As both lawyer and executive I’ve seen multiple variations of this scenario: A friend heading an industry lending group at a money center bank calls me. Agitated. He and his counterpart at the potential client company have agreed on all business points for a large loan. But one lawyer’s insistence on their pet wording of some clause threatens to kill the deal, or at least add unnecessary time and work before closure.
Though occasionally legal counsel’s preferred wording may be sound, too often it just reflects one lawyer’s stylistic preferences over another’s — without adding to legal protections. Here’s a corrective viewpoint from Jeff Carr, lawyer and former P&L executive:
“Contracts really are simply business project management charters (who is going to do what when). We lawyers have made them far more complicated by focusing on what happens when something goes wrong. Far better to make sure obligations are understood and can be fulfilled.”
This Matters to Your Business
An example of the more practical approach to contracting: Bonterms, a standardized contract business formed earlier this year, will be launching a platform to simplify collaboration among lawyers. They have designed this so that lawyers for each party can protect their corporate clients’ respective legal positions without reinventing the wheel when it comes to specific contract terms. “Contracts are … a Business Relationship“. Artificial Lawyer, December 19, 2022.
What I admire about Bonterms is that Todd Smithline, its founder (formerly an attorney in a large law firm and a general counsel), has identified the main requirements for streamlined corporate contracting.
First, streamlined corporate contracting needs to begin with some degree of standardization:
“There’s always two users [of a contract] … making a key point that although it is right in everyone’s faces and implicit in the nature of contracting, we can sometimes forget that contracts have to work for both parties, and the same goes for standardized contracts. It can never be just one party chucking a document … at another party and just expecting them to go along with it without any recourse to changes.”
Second, Bonterms’ founder stresses that the standardized agreements are designed to enable expedited collaboration by zeroing in on the handful of deal points where the parties’ lawyers disagree:
“What is the right balance between variability and the unchangeable? … There has to be some variability and users of Bonterms have to be able to change things. However … certain types of contract always have a limited number or key areas where people want such changes.”
“It’s an 8 or 10 issues list that people focus on for each contract. We allow people to go right to the issues list and make changes ….
“For this to work there has to be a good base contract and it also needs to be adjustable.”
As an earlier piece about Bonterms in Artificial Lawyer put it: “The overall idea is to get as standardized and rationalized as possible, but without sacrificing the very real need of lawyers and their clients to modify and adapt.”
The traditional contracting framework that still prevails in most in-house and in law firm settings lacks standardization. It invites deal parties’ lawyers to reinvent the wheel by indulging their respective preferences on pet wording. Legal can do better than this. Bonterms’ offerings are a welcome contribution to that end.