How To Draft Shorter Construction Contracts 

Contract Teardown

Contracts that take forever to negotiate, are unclear to everyone but lawyers, and generate too many disputes between parties seem to be the status quo, especially in business. A long contract with complex jargon can confuse both parties and lead to a longer sales cycle. Sarah Fox, a construction lawyer and contract brevity expert, has strong sentiments about lawyers who copy/paste thoughtlessly. She explains how contract drafters can make life easier for both the client and the consulting by modifying the language.

Questions in this Episode

  1. Does a net contribution clause add value to the agreement or complicate it?
  2. How can you eliminate ambiguity and write clear clauses?
  3. How can your drafting make payments easier and faster?
  4. How can a few contract drafting changes improve the contracting experience?
  5. What is the broader picture in terms of creating more functional contracts?

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Let’s Get Some Context

This contract contains clauses that were copied and pasted from the internet, resulting in a mongrel beast of a contract. The person who drafted this clearly has no idea what they’re doing.

“You can write a contract in 500 words rather than creating a pick and mix approach from the sweet shop of clauses and chucking a load of stuff in and then finding out you can't afford it in the end.” -Sarah Fox

Let’s look at how copy-pasted language with no context modifications might cause issues and how to fix them.

Net Contribution Clause: Boon or Bane?

Clause 10 states that “the liability of the consultant for any claim or claims shall be further limited to such sum as it would be just and equitable.” This is the worst language to use in consultant appointments. This was pushed by insurance firms in the United Kingdom ensuring that only consultants with the best insurance policies received all claims.

For example, someone having 10 million pounds of insurance and someone with half a million pounds of insurance would be treated differently depending on the amount. This is unfair because both parties have attempted to protect themselves. It should be shared with others. And this resulted in a clause known as the net contribution clause, which allows people to share it even if parties do not have contracts with you or become insolvent. Essentially, there will be no payment beyond the “fair share.” The issue is how to negotiate a fair share since, by the time you’re in dispute, you’ll have to call a judge and things will get complicated. 


10.
Without prejudice to clause 9, the liability of the Consultant for any claim or claims shall be further limited to such sum as it would be just and equitable for the Consultant to pay having regard to the extent of the Consultant’s responsibility for the loss and damage suffered as a result of the occurrence or series of occurrences in question (“the loss and damage”) and on the assumptions that:

However, this provision goes on to say, “on the assumptions that there are no limits on their liability.” In a contract with a bizarre limit on their liability, it also allows people who have a better contract than others to receive compensation. It just doesn’t sit together nicely. It will also result in multiparty proceedings, which are the most complicated and expensive kind of actions.

Draft Clearly to Avoid Ambiguity 

The word “reasonable” is exceedingly ambiguous in section 4 of this construction consulting agreement. It’s the worst possible clause because it says – the consultant will be averagely competent. You don’t want to waste your money on people who will only be average.


4.
The Consultant shall exercise reasonable skill and care in the performance of the Services.

The client doesn’t care how much competence you have or how much effort you put in; they just want the result to match their expectations at the end of the day. 

“This contract makes no mention of the client's expectations, needs, deliverables, or results, instead focuses on being average.” -Sarah Fox

Section 9 discusses liability limitations and states that they “shall not exceed amounts recoverable by the Consultant under the professional indemnity insurance”. It’s basically saying that they’ll be average, but if their performance is terrible, you should contact their insurance provider. That doesn’t sound fair.


9.
Notwithstanding anything to the contrary in this contract, the total liability of the Consultant under or in connection with this contract whether in contract or in tort or in negligence or for breach of statutory duty or otherwise (other than in respect of personal injury or death) shall not exceed amounts recoverable by the Consultant under the professional indemnity insurance policy taken out by the Consultant and in force at the time that the claim or (if earlier) circumstance(s) that may give rise to the claim is/are reported to the insurers in question. This limitation shall not apply if no such amount is recoverable because the Consultant breaches the terms of any such insurance policy or fails to report any such claim or circumstances to insurers in accordance with the policy’s terms.

Section 9 has a problem because there is no promise that the consultant will have professional indemnity insurance in this agreement. If they don’t have insurance, they won’t know until you have a claim, at which point your limit of liability is the amount they can recover due to the absence of an insurance policy. This is equivalent to playing football in the dark or blindfolded. It just goes around and around in circles. You have no idea how much their insurance costs, what the restrictions are, or whether they can get it at all. Professional indemnity insurance is paid on a claims-made basis, so it is required to have it in the year you intend to file a claim. If they don’t have insurance in a given year, you have no recourse.

"Section 9 means: We'll offer you average, but if we're not average, you won't be able to claim from us. Hurray!” -Sarah Fox

Make it Easy to Get Paid

The language in Section 11 is bouncing around. It establishes duties, but it juggles due dates and final dates. It was driven by a piece of law in the United Kingdom for construction contracts, and it includes consultant appointments. However, the language employed in the legislation is inadequate. When it refers to a due date, it does not refer to when the money is supposed to be paid, but rather to the final date.

The purpose of payment provisions for a consultant drafting this agreement is to make sure they get paid. -Sarah Fox #ContractTeardown Click To Tweet

This clause has a lot of terminology and definitions. The issue here is that, while they’ve utilized terminology that is consistent with the act – it’s nearly impossible to grasp unless you know the act. Nobody is going to study four different pieces of legislation to figure that out.

This section could be far more user-friendly if it mentioned submitting an invoice and when it will be paid, rather than having ambiguous terms like final dates or anything else. The terminology is simply too confounding to use. Why aren’t they making it easier for someone who isn’t a sophisticated consultant or hasn’t read these acts? Just make it easy to get paid.

Think About the Specific Goal of the Contract

Section 12 deals with interest on late payments when the UK was a member of the EU. If someone does not pay you on time, you are entitled to interest with a maximum of 8% above the base rate. Most conventional provisions do not even come close because interest rates in the UK have historically been low at 1%. So an increase of 8% is massive. But this provision doesn’t only state we’ll get 8% (the maximum you can get), but it also says we’ll get whatever extra sums we spend to recover the debt. This is a consultant agreement, so there isn’t much money at stake. At this stage, it’s like using a sledgehammer to crack a nut.


12.
Interest shall be added to all amounts remaining unpaid after the Final Date and shall be calculated at the rate of 8% above the Bank of England base rate from time to time in force. In the event that the Consultant has to use debt collection procedures to recover any sums properly due to it under this contract, the Consultant shall charge the Client such costs as are reasonable and proportionate to the debt owed.

Section 13 is a strange one as it states that the consultant can appoint others to do services that are within the scope of the consultant’s work. This section also requires the appointed individuals to communicate with the client. The client is saying “I’m not going to be responsible” but that’s not how contracting works. The client and consultant will always have a relationship of accountability between them. This clause appears to be an attempt to undermine that. Clients may object to having too many contracts, but a consultant wouldn’t be happy with being forced to use one of their sub-consultants.


13.
If the Consultant agrees to appoint sub-consultants on the Client’s request, the Client shall pay the Consultant for the sub-consultants’ services as part of the payment procedures set out in this contract at cost (plus an arrangement fee) with the Consultant will agree with the Client in advance. In employing sub-consultants on the Client’s behalf, the Consultant does not accept any liability to the Client for such sub-consultant’s services or for any consequential costs arising therefrom. The Consultant can if required request a letter of reliance in the Client’s favor from the sub-consultant warranting their services.

It’s better to be clear about what a material breach is since you don’t want to be arguing about it later. For example, in section 14, all they need to say is something similar to, “if you fail to pay our fees for two months or more than ten thousand pounds, we can terminate, or if we fail to show up to work, you can terminate.” You don’t need the “material breach” language.


14.
Either party may terminate the Consultant’s engagement under this contract in the event of a material breach of this contract by the other party or in the event of the insolvency of the other party by giving two weeks’ notice in writing in respect of all the Services.

If you want to make life difficult in the 21st century, don’t allow emails as notices. This is exactly what this agreement does. If it’s anything significant, like terminating the contract, or you want them to follow up with a paper copy in case your server goes down, someone cancels your email, or your internet goes down, that’s fine. It’s inconvenient to not be able to send emails and to have royal mail special delivery.

“Construction projects require a lot of to and fro between parties. This is not like a one-time purchase so the idea of hand-delivering during a pandemic – Good luck with that.” -Sarah Fox

The four examples above are instances of neglecting the essence of the contract. It’s a good idea to bear in mind the type of contract you’re drafting and the purpose you’re attempting to achieve with it at all times.

Don’t Use Terms to Compensate for a Poor Contract Process

The final sentence, “the work will be carried out on the understanding that these standard terms of a contract have been read and agreed to,” attempts to substitute a defective contract process with certain terms.

“There are many clauses that try to tie us up in knots, get the focus all wrong, and don't help build trust.” -Sarah Fox

People have either read the terms or have not read them, and simply saying “you’re deemed to have read them” or “it’s on the understanding that you have” does not imply that they have. If the aim of a contract is to help us do business, we should read, comprehend, and use it.

Contracting exercise is not a legal process. It's a business process. - Sarah Fox #ContractTeardown Click To Tweet

Businesses are losing interest in these pieces of paper as they realize they never use them and have to spend a lot of time negotiating and paying for them to be drafted. Actually, they don’t use them very often because they have solid commercial relationships and would rather do something more exciting than sue someone. This contract teaches us that brevity is the soul of wit. But it doesn’t mean brevity is wit, because cutting something down doesn’t mean you did the real work.

Be Functional Instead of Defensive 

Lawyers are overly concerned with the repercussions and seek to cover all their bases, but the social function of a contract should be to build the trust that enables commerce and collaboration between people.

“Focus on what clients care about rather than what lawyers care about.” -Sarah Fox

Don’t waste time with archaic language, or foreign codes, or copying and pasting – simply make it clear, obvious, and impactful.

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Show Notes

THE CONTRACT: Consultant Agreement 

THE GUEST: Sarah Fox is an expert contract drafter and reviewer, especially when it comes to simple effective construction contracts. With 25 years’ experience, she creates contracts that are easy to read, understand, and use. She also offers bespoke training through her website, https://500words.co.uk/. She has also authored four books about contracts which you can find on her Amazon author page.

THE HOST: Mike Whelan is the author of Lawyer Forward: Finding Your Place in the Future of Law and host of the Lawyer Forward community. Learn more about his work for attorneys at www.lawyerforward.com.

If you are interested in being a guest on Contract Teardown, please email us at community@lawinsider.com.

Transcript

Sarah Fox [00:00:00] I don’t think the person who drafted this actually understands what they’re doing. 

Intro Voice [00:00:03] Welcome to the Contract Teardown show from Law Insider, where legal experts tear down contracts from some of the most well-known companies and high profile executives around the world. 

Mike Whelan [00:00:17] In this episode, construction lawyer and contract brevity expert Sarah Fox tears down a standard construction consultant agreement. Sarah has strong feelings about lawyers thoughtlessly copy pasting and teaches those lawyers how to build contracts focused on what really matters. So let’s tear it down. 

Mike Whelan [00:00:38] Hey, everybody. Welcome back to the Contract Teardown show from Law Insider, I’m Mike Whelen. The purpose in this show is exactly what it sounds like. We take contracts, we beat them up where you usually mean occasionally nice. But today we have Sarah Fox, and she’s just mean we’re just going to be me and Sarah. How are you today? 

Sarah Fox [00:00:58] I’m fine. Thank you very much. 

Mike Whelan [00:01:00] In the afternoon in the U.K., it’s morning here. It’s cold. All my vegetables are dying and I have to find a new hobby. I bought a Vespa and I think I’m going to learn how to fix the Vespa or just curl up in a corner in a ball of depression. These are my options. So speaking of depression, today we are going to talk through a document that was a pivot. Do you see how professional that pivot was? We are going to talk about a document, a standard terms of contract. Let me share this with you guys. This is it. It’s a few pages. Sarah, what is this thing? What is this document and why are we talking about it? 

Sarah Fox [00:01:36] So we’re talking about it because it’s kind of on the surface, it’s only two pages. A couple of thousand words looks like it kind of should be simple, but it’s obviously a bit of a cut and sharp. They’ve kind of taken clauses from things that they’ve seen. They’ve copied and pasted off the internet. They’ve put together a sort of mongrel beast of a contract. And I don’t think the person who’s drafted this actually understands what they’re doing. I don’t think it’s been written by a lawyer or it’s not be collated by a lawyer. But I think some of the clauses have clearly been originated by a lawyer, somewhere somewhere in the internet. Yeah. So just to have a look at why people put this stuff in their contracts, it 

Mike Whelan [00:02:17] reminds me some of these contracts remind me of the AI generated, you know, novels or whatever scripts. There’s this awesome one that’s a sci fi script. You guys have to find out where they like, actually recorded a movie recording of it, and it’s hilarious because things just sort of don’t. None of it makes any sense. So I love these sort of human slash A.I. generated documents. But Sarah, you why are we talking to you? Tell me about your background and what brings you to this awful document. 

Sarah Fox [00:02:47] Well, I started as a construction lawyer in the UK, and I practiced construction law for 20 years, and in that time I looked a lot, a lot of contracts. We use a lot of standard form construction contracts in the UK. There are roughly fifty thousand words kind of small novel length, but I’m also a dual qualified trainer and as I was training people on contracts, I realized that not a single person have a Scooby-Doo. What they meant. So the lawyers didn’t know what the contracts meant. The clients didn’t know what the contracts meant. It looked like we were just generating paper because we didn’t like trees, so I decided to kind of challenge myself to come up with a training tool that was could get people to start talking about what ought to be in a contract and then how you could finesse it, how you could make it work. So then they kind of started to like it. So then I have to justify whether or not it would be a legally effective contract and then people still didn’t believe me. They said I couldn’t do it, so I wrote a book to explain my code. So I’ve now written a few books to explain how you can write a contract in five hundred words, rather than create this kind of pick and mix approach of going to the sweet shop of clauses and just checking a load of stuff in and then finding out you can’t afford it. In the end, 

Mike Whelan [00:03:59] I require through the rest of this conversation that you continue to use British aphorisms that we don’t know what they mean because they nobody has a Scooby-Doo is like, I don’t even know what that means, but I love it. So we’re going to go to the document here and talk through some of these sections. Let’s start with four. So this document, before we get to it and if I understand correctly, this is like a company is hiring a construction contractor or somebody who’s going to do because it uses the word consultant when this document is using the word consultant. Tell me, what does that word mean in this context? 

Sarah Fox [00:04:32] I think they mean somebody who’s providing services not works. So it could be a designer. It could be a planner, it could be an engineer, it could be a cost consultant, a quantity surveyor. Somebody is not actually doing any work work on the site, but is helping to administer that whole project well. 

Mike Whelan [00:04:51] And to the big point that I know we’re going to get to, they may use this for all kinds of people that this actually doesn’t make sense for. So let’s start with four the phrase and this one is the consultant shall exercise reasonable skill and care in the performance of the services reasonable. The word that holds up the entire common law legal system. What do you think about number four? 

Sarah Fox [00:05:11] They’re not, of course, just the worst possible sort of clause because basically you’re saying you’re going to be average averagely competent now. I don’t know about you, Mike, but I don’t think you’d ever get a job if you put on average to be competent in your CV. And yet that’s all they’re promising to do. But the other thing is, the client doesn’t actually care how much competence you’ve got and how much you put in. They want the product at the end of the day. So they want the report or they want the design, so they want all of that. Stuff and they want it to meet their expectations. There is not a single reference in this contract to the client’s expectations that needs any deliverables, the outputs. It’s just focusing on kind of being average as you go in. Well, I don’t know. I don’t want to spend my money on people who are just going to be average. 

Mike Whelan [00:05:59] Especially when you jump down to nine and this is a long one. I won’t read it to you guys, but we’ll share it on the screen. This one is a limitation of liability, and it says that this is awesome, that it shall not exceed amounts recoverable by the consultant under the professional indemnity insurance policy. So they’re basically saying we’re going to be, you know, OK, and if we’re terrible, you know, call the insurance company. What do you think of nine? 

Sarah Fox [00:06:24] Well, there’s a few problems with nine. First of all, there’s no promise in this agreement anyway, that they will have insurance so that if they don’t have insurance, you won’t find out until you’ve got a claim in which case you’ll limit of liability is the amount they can recover under a non-existent insurance policy. This is definitely like kind of playing a game of football in the dark or blindfolded is just going around in circles, so you don’t know how much their insurance is. You don’t know what the restrictions on it are. You don’t know whether they’re going to have it. Because professional indemnity insurance is on a claims made basis, which means you’ve got to have it for all the years in which you might want to bring a claim. If they haven’t got it anymore, you’ve got no recovery whatsoever. So basically, they’re saying we’re going to promise you average, but if we’re not average, you can’t even claim from us. 

Mike Whelan [00:07:09] Hey everybody, I’m Mike Whelen. I hope you’re enjoying this episode of the contract teardown show. Real quick, I want to ask you to do me slash you really a quick favor. Look down below. You’ll see a discount code to join the Law Insider Premium subscription. When you do that, you get access to more content like this. You’ll see webinars daily tips on contract drafting, not to mention access to the world’s largest database of sample contracts and clauses. It will help you write better contracts faster if you want to do it. Right now, there’s a code below, so get there. Also, if you’re part of a larger team, if you’re in house or in a law firm, just email us. We’re at sales@lawinsider.com, we’ll make sure you get a deal as well. Come join us in the community. The code is below. Let’s get back to the show. 

Mike Whelan [00:07:56] Number 10 now. This one’s like a line straight out of Downton Abbey without prejudice to clause nine. The liability of the consultant for any claim or claims shall be further limited to such sum as it would be just and equitable for the consultant to pay. What do you think about 10? 

Sarah Fox [00:08:14] So number 10 is one of my pet hates in consultant appointments. It was driven by insurance companies, so nobody would have thought of this off their own bat. But the idea is that what used to happen, particularly in the UK, is the consultants who have the best insurance policies, got all the claims. So if I was a number of different consultants working on a project and somebody had 10 million pounds to pay on somebody at half a million pounds, the person with 10 million pounds and get all the claims and they were gonna go, Well, this is unfair. We protected ourselves. Why should we get all the claims we want to divvy that we want to share out among people? So they came up with this clause, which is called a net contribution clause, basically says we were allowed to divvy up even if the other parties don’t have contracts with you, even if the other parties have become insolvent. We’re not going to pay any more than our share, our fair share. Now the problem is is how do you negotiate what a fair share is? Because by the time you’re in dispute, you’re going to have to call a judge, you’re going to have to get it’s going to get complicated. But interestingly enough, this clause also goes on to say on the assumption that there are no limits on their liability in a contract, which has this weird limit on their liability. So it’s like, hang on. Other people have got to have a better contract than us, but we’re still going to give them some of our compensation. I did just doesn’t sit together nicely. It’s all going to result in multiparty proceedings, which are the most complicated and expensive proceedings you can get. This is a hiding to nothing. 

Mike Whelan [00:09:42] Yeah. And I mean, I’m looking at sub one, two and three in 10, as you said, it goes on. And it talks about these, these different like how they’re transferring the insolvency, the non payment stuff, it gets quite confusing in 11. There’s a lot of language in here about due date. There’s also final date. There’s just language that sort of bouncing around and and, you know, it defines duties. But with these sort of vague dates, what do you think about eleven? 

Sarah Fox [00:10:11] Well, eleven was driven by a piece of legislation that we have in the UK for construction contracts, and that includes consultants appointments. But the language used in the legislation is pretty poor when it talks about a due date. It’s not when the money is due to be paid. The final date is the money when the due date, when the money is due to be paid. So we have all these kind of terminology. There’s a whole load of definitions used just in this clause. But the problem is, although they’ve used the terminology to be consistent with the acts, and that’s kind of good, it’s almost impossible to understand unless you know the act now you have to read four different piece of legislation to really understand it, and nobody’s going to go off and do that. So this could be just way more user-friendly by talking about, you know, submitting an invoice when it will be paid and then just saying, that’s when you’re going to pay, not this final day, pay less. You know, the terminology is just too gloomy to actually use and the purpose of payment provisions for a consultant who drafted this is to make sure they get paid. So, you know, why aren’t they making it simple for somebody who might not be a sophisticated consultant, might not have never met these acts of Parliament? Well, it just making it easy to get paid. 

Mike Whelan [00:11:25] Yeah. Why wouldn’t you? Yeah. Well, speaking of 12, has the stick right? It’s it’s the penalties for not having paid. Tell me about one. Do you like it? 

Sarah Fox [00:11:35] Well, there’s a piece of legislation which came out of Europe when we were still members of the European Union, which looked at interest on late payments so that if somebody didn’t pay you on time, you were entitled to some form of interest. Now that was it set at the maximum rate of eight percent above base. And most standard clauses don’t go anywhere near that because interest rates in the United Kingdom have been historically low. You know, they’re running as sort of one percent, so eight percent is kind of a massive increase. But this not just says we’re going to get eight percent the most you could possibly get, but on top of that, we’re going to get any of the sums we pay to recover that debt. And it doesn’t say reasonable sums. It just says pretty much we can appoint the queen to come and get all debts of you. And, you know, if she she’s very expensive. So but we’re still going to charge you that. Now this is a consultant appointment. There’s probably not a lot of money at stake, so it’s kind of a sledgehammer to crack a nut at this point. 

Mike Whelan [00:12:33] Hmm. Thirteen goes on, comes back to talk about liability and dividing liability. What do you think about 13 

Sarah Fox [00:12:42] 13 is a really weird one. So 13 is basically saying you Mister client or Mrs Client can tell me that I ought to appoint some people to carry out services that are in my scope. But you want me to use it because say that in your bathroom specialists or say that your favorite geotechnical engineer or whatever. So I have to appoint them. They have to be in contact with me, not you, because you don’t want to be responsible for them. But then if I’ve taken them over, I don’t even understand all know them. I’m not going to be responsible, but that’s not how contracting work. So between the client and the consultant, they’ll always be responsible, and this clause kind of seems to try and undermine that. It’s a weird one. I understand why clients sometimes want not to have too many contracts that they enter into, but if I was a consultant, I would not be happy with being forced to use one of their sort of consultants. 

Mike Whelan [00:13:32] Got it! 14 gets into termination breach. What do you think about 14 

Sarah Fox [00:13:37] 14 is one of the it’s literally two lines, two lines to say if you’re insolvent or in material breach, then we can terminate. Terminations are really serious. You know, it’s a it’s a it’s a end game, isn’t it? For all these kind of things, you shouldn’t be allowed to divorce easily. I get that, but you should be really clear what material breach means. You know, insolvency. I think we can get that for failure to pay your debts, that kind of thing, but material breach. I don’t think we want to be arguing what it means to check whether or not we can do it, because this is a point at which if you get it wrong, you know, catastrophic circumstances, drive of the policy. So yeah, I think we need to be just a little bit clearer. I mean, for example, all they need to say is if you fail to pay our fees for two months or whatever or more than £10000 or whatever we can terminate if we fail to turn up to work, you can terminate. That’s all you need. You don’t need material breach and then to try and get a lawyer to tell you what that means before you can do what you need to do. So you know what? That’s why I said. Although it’s short, it’s still really gluey. 

Mike Whelan [00:14:46] Yeah, yeah. 19. I’m going to jump down to a sentence. It’s pretty shocking, says for the avoidance of doubt, any notice sent by e-mail shall not be an effective notice under this contract. This thing is dated 2015 and telling us that we can’t use email for communications that are legally binding. What do you think about that? 

Sarah Fox [00:15:08] But why? Why do we not allow email? You know, maybe if it’s a serious thing like terminating the contract, you want them to follow up with a hard copy just in case your server goes down or somebody canceled your email or your internet fails or whatever. But at the same time, saying that all other notices under an agreement which needs a lot of to and fro consulting project construction projects require a lot of to and fro between parties. This is not like a one time buying of goods. Then you might return them because you’re unhappy with them. That’s slightly different, but this isn’t real to and fro relationship now idea that you have to send everything by hand so you have to hand-deliver it in a pandemic. Good luck with that. Or Royal Mail Special Delivery. Wow. Know how to make life difficult for yourself in the 21st century. 

Mike Whelan [00:15:56] Yeah, hold on a second. I need to plug my fax machine back in. You know, I don’t know if lawyers of all people should be the ones criticizing the how people send information, but I mean, we’re at the point where people are like mostly communicating by text and we should be having conversation about text, but I feel like email should be established by now. All right, last line. Tell me about this one. The work will be carried out on the understanding that these standard terms of contract have been read and agreed to. What do you think about that sentence? 

Sarah Fox [00:16:27] So this is another one of trying to use your terms to replace a poor contract process. So, you know, contract formation happens when there’s been an offer acceptance, all that kind of stuff legally. But actually, either they’ve signed these or they haven’t signed them, either they’ve read them or they haven’t read them and just say, Oh yeah, you’re deemed to have read them or it’s on the understanding that you have. Doesn’t mean that they’ll read them. And if the purpose of a contract is to help us do business, then we need to read, understand and use them. Now the well, that’s really interesting. I had some data recently that world commerce and contracting looked at how many contracts end up in serious dispute, so not necessarily in court, but serious dispute. It’s less than not seven percent of contracts globally that end up in dispute. So we got all these clauses that trying to tie us up in knots and there’s loads of them in this short contract, Karachi. They’re not helping us manage the project. This is almost all about the legal stuff. I’m not going to happen on point, not seven percent. You know, the focus is all wrong for me in this. It doesn’t actually help build trust. Describe what the parties want to do. Say what the client wants to receive or deal with any of the kind of risks of working together on a project. 

Mike Whelan [00:17:42] Yeah, it’s interesting that like that data point because it’s it’s it’s sort of like, well, that’s sort of it is literally like this. Contracting exercise is not a legal process. It’s a business process. This is a form of communication that we’re going in and adding complexity to it that, you know, doesn’t really mean much to the business process. 

Sarah Fox [00:18:02] It has no value. These pieces of paper having less and less of value to businesses as they realize that they never do things with them, they spend a lot of time negotiating them, paying for them to be drafted, paying some of them to be adopted. And actually, they very rarely use them because they’ve got good commercial relationships. And if they haven’t, well, maybe they’ll be able to write it off and, you know, go and do something more interesting than suing someone. 

Mike Whelan [00:18:28] Yeah, it reminds me of the days back when I worked in logistics. Like, if you guys realize the majority of commerce is done with things that are like, What are you delivering? How much when, basta (enough), you know, like, that’s it. 

Sarah Fox [00:18:40] Yeah, yeah. And interestingly, I was I was sorting out my mom’s effects and found an invoice from a big company in London who was sending furniture to the Isle of Wight, where my mom used to live so off the mainland to the UK and their terms and conditions, literally four lines. I say, why have we got so far away from this four lines, this is 

Mike Whelan [00:19:02] why everybody loves hanging out with lawyers. Well, and I want to get to that because you know your your thing is to talk about you’re trying to limit contracts, trying to get the language down. And, you know, I sort of feel like what we’re learning from this is brevity is the soul of wit. But that doesn’t mean brevity is wit. Like just because you cut something down doesn’t mean that you did the real work. Talk to us about the big picture of how do you have that? How do you do that exercise of saying, All right, I want to cut this down and I want to be plain language and I want to do that exercise. But in a way, it’s actually much harder because now I have to make conscious decisions that before I was just copy paste. 

Sarah Fox [00:19:40] Yeah, yeah, completely. So I when I decided to try and do a contract in 500 words, first of all, I wasn’t sure I could do it. So, you know, I spent a long time making sure I could before I branded my business that way. But one of the things I wanted to do is look at what do I absolutely need in a contract? So I split that into sort of 10 different things. I need to know what they were doing, who was doing it, what processes like change management processes, what risks, how we might limit liability. I looked at the sort of things that clock that case law because we have a common law system in England, my employer in, so we don’t need to deal with that particular if it’s really well known. I looked at the sort of things are acts of Parliament might add in that we didn’t need to deal with, but I kind of tried to focus on what clients cared about rather than what lawyers cared about. So all the sort of boilerplate clauses, sort of stuff you’ve discussed on your show before? Sure. I just basically threw them out and the lawyers went, Oh, well, you can’t do that. It’s like, Yeah, but people are doing it all the time. We’ve got these copy and paste come up, pick and mix contracts that people are writing off the internet all the time. Why not give them at least a structure that allows them to have the bare minimum, right? So that’s kind of my justification for getting rid of, you know, ninety five thousand words. 

Mike Whelan [00:20:58] Well, and when you do that, I’m sort of wondering, do people actually really, you know, like as a as a part of the process when you’re doing these sort of documents, you feel like I got to cover all the bases. I got a plan for all the things and put them all in the document. But you’re almost guaranteeing that for the contract purpose of setting expectations, of getting everybody on the same page, like the social function that a contract should, you know, serve, which is building the trust that enables commerce, that enables collaboration between people, that in fact you’re making it like the more you go on the, the less people are actually going to read it. I sort of feel like this kind of thing. If you get to the crux, what you’re really saying is, you know, we’re going to get down to the things that enable the commerce that we were going after in the first place. 

Sarah Fox [00:21:45] Yeah. And you avoid that thing of people not trusting it because they’re small print or it’s hidden somewhere in the documents or they haven’t read it or they didn’t quite understand it because you couched it in legal jargon and just an equitable and without prejudice to the general, you know, all that kind of arcane-isms that we just don’t need. If you have five hundred words, which is literally a side of A4 in decent font size as well, not just teeny tiny font. So why wouldn’t somebody read it? And if you in order to do that, you can’t. You don’t have room for archaic language of foreign codes or copying and pasting. You have to make it clear and obvious and impactful. So it has to be immediate rather than sort of going around the houses. We don’t have five hundred words doesn’t give us any time to skirt around the houses. 

Mike Whelan [00:22:33] Yeah, the enabling power of constraints. I mean, you set those things and then you get to work in it. So hard decisions. But so for people who want to learn how to do this, actively to think actively about the way they’re, you know, using language, not as precedent. I love the the word that we use. Oh, we’ve got this precedent, which is really fancy code for word copy pasting and not really making a lot of decisions. But for people who want to learn from you how to do that, what’s the best way to reach out to you, Sarah? 

Sarah Fox [00:23:00] So I have a blog called 500Words.co.uk, but also I have four books on Amazon that cover sort of construction things they do with consultants appointments. They deal with small works, contracts and a couple of other construction ideas. But actually, they’re not just. The ideas are limited to how you would structure a construction contract because they talk about what needs go in, why it’s in and what happens if you don’t put anything in your contract. And you know, really, it’s about trying to get people to think differently about the purpose of that contracts. Is it to help them do business or is it to feed lawyers, you know, need to pay off their student loans?

Mike Whelan [00:23:37] You decide one day will write the philosophy of law book that says, guys, it was all about trust. It was all about building trust so people would collaborate. I love it. So we’ll make sure to include all that contact information in the post at LawInsider.com/resources that corresponds to this episode. We’ll have your contact information and we’ll have this. Document so people can look it over. Also, if any of you want to join us and be a contributor on the contract teardown show, just email us. We are at Community@LawInsider.com. We’d love to have you, Sara. Thank you for being with us. Thank you for this Scooby Doo and other aphorisms, and we will see you guys next time. Have a good day. 

Contributors

Sarah Fox
Sarah Fox
Author, Speaker
Mike Whelan
Mike Whelan
CEO @Lawyer Forward

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