What you’ll get out of this episode

This post is for businesses and their advisers who care about making contracts more productive. Applying the method taught in this episode will help you structure contracts better by moving from the usual tail-wags-dog structure…

...towards a “business-end first” model. Where the dog wags the tail - as things should be. This approach will make your contracts more user-friendly and bring efficiency to each stage of your contract process. If you don’t want to take my word for it, explore the extra resources at the end.

The back story (you can skip this if you’re busy)

As the year closed, a number of observers - including me - summarised 2019 as the year of hype and talk: lots of attention on new toys, AI panaceas and design experiments that remained just that. Too little “boring innovation” and hardly any change at the daily coalface.

I love tech, AI, design and workshops and there’s amazing work being done out there on plain language and contract design - but what about applying these techniques broadly, making them scaleable, negotiable, automated?

That’s why for 2020 I set myself the task to blog about practical ways in which contracts can be shaped and redesigned. To make contracts shorter, smarter, quicker to work with, easier to negotiate, better at delivering business outcomes.

I’m kicking off with my favourite starter technique: a way to restructure contracts by putting the business end first. This is a tried, tested and proven technique. I’ll start with my own version of this - and give you some additional resources at the end.

Do you need a legal designer or other specialist to apply these techniques? A really effective project needs structure, the right team, collaborative working and design thinking. A legal designer, or plain language expert, or anyone who consults on contract improvement, will get you there faster and help you do it better. But you can get started and achieve useful results without it. If you simply don’t have the resource, getting external help pays for itself.

Better contracts: the business end first

Step 1: declutter the landing page

Starting with the first page of your template, get rid of clutter. You need a simple title and the parties and that’s it. Eliminate fancy formatting. Bin the recitals. If you really need recitals (i.e. you have a complex history without which a reader won’t understand the contract), move them out of the way and we’ll deal with them later.

Step 2: business end first

Create a section called “Key terms” right after the list of parties. Now, take the most important elements of your contract and write them into your key terms section. Focus on:

start dates, duration, end dates;
subject matter, project scope, purpose;
the agreement structure, e.g. is the work done through call-offs, is there a framework with local agreement etc;
money;
commercials that usually need to be filled in or negotiated;
data points that need filling in - put them upfront rather than expecting users to locate them in your legal haystack.

You’ll need to make a call as to how much you put on that front page. The more of these items you can put upfront, the better, even if it is in summary form.

You can include key definitions and governing law and how disputes will be resolved (when you’re working internationally governing law can be an important point to cover upfront). It depends on what works for you and your agreement, and how often users need to negotiate these items.

Step 3: get rid of verbiage, make it functional

Now, convert your sentences to a heading-content structure. Instead of “This agreement commences on…”, use a title like “Effective Date:” or “Start Date:” and put in the date. Short, easy to read and write.

Make sure all your contracts use the same heading/content format. Now you’re standardising too!

Here is an example of an NDA applying this technique, generated using Majoto (www.majoto.io). All of the points you’d normally fill in and negotiate are upfront on one page together with the signatures. Business users are only interested in what’s on that first page.

The beauty of this structure, is that it helps you to standardise key terms across your contracts, which helps with productivity, analytics and automation.

With more complex agreements, you need to experiment a little. If you’re brave, you can keep it short and functional, fleshing out detail in the main agreement. Here’s an example of this approach for a development agreement (again, generated in Majoto).

As well as structural items like duration and how work is initiated, this deals upfront with the most important issues in a development agreement: who pays for the work, who owns the IP, who takes the IP risk, and governance.

Step 4: sense check and adjust

Does your summary give a decent idea of the purpose of the contract and the most important business elements? Think about what a term sheet would look like.

Now you can do some legal housekeeping. Concerned about conflicts between the Key Terms and the main agreement? Shouldn’t be a problem if you’ve written it well, but in your “interpretation” section you can include a statement that the main body prevails. Got definitions? You can specify that capitalised words in the Key Terms section are incorporated as definitions.

Step 5: overall structure.

I’ll be talking about organising complex agreements and modular structures in upcoming episodes. For now, a few suggestions:

Recitals - if you need them, include them at the beginning of your main body of legal or commercial terms.

Defined terms - if you have a long list of defined terms, put them in a separate schedule or module. Otherwise, incorporate them organically into the agreement, which is more reader-friendly. Definitions that are relevant only to one section or schedule, should be set out there, close to the content where it’s needed.

Schedules - the conventional approach is to put commercial, technical, compliance and other schedules at the back. That’s fine. But consider why the commercial “meat” (who does what, money, service levels, timelines) shouldn’t come straight after your key terms section. To expand Verity White’s terminology, instead of a “reverse sandwich” you could offer up “open sandwiches” - e.g. a multi-layer open sandwich, or a platter of bite-sized open sandwiches:

It’s going to depend on your needs especially when you’re applying this to complex agreement structures including master and framework agreements. Get creative with your customers and keep improving. In broad terms, get your content as close as possible to this:

Step 6: marvel at your creation.

You now have a useful document that your customers or partners can understand and which helps them navigate the rest of the agreement. You are moving towards a contract that puts the legal terms at the service of business outcomes. You have key data points right there at the front, rather than scattered through the agreement. Need a term sheet to kick off negotiations? Alakazam! - your Key Terms section is a ready-made term sheet. Amazing.

Step 7: iterate.

You’ll need to use your judgment, experiment, and work with your legal/business partners. You may need a proper project. But that shouldn’t stop you claiming the low hanging fruit. Start simple, get feedback, go deeper, improve, repeat.

Further resources.

If you’re curious about the Majoto examples, hit me up at denis@majoto.io. (I don’t apologise for the plug, because this is exactly what Majoto is about - transforming content).

To get your teeth into this further, check out Verity White’s Reverse Sandwich. Verity has rich content on this which I don’t need to reinvent! A similar technique is described in IACCM’s contract pattern library - also a source for other contract design patterns to start using.

Plus take a look at this guide on template structures (which can be combined with the technique described here): https://radiantlaw.com/guide-to-contract-templates

What next?

The “business-end first” method can be combined with other techniques to make your contracts even more functional and easy. I’ll be blogging about these during the course of the year. If you can’t wait and want to know more, email me at denis@potemkin.legal. Of course I’d love to hear your own thoughts and experiences, or any particular areas you’d like me to address.

Better contracts, Episode 1 (the one with the dog wagging the tail)