Articles

Trying to draft good contracts, or just seeking ways to scupper human nature?

In the process of drafting contracts for work, which work is going to be undertaken at some time in the future, there are obviously many hurdles. This is clearly evidenced by the history related to the creation of standard forms of contract which may be chosen as the basis for a future agreement; often long after the form has been published. Even in the creation of an ad hoc contract, which is usually about formally binding the parties to something which has already been agreed in principle, the task is not easy. In this article, I am focusing on the aspect of human nature because I believe that human nature is bound to be a significant driving force in the process of drafting and agreeing such contracts.

It seems to me that it is beyond contention for me to say that the people who have the onerous duty to prepare such contracts are driven by their own human nature to scupper the potential effects of other people's human nature. Indeed, I would go so far as to say that every contract which I have dealt with was, to a great extent, simply an endeavour to deal effectively with aspects of other peoples' human nature within the context of the prime object of the contract. Thus, if I am correct, we normally find each party to a contract seeking respectively to scupper opposing aspects of human nature which may subsequently come to the surface as the main purpose of the contract makes it way towards completion.

However, I doubt whether the expression 'human nature' is owned up to as an underlying factor in the context of the drafting of a contract or in the context of undertaking the duties under the contract. This natural reluctance of people to own up to human nature in these two aspects of any contract is quite understandable, namely: because for those people directly involved, such expression like 'human nature', would imply subjective qualities as opposed to objective ones; and no professional person wants to be thought of as having a subjective outlook when dealing with such matters [of course, it seems quite all right to allocate the expression 'human nature' when speaking about the actions of other people, but never one's own actions]. However, for clear evidence of the human nature aspect, simply witness the endless tussle between the objectives of those who are in the non-contentious side of drafting and agreeing contracts and those who are in the contentious side of fighting disputes.

Regardless of the general reluctance of people to acknowledge openly the 'human nature' factor in respect of drafting contracts, I have no doubt that, since the very beginning of time, generation after generation has tried to scupper the effects of other people's human nature whilst trying to preserve the freedom for their own. Most attempts have, of course, been relatively unsuccessful and, still today, people are trying hard to draft contracts with a view to improving on the contracts of the past, which contracts have presumably been found flawed in some respect, which is usually related to human nature.

This is especially so with the standard forms of contract which are in the public domain. Each successive contract of the past was probably hailed as the success story; each in turn has failed in some respect because, as stated above, people are still working hard on creating new forms of contract which they claim will be better. All of these attempts have, I believe, had that same enduring object in mind, namely, to overcome human nature. The reason for this endless endeavour to get the contract right, but still failing, is quite understandable, i.e., because human nature continually adapts itself to the circumstances as they exist in real time; and, thus, it is very difficult to devise contract terms and conditions which are, on the one hand, clear and precise and, on the other hand, capable of endless modification as the real events, which are actually being undertaken, move progressively towards completion. Indeed, so much so is this the case that one has to wonder about how any future commitments could ever get undertaken successfully without disputes and problems.

Nevertheless, we all have to admit that over all the time that records exist of work being carried out under contracts, a vast amount of work has been undertaken and successfully completed. So, with the enduring evidence of that success, i.e., the end product of the contracts, it may be claimed that the contracts which governed all that work were generally up to the task and so, perhaps, my comments are ill-founded.

Well, whatever evidence may be submitted, my own cynical view is that most of the work which was successfully undertaken in the past was simply the result of another aspect of human nature. In short, the work was successfully completed because the parties got on with what they believed were the obligations which they had undertaken, rather than being driven by a full and proper understanding of the conditions of the contract itself. Indeed, it is my opinion that the vast majority of work which is undertaken is undertaken based upon the perception of what the contract says rather than based upon a close examination of the actual wording of the contract. The reliance upon such perception is, in my opinion, the reason why so much work is undertaken without disputes; and not because the parties followed the contract to the letter.

I am not, of course, suggesting that the experts representing the parties to a contract do not understand the true meaning of the contract. Indeed, where lawyers are involved in advising the parties, the lawyers would clearly understand what the contract means. Further, those people directly representing the parties and dealing with the lawyers would probably know sufficient about the contract terms. However, it is so often the case that the contract documents are locked away safely after they have been signed and they never see the light of day again unless there is some specific reason for referring to the contract. It seems to me that those who actually deal with all the physical aspects of the work, which has to be completed in accordance with the contract, often never get their hands on the complete set of contract documents. Even where the basis of the contract is a standard form, those who actually do the work often do not see the details of the signed copy; and it is often a long time, for them, since they actually studied the standard form in question and, often then, they have only studied the old [currently redundant] editions which were available in their earlier days of study.

When I have been involved in a dispute, it is often the case, when I have asked to see the actual contract documentation, that I have been the first person to look at that documentation since it was signed and put away safely. The point of my saying this is that in event of some disagreement arising, which gives rise to the contact being studied in relation to that specific disagreement, those whose perceptions about the contract are found to be wrong often seek ways and means to protect themselves by raising matters of dispute. Indeed, how often has one heard the expressions of those whose perceptions have been found to be wrong say things like, 'I cannot believe that the contract has such a meaning.' So, in that context, would it be wrong to say that contracts which fight against human nature are bound, if the parties take full notice of the wording, to lead to unnecessary difficulties and may cause disputes?

Of course, I suppose that one could be even more cynical and say that where there is no public evidence of disputes and conflict following on from misconceived perceptions being exposed by events, that the lack of evidence is simply the product of the difficulties being massaged away by mutual consent or camouflaged in some way or other; i.e., another aspect of human nature. For my part, I have always been impressed by the skill of people who are in the spotlight, in the context of a dispute, to find a way out of difficulties whenever there is room for manoeuvre.

One significant aspect in the drafting of contracts which brings into play the aspect of human nature, is the natural desire of one side to off-load responsibility for uncertainties on to the other party or parties to the contract; and thus, on the face of it, turn the uncertainties into certainties. This monotonous theme has been underlying the creation of contracts over the years. However, the theme is usually associated with the off-loading of responsibility for uncertainties on the basis that dealing with the uncertainties fairly, as and when they arise, is likely to be considerably more expensive than the forecast of the party who has taken on the obligation at the time of entering into the contract. Well, maybe the truth is this: if the forecast overvalues the pending uncertainties, then the desire for certainty would have been rather costly. On the other hand, if the forecast undervalues the pending uncertainties, then the human nature of the party, who took on the burden, is likely to seek to find ways of redressing the balance.

It is my belief that the fight against the human nature of opposing interests when drafting contracts, especially when, at the same time, those concerned are claiming to be taking an objective view, is bound to lead to ongoing problems. Perhaps it would be a better course to accommodate human nature within contracts and then to manage the effect of human nature.

Perhaps the only effective requirement for a contract is simple clarity for what is clearly known before the contract is agreed, coupled with a process of continual moderation [or perhaps a better expression may be 'a continual balancing process fairly adjusting the interests between the parties'] for all those things which were uncertain at the time of entering into the contract. In the context of uncertainty in a contract, in answer to any questions about enforcing uncertain contracts, that aspect - as readers will clearly know - could easily be resolved by an arbitration provision to determine all matters upon which the parties could not agree.

Wouldn't the above be better than the anticipatory type of contract, which provides for predefined machinery for dealing with all the unknown factors, with the result that after a problem arises all the parties search the contract for beneficial conditions and, where possible, grab the proverbial sledge hammer to crack the offending nut. I am, of course, referring here to the usual provisions for variations and also the loss and expense provisions which are intended to deal fairly with the unknown elements. What I am emphasising is this: truly having the courage to acknowledge that the contract is about moving forward into an uncertain future; truly having the courage to acknowledge that the clearly defined elements in the contract may turn out, in the end, to have been much less of the total cost of the project than was originally anticipated; and, thus, truly having the courage to use a contract which highlights the uncertainty alongside the clearly defined parts, rather than a contract which has the pretence of certainty with some room to accommodate the uncertainty.

As an incidental point, would it be wrong to say that the type of person who is good at drafting contracts is unlikely to be good as the manager of the duties under the contract; and, equally, the type of person who is good at managing the duties under contracts is unlikely to be best suited to drafting a contract? If that observation is near the truth, then one aspect of human nature, and perhaps human qualities, lies at the root of the problem of the creation of contract documentation and also the implementation of the duties under the contract. However, on that point, I must admit that many people on both sides of that comparison have emphatically told me that they would have made a much better job of the relative tasks.

I am hoping that this article will generate an exchange of letters on this subject in the Newsletter. We all have our own particular angle on contract documentation so I am ready to concede that my thinking may be subject to criticism and I shall be pleased to read the views of others on the subject.

P.S.  I wonder if there is an old saying which says, "He who kicks against human nature, gets a painful foot."

END

Francis Miller

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