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What Is the Value of Redesigning Contracts? | Part One

As a lawyer in an in-house team, it is common that stakeholders within your business might comment on how difficult it is to understand their contract. To make lengthy contracts more easily understandable, lawyers are beginning to:

  • summarise the main clauses;
  • flag the key issues; and 
  • set out which actions should be taken.

While helpful in demystifying a legal document for non-lawyers, this is not an efficient way of working. It requires double the effort as lawyers must first draft the contract in legal terms and then explain it in simple terms. In this article, we explore how redesigning contracts can improve efficiency for both lawyers and the parties to a contract.

In part two of this series, we will look at where to start when implementing contract redesign.

Redesigning Contracts to Support Business Relationships

Contracts are increasingly being seen as a tool for managing relationships between parties and promoting collaboration. In this way, contracts can protect the interests of both parties in the event of a dispute. 

Where contracts are used as a roadmap for effective business relationships, the parties need to be able to clearly identify the: 

  • actions required;
  • important milestones; and 
  • events that will trigger an action in a contract. 

The clauses that relate to the parties’ legal relationship need to be clearly understood by both your business and the other party. 

For example, these clauses might include:

  • warranties; 
  • indemnities;
  • termination; and
  • assignment.

It is crucial to keep in mind that the core of an effective contract is the business strategy of each party. Not understanding how the document will function in the context of the business relationship can lead to mistakes during implementation. Designing a contract that your business can use to manage their relationships fosters:

  • transparency;
  • trustworthiness; and
  • collaboration. 

Redesigning contracts can have significant benefits for lawyers. Some contracts are difficult to draft, and stakeholders within your business might come back with questions on how the document operates. Having a well-designed contract can reduce the amount of time it takes to draft them.

For example, a well-designed contract might be one that:

  • emphasises key terms; 
  • uses visualisation tools to highlight important information; and 
  • is written in plain English.

When a contract is well-designed, it also is easier to read and understand. This promotes a better user experience for stakeholders within your business. Subsequently, it may mean that they require less assistance from your lawyers to understand the document. In turn, your time will be freed up to focus on more complicated matters. 

Redesigning contracts is also an opportunity for lawyers to create consistent templates across different legal areas. Consistency between templates is a crucial step towards contract automation

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Measuring the Success of Redesigning Contracts

Redesigning contracts will require an investment of resources from the broader business. For lawyers who are using an existing contract template, one of the challenges for undertaking a redesign project is being able to allocate resources to re-drafting the contract. To be effective, a contract redesign process requires: 

  • planning;
  • careful implementation; and
  • space for testing and reflection.

Projects like these are also likely to be competing with initiatives that are generating immediate revenue, like legal work for a business dispute. In comparison, the pay-off for redesigning contracts will be realised over the longer term.

Therefore, to access the necessary resources from your business, it is vital to come up with ways to measure the success of the redesign initiative. This way, you can better illustrate to the business why you may need different resources.

To measure success, it is always useful to get subjective feedback from the parties involved.

For example, ask the lawyers involved whether:

  • it was easier to draft the contract; and 
  • they feel as though they were drafting faster.

You should also make sure to ask the parties within the broader business on:

  • whether they had a better experience in understanding the contract; and
  • where the contract design can be improved.

However, it is also essential to use objective metrics to test the effectiveness of the process. The most straightforward one is the time it takes to draft a contract that has been redesigned. Depending on how the specific legal team operates, other objective metrics could be the:

  • number of correspondence on one document;
  • duration of the negotiation; or
  • length of conference calls relating to the contract. 

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Key Takeaways

Redesigning contracts could increase efficiencies across all aspects of both your legal team and the broader business. It is crucial that this design reflects the business strategy of both the business and the other party. Redesigning a contract to be simpler and straightforward will create a better experience for both writers and readers.

However, redesigning contracts requires investment, and it is, therefore, crucial to gain metrics that demonstrate the success of an initiative with metrics. If you have any more questions about undertaking the process of redesigning contracts, contact LegalVision’s Legal Transformation lawyers on 1300 544 755 or fill out the form on this page.

Read part two of this series to better understand where to start when implementing contract redesign.

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Melanie Gilbert

Melanie Gilbert

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