When we work with others towards a goal or on a job, we are more productive (and happy) if we are collaborating together rather than operating as adversaries. A relationship conducted as a shared effort for mutual benefit has a greater chance of success and durability than one where the parties are constantly competing against one another to come out ‘on top’ at every stage of the project or transaction.
At the same time, as we enter a business relationship, whether it is a transaction or shared venture, we want as much certainty as we can get. We want to know that promises will be kept and that we’ll not be taken advantage of by the other party. We also want to be able to make changes as needed should circumstances change so that plans cannot be fulfilled as expected. In short, we want to ensure we have clarity, accountability, and agility.
Contracts are tools of business with many functions. They are meant to memorialize the agreement the parties have reached. The contract is a record of the agreements about roles, responsibilities, and timelines. It documents promises and obligations. We expect the written contract to give the necessary clarity and accountability to allow everyone involved to undertake their part with confidence and a sense of security.
Unfortunately, most of today’s contract negotiations and documents seem inadequate to these purposes. The process of negotiation and drafting often seems detrimental to the parties’ relationship, sowing the seeds of future dissention. Clarity is rarely a hallmark of business contracts; and most contract negotiations are based on the premise that the parties come to the table as opposing sides with necessarily adverse interests and a struggle for advantage one side over the other must ensue. There are lawyers who unabashedly declare that their role is to bully the other side and make contractual language as inscrutable as possible so that there is greater scope for evasive argument and re-interpretation in the future should their clients wish it.
From the standpoint of us-against-them, contracts are seen mainly as tools for predicting potential conflict and controlling associated risk. The parties focus on creating mechanisms for enforcing promises and dividing the burden of loss should they face change or breach down the road. The goals of clarity and agility are regularly undermined subverting one of the most beneficial functions of a contract. Rather than clarifying and sustaining agreements, written documents become caches where each party tries to stash defensive and offensive weapons for use in creating and preserving competitive advantage one over the other.
Once the contract is signed, parties can believe that they have everything in writing only to encounter changes in the law or changes in circumstances that no one anticipated at the time the contract was created. Even if the contract is clear, we all know that the legal system can be ‘gamed’ to create delay and expense as a tactic enabling one party to prevent the other from fully enforcing the documented promises or remedies.
Long adherence to the ‘opposing forces’ model has generated contractual norms and a legal system that are neither agile nor efficient. Contractual language is vulnerable to re-interpretation; and litigation processes are slow and expensive, burdensome and distracting. Moreover, litigation is virtually guaranteed to destroy whatever productive potential might have remained for the relationship and endeavour.
This is not to say that having a written contract is pointless. On the contrary, without a written agreement, the parties are even more at risk that the legal system can be used to subvert their intentions and destroy relationships and the value of their shared venture.
What I am saying is that there is a way to enhance the contract’s ability to support and deliver clarity, accountability, and agility without sacrificing security. By focusing the process on creating a written document that calibrates and maintains alignment of the parties’ vision, their mission in pursuit of that vision, and their core values (the keys to satisfaction in the way business and life is conducted), and by deliberately choosing the style and structure that they’ll use to address change and engage disagreement, the parties can embark together with confidence, holding not only a clear plan of action, but a navigational tool for plying the waters of change and weathering storms of crisis and conflict.
When negotiation and drafting of agreements is approached this way, the resulting contract does more than lay out a plan for dissolution of the relationship and division of the spoils in case of failure or breach. It becomes a tool and guide for establishing, conducting, and sustaining the parties’ shared mission and productive relationship.