As a GC within an in-house team, it is crucial that your lawyers are provided with the tools to draft contracts in a way which promotes collaboration between the business and the other party. In most instances, however, contracts look more like a rulebook for dispute resolution than a practical business roadmap. Therefore, it is important to undertake contract redesign so that they are:
- simple and efficient for your lawyers to work with; and
- easy for those who will use it within the business to understand.
Understand the Problems That Need Solving
Before undertaking a redesign exercise, it is crucial to consider the overarching objective of your business. Contract redesign needs to be a solution to a problem. Therefore, you must identify the issues within both your broader business and your in-house team that need to be solved.
This will require talking to all stakeholders to better understand:
- any risks they are trying to prevent;
- the uncertainties they wish to clarify; and
- any opportunities for improvement that they have already identified.
To capture those answers, a useful exercise is to shadow the relevant stakeholders, such as:
- those who are drafting the contract; and
- the members of the business who will use the contract.
Observe how they practically deal with the document day-to-day and record critical challenges and opportunities for change.
Who Is the Contract For?
Once you know the specific challenge that you are trying to solve, it is helpful to identify the ‘precedent persona’. In general terms, a precedent persona is a character that organisations can create to better understand the profile of the people who use their particular product. The persona represents a typical person that the business interacts with, such as a type of customer.
Answering the questions below will be a helpful exercise to identify the precedent persona:
Who Uses the Document?
Make sure that you understand who interacts with or will be using the contract. Essential questions to know the answers to include:
- whether the readers have a legal background or commercial background;
- if, typically, the other party to the contract is an individual or a company;
- if they are typically a company, what is the size of their business; and
- what are the typical concerns of both your business and the other party.
How Is the Document Used?
Ask yourself if the contract is:
- a standard form document, or one which requires bespoke clauses; and
- part of a suite of documents with cross-references to one another.
Identifying these factors will inform the way that you need to design the contract, as it provides practical insight into how it will be used on a daily basis.
Why Is the Document Used?
It is crucial that you know:
- in what situations someone is using the contract;
- what is the underlying transaction for the contract; and
- what is the risk profile for the underlying transaction.
Understanding why the contract is being used is essential as it provides insight for your in-house team into the circumstances surrounding the persona.
Re-Thinking the Structure of the Document
Contracts are usually quite long, and not all clauses have the same level of importance for the parties. It is essential to think about the structure of a legal document and understand its different components, such as:
- drafting notes;
- any details that are specific to the transaction; and
- any details that are specific to the parties.
A useful exercise is to map out the contract first, to identify where each component will sit, before commencing work on re-organising. This activity will help you understand which components:
- must be highlighted to emphasise their importance;
- can be grouped based on common themes; and
- can sit outside the document and be moved to, for example, a cover document.
Testing Options for Guidance Notes
Precedents usually include some drafting guidance, that takes the form of notes throughout the document, that intend to help lawyers with the drafting process. Drafting notes can be:
- legal: “consider the application of Australian Consumer Law when drafting this clause”;
- practical: “if you insert a clause on delivery, insert a definition of delivery costs”; or
- optional: “use this drafting if the clause needs to be one-sided, if not refer to the alternative drafting”.
The objective behind guidance notes is that the amount of time or resources that lawyers need to draft a contract can be cut down by:
- having a junior lawyer amend a standard template; or
- drafting a document based on a precedent that covers different options.
Sometimes, however, there are so many drafting notes that the document is barely readable. This can be because the document is particularly complex or because the precedent is trying to cover too many options.
Another issue with drafting notes is that lawyers need to ensure they remove the notes before sending the document to the member of the business or the other party. Ensure that you are separating the drafting notes from the rest of the document.
Understanding what problems need to be solved is an essential step in the contract redesign process. Identifying the precedent persona will help you generate ideas for mapping out the different components that are useful to understand their relevance for the parties. Drafting notes can help your in-house team better understand what the contract needs. If you have any questions about undertaking contract redesign within your in-house team, contact LegalVision’s Legal Transformation lawyers on 1300 544 755 or fill out the form on this page.
To better understand the value of contract redesign, read part one of this series.
Was this article helpful?
We appreciate your feedback – your submission has been successfully received.