Why we hack Contracts - Part 1
At Humble Paper we’re busy building Document 2.0. Our current offering solves problems associated with contracts. Here’s why.
I was a lawyer for the longest time. A technology lawyer. Meet a technology lawyer of reasonable repute today, and he or she will tell you about the interesting stuff they did around the turn of the millennium. I did.
I was a member of India’s first and fledgling technology law practice. We were an interesting bunch of kids, some of us just barely out of law school. But we had a passion for technology and were brimming with enthusiasm about this new and exciting field of legal practice.And we were enjoying every bit of the ride.
We’d just passed the anti-climax that was Y2k. The ‘dot-com bubble’ was just peaking, and we had a steady stream of clients, from venture-backed kids still in college to larger technology and outsourced services companies. We assisted clients in getting back hijacked domain names through online arbitration, obtained patents for innovative technology, helped draft and negotiate software development agreements, counselled companies on software licensing and intellectual property strategies, and even provided advice on the country’s telecom laws for international satellite companies. I drafted the first ever rules for Internet trading for the country’s largest stock exchange.
But the daily routine consisted of working with contracts. We helped prepare new kinds of technology-related agreements for our clients -payment gateway agreements, music streaming contracts (Napster was huge at that time), stock trading feed agreements, agreements of every hue and colour relating to the three pillars — technology, media and telecommunications. We opined on the enforceability of certain contracts. We helped our clients negotiate those contracts. This work with contracts as it turns out is a significant part of any business lawyer’s practice.
In 2001, I found myself at the heart of India’s telecom revolution.I was now an in-house lawyer working in a company whose owner had (oblivious to the bust that had just laid waste to much of the technology world) launched a gargantuan project that involved plumbing much of India’s cities with optic fibre and introducing low cost mobile phones that were affordable even to India’s large working class labour force. The work initially consisted of preparing forms for new kinds of contracts, then moved on to managing their deployment in businesses (such as appointing retailers and distributers, publishing terms for handset subscriptions), and finally negotiating and re-negotiating zillions of contracts that the company needed to enter into with all kinds of software and hardware providers. These included some very significant long-term, high-value contracts for the purchase and installation of the core telecom network around which the entire operation revolved. The sheer size of the project guaranteed that we were negotiating with almost every company in the world associated in some way with the telecom industry. Maybe that’s a bit too much, but you get the picture :)
These contracts were intricately connected to specific cutting edge technologies and the company’s innovative business plans. They provided a fascinating overview of the fast evolving telecom landscape at that time.
As in-house counsel, I worked with different divisions within the company — from working with procurement, to enterprise and retail sales, from wireless to video-on-demand. My days and nights were spent moving from one conference room to another. At times we’d be negotiating with competitors placed just rooms apart. It was messy and disorganised but exhilarating too. Importantly, it opened my eyes to varying negotiating styles, protocols and attorney practices; because our counterparts were often attorneys, alone or accompanying their business or sales teams, from different geographies and cultures.
Some years later I had the opportunity to manage the contracts line of business of a legal process outsourcing startup that had just opened shop in Mumbai. The startup worked with Fortune 500 American companies whose legal departments had problems managing the sheer flow of contracts from operations and sales teams in their organisations. We worked with these departments by providing a first level review of the documents and managing spreadsheets that provided updates on the status of each contract and where it stood in its iteration cycle.
Working continually with or across so many professionals gave me a perspective of contracting as a process that I might not otherwise have had.
Insight #1 Contracts are data, not text
Yes, contracts are really boring long legal documents. But they’re important because of what they represent. As documents, they are visually organised in order to indicate specific logical structures. Much before the advent of computers, formatting had been used in contracts to provide visual cues to the structure of data that the text represented.
Contracts are granular
Contracts are divided into granular elements called clauses, usually demarcated as paragraphs.
Clauses may have headings which are usually in bold, underlined or in some other emphasis related styling.
Indenting is used to indicated nested trees of headings, clauses and sub-clauses.
Capitalised words are usually defined terms that have a specific meaning.
Clauses are numbered in a way that represent the level of the clause in the nested tree.
These are just some of the high-level visual cues in plain documents that have been used to represent data structures.
More importantly, contracts represent commercial and legal data about a deal between two or more people or businesses.
Legal Data
Attorneys are trained to read contracts, and to translate them into meaningful information that they can use to communicate with their clients and counterparts.
An experienced lawyer typically does not commence a contract review by reading a contract linearly. That is, he or she does not start with a table of contents and then make his or her way down to the bottom, page by page.
Lawyers familiar with many contract patterns usually skim a document looking for those patterns. Some patterns are generic and almost universal and allow lawyers to read contracts as blocks of provisions, such as the placement of definitions at the top, scope or purpose provisions thereafter, payments and taxes, representations and warranties somewhere in the middle, indemnification, limitation of liability, termination and other similar provisions at the beginning of the end, governing law and all the miscellaneous provisions at the bottom.Others are specific to an industry or even to a particular jurisdiction. Some are matters of nuance that experienced professionals have learned and incorporated into their own proprietary toolbox when negotiating contracts.
Commercial Data
The commercial information, operational and payment details in a contract need to be accessible as meaningful information to management and commercial teams.
Quite often, extracting this data happens once or twice, but usually after a contract is signed. This is almost always a manual operation involving a poor bloke not-so-intelligently skimming the contract and entering numbers into some ERP system or a spreadsheet.
Insight #2 You are only as strong as your weakest link
Contracts often tend to be the weakest link in a purchase or sales process. There is near universality in businesses around the globe when it comes to the problems that beset contract preparation, review, iteration and execution…and these problems often bottleneck an entire sales or procurement process. Sometimes they present existential challenges to the companies involved. Enterprise sales are hard enough. Contracts make them even harder.
Insight #3 Contract review involves heavy cognitive load
Because contracts are data, every change to the text of a contract represents a set of corresponding changes to the data that the document represents. Say, when someone makes a change to the definition of a term within a contract, that change is reflected as updated context information wherever that term is used in the contract.When a person reads a contract, her brain is in overdrive processing all that she is reading and connecting patterns to this virtual data object in her head.
Reviewing contracts tends to be quite exhausting when it comes down to reading anywhere between 20 pages to 300 pages of a contract and doing it repeatedly over days, months or years. While a person tends to get better with time and cognitive load reduces as a person picks up more and more patterns, every document that is different or is redlined in a way that does not fit existing patterns represents a longer more intense processing session for your brain.
The typical response in such situations is for the person to put off reading the contract. This is not an uncommon reason for delays in negotiations between businesses.
Humble Paper started as a germ of an idea born from my experiences and insights as a lawyer. But the Humble Paper team have since worked hard to re-engineer documents themselves as a generic form of text communication. While working on Humble Paper, my colleagues and I have had the opportunity to rethink how we prepare and use documents as a tool for communication in our personal and professional lives.
We’re working on simplifying the way document review works. Some of our features focus on reducing the cognitive load on the reviewer. Other features are geared towards securing in-document communications, shortening the lifecycle of a contract and accelerating decision-making during negotiations.
In the second part of this post, I’ll talk about how exactly we’re going about doing this.
