Seplat Petroleum Development Company Plc
Author: Tim Cummins
Twice last week, I heard from business executives that long, complex agreements are a thing of the past. I don't know whether they had been speaking with each other, or perhaps attending the same event, but both were forceful in their view that contracts must change - a sentiment that we strongly echo at IACCM.
In the view of these executives, there are two fundamental issues driving the need for a fresh approach. One relates to the sheer complexity, time and cost associated with drafting and negotiating multi-page agreements. They also observed that such massive tomes are rarely used and, when they are, they are full of contradictions – a classic case of 'too many cooks', as one law firm recently described the typical business contract.
Focus on principles
The second factor is that they want agreements that truly reflect the spirit and intent of the parties. In this context, they talked about contracts which focus on underlying principles and clear approaches to governance, all of which can be expressed succinctly and then communicated within the customer and supplier organizations. Ultimately, these executives reflected the growing view that litigation in the typical b2b contract is so unlikely that traditional 'belt and braces' legal agreements are unnecessary. That doesn't mean clarity is not important – in fact, the reverse is true – they want clarity for the business user as well as for the lawyer.
Calls for better contracts are not new*, but they do appear to have growing momentum. In part, this may be because they are now so pervasive. But I suspect also that the overall complexity and volatility of our business environment has increased appreciation of the need for documented agreements – and that these, far from adding to the complexity, must actually make it simpler to handle and understand.
Great jurists such as Lord Denning have been powerful advocates for clear language, promoted also by evangelists such as Ken Adams and his Manual of Style. Today, these efforts have been further advanced by IACCM member working groups which have established a series of contract principles, model terms and contract design standards, all freely available at the IACCM web site.