The traditional contracting process is expensive and inefficient at best. Some would go so far as to claim that it is fundamentally broken. We think the truth is somewhere in the middle. So, what is going wrong? There is no singular answer - and we don’t claim to know all of them. We set out what we see as some of the key factors ...
Getting off on the wrong foot.
In the commercial world the client often dictates the contracting documentation. This practice is commonplace in the business-to-business (“b2b”) commercial contracting world, but this is madness when you pause to think about it.
Can you imagine, in your personal capacity, drafting your contract with your mobile telephone provider, or with the car sales dealership you bought your vehicle from? Can you imagine sending your own contract to your wedding planner or pet groomer, explaining the terms on which you are prepared to buy their services? Clearly not!
We accept, as customer, that the provider likely has a much better understanding of what they are selling, than we have of what we are buying. The problem in the b2b contracting world, however, is that the majority of the time the buyer (/ customer) will refuse to contract on anything other than their own standard terms. These documents are often not fit for purpose, or they are frustratingly one-sided and unreasonable.
If both parties truly are committed to getting a deal over the line quickly, efficiently and with minimal “pain”, then why does the first draft so often omit a sensible liability cap for the other party? Why do we have to go through this ridiculous dance each and every time we contract?
There has to be a better way of doing this.
The public sector often (if not always) leverages standard documentation and as a result they generally experience far shorter deal cycle times. Similar efforts have been made in the construction industry.
Sally Guyer and others at the World Commerce and Contracting have analysed approximately 120 master service agreements in the financial services sector and staggeringly found that even though the expression of the documents was different, “over 90% of the content of those agreements was the same”.
Starting with a heavily one-sided document is a recipe for inefficient contracting – prolonging the period before which the parties enter the “settlement zone” where the contract has a realistic chance of being acceptable to both parties.
With all this data to hand, it’s a no-brainer for commercial contracting to adopt standardised documents.
We’re excited to see we’re not alone in this standardisation revolution.
They say “the definition of insanity is doing the same thing over and over again and expecting a different result”; so, wouldn’t it be great if we could all agree on an industry “standard” to avoid wasting time with this insanity?