inuit and Métis in Canada who are business owners.” This sounds like a big number. But if you dig into the details of this report, you discover for example that:

In general, Aboriginal businesses tend to be quite small, with three-quarters (73%) that are unincorporated and more than six in ten (64%) that have no employees.

And:

The majority of Aboriginal businesses also continue to be home-based. Two-thirds (66%) of Aboriginal business owners report that their business currently operates from their home or the home of their business partner, which is essentially unchanged from 2010 (66%).

In IP Draughts’ mind, this research confirms his initial impression that these examples are of marginal relevance. This has nothing to do with the ethnicity of the people whose statistics are given. He has exactly the same reaction to any very small business.  Taking business contracts as a whole, to focus on the needs of (for example) a one-man-band plumber in Wallingford, Oxfordshire, will not tell us much about how business contracts should be drafted or structured. Often, these businesses won’t even have a written contract with their customers.

Of course, some of the people covered by the statistics that Sally quotes will be operating on a larger scale and will be regularly involved in mainstream, written business contracts. But the headline statistics presented by IACCM are, in IP Draughts’ view, misleading and shouty.

There may be a place for IACCM’s approach in the bigger picture. Some people may be persuaded by bold, high-level arguments made with passion. But in the world that IP Draughts inhabits, business people and their lawyers prefer a more grounded approach that reflects everyday experience, when deciding what terms to include in their contracts and how to express them.

IP Draughts’ starting point is that people who share a professional interest – here, to make business contracts more user-friendly – should be able to cooperate in pursuit of a common cause. Clearly, we will all need to do some work before there can be a meeting of minds.

 

 

 

 

 

 

3 Comments

Filed under Contract drafting

3 responses to “Contract drafting wars: the rise of the rhetoricians

  1. Making contracts universally accessible to the illiterate is an … interesting aspiration.

  2. Mark, could you provide a link to the LinkedIn discussion to which you refer?

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