Yesterday I spotted the following tweet that @mcfandrew86, research development officer at Queensland University of Technology, Australia, apparently posted while at a contracts workshop:
Basic rule of contract drafting? Don't use a USA contract as an example! Oh, and don't copy and paste in haste! #arms2012
— McFandrew (@mcfandrew86) September 19, 2012
Then there was this last week from @IPDraughts, also known as our own Mark Anderson, who is based in England:
@AlisonFrankel @BryanAGarner @Reuters When is the US legal profession going to stop using 10 words when one will do, in contract drafting?
— Mark Anderson (@IPDraughts) September 15, 2012
And on September 4, another Australian, lawyer @MariamVeiszadeh, took a break from her prolific human-rights tweeting to make the following observation:
Can't stand US style legal contract drafting. Why overcomplicate things…whatever happened to plain English legal drafting? #lawyersrant
— Mariam Veiszadeh (@MariamVeiszadeh) September 5, 2012
As the old saw has it, three is a trend. Dear U.S. contract drafters, the world isn’t inclined to show you much love.
And I can’t say I blame them. Hey you, BigLaw drafter! It’s very likely that your contracts range from so-so to disastrous. (Go here to check out my critique of the Google–Motorola Mobility merger agreement. Or go here to see my assessment of an extract from a BigLaw model confidentiality agreement.) But that won’t come close to putting a dent in your cast-iron smugness.
And you, Fortune 500 contracts lawyer! Compared with law firms, your company is in a far better position to take control of its contracts, given that you use a limited number of templates repeatedly. But it’s very likely that your contracts range from “meh” to calamitous. (Go here for “before” and “after” versions of a representative big-company template.) And it’s very likely that your contracts process is patched together with duct tape and leaks at every seam. But you’re comfortable with the status quo, even though your company keeps frittering away time and money and assuming unnecessary risk.
I don’t say this with any relish. It’s just the way it is. Yes, I’m sure there are plenty of exceptions, but in general the rueful sniping on Twitter is justified.
At the same time, I suggest to the rest of the world that no one has cause to be complacent. Hey, England! Sure, U.S. drafting can bore you to death. But you, with your terms-of-art fetishes (for example, here and here), you flat-out scare me. And Australia, yes, you’ve done a great job of ridding your contracts of a lot of mindless stuff. But that’s the easy part. Based on my review of a sample of contracts drafted by some of the bigger Australian law firms, there’s plenty of room for subtle but important improvements. (Go here for my assessment of Australian drafting prompted by my visit there last spring.)
A reader who would prefer to remain nameless emailed me the following thoughts:
“I hear often from non-US folk and from staunch advocates of ‘plain English’ drafting that US-style contracts are overblown. But while it is
true that US-style contracts are chock full of bloat, I find that the same is
true of non-US style drafts. In my experience, the difference in length and
verbosity has to do with a difference in mentalities. US attorneys are trained
to think of all of the potentialities and ‘cover them off.’ This is not to say
that non-US attorneys don’t address the ‘what ifs.’ But I feel that we address
the margin case more so here in the US. Additionally, for any given expression of
a concept in a contract, we try (at least I do) to think of not only the most
likely interpretation of that expression, but also other possible reasonable
interpretations. And sometimes, for key concepts that a client wants hammered
home, we consider potential interpretations that might be somewhat
unreasonable. So I often feel that non-US-style contracts are drafted to ‘do
the trick,’ whereas US-style contracts are drafted to account for ‘the 1%
scenario.’
“For example, for transactions in which I need to reference
entities of different types (e.g., corporations, partnerships, LLCs, and non-US
entities), I will often define the terms ‘Board’ and ‘Directors’ to extend to
concepts that are analogous to a board of directors and an individual director
in the context of corporations. I would suspect that the ‘plain English’ and
non-US-style advocates out there think that goes too far: a board is a board is
a board. And if it is not a ‘board of directors,’ well, you get the idea; the
contract is referring to board-like governing bodies and director-like
individuals. But I’d prefer not to leave this up to chance and deal with the
potentiality, even if I can’t readily assess the likely look that the ambiguity
would be relevant or the cost of that ambiguity (and even if I know the
expected cost of that ambiguity is relatively low).
“Also, I think that, as part of the
contract-drafting process, when deciding whether or not to make a change,
drafters (either consciously or unconsciously) conduct a cost-benefit analysis.
For those changes that are deal-killers, it’s easy to assess the marginal
benefit of making that change as outweighing the marginal cost of doing so.
Changing ‘happy’ to ‘glad’ – that’s usually an easy one two, with the opposite
result. But the universe of contracts that the attorney and the client
regularly deals with, and the expectations of the parties in this regard, also
matter. If US clients expect a US-style agreement, then the drafter is more
likely to assess the marginal cost of incremental changes as being low. On the
other hand, if UK-based clients and attorneys are drafting the document, the
drafter will have a more difficult time justifying an incremental change and is
therefore more likely to ascribe a high cost to making that change.”
Very interesting. I wonder whether anyone has conducted research on whether the “1%” approach is actually protective of a client’s interests (ie produces a better outcome in court or in negotiations), or is just a professional norm among US attorneys that has developed without empirical justification.
I am also curious about client expectations. In my world there is pressure from the client to keep it simple, but I recognise that in some areas of practice and cultures, that is not the case. Maybe some clients don’t even realise that there could be another way of drafting. For example some insurance contracts are dreadful in their structure and content, but I have the impression that insurance professionals just accept them as “the way it has always been”.
Can the “1% approach” of U.S. drafters be related to the fact that (a) U.S. is on of the most litigious jurisdictions (b) if a lawsuit is brought, each party has to pay counsel expenses no matter who’s right?
Having practiced in both Europe (Italy) and U.S., I have also the impression I could leave out more things from a contract back at home, because the Civil Code covered certain boilerplates for me (e.g. the severance clause), but it’s no more than a feeling, I have no stats here – and this is the kind of difference that will get less and less relevant the more globalized our economy gets.
As per client expectations, I think most client would appreciate simpler contracts, but they care more about minimizing transactional costs and get to a final draft as quickly as possible by modifying as little as possible. This interest was sometimes not aligned with the need of some attorneys to “show off” and justify the hours billed by rewriting entire clauses with little if no impact on the negotiation. But that’s a separate problem!
Veronica, you raise a good point about the US being litigation-happy. The readiness to sue over anything or nothing has another side effect: lawyers may be drafting overly complex agreements to protect themselves against malpractice claims if an unforeseen issue results in a lawsuit between the parties to the contract, or causes the client to lose money.
My response to my anonymous reader is that it’s all well and good to attribute the U.S. approach to risk aversion, but that doesn’t take into account the endless crappy archaisms, redundancies, and misconceptions that clog U.S. contracts. Australians have gotten rid of a lot of such stuff. Why can’t U.S. drafters?
Ken, one thing that strikes me in US drafting is their willingness to try and negate positions that would never fly at law anyway (and which English/Aussie lawyers would leave alone because of it); or to state (clearly) what is intended folllowed (pointlessly) by statements of what is not intended, and usually could never have been interpreted as being intended. (arghhhh) I’ve also had clients instruct me to add crazy sentences in, ‘just to avoid the idiot argument’ – which makes me cringe, but to which I’ve succumbed under client pressure. In this respect, I see the anonymous poster’s “1% scenario” as being far more of a “0.0001% scenario”.