As a legal practitioner, I was often instructed to capture various forms of commercial transactions into a legal document. Many times, even after scouring the legal library for precedents, I was still left with a feeling that the legal document was not ironclad due to the lack of clarity of instructions from clients and the lack of business experience as a young lawyer on my part.
Fast forward to my career as a professional manager, I am yet faced with long forms of documents, full with superfluous words and clauses. Worse still, I am sometimes faced with poorly drafted standard form documents that I have to execute and have little room for negotiation simply because they are ‘standard’.
Now armed with both viewpoints of the legal advisor and the client, here are 3 typical communication pain points and some suggestions as to how to overcome them
Issue 1: Legal format and language
Chances are that in your professional career you have had the misfortune of encountering a poorly drafted legal document. Whether it contained unnecessary phrases such as “hereinafter referred to as” when a simple (“ “) would have done the job; or having to flip back and forth across the main document and the schedules, one cannot but help feel that perhaps their time could be better spent.
The legal document is not structured like a typical article or book. It typically starts with a definitions and interpretation clause up front, that contains prosaic and often repeated information such as registered address of the parties and the likes, even before we know what the subject matter of the contract is about. It is akin to a work of fiction introducing its characters in chapter one, in the absence of context.
TIP to the client: Skip the definitions and interpretation clause, and use it only as a glossary as and when needed.
TIP to the lawyer: In my later drafting I would enclose the definitions and interpretation clause at the end of the document, to provide a more natural reading flow to the business reader.
Also as to the multiple schedules at the back of documents, these are usually created with the end goal of being able to produce mass documents from a master document (think commercial tenancies in malls) in the fastest possible time by isolating the variable components to one area of the document for the paralegal or legal secretary to work on. For the client, it translates as cost savings in exchange for the hassle of flipping through pages.
Issue 2: Commercial lawyers function in their silo with little hands-on business operations experience
Have you ever sent a document for a lawyer’s opinion only to receive an opinion which primarily was correcting grammatical errors? This is not only frustrating, but evidence that many lawyers (especially those in early practice) do not put on a business lens in evaluating contracts before them.
Yet conversely, sometimes the instructions received by lawyers are not with sufficient clarity. In another case, a client had instructed a lawyer to prepare an employment contract with a profit sharing element, without defining what profit is. When asked for more information, the client proposed, “Why don’t you advise.” This is not an ideal situation for this requires knowledge of the company’s financial performance and expectations which a typical lawyer is not trained for. Professional managers would know that profit could range from gross profit, to operating profits, to profit before and after tax, and any other definition in between which the parties could agree to.
To overcome this communication challenge, a commercial lawyer should ideally equip him/herself with basic business and accounting concepts; while the client should be able to elucidate the transaction he is trying to reduce to a legal document, be it by a way of a simulated financial statement or a process flow document, as examples.
TIP to the lawyer: To draft a commercial transaction, obtain more instructions from clients if you are not able to visualize the transaction steps fully.
TIP to the client: Do not rely too heavily on the lawyer to advise on commercial and economic terms; these are business decisions. The lawyer’s role is to ensure that a commercial transaction can be performed and enforced.
Issue 3: Good lawyers excel at negative distortion thinking, good business people excel at positive distortion thinking
As commercial lawyers, you sometimes get the feeling of being the person in the church responding to the question “Should anyone objects to this marriage, let them now speak.” Face it, your clients are happy and racing to get the contract signed and making money, and there you are the naysayer lawyer, telling them all the 20 ways or more the other party could basically sc*w them over.
The best documents that I have drafted gave both parties sufficient incentives to perform. The mental images of guns drawn and pointed are at the back of every obligation or warranty drafted: i.e., for every obligation there must be an incentive to perform, otherwise it is a meaningless clause.
Nowadays as a businessperson, in crafting a deal, the mental image is to achieve a win-win situation.
And herein lays the fundamental crux of the tension: great lawyers excel at negative distortion thinking (how things can go wrong) while great business people excel at optimistic thinking (how great things can be if everything goes right).
TIP to lawyer and client: A way to overcome this tension is for all the risks to be listed down, and have both the client and the lawyer weigh each probability of occurrence. Thus, doomsday scenarios are tempered; and the client will walk into a transaction with eyes wide open.
[Metamorphic Training offers workshops on Commercial Drafting to Junior Lawyers seeking to understand common business concepts and transactions and Essential Law for the Business Professional for professionals, managers and executives. For more information: visit www.metatrainings.com or email firstname.lastname@example.org]