Contract contraction: is short the new long?

02 Aug 2012
Alasdair Taylor

In the early part of my legal career, most of the clients I worked for were lawyers or legally trained, and a 50 or 500 page contract was nothing special to them. 

Most of SEQ Legal’s clients aren’t lawyers, and I’m sometimes asked about the size of legal documents.  Do they really need to be so long (i.e. more than one page)?

Contractual documents prepared by those without any legal training often take the form of a handful of statements about the commercial fundamentals: the contract price or charges, and the service or goods being provided.  Isn’t that enough?

No. In many cases, it isn’t.

Measuring contracts

Consider the following questions that might be asked in relation to a particular contract:

  • Is the contractual document absolutely clear and certain, so that there is no room for divergent interpretations, no room for disputes about interpretation?
  • Does the contract reflect every material element of the parties’ agreement?
  • Does anything in the document actually constitute a breach of regulation?
  • Could the use of the document itself constitute a criminal offence? 
  • Does the document take account of all of the legal landscape in an appropriate way? 
  • Does it ensure that the risks associated with the contract are: (a) eliminated where practicable; and (b) appropriate distributed between the parties where they can’t be eliminated?

Typically, short legal documents will not adequately answer all of these questions.

Example 1: limitations of liability

There is a lot of background law – case law and statute – that affects the drafting of particular types of contract clauses, usually meaning that more words are required than might otherwise seem necessary.

A good illustration of this is the disclaimer of liability.  There are various pieces of legislation and common law principles that restrict the scope of limitations of liability, most notably the Unfair Contract Terms Act 1977.  As a result of all this background law, you cannot usually just write “X will not be liable to Y in respect of Z”. If you do, then at best the clause will likely be unenforceable in court. If it’s unenforceable, there is little (or at least much less) point including it in the contract at all. 

Example 2: a confidentiality clause

There can also be practical reasons why a clause needs to be longer than you might expect.

Why, for instance, can’t a confidentiality clause be left at “you are not allowed to tell anyone how much you paid for it”?  Here, both the law and common sense both intervene.  Under the common law, unqualified confidentiality obligations may be unenforceable. 

Common sense also requires that some disclosures be permitted: disclosures to accountants, for instance, or the tax authorities.  And, if you really want to keep something secret, you might need to caveat your caveats: e.g. putting limits on the purposes for which third parties to whom the information is disclosed may use it.

All this costs words.

Example 3: a contract of sale

Often, when you think about it, there is more to a transaction than initially there seems to be.

Do you really need 10 pages of legal gobbledygook, you might ask, to say “I’ll buy X from you for £Y”?  No, of course you don’t; but if you want to also say “I’ll retain title to X until Y is paid in full” and “you are not allowed to tell anyone how much I paid for Y” and “you have to promise me that X will work properly”, then you’ve already filled a page or more.

Changing what needs to be changed

When I was a trainee solicitor, I was told a story about a senior lawyer. He was in the habit of re-purposing complex legal clauses and sets of legal clauses by the insertion of words such as “Clause X will apply to Party A as it applies to Party B, mutatis mutandis”.  That is brief, and Latin.  But it is not generally a best practice when it comes to legal drafting.

Compare software. Whilst brevity of code is considered a virtue amongst programmers, it comes behind robustness, extensibility, security and efficiency.  Similarly, for legal documents, brevity is less important than legality, effectiveness, certainty and clarity.

It all goes back to the purposes of the contract: to ensure that the parties really are in agreement about the subject matter of their deal; to reduce the likelihood of a dispute between the parties; to help manage disputes when they do arise.  Reducing legal document length for its own sake can have a deleterious effect on these purposes. 

So yes, contracts should be as brief as reasonably practicable: sometimes, that means long; sometimes, very long.

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