5 features for a new contract paradigm
In my previous post I set out 5 reasons why contracts - in their existing form as word-processed documents - make poor business tools. Here, I share my vision of what a “new generation” contract needs to be able to do, to be a modern effective business tool.
The features I describe do not need any special software, blockchain or AI. I am also not talking about the process of how contracts are put together or managed (which is the focus of existing contract automation software) but about the intrinsic features of the contract as an instrument. Of course, automation can bring important functionality and efficiency, but the core features I describe here can be achieved using the basic office tools we all have.
The barrier is not technology, but habits and paradigms.
Much of the current paradigm around contracts results from a focus on process rather than outcomes. As Richard Susskind points out, clients don’t want us, they want the outcomes we bring. Which leads to the question of whether the outcomes of today’s (traditional or human) way of working can be delivered in different ways with the support of technologies. What does this mean for contracts? It means that contracts in their prevalent inadequate form are a product of process-centric thinking and old technology, and the designers of the instrument(s) that will replace them will focus on outcomes first.
And that is what my proposed features are all about.
Feature 1 - centred on users and their objectives
This is not about making contracts user-friendly (especially in the case of B2B contracts). Contract language needs to focus more on outcomes (achieving the business objectives) than risks - applying that mindset alone drives a different approach to language, presentation and structure. Contracts also need more language discipline, greater consistency and potentially standards (proprietary or otherwise) around how legal language is structured - to support drafting automation and new ways of presenting content such as visual means.
Feature 2 - able to interface
Like Alice dismissing books without pictures or conversation, I believe that a modern contract must be able to present information in ways which is helpful to the user and supports interaction. This means providing business people with an interface they can work with, potentially even giving them a choice of how they see the information. It means providing a useful interface for the contract professionals working with the detail. Aside from aiding comprehension, these features will help to engage the business and encourage effective and efficient use of the contract by all users.
Feature 3 - dynamic
A contract should be able to simplify, not complicate, its own lifecycle. It should not be a static limp thing unable to do anything without an extrinsic processes or software. To my mind, the ideal state is a dynamic instrument that can handle amendments, extensions and other lifecycle activities within the instrument itself. Just imagine those tangles of inter-related contracts, addenda, amendments, implementation agreements, terminations and other documentational diasporas - which can take hours to untangle and sometimes don’t untangle at all - compressed, organised and simplified into a single living functional file. It can be done.
Feature 4 - multi-functional
A contract should be able to perform multiple functions, in an integrated way. Current practice often leads to the spawning of several separate documents around the contract file - negotiation plans, term sheets, summaries for the business, risk assessments, playbooks. A truly modern contract instrument should be able to integrate all of these functions seamlessly into a single electronic document. It should easily integrate (with) modern collaborative negotiation capability - not least because red-lining will not be helpful when you’re negotiating a visual agreement.
Feature 5 - machine-friendly
As machines take over contract creation and management, the most effective systems are unlikely to be built around word-processed documents. And the system that will win in the market is the system that is the first to move away from that paradigm. New approaches to contract structure and language can help machines do more, faster - and sooner.
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I believe that these features create an opportunity to do things better now, to remain relevant, and to propel legal tech to the next level. To sum up, Richard Susskind: