Why do we tolerate bad template agreements?

Yesterday, IP Draughts puzzled over an agreement that was based on a well-known, industry-standard template. He had read a clause one way, and his client helpfully pointed out that it could be read another way. He realised that he had been making assumptions based on what he thought it should mean, and what similar clauses meant in other agreements, rather than what it actually said. It only became apparent after looking carefully at the clause that the quality of the drafting was poor. It helps to have several pairs of eyes look critically at contract wording.

This problem could have been solved at birth if more attention had been paid by the original drafter of the template. Why do we persist in using mediocre templates?

People like what is familiar. In the case of a template agreement, they like it even more if it has the cachet of an independent authority. Take a bow, Lambert Agreements, Brunswick Agreements, DESCA consortium agreements, NHS Trust clinical trial agreements, and the British Venture Capital Association standard subscription and shareholders agreement. IP Draughts could go on.

Some of these documents are better than others. Some are revised more regularly than others. But in IP Draughts’ experience, and to generalise, not enough attention is given to pure drafting issues, as distinct from issues of commercial negotiation.

Whether a contract term is clear and accurate tends to come into sharp focus if there is a dispute, or if one party wants to terminate another party’s involvement in a contract. But disputes are few and far between. People comfort themselves with the false argument that “we’ve never had a problem with this contract” as if using a contract a few dozen times proves anything about whether clause 7.21 is ambiguous.

IP Draughts has encountered several types of problem, including:

  1. The template that is used because it is convenient, and familiar. It never gets a critical drafting scrutiny, and much of the core document is poorly drafted.
  2. The template that is updated periodically by a committee, but the focus is on improving the commercial content: the committee lacks an independent, high-quality drafter who is paid to focus on drafting issues. Or there is no systematic method of identifying problems encountered in practice. IP Draughts has never been asked for his opinion on detailed issues arising from the use of industry-standard templates, though he has been working in fields such as university contracts for several decades.
  3. The template that is modified, because the drafter of an individual contract inserts changes, not always for the better. But still it is claimed to be the template – perhaps a header or footer identifies the original template.

An argument that is sometimes used is that no-one gets into disputes over the interpretation of these agreements. But that is simply not true, in IP Draughts’ experience, and he suspects other law firms could provide examples from their experience. There may not be large numbers of disputes, compared with the number of times that the template is used, but there are enough to make it efficient to get the drafting right.

Perhaps IP Draughts shouldn’t be raising this issue. After all, he and his colleagues have written several hundred published template agreements, and some have acquired a familiarity, and perhaps a credibility, through use over many years. For example, his licence agreements tend to have a schedule that identifies the procedure for referring certain disputes to an expert, and he has seen versions of this schedule in other people’s agreements. He remembers working this schedule up around 30 years ago, with input (though IP Draughts is responsible for what became the final version) from Matthew Warren of Bristows.

To take a more recent example, he feels a certain sense of pride that one of his template material transfer agreements has been used by organisations collaborating on research on the coronavirus.

Given the amount that universities and companies spend on commercial transactions using industry-standard templates, wouldn’t it make good economic sense for organisations to chip together to pay for better drafting? And then agree to stick with the template rather than making individual changes for each transaction.

This is not a pitch for work. There are plenty of good contract drafters in law firms across the country (and also plenty of mediocre drafters) – you just need to find the right person. But it is a pitch for greater recognition that the skill of contract drafting is important and valuable, particularly in the case of industry-standard templates that are used many times.

 

4 Comments

Filed under Contract drafting

4 responses to “Why do we tolerate bad template agreements?

  1. I am very fortunate (in a way), because I now run my own tiny IP practice with very few clients & therefore I can draft my agreements with them and for them, each one tailored to their particular circumstances. I still believe that the most important issue is for all parties to understand their obligations under the agreement. I am also acutely aware that the parties to an agreement may change over time and therefore it is important to ensure that the wording will not/cannot be misinterpreted by others at a later date.

  2. Regrettably, most stakeholders are keeping too many other plates spinning to care much about identifying and fixing “hypothetical” future problems — even though, as you correctly point out, the problems have a way of becoming distinctly un-hypothetical.

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