Today’s legal system incentivizes complexity — particularly when it comes to legal contracts — yet, the adoption of “Plain Language Contracting” could be transformative.
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.
Put simply, legalese is unnecessarily complex legal language that is used to ensure that regular people (that would be you and me) are unable to understand what is being said so that expert lawyers need to be called in to help out.
It’s amazing how brainwashed we have become to this scourge of the business world. 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 encourages more legalese and, generally, panning any legal agreement off to a lawyer without even trying to comprehend what it actually says.
Now, I am not saying that lawyers are the issue. I have worked with many great lawyers that provide wonderful counsel, work hard for their companies, and do their best to navigate these legal documents. Rather, the issue is with the entire legal system itself.
With the advent of a billable hour and the incentive to make contracts more and more complex there was no counterbalance to these activities. The incentives skewed towards adding greater and greater complexity to the system. It’s not enough, for example, to say that each side shall pay their taxes. Now we have to add in language 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? Of course, it doesn’t. More to the point, the client usually isn’t even aware as they are non-lawyers and would never understand what expert lawyers are doing anyway.
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 (or tax) goes to the legal system. Yet, what’s the benefit of this contribution and do the aggregate costs outweigh those benefits? Every year businesses pay billions of dollars to the legal system and get far less value than what they paid in. It’s not that a lawyer’s input isn’t helpful, it’s that there is simply too much unnecessary and/or unjustified legal spend without a corresponding overall business 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 often forget that the costs necessary to get that reduction may not be worth the investment.
In order to protect a company’s interest, business-to-business transactions require a contract. However, most contracts are not simple. Many– if not, most– of today’s business lawyers feel compelled to use complicated terminology. Often modern contracts utilize more words where fewer would suffice and include redundant clauses lest some potential court down the road disqualify a portion of a contract. It is the rare exception when a business-to-business contract is simple enough for a layman to understand.
Again, 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 higher 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 billions of dollars. It doesn’t have to be this way.
There is actually 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 rather than review 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 for all involved to a seamless, efficient, and fast process that makes companies easy to do business with while also 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 the “legalese tax” on every contract. 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 where legalese is a thing of the past.