Plain contract language - how to make the case?

We partnered with plain contract language expert Verity White to look at the benefits awaiting those willing to embrace 'human language' in their contract drafting.

Surrounded by contracts

What to expect?

We partnered with plain contract language expert Verity White to bring you this two part series. Verity's passion and expertise is in simplifying and re-designing contracts for automation, readability and usability.

In part one of this resource Verity hit the virtual roal on behalf of Donna to ask global experts and innovators in different areas of contract drafting and design for their input on how to make the case for plain language contracts.

Here's what we'll cover:

Contracts in the news

Kanye West got the attention of the legal world recently when he unexpectedly posted his entire 2005 recording contract online and then called out lawyers as part of the problem for creating confusing, unreadable, unfair contracts for recording artists. Many in the legal industry found themselves pleasantly (or perhaps unpleasantly) aligned with Mr. West as he called for simplified legal documents.

As someone who lives and breathes the world of plain language and contract design, I felt strangely confronted by this news story.

Whilst there are arguably more altruistic causes to champion than Mr. West’s attempts to regain control of his own music copyright, I think the legal industry has a lot to think about…

Whilst contract disputes in the music industry grab headlines but often little sympathy, contracts that businesses and consumers enter into every day are filled with similar power imbalances and confusion.

And lawyers continue to use the same old precedents…

...one contract was drafted 1000 years ago and we've been editing it ever since… (J Kim Wright - Integrative Lawyer & ABA Legal Rebel)

What's wrong with current contracts?

Contracts act as the ‘glue of business’.1 Every business enters multiple contracts every day – both with their customers and with their suppliers. Despite this, contracts are notoriously difficult to read, understand, and act on,2 regularly causing stress to users.3 Additionally, contracts require specific drafting skills not actively taught at university4 and are often written and used in a conflicting regulatory environment.5

At a 2019 presentation at the Australian Legal Innovation and Tech Fest, I asked an audience of over 100+ legal professionals one of my favourite questions… ‘What’s wrong with your contracts?’.

It may be comforting to find out that no one seemed to think their contracts were perfect – so, you are not alone if you experience contract consternation!

The crucial issues tend to be length (contracts are too long) and comprehension (clients / customers don’t understand our contracts). If we could reduce the length of contracts and make contracts more understandable, you could reduce the top 40% of contract issues.

Audience poll results from 2019 Legal Innovation and Tech Fest in Sydney, Australia

Why is it so hard for lawyers to change the way they draft contracts?

Clearly there are lots of factors that have influenced the evolution of contracts and legal drafting so far.

The reasons for the resistance to change to more readable contracts could be grouped into three key areas.

Lack of power (perceived or actual)

  • This is just the precedent document I have to use
  • What if I make changes and it goes wrong?
  • This is just how we do it in our industry

Lack of time, understanding and skillset

  • Who has time & energy to redraft a precedent?
  • I need precise legal phrasing
  • Our documents got us this far...why change now?

Self-focus over client-focus

  • Easy contracts will mean less work for me!
  • But I work in M&A, I don't want to get sued.
  • Clients aren't meant to understand contracts

Clients might not complain about your contracts specifically, but do they mention concerns such as…

  • How long it takes them to negotiate contracts
  • How stressed they are
  • The costs of implementing expensive contract management systems
  • How little time they have to innovate or try new things
  • Length of time clients have to wait for you to review contracts

And what about your law firm…

  • Are you writing off billable hours to find the right clause or precedent?
  • Does it take you hours to review and train younger lawyers’ drafting?
  • How long does it take your team to manage precedents and clause banks?
  • How long does it take you to review those precedents when a new law comes in?
  • What’s the value of clients you have lost entirely or some aspects of, as they try new ways of working?

If even a few of these are partially true for your law firm, the costs, multiplied by the number of clients or the number of times you use a precedent could be significant. If you are a lawyer, then you are in the trust business.

Any relationship benefits from aligned expectations and it’s a shaky start and rocky road ahead if people can’t even understand the contract that’s supposed to provide the basis of that relationship. (Melissa Lyon - Associate Principal, Hive Legal)

What are contracts costing us, as a legal profession and as a society?

When your contracts are unclear or confusing, you are putting your clients on the back foot at the negotiating table with their suppliers, partners, or customers. There is so much your clients want and need from you that you aren’t currently delivering.

How to get feedback from your clients about contracts?

Keep your questions simple to start with. Pick one or more from the below and ask around 5 different clients in an open-ended way to get real feedback.

Questions to AskHow to use this feedback
What do you think of the contract?Direct client quotes and testimonials help to understand what users want from a contract and explain that to others.
What irritates you about this contract?Pain points are a starting point, aim to get to the root cause. Try asking why five times (based on a Toyota technique) where you ask a question and then ask ‘Why?’ until you find the root cause of the pain point. These can help refine what you might change about your drafting style or precedents.
What are the most important parts of this contract to you?Use this feedback to restructure content. Put users’ important contract terms in a place they expect and in a way that is easy to find or upfront.
How long does it take you normally to find what you need in the contract?Use this as a baseline. Build out basic metrics about the way people use the agreement.
How do you feel when you read and use the contract?Helps you think about the client experience of contract design and how you would like people to feel when they use the contract.

Cost of Unclear Communication

Apart from the lack of trust and other insights you gain from asking your clients about their contracts, there are some genuine costs that sit behind contract confusion.

The below figures are just one example based on clarifying unclear emails in a medium sized organisation with 100 staff / 30 emails per day / 10% need clarification at 7 min each / on $40/ hr.

Costs of Unclear Contracts

How do your numbers stack up? Head to ‘Rewrite for Change’ to calculate your costs of unclear communication.

Turning plain language into profits with human-focused contracts

Lawyers need to move away from the mindset that contracts are ‘lawyer only’ tools. This mindset sells the lawyer short. It says lawyers are only needed when things go wrong. If you limit yourself to an outdated view of what a contract is you will miss out on what it can do for you as a legal practitioner. You’ll also miss an amazing opportunity to add value to your clients and create a new revenue stream for your firm.

Contracting for competitive advantage

It isn’t easy to go through a change in the way you write and design contracts. If it were easy, everyone would do it! It takes effort, skill, focus, and vision to redesign contracts and create legal drafts that are comprehensible. This gives early adopters a chance to gain an advantage and build a brand that’s based around usable, human focused contracts. What if you could also offer a speed boost to your clients’ business practices and help them to increase their own customer satisfaction levels?

The busier life gets, the more value there is in simplicity as a point of competitive differentiation. (Arkadi Kuhlmann, former ING Direct CEO)

Clearer contracts are easier to manage

Clearer contracts are easier to manage than confusing complex contracts. According to research by World Commerce & Contracting, the equivalent of 9% of annual revenue is lost on average from contract value leakage caused by poor contract management.

Reduced time to close deals

You can also look at the competitive advantage of a shorter time to close deals. For example, if you are able to help customers sign up on average 2 weeks faster than with previous contracts, you are getting that revenue into the company two weeks sooner. This effect is multiplied across multiple customers, and, with ease of doing business, you can also expect positive customer feedback and improvements to client experience.

Client user experience

In many areas of business, concepts of usability and user-experience are considered important dimensions of quality, but this is strangely not the case for contract drafting.6

Think about who needs to understand the contract and design it in a way that works for them. (Melissa Lyon - Associate Principal, Hive Legal)

If you are measuring customer satisfaction metrics like Net Promoter Score, then you should pay attention to every touchpoint with customers, including contracts and legal advice. For many businesses, director and employee wages or bonuses are often tied to some measurement of customer satisfaction. If you talk up how easy a firm or a company is to do business with in your sales pitch but then demand unreasonable terms in your agreements, that is a clear disconnect that can affect the client experience.

Contracts should add value to, rather than detract value from, the business relationships we aim to establish. It's time to start 'designing' these experiences so that this is the case. (Nathan Kinch - CEO, Greater than XD)

Using contract design techniques like visuals in contracts are shown to significantly improve the contract users’ experience.7

Faster comprehension = Trust = Speed to sign

In fact, research has shown that using well designed, visual contracts actually lead to faster comprehension than textual contracts and users give more accurate responses to questions about the contracts.8

Careful attention to designing trustworthy legal terms and conditions is also showing some incredible results. Nathan Kinch, CEO at Greater than X has been researching, tracking, and harnessing the impacts of trust for years. Recent research undertaken by Kinch and his dedicated team showed a remarkable increase in willingness to sign up to an agreement that was designed with the intention of creating trust in the organisation and in the document the user was asked to sign.

Kinch is quick to add that this particular research is a preliminary study with a very small sample size but notes the powerful uplift in key focus areas as significant. Kinch believes there is ‘strong potential’ to replicate the impressive results of this study across different contexts and larger cohorts.

Results from a preliminary study in a complex consumer contracting context

If you could provide your clients with a contractual tool that made their customers more willing to sign an agreement and to feel the process was fair, you could have a strong business proposition.

Industries or companies who have an image problem could benefit from a redesigned contract as research shows a ‘visual contract elicits more positive emotions and fewer negative ones than the textual contract.9

There's gold in those plain language contract hills

As Stefanie Passera points out, we ‘would never accept a poor, unclear, cumbersome, frustrating, boring user experience from our smartphones, so why do we let our contracts “mistreat” us?’

With that in mind, perhaps the question shouldn’t be why did Mr. West tweet out his contract in outrage… but actually why haven’t more of us done so sooner and why aren’t law firms actively seeking to use human focussed contracts as a competitive market differentiator?

Stay tuned for Part 2, where we look at how to put this knowledge into practice with concrete suggestions on how to get started with plain language and some basic information design.

Learn More

Our mission at Donna is to make the tedious task of contract proofreading and drafting more productive and fun! That’s why we partnered with plain contract language expert Verity White. Together we can help you make sure that you spend more of your time crafting great simplified contracts that your clients will love, instead of looking for those missing references and duplicate definitions.

To free yourself from robotic contract proofreading work give Donna a test run. We offer a 14-day free trial available at www.donna.legal.

For tips and suggestions on how to simplify your contracts make sure to follow Verity White on LinkedIn.

References

  1. Passera, S. Beyond the wall of contract text - Visualizing contracts to foster understanding and collaboration within and across organizations. (Aalto University, 2017), https://aaltodoc.aalto.fi:443/handle/123456789/27292.

  2. IACCM. Attitudes to Contracting. (IACCM 2014), https://s3.eu-central-1.amazonaws.com/iaccmportal/resources/files/IACCM_Research_Report_Attitudes_to_Contracting_Survey_2013_v1.2.pdf.

  3. Hagedoorn, J. & Hesen, G. Contractual Complexity and the Cognitive Load of R&D Alliance Contracts. Journal of Empirical Legal Studies vol. 6 818–847. (2009) https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1740-1461.2009.01161.x

  4. Curtotti, M., Haapio, H. & Passera, S. Interdisciplinary Cooperation in Legal Design and Communication. (Social Science Research Network 2015) https://papers.ssrn.com/abstract=2630953

  5. Finn, P. Internationalization or isolation: the Australian cul de sac? The case of contract law. Exploring Private Law, 41–66 doi:10.1017/cbo9780511779213.004.

  6. Haapio, H., Designing Readable Contracts: Goodbye to Legal Writing—Welcome to Information Design and Visualization, (2013).

  7. Passera S., Beyond the wall of contract text. PhD Dissertation, (2017).

  8. Passera S., Beyond the wall of contract text. PhD Dissertation, (2017).

  9. Passera S., Contract visualisation – boost your brand and bridge the language barrier, (2014).

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