Contract Modernization and Simplification
Save time and money: Contract modernization and simplification with ContractStandards gives you concise, readable contracts and reduces contract cycle time.
What you need
Contracts are the language of business—they document our business relationships. They are the economic drivers of financial success. But they are often highly inconsistent, sub-optimal, and a drain on business performance. Too many contracts have different formats, different clauses, similar clauses expressed in different ways, key clauses sometimes either entirely missing or else missing essential components, and, worst of all, often expressed in impenetrable legalese! For some contracts, you must send them out for costly and time-consuming legal review.
You need dynamic templates based on a common clause library with standardized and easy-to-understand language, where the key clauses identified and annotated for your needs. To get there, you need to analyze, organize, and simplify your contracts. We offer powerful AI software to speed your journey.
What we do
When you engage our services, you will first determine which contract types you want to improve. These could be anything important to you: sales agreements, procurement agreements, confidentiality agreements, etc. You may wish to start with either your high-volume or high-value agreements. Based on your existing precedents, we will—in short order—analyze your contracts to establish the "ground truth", organize the constituent contracts and clauses into a common clause library, and work with you to create best practice playbooks for your use in contract assembly and review.
Start with your agreements.
What have you agreed to in the past? What are your standard terms? What are your fallback positions? This work can take months if done manually, and the results will likely be inaccurate or, at least, highly subjective.
1
Analyze
Our software automatically determines how your agreements are organized, what clauses they contain, the standard language of each clause, and all deal-specific variations.
The output is a searchable repository of contracts and clauses combined with visualization tools to help you quickly understand even large contract libraries .
You can easily find the most conforming agreement. It is the one with the most matched clauses in common with the other agreements, the fewest deal-specific or divergent clauses, and the least missing clauses.
The result is a distribution where the most conforming agreements appear at the curve's apex. Outliers lie at the edges.
Contract Analysis
Act on data: ContractStandards quickly and accurately analyzes your contract portfolios.
What?
Quickly understand all your past positions
- What clauses and terms exist in our contracts?
- How are our contracts organized?
- What is the standard language for each clause and the commonly occurring alternatives?
We work with objective data. Our software rapidly examines a large corpus of executed agreements and establishes the "ground truth" or de facto standards of contract negotiations. It precisely determines what terms the contracts contain, how they are organized, the standard language of each term, and all-deal specific variations, together with statistical data on clause frequency and language consistency.
We first create an outline (table of contents) showing all the terms found in the sample set, organized to best represents the norms found in the entire set. We then recommend reorganizing this outline into a common structure based on the Unified Contract Framework for all contracts. Adopting this common framework offers two main benefits. First, using a consistent organizing framework for all your contracts enables you to benchmark them and assess their conformity to market, peer, or company standards. Second, it provides a logical structure that allows you to assess what terms should be in your contract.
Classification and organization
Our software analyzes every clause of every contract in your sample set. You determine which contracts you want included in this sample set. If you wish, we can include publicly available samples that we have collected to help provide guidance as to what is standard in the market.
We then match every clause, regardless of the title it might be given and potentially wide language variations.
Identifying standards and alternatives
From our experience in analyzing millions of contracts, one thing that becomes clear is that, for every clause, there is one standard way of stating the issue. It is the most commonly occurring drafting of that clause. In addition, We identify all the commonly encountered variations. For example, in many contracts, a party cannot assign its rights without the prior written consent of the other. There are, however, three or four standard variations of that scenario, so the variations are tagged in conjunction with the standard language.
So, from a sample set that might contain 100 different ways of addressing a particular issue, we give you the standard clause and the language of the common variations.
The table displays clause scores calculating a similarity measure for each clause compared to the template, where more green indicates greater similarity and more red indicates greater difference.
Harmonization
The next step is one of the most important ones in the whole process, namely harmonizing the clauses for each contract type into a standard organizational structure. Once again, based on our extensive experience in analyzing contracts of all forms, we have determined that there is single, best way to organize contracts. This is the Unified Contract Framework, described in more detail on our website.
So, from a sample set that might contain 100 different ways of addressing a particular issue, we give you the standard clause and the language of the common variations.
2
Organize
Eliminate duplication and redundancy. Organize contract terms into a unified clause library – a common framework for all agreement types – in which each clause type has only one instance in the library. This ensures consistency across all agreements and allows you to efficiently update all templates at the same time.
Contract Frameworks
Get organized: ContractStandards provides an organizing framework for all your contracts.
What?
At their simplest, contracts contain a set of statements defining:
- what you must do
- what you can't do
- what you can do
- and statements that you will be held to
Contract frameworks offer an analytical structure to compare all types of contracts, classify all contract terms, assess their conformance to market standards, and evaluate their associated risk. Different frameworks can be constructed for a range of contract classes, such as organizational agreements, unilateral agreements, and bi- or multilateral agreements.
After evaluating many different framework structures, we settled on the simplest. Our framework is organized by the roles and responsibilities of the parties and key statements of the agreement. In this model, each transaction component (such as the provision of services, access to information, or transfer of assets) has a corresponding set of terms assuring that the parties will perform their contractual obligations as intended and a set of contract terms to ensure the parties allocate any risks in the event of unintended events. Based on a common framework, we can then run negotiation simulations or compare contract terms to market standards.
| Agreement | Party A Roles and Responsibilities | Party B Roles and Responsibilities |
| Formation and term of the agreement | e.g. performance, delivery, invoicing | e.g. inspection, acceptance, payment |
| Interpretation and Enforcement | Protections | Rights and Remedies |
| Agreement scope; beneficiaries | Assurances to ensure performance as intended | Remedies in the event of unintended circumstances |
For example, in the case of the sale of a car, a standard term of assurance is a warranty that the seller owns the car and can transfer good title. Or, in the case of a complex services agreement, acceptance and milestone payments assure the purchaser that each component of the engagement is performed and delivered in accordance with the purchaser's specifications and requirements. In each case, the parties should consider the question: for each delivery obligation, what are the enforceable statements of the counterparty that will assure that the counterparty will perform the terms of the agreement as intended? In addition, the parties should also consider what events and circumstances could frustrate or prevent the parties from realizing the benefit of the bargain. Typically, this analysis will take two parts: first, identifying what are the most likely intended events that could arise, and second, determining what are the parties' rights and remedies. For example, in the case of a confidentiality agreement, one of the most common unintended events is inadvertent disclosure. In such a case, the party disclosing the information should inform the other party, providing sufficient details about the disclosure so that the other party can contain any damage. Under the common law, the parties will also have rights to damages for breach of contract. However, it is unnecessary to reiterate these common law rights in the contract.
3
Optimize
Eliminate friction points in your contracts. Streamline contract terms and simplify contract language. We use analytics to identify and remove contract negotiation friction points and apply our contract editing style guide to eliminate unnecessary language and craft the remaining legalistic language into more standard English.
Contract Simplification Editorial Approach
Get organized: ContractStandards provides a consistent organizing framework for all your contracts.
Deliverable–Playbooks
Once we have identified the required terms for a given contract type, the most conforming examples of each clause, and all required standard alternatives and fallbacks, we can create a playbook. The playbook allows you easily and comprehensively to create a draft contract with all the necessary terms, using language based on one of three different approaches to contract simplification.
Further, you can, at your option, annotate the contracts and the constituent clauses in each playbook, guiding contract professionals on the use various terms. The resulting playbook and optional guidance can be delivered as an application or in the form of a document and spreadsheet.
But!
Skeptics will say that, while short and simple contracts may be quick to prepare, they fail to protect the parties' interests adequately. According to this position, legal agreements must be comprehensive and necessarily longer to cover all possible circumstances.
How do we balance the competing objectives of long and comprehensive versus short and simple agreements? One approach to this complex endeavor is to start with an existing template and redraft it in plain language. However, this approach does not take into account the wealth of experience found in the entire repository of successfully negotiated agreements and cannot identify standard alternatives or acceptable language for fallback clauses. To understand how the technology assures a comprehensive review, see Contract Analysis.
What?
There are three contract drafting models:
- Market standard contract
- Simplified contract
- Streamlined contract
Your choice will be based on your needs. You might choose to start with the market model and, having determined the benefits of that approach, move to the simplified model in order to reap even greater benefits. You may choose to move directly to the streamlined model in order to maximize the benefits of your contract simplification efforts. To better understand the impact of your choice, see Contract Economics.
Market Model
What we do
- Analyze all the clauses, delete any repetitious ones, and rearrange them into a logical structure, so that similar issues are dealt with in a single section
- Review the clause titles to ensure that each one has a clear title that communicates its content and so that different sections don't have the same titles
- Break compound sections (that deal with two or more different legal issues) into their separate component parts
- Create more "white space" within the document by breaking the elements of long sections into separate paragraphs and subparagraphs, ensuring better readability
What we don't do. We don't include many clauses that lawyers often include in such contracts but are not in fact, necessary.
Result: You get a contract that is in many ways similar to your base document, but it
- is now organized in a logical way
- has clear, logical titles
- has clauses that deal with only one substantive issue
- is (somewhat) easier to read
Simplified Model
What we do
- perform all the tasks of the market model
- preserve all the clauses in the source agreement
- identify clauses or elements of clauses that might be missing from your contract
- redraft each clause in standard, simplified English
What we don't do. We don't eliminate substantive terms from your contract: while we may be able to reduce some verbiage in longer clauses, but you will still be left with those longish clauses.
Result: A contract that is much easier to read, containing all the substantive clauses of your base contract.
Streamlined Model
What we do: We start from scratch to create a contract that details all but only the essential legal terms in the fewest and clearest words possible. We do this through a penetrating analysis of the fundamental business and legal issues at play.
We use as few words as possible. Clauses are, therefore, very broad in their application.
What we don't do. We don't eliminate substantive terms from your contract: while we may be able to reduce some verbiage in longer clauses, but you will still be left with those longish clauses.
Result: A contract that is much easier (and faster) to read, containing all the substantive clauses of your base contract.
Benefit
The benefits of simplified and streamlined contracts are clear. They reduce negotiation times and minimize disputes.
Contract Economics
A growing number of businesses and governments are evaluating the merits of contract simplification because of the significant, quantifiable bottom-line benefits.
Why?
Concise, readable contracts
- reduce time and cost of drafting and reviewing contracts and potential customers/suppliers will appreciate the ease of contracting with you.
- accelerate cash flow by significantly shortening pre-contract negotiation time and reducing post-contract administration costs through standardization.
- reduce disputes because they offer clear, understandable terms
Decrease time (and cost)
Economics of language complexity
There is a direct correlation between contract length and language complexity, on the one hand, and negotiation time, on the other.
As the number of words and readability difficulty increases linearly, costs increase exponentially as a function of the number of reviewers, the reviewers' pay scales, and the number of reviews involved. For example, estimating the costs of a master service agreement (MSA), as a function of word count and language complexity illustrates that reducing both the number of words (from 70 to 50 pages) and the reading complexity (from a required grade level of 24 to 21) saves $12,032 per contract. If a company negotiates 1,000 MSAs each year, those annual savings will exceed $12 million. Drafting contracts in a more readable manner, therefore, yields oversized returns. GE Aviation confirmed the benefits, reporting in the Harvard Business Review that, as a result of its contract simplification initiative, "agreements took a whopping 60% less time to negotiate than their previous legalese-laden versions did," The Case for Plain-Language Contracts, HBR, 2018.
| Formula | Pages | Words | Readability | Cost |
| Cost ≅ number of words x readability (grade level of education required to understand it) x pay scale of reviewers x number of reviewers x number of reviews | 10 | 5,000 | 15 | $321 |
| 30 | 15,000 | 18 | $2,151 | |
| 50 | 25,000 | 21 | $7,254 | |
| 70 | 35,000 | 24 | $19,286 |
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Calculate the costs of your contracts
| Current | 10% reduction | |
| Number of words | ||
| Flesch-Kincaid readability grade | ||
| Savings per contract |
Increase Deal Velocity
Economics of deal acceleration
Reducing contract negotiation time and thereby accelerating the rate at which these contracts are finalized directly benefits corporate profits.
The costs of delay include
- deferred revenue (loss of revenue from delayed subscriptions)
- deferred benefits (delayed receipt of revenue from delayed sales or opportunity lost from delayed receipt of benefit from products or services)
- Lost deals due to deal fatigue (the excessive time needed to negotiate long contracts)
- Reduced contract value due to increased pressure to discount
The daily cost of deferred subscription revenue is simply the anticipated contract value by 365. For deferred benefits, the daily cost can be estimated by multiplying the value of the opportunity lost from the investment of each day's deferral of the anticipated revenue by the return on the cost of capital (calculated at the standard rate of 12%):
| Revenue Stream | $1 million | $10 million | $100 million | $1 billion |
| Deferred benefit | $329 | $3,288 | $32,877 | $328,767 |
| Delayed revenue | $2,740 | $27,397 | $273,973 | $2,739,726 |
In the case of a billion-dollar revenue stream, the weekly cost of delay totals over $19 million per year.
Fewer disputes
While there are few available empirical studies, reported experience confirms expectations that simplified language results in fewer disputes.
Quantification of risk
GE Aviation confirms that "[c]ustomer feedback has been universally positive, and there hasn't been a single customer dispute over the wording of a plain-language contract".