Legalese: The Business Scourge of Our Time

August 15, 2019 legalese

Author: Derek Schueren

We have all seen it, heard of it, and likely dealt with it at some point in our lives. If not affecting us directly it has undoubtedly affected a colleague or someone we know well. No, I’m not talking about cancer, I’m talking about legalese.

But what is legalese? Put simply, it’s unnecessarily complex legal language that is used to ensure that regular people (that would be you and me) are unable to understand what a legal document says, so that expert lawyers must be called in to sort things out.

Search for “legalese” on Wikipedia and one finds the following:

“…a pejorative term associated with a traditional style of legal writing that is part of this specialized discourse of lawyers: communication that “lay readers cannot readily comprehend”.”

It’s amazing how brainwashed we have become in the business world to this scourge we call legalese.  It’s so bad that we regular people end up subconsciously perpetuating this specialized language by accepting overly complex legal contracts, paying lawyers an hourly rate that incents them to propagate this legalese and generally panning any legal agreement off to a lawyer without even trying to comprehend what it says.

Now, I am not saying that lawyers are the issue. This is not what I am saying at all. I have worked with many great lawyers who provide wonderful counsel, work hard for our company, and do their best to navigate these legal documents. Rather, the issue is with the entire legal system itself.

With the advent of the billable hour, contracts became more and more complex with the client’s interest becoming lost in the process. The billable hour incentivized lawyers to add more and more complexity to the system. It wasn’t enough for one to say that each side shall pay their taxes; now language had to be added about what currency the taxes should be paid in, what coverage these taxes should assume, and perhaps even how taxes would be paid in the case of an earthquake. How does this help the client? Oh yes I forgot, the client doesn’t know any of these details as they are non-lawyers and would never understand what the “expert” lawyers are doing.

Speaking of taxes, this is exactly what is happening in the business world. For every contract that is created, negotiated, and executed a certain transaction cost is levied by the legal system. But what benefit does the world get from this contribution? To be sure there are benefits to legal contracting, but the aggregate costs of unnecessary complexity far outweigh the aggregate benefits. Businesses pay hundreds of billions of dollars to the legal system every year and get far less value in return. My point is not to say that lawyers’ input is not helpful, but rather that there is a lot of unnecessary and/or unjustified legal spend that does not give the business an overall benefit.

Simple case in point: if I charge my client $5,000 for changes to a contract to reduce a risk which has a less than 1% chance of occurring and would lead to a $10,000 loss, then I would have been better off putting that $5,000 into an insurance pool and paying for any damages from that risk should it occur. Lawyers focus on risk reduction but forget that the costs to get that reduction may not be worth the investment.

Today, in order to protect a company’s interest, business-to-business transactions require a contract.  However, most contracts are not simple; rather, many – if not most – of today’s business lawyers feel compelled to use complicated terminology. Often modern contracts utilize more words when fewer will suffice and include redundant clauses lest some potential court down the road disqualify a portion of a contract.  Today, it is the rare exception when a business-to-business contract is simple enough for a layman to understand. This added complexity is not without cost: it forces businesses to spend far more time and money than they need or want to on the contracting process due to longer contract cycle times and high legal costs. Aggregate these thousands of hours of unnecessary legal costs along with the overhead it creates for the business and possible lost revenue or relationships across the global economy and you are taking about the loss of hundreds of billions of dollars annually.  It doesn’t have to be this way.

At Akorda we see a much brighter future where contracts are negotiated and executed quickly because they say what they mean, simply and clearly.  Where parties to an agreement are able to negotiate, agree and document their relationship quickly and confidently. Where revenue can be brought in far more rapidly, thereby drastically improving business performance.  And where legal teams are able to focus on higher-value work than reviewing endless iterations of overly complicated and verbose contracts. Think this is an impossible dream? Think again: it’s already happening.

Fed up with its own inefficient process, in 2013 GE Aviation’s digital services unit embarked on an ambitious effort to drastically simplify and streamline their commercial contracting process.  They sought to consolidate 7 separate contracts ranging from 25 to 54 pages in length into a single contract covering all transactions. The new contract had two key requirements: amply protect GE’s interests, BUT be simple enough for a high schooler to understand.  They succeeded. “Plain language contracting” has saved GE Aviation enormous amounts of time and money; better yet, customers loved it. The effort has been so successful it began spreading within GE.

The success GE has experienced can be enjoyed by any company; the key is a firm commitment to discard legalese and commit to contractual simplicity.  Couple this with intelligent technology that can help you streamline and automate your contract negotiation processes and the contract negotiation experience can go from a nightmare experience to all involved to a seamless, efficient, and fast process that makes companies easy to do business with all while reducing costs, contract cycle times and risk.  Here at Akorda we are leading a “No Legalese” movement that is committed to getting rid of legalese and freeing the business world from the drag of this legalese tax on every contract.

Are you interested in a better world without legalese?  Join us and our peers as we build a coalition of like-minded people determined to fight this battle and change this status quo. The time has come for us to bring in this brave new world of simple straight-forward plain English contracting. If you’re an enterprise that is looking for a better way to do things, feel free to reach out to us anytime. Akorda is fully committed to this vision and the more people support this cause the quicker we can get to a world with no more legalese.

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