Never bring a knife to a gunfight… right?
You never want to be under prepared for battle, so make sure you are armed to the hilt. Sound familiar? Lawyers love this sort of mentality, and many of them can’t help themselves when it comes to making contracts as complex as possible. There is self-interest in this – it is not as much about protecting you, as much as it is about them. After all, if they put the toughest possible clause in a document, you can’t complain to them later about it not being tough enough, can you?
A quick case study…
I remember a matter where an agency had been working on a deal with a technology company, a very ambitious collaborative venture which involved them working together mutually to create and then exploit something that was very unique in the market.
The technology company got their (very expensive) commercial lawyer to draft up the contract which was about 50 pages long, with layers of extremely technical, complicated and overly unreasonable clauses, all very one-sided to favour his client.
The parties spent months and months negotiating over this contract and eventually the agency lost energy and motivation on the deal, lost faith in the company’s intentions and walked away. I will never forget that – it is a great example of the wrong lawyer torpedoing a deal. Yes that agreement protected his client to the max and beyond, but nobody got what they wanted. No value was created on either side of the deal, and the market lost what could have been a brilliant product.
We’ve come across so many of these situations, where the lawyers have gone to town, thinking of every possible eventuality, layering with all the safeguards they can dream up. They draft the contract like a beautiful fortress, with walls and walls that no one can get through. As elegant as it is terrifying, every possible little ray of sunlight that was getting into that castle has been boarded over and nailed shut. There are twenty foot tall fences of legal protection, iron doors and gates and drawbridges over moats. The lawyer is very happy with this.
Why is doing this in your lawyer’s favour?
What it means is that the lawyer gets very well paid from all of this. Firstly, because it take an insanely long time to draft and they almost certainly charge by the hour. But in so many other ways also.
Of course they don’t charge by the word, but the longer and more perfectly complicated the agreement is, the bigger the bill. But that’s just in the initial drafting – once you present that fortress to the other side, you see, that is when the real benefit starts for that lawyer. An overly complicated agreement is very one-sided and has all the protections but is usually a nightmare to deal with in practice. Once the other party sees it and starts to renovate it, the agreement has to be pulled back and balanced out to get to a more reasonable position, and especially if it goes to a similar lawyer on the other side, they start to carve out their changes, take to their positions and you are all set for a drawn out, long and expensive contract negotiation process. Lawyers can start to control the negotiation, which again… means higher fees for more meetings.
Everyone pays their lawyers for round after round of changes, back and forth, while the insanely complicated document is adjusted, tweaked, and worked into more reasonable shape, eventually. This can mean that the parties are locked into negotiations well into the time when services are already being provided, and the conversations around liability caps and insurance and performance breaches can set a negative tone to the relationship. Believe it or not, our clients have endured contract negotiations with lawyers like the above, where the negotiations continue throughout the entire delivery of services, before finally expiring because the relationship ends two or three years later, and the contract never even gets signed.
The lawyer is more than happy with this, as they keep adding to their bill and getting ready for the next round. Many lawyers thrive on the conflict, and the power plays with the other side. There really are no winners in this situation (other than the lawyer) as the deal stays unsigned and the parties get stuck in the back and forth.
Lawyers do this to protect themselves. They can sleep easily at night knowing they have protected themselves and their firm against claims, as they have covered every eventuality. If the deal stalls for months, that really is not their problem. Then if there is a dispute, payday starts again as only the lawyer knows how to unravel it.
Of course, none of this mentality is actually in your own best interests….
which are… having a contract that is well balanced, caters to your business needs, covers off the key protections but in a way that is more commercially amenable and reflective of the current market climate. The best sort of contract is one that both parties can agree on, that covers off on each party’s main concern areas and then (hopefully) is not needed again. What you actually want is a contract that is user friendly to negotiate, that makes sense, that you can explain in a reasonable way, and that can be more readily negotiated, so you can get on with the business and doing what you do best without the legal headaches. There are always commercial imperatives that drive every deal, and a lawyer who understands those will be able to weigh up what is critical, and what you can and can’t live with, and what compromises or options may be available to help finalise the deal.
Your contracts say a lot about you as a business, and can act like a bit of an advertisement for you if done right. If your contracts are too short and simple and haven’t been looked at in a while, this may not present you as the most professional operator. If your contracts are overly arduous and onerous, this could be off-putting to clients and pull you into difficult conversations, before getting started. If you have a contract that is well tailored to your business, it may help position you as a well-tuned industry provider on top of your craft. If your contracts are up to date, commercial and well-balanced, with all the right safeguards without going overboard, it can help set a good platform for your business relationships.
If you would like someone to take a balanced and commercial look at your contracts, please let us know, we’d be happy to help.