Is ‘cut and paste’ the enemy of good contracting?

How do the tools we use affect the nature of the contracts we create?

Have you ever stopped and asked yourself whether MS Word is the best tool for creating complex contractual documents? 

Legal and regulatory documents were one of the first intended uses of semantically structured text, in SGML, the precursor of XML. But those early ambitions got lost in the marketplace. 

The first widespread system of legal document automation was minicomputer systems (notably Wang). With the arrival of networked computers, these ceded to WordPerfect. 

Microsoft Word supplanted WordPerfect as the change was made from DOS to Windows and the marketing power and global reach of Microsoft kicked in. The critical events happened and the legal profession became committed to Word even before email and the Internet became part of the legal profession’s toolkit. 

Word became the nearly universal format for law, still mandatory for nearly all lawyers and others involved in contract drafting and negotiation, because contracting is very broadly networked. That is, a lawyer or negotiator will frequently collaborate with people that they have not dealt with before, with whom they will have to agree on a common format. Word became that format.  

But Word was and is an inappropriate format. Word processing works by copying and reworking “full text” documents, in multiple drafts, even though most of contracting is a matter of some transaction-level modifications to an existing paradigm, incrementing an existing relationship. 

The use of word processing has resulted in extraordinary bloat of legal documents, to the point where it is functionally impossible to read all the documents that one consumes.  

In the era of typewriters, documents were short, fact-oriented, and generally more literate because they were usually the product of a team collaboration that included a highly-skilled secretary. Word processing removed the effort of making documents long, while retaining most of the effort of reading them. Game theory favored the proponent of long documents. 

A penetrating exploration of the consequences of document bloat is given by Howard Darmstadter in his “Precision’s Counterfeit, or the Problems of Complex Documents” (Darmstadter 2010).   

Even very well-represented parties sign documents that nobody understands. 

It can even be said that sometimes nobody, not even the “author,” has “read” the document because documents sometimes contain errors as gross as having the name of party from a prior use. A recent report in the New York Times claims that privacy policies are semantically nearly as complex as Emmanuel Kant’s “Critique of Pure Reason.” Equally, IACCM research also shows that some 80+% of executives admit to not understanding their contracts.

The length of legal documents invites treachery. A drafting party can hide unfair terms amongst the boilerplate, where it may go unnoticed or unappreciated. 

The impact of document opacity is accentuated by the tendency of legal systems and courts to interpret the words of contract documents as if the parties had actually read them, understood them and intended them. This approach is particularly accentuated in the Anglo-American tradition. The precise words of a contract will often determine the outcome of a dispute even when one of the parties did not understand or read the terms. 

So with all this in mind and the rising functionality and power of technology, isn’t it time to consider evolving from MS Word and pure prose towards a more value adding blend of prose, code, and metadata such as found in Ricardian contracts, and which will likely unlock enhanced value from increased automation, accuracy, and data insights? 

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