There’s sometimes no good excuse. In my experience, it’s
uncommon for lawyers to set out to create a confusing document, but a
combination of ingrained habits, the jargon that builds up between members of
any profession, and laziness leads to unreadable contracts in circumstances
where they should be readable.
Lawyers rarely draft contracts from scratch. If the lawyer has
already done a similar contract (or someone else has), it’s just inefficient to
start with a blank page. It takes less billable time to modify an old
contract that’s close to what you want.
In addition, it’s easier and feels safer to use a sprawling, wordy
provision that covers everything conceivable than to think carefully about a
sparsely worded one. Are you really covered if you say “liability”?
How could it hurt to add “any direct or indirect indebtedness, liability, or
other obligation, whether fixed, unfixed, secured or unsecured, accrued,
absolute, contingent or otherwise”?
Once someone has drafted a sprawling provision that covers everything,
it tends to be copied from document to document and changed only to add a more
words . . . just to be safe.
So even in a situation where a very simple document would be
appropriate, you often find lawyers producing long and wordy ones.
Sometimes that’s because the lawyer lacks the skill and imagination to produce a
short effective document. Usually, it’s because the lawyer doesn’t think
the client wants to pay for one.
So short and readable contracts are possible in some circumstances,
but they might cost you more than long and convoluted ones. To give an
example, There was a client that was “rolling up” a lot of small businesses
into a larger chain. On the first few deals, the lawyer used my standard,
50-page, everything-but-the-kitchen-sink asset purchase agreement. That
seemed efficient because I already had it. Each deal required only a few
modifications. The client and I quickly realized that was false
economy. The sellers complained. What’s worse, they didn’t
understand the contract, even if they agreed to sign it (if they had lawyers at
all, they usually couldn’t afford good ones). That was bad for my client,
since one of the main purposes of an asset purchase agreement is to encourage
the seller to disclose facts the buyer needs to understand and price the
deal. So the client paid me to develop a short form. A lot of
thought went into simplifying. The lawyer had to think through every
provision, looking for things that could be safely eliminated or
reworded. In the end, I got the document below 20 pages. Most
sellers could understand it without difficulty. The sellers were happier
and the client got better disclosure. It cost money, but it seems to me
(and seemed to the client) that it was worth the price.
So if you think you really need a simple contract, ask for one.
If you’ve got a frustratingly complicated form contract that you use all the
time, ask your lawyer if it can be simplified. But be prepared to pay for
simplicity. Remember, lawyers charge by the hour, not the word.
Contracts Are Closer to Computer Programs than
You see words on paper or a screen. They seem to be English
words. You know how to read English. But you can’t make head or
tails of it. You naturally conclude that it’s the product of either bad
writing or deliberate obfuscation.
This is the thinking behind a lot of complaints about legal
documents. As discussed above, it’s sometimes justified. Often,
however, it misses an important point: Contracts aren’t novels.
They’re much more like computer programs.
A contract is equivalent to a computer program, designed to be read
and executed by human beings. The idea is to combine a series of promises
to determine the future actions of the parties under contingent
circumstances. If the contract works right, a given set of inputs will
produce a predictable set of outputs. If it doesn’t work right or if the
inputs were not anticipated, you may end up with The Blue Screen of Death
(otherwise known as endless litigation).
This function of contracts goes a long way toward explaining why they
are hard to read if you aren’t used to reading them. You would not expect
the source code for a complicated program to be something that you can sit down
and ready quickly and easily. You should have similar expectations for
contracts. If the deal is complex and involves a lot of contingencies,
you should expect a dense, complex contract.
There’s one crucial difference between a computer program and a
contract: A contract has to be designed to withstand the parties’
deliberate attempts to make it crash. As Homer Simpson put it, “Weaseling
out of things is important to learn. It’s what separates us from the
animals . . . except the weasel.” As economists put it, people are
opportunistic. If a contract sets a rule and the rule starts to work
against one of the parties, they often don’t just follow it. They try to
reinterpret it. They look for loopholes in the language to turn the rule
on its head. They suddenly remember what the contract was “really
supposed to mean” when it was negotiated (always, miraculously, exactly what
they want it to say now). They reinterpret the facts or try to obfuscate
Businesspeople negotiating contracts often aren’t concentrating on the
possibility of future weaseling. They’re focused on the business terms of
the deal. But lawyers are paid to worry, and weaseling is one of their
biggest concerns. As they try to protect against it, they aim for maximum
precision. Simplicity and readability properly take a back seat. A
contract has to be functional before anything else.
Simple, common terms, for instance, tend to have somewhat ambiguous
meanings. That’s not a problem in normal conversation. Everyone is
trying to understand the speaker and will usually focus on the intended meaning
and ignore the other possibilities. A good lawyer can’t assume a helpful
reader when drafting a contract. To the contrary, the lawyer has to
assume a hostile reader who is trying hard to misunderstand. So lawyers
define common terms in wordy ways, hoping to prevent people from exploiting the
ambiguities (see the definition of “liability” above).
There are ways of mitigating necessary
complexity. One of the most common is to put long-winded defined terms
somewhere in the back of the document, where they don’t get in the way.
So long as human nature remains unchanged, however, there’s only so much you
can do without taking real risks.