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Contract design

Contract design

Fundamentally, contracts are tools: structured communications that aim to reconcile the parties’ expectations. A tool should speed up your business, not block it or slow it down — but in the real world, not all contracts work so well. When your agreements aren’t user-friendly (badly structured, written in legalese), it can lead to one of two Pretty Bad Things:

1) miscommunication (if people misunderstand the agreement)
2) un-communication (if they don’t read the agreement at all, because it feels like an impossible task)

An agreement that’s hard for one of the parties to read and understand is a risky one, because it’s likely that they will interpret it differently. Cue unmet expectations, disappointment, and before long, you may have a dispute.

Contract design prevents that by making these agreements easy to read and understand. When you create agreements with the user in mind, you stop seeing them as a tool written by lawyers for lawyers. It makes you rethink the contract from the actual user’s perspective: for example, a client who has to sign the contract, or salespeople who will be negotiating it.

Here are some of the brilliant ‘side effects’ of applying legal design to your contracts:

  • shorter negotiation times.
  • better risk management.
  • reduced litigation risk.
  • better internal and external client relationships.

Contract design can take many forms. For each case, the right choice will depend on things like the type of user or users, the communication channel, the level of contract automation, and the specific objectives you want to achieve.