Rocket Lawyer? Contract Automation FAIL

I’ve seen a lot of chatter about automated contract creation offered by Rocket Lawyer and LegalZoom. For the life of me, I don’t know why.

Take Rocket Lawyer—please!

Report Card

I took advantage of Rocket Lawyer’s week-long free-trial period to create a confidentiality agreement. I chose their confidentiality agreement because I’m intimately familiar with the issues, thanks to my work on Koncision’s confidentiality-agreement template. I think it’s fair to assume that it’s representative of their offerings.

I considered different aspects of the process, in each case giving Rocket Lawyer a score. Rather than grading against some notion of perfection, I graded Rocket Lawyer against Koncision’s template, to which I attributed a score of 100. (That’s not to suggest, by any means, that Koncision is perfect.)

Here’s my report card on Rocket Lawyer’s confidentiality agreement:

Customization. Score: 25

You’re asked around twenty questions regarding what you want to include. Some questions require you to plug in factual information. Others invite you to select from among various offered alternatives. Others you answer “Yes” or “No.”

That might seem like a respectable number of questions, but a handful of them invite the response, “Duh—yeah!” For example:

• “Is [the recipient] restricted to only using the Confidential Information for the purposes described in this Agreement?”
• “Will the terms of this Agreement also apply to [the recipient’s] employees?”
• “Will [the disclosing party] be entitled to pursue remedies against [the recipient] if it appears that [the recipient] has disclosed Confidential Information in violation of this Agreement?”

And the questions skate over countless issues that a disclosing party might want to address. For example, no questions address for how long the disclosing party will be disclosing information to the recipient. And no questions consider for how long the information is to be kept confidential. Instead, the output document doesn’t put a limit on the obligation to keep the information confidential. That’s a legitimate approach, but I’d want to give the user a choice and explain the implications of the alternatives.

By way of comparison, I just completed a Koncision questionnaire of medium complexity—I answered “No” to many questions that offered “No” as an answer—but I still ended up answering 81 questions. (Think that’s too many? Read this blog post.)

***

Guidance. Score: 20

Each question is accompanied by guidance, under “Help,” consisting of a short treatment of a given topic and links to related “Help” articles.

But the guidance isn’t specifically geared to the question being asked, and several topics were repeated. For example, for six questions the guidance topic was “Confidentiality Agreement,” for four others it was “Confidential Information,” and for yet four others it was “Protection of Information.” And whatever the topic, the treatment was superficial.

***

Usages. Score: 15

Of course, Rocket Lawyer hasn’t promulgated a style guide for its contracts. Instead, the resulting confidentiality agreement uses the wordy, archaic, and inconsistent language of traditional contract drafting. For example, instead of using a single one verb structure for a given category of contract language, the Rocket Lawyer draft is all over the place:

• For obligations imposed on the subject of the sentence, both agrees to and shall are used.
• Language of prohibition uses both shall not and will not.
• Language of declaration uses acknowledges, acknowledges and agrees, and understands and acknowledges.
• Language of policy with respect to contingent future events uses shall, not will.

***

Layout and Typography. Score: 40

The resulting Word document isn’t pretty:

• It uses Times New Roman.
• It uses Roman numerals to enumerate sections.
• The “Enter” key was used to create space between paragraphs.
• Some text in the body of the contract was inserted as a table; other comparable text was not.
• All-capitals are used for a warranty disclaimer.

On the other hand, it does use ragged-right justification—thank heavens for small mercies.

***

Technology. Score: 35

The technology passes the laugh test. It’s logic-driven: with respect to one out of all the questions, the question that follows is determined by the answer you give. I wonder why that feature wasn’t used more.

You get to see what your document will look like, and you can update that view to reflect the questions you’ve answered. ContractExpress offers a sophisticated version of that feature; in early 2012 it should be available in the cloud version, which is what Koncision uses.

On the other hand, if Rocket Lawyer’s technology offers anything like the endless functionality of ContractExpress, it sure isn’t on display. For example, a party-name defined term inserted in the all-capitals disclaimer is in initial capitals. And one tabulated enumerated clause in a set of three is inserted as a table and is flush left, unlike the other two.

***

Substance. Score: 20

The substance is a function of the questions asked, and as a result is flimsy. I didn’t have the stomach to delve into it further, but one thing did catch my eye: Why have the disclosing party disclaim implied warranties? This contract wouldn’t fall within the scope of article 2 of the Uniform Commercial Code, so there’s no basis for including the disclaimer, and it’s counterproductive to do so. Instead, the contract should simply state that the disclosing party is making no representations as to accuracy of the disclosed information.

[October 18 Update: For another issue raised by this contract, see this blog post about excluding consequential damages in confidentiality agreements.]

***

Credentials. Score: 0

Who are the people who prepared Rocket Lawyer’s confidentiality agreement? I have no idea. And I’ve seen nothing to suggest that users would be justified in relying on them, or that users could feel confident of convincing the other side that Rocket Lawyer’s draft represents a suitable starting point.

The bottom line? In my opinion, Rocket Lawyer’s confidentiality agreement is drastically suboptimal.

No Dual Standard

I can imagine the counterargument: “You’re being … elitist! The people are entitled to contracts, too!”

But there exists no basis for dividing the market for automated confidentiality agreements into two camps—sophisticated users and the rest.

It’s one thing to distinguish between wills and other consumer documents, on the one hand, and business contracts, on the other hand. (I draw that distinction myself—I don’t touch consumer documents.) But a confidentiality agreement isn’t a consumer document, it’s a business contract.

Furthermore, “good enough” has no role to play in contract automation. When I want to buy a pair of shoes, I know what my needs are, what my budget is, and what image I wish to project. Based on that, I can buy a pair of Red Wing work boots for $280, or I can instead elect to buy my work boots from Walmart for $20, if I decided that they’re good enough for my purposes.

But even if by the standards of corporate America not a lot is riding on your disclosure of confidential information, that doesn’t mean that you should be satisfied with a bargain-basement confidentiality agreement. It’s a truism that small transactions are as complicated as bigger ones, and what your needs are becomes apparent only once you consider the circumstances closely.

Of course, if there were a substantial price disparity between a rigorous automated confidentiality agreement and the bargain-basement version, you might not have a choice in the matter. But a one-transaction subscription to use Koncision’s confidentiality-agreement template costs a big $100. That might be regarded by some as a steep price for creating certain basic business documents. But if you’re considering entering into a confidentiality agreement to protect your information, presumably you think it has some value.

In any event, if there is a $100-is-too-much market for automated confidentiality agreements, it’s ill-served by Rocket Lawyer.

I suspect that Rocket Lawyer and its backers—including Google Ventures—will make money off people who are entirely uninformed consumers of legal services. A page of Rocket Lawyer’s website is emblazoned with a customer testimonial to the effect that using Rocket Lawyer to create a legal document was “quick and easy.” The most that I’d say about Koncision is that it makes the process of creating a state-of-the-art confidentiality agreement much quickER and easiER than would otherwise be the case. Beyond that, there are nuances that you can’t escape when choosing between alternative provisions.

Stray Thoughts

I leave you with the following stray thoughts:

• I wonder whether the management of Rocket Lawyer believe their own press release and think that they’re delivering “the type of ‘wow’ user experience that online customers love.”

• It would be nice if the more enthusiastic law-and-technology boosters would look more critically at contract-automation offerings before proclaiming that the New Legal Order is upon us.

• If I haven’t included LegalZoom in this post, it’s because there’s only so much a mortal can bear. (And they didn’t have a free-trial period—I wasn’t inclined to give them a penny.) But based on what I’ve seen of LegalZoom, I have no reservations about lumping LegalZoom together with Rocket Lawyer.

• It’s all well and good to talk about commoditizing contract creation, but be careful what commodity you’re shoveling.