Sign Here: The Enterprise Guide to Closing Contracts Quickly
|The Jolly Contrarian’s book review service™|
It’s a nice, snappy title and excellent cover design, but in calling his book “sign here”, and not “everything you need to know about designing commercial legal process in the twenty first century” Alex Hamilton has sold himself short. This is a really good book, filled with counter-intuitive insights which have you jumping off in directions you didn’t expect. I ruined my copy in a weekend walking round the local park scribbling gnomic revelations on it (and occasionally walking into trees).
What I liked about it especially is that so much of it focuses not on legal services delivery — which every other thought leader obsesses about — but the design and content of legal process, with a view to optimising their outcome. Legal service is not like delivering pizza. No one cares about the box.
Here are just a selection of points well made:
Negotiations focus on the wrong topics
We legal eagles think we know what is important: Indemnities. Events of default. Governing law. But these aren’t the parts that create litigation. Litigation comes where you least expect it: more or less, by definition.
Worse; indemnities and default terms are all catastrophic fire-breaks; last-ditch tools for when everything has gone Pete Tong. But should we focus on life-rafts — or making sure there is enough gas in the tanks and the wings are properly attached to the fuselage? You only need life-rafts once you crash. If the legal service delivery providers do their jobs properly, the plane shouldn’t crash.
To obsessing about disaster scenarios in negotiation is like war-gaming divorce outcomes on your wedding day. It may, curiously, make divorce more likely.
“I’m talking about a twenty year deal here and you’re stuck on process agents? Today? What, are you expecting to sue me?”
Of course, commercial harmony it is not all down to the lawyers — indeed, it’s barely anything to do with the lawyers: like bad parents, they can only screw it up. Once a contract is inked, sensible business people will not cast it a backward glance. Well-managed relationships do not descend into acrimony; if you prudently manage the portfolio while the relationship is ongoing, you can distribute the risk of loss should that unwanted eventuality arrive. The way to manage risk is through your ongoing behaviour, not legal documentation, that is to say. Don’t over-engineer your contracts. Don’t design your plane to be waterproof in case it falls into the sea. Design it so it doesn’t crash.
The agency problem looms large
Much of the cut and thrust of a commercial negotiation is not at all about the interests and benefits of the principals, but is an elaborate pantomime performed by their agents to justify their own appearance. The fear of redundancy — in the broad sense of not having enough to do, but in the narrow sense of losing one’s job, too drives much negotiation behaviour. This iatrogenic peripheral fiddling serves the agent’s immediate need — to look busy — but at a long term cost of drip-feeding complication, confusion and bad engineering into templates, processes and roles.
Says Hamilton: fixing contracts is hard, requires leadership and requires refocus on stuff you don’t always think about.
Too much contemporary patter regards fixing contracts as an easy problem: something ripe for solution by simple technology. But thirty years of legal tech disappointment surely illustrates this is profoundly mistaken. You would think, by now, thought leaders would have started to glom onto this: the magical new technology isn’t working very well.
Instead, the challenge for legal innovators is figuring out how to stop the barnacles forming. There is little wonder cheap technology can’t do this. It doesn’t even try. If you overlay it on bad process, legal tech makes the process worse.
The problem runs deep. Ask those who build and manage legal process: “do you think there is a problem?” and “if so, what do you think is the problem?”
Many are so siloed by their own organisations and contrained by their own mandates that they literally cannot see the problem at all. If your remit is “manage credit risk at all costs” then the cost/benefit of the tools you bring to bear is not your problem.
Contracts and scalability
Hamilton compares the traditional approach to contract negotiation with his “RADICAL” approach — I can take or leave mnemonics, but this one isn’t bad — in what they do to help scale your legal operation: to what degree you can be sure individual client contracts will conform with each other to provide a robust platform across your business, allowing you to concentrate on building and managing your customer relationships.
Traditionally you go out with an “optimal” position — meaning one that is practically outrageous, however much the concept might make your risk officer’s heart sing — and presume you will have to negotiate away from it. The theory is even, sometimes, to have something you can easily give a customer so it feels like it has won something.
behavioural economists like this idea: it gets the “anchoring” right, and some believe inflaming and then quickly redressing a grievance yields more relationship capital than just being a good sport from the get-go.
But these are superficial advantages, if they are even true at all. It will leave you with a portfolio of contracts with variable terms, negotiated at cost and time.
- I have a theory, that I haven’t quite nutted out yet, that a draft contract plays a totally different role in commercial life to an executed contract. A draft contract is all about signalling to your counterparty: commitment, thoroughness, dominance: it is intended primarily to persuade. An executed contract is like a will and testament; instructions on what to do should one or other party unexpectedly die or become incapacitated. In any other case of doubt, the parties should speak to each other.
- The heady days when nudge solved everything are in the rear-view mirror nowadays: Cass Sunstein and Dan Ariely, and even Daniel Kahneman have been on the wrong end of recent invective.