One of my clients referred me to this video and it is terrific. Besides its opening sentiment, the video highlights the importance of a good contract and has an attorney giving his perspective. This is definitely worth watching.
I thought I was being relatively radical and progressive when I wrote about how the approaching legal documents business singularity but it seems I was just joining a crowd of progressives. Two recent posts caught my attention recently which illustrate this growing trend.
In the first post, titled "Standardizing (vs. Reforming) Contract Drafting", William Carlton talks about open sourcing legal documents by opening up law firm precedent banks to the general public. In his response to a post on Koncision blog arguing that legal documents open sourcing just isn't happening in a meaningful way, Carlton said the following:
Ken, I really mean open sourcing, not crowd sourcing. The place to start (I think) is to simply "out" the template banks that every law firm keeps. 2007 was the dark ages, in web terms; it will not be possible to keep templates off the web much longer. And business lawyers shouldn't try. (Prediction: the most successful won't.) The profession should embrace transparency and move on to charging clients for counseling, negotiating, customizing. Not for unveiling the boilerplate.
Carlton points to news that international legal group, DLA Piper, reportedly intends dropping the walled garden around its precedents which it restricted to its clients (a major legal group already sharing its precedents with its clients). The Koncision post was partly in response to an earlier post by Carlton titled "Open Sourcing Legal Docs" which explores the idea of making legal precedents publicly available as part of a broader process of identifying best practices and almost standardizing sets of documents based on those best practices. Carlton concludes that post with the following observation:
And the legal profession will do just fine. Right now the industry is still behaving as though there is proprietary value in standard boilerplate documents, and the opposite is true: there is tremendous public value in the documents, and unleashing that value helps clients and lawyers alike. The sustainable proprietary value is in counseling what, when, how, and why not or why something else instead.
The other post which inspired this post is the second part of a series of posts titled "Developing CAD for Law" on the Contract Analysis and Standards blog. This second post talks about how legal documents have an almost modular construction and the goal of a contract development platform would be to take blocks of text or clauses that can be combined, forming coherent legal documents appropriate for specific circumstances. I pointed out a service which does something similar in my previous post. Another interesting approach is a comparative approach to certain types of documents aimed at distilling the best clauses to be incorporated into the intended document. The example I came across is a template for an End User License Agreement on the kiiac site.
This all points to an increasing shift away from document-based legal services to what the legal services business should be: applying legal knowledge to specific situations and formulating effective legal frameworks to meet clients' needs. Legal documents become analogous to software applications with variable functionality. The real value is in the knowledge and skill that produces not only those applications but also develops the appropriate and broader framework.
I mentioned in my previous post that I will be releasing my documents under a Creative Commons license. I have selected the Creative Commons Attribution-ShareAlike 2.5 South Africa License for my documents and my first release under the "web.tech.law legal docs" brand is an agreement for photographers which I published to the web.tech.law Facebook page yesterday evening. This first document is available for free although future documents be paid "apps". I will expand this offering in due course to include a support model for these documents. The document is available for download and comes with an explanatory note:
Having your contracts prepared and signed is only part of your contract management process. It is usually also only the beginning of what could be a long relationship with your contracting party. It makes sense to give some serious thought to an ongoing contract management process for you business. Reasons for this include -
If you haven't taken stock of your contracts with other parties, a good starting point is to conduct a form of due diligence through which you collate all documents with contractual significance (these includes both contracts themselves as well as any other documents which could have a bearing on contract terms such as emails, appendices, memoranda of understanding, letters and other documents. Many people forget that a binding contract need not be a formal document setting out the contractual framework and signed by both parties. Documents with contractual significance (and which could form part of an overall contractual framework) could include letters, notes, faxes, emails, instant messages and even sms's. All of these documents and data should be collated and analysed to determine their significance and impact.
Having conducted a review of your company's contractual frameworks, it is a good idea to develop and implement an effective contract management processes which may include -
Aside from managing the documentation informing your contractual frameworks, it is also advisable to implement appropriate policies within your organisation to guide how contracts are entered into and who may do so on your company's behalf. In an environment where emails, instant messages and tweets can give rise to binding contracts, companies must clarify who has contractual authority within their organisations and with their contracting parties. Those people with authority to bind the company should be subject to a review process to ensure they are complying with the company's guidelines.
It is also becoming a necessity that companies not only make sure they have adequate email disclaimers but also appropriate terms and conditions to govern communications on social media platforms.
Contract management processes take a fair amount of planning and work to implement but they will be more than worth the effort. There are a number of useful contract management resources online which you may find useful including the UK National Audit Office's "Good practice contract management framework".
I wrote about the coming legal practice singularity recently. Legal practice is changing rapidly and the prospect of a sufficiently advanced artificial intelligence to start taking over many legal research and similar tasks is fascinating. Unfortunately for many lawyers the wait may not be quite as long as it may take for such artificial intelligence to arrive on the scene.
Lawyers are accustomed to services that offer standard contracts for reduced prices. Some retailers and bookstores have been selling common agreements like leases and powers of attorney for quite some time now and there are a number of online options too, including Law Unlocked which was pointed out to me today. The next step is a site which promises a DIY solution which should scare lawyers who rely on legal documents themselves for their fee income.
Desktop Lawyer offers a self-service option to customers whereby they can have fairly complex agreements like shareholders agreements prepared for them by answering a series of questions. The process is apparently so dynamic that you actually see the document take shape as you work through the questions. The end result is a document that goes beyond the current "one size fits all" model because the service's users will be able to download a fairly customised agreement that better suits their specific needs. This is unlikely to be the end of the road for the technology and we will likely see more and more advanced solutions that will replace lawyers whose focus is document production as an end in itself. In other words, the market for "search and replace" precedents will give way to these sorts of smarter and more cost effective solutions.
This likely future touches on my thoughts about the current legal services model and the very real need for lawyers to rethink the value proposition in their work. The days of value being based on time or documents are just about over and lawyers who can't adapt will struggle to survive. The value in legal services is in lawyers' knowledge of the law and how to use the law to develop appropriate and effective legal frameworks for clients. The documents reflecting or embodying those frameworks are worth about as much as the paper they are printed on.
In keeping with this emerging reality, I am rethinking what my clients will be charged for going forward. We will start removing documents as line items in our invoices and effectively treat them as free. Documents we produce for our clients will be released to those clients under a Creative Commons license to enable clients to make more flexible use of those documents and I am working on a service for clients which will effectively release fairly standard documents to participating clients as a value add at no charge for the documents themselves. I am still working on the parameters of this pseudo-open source approach to legal practice and will ensure that important considerations like client confidentiality and custom legal frameworks are adequately protected but the days of charging for relatively standard legal documents are coming to an end.
The current legal services model is fundamentally flawed. At least certain common perceptions of the legal services model are. In my modest experience, clients, and a great many lawyers, see the legal services business as essentially being about two things: production of documents and/or time based attendances. Those perceptions do both clients and the legal services industry a disservice.
Perceptions of the value in legal services are skewed either in favour of time or documents. Both miss the real value of legal services even as they typically benefit law firms and warp client perceptions of where the value in legal services lies. Clients tend to instruct their attorneys to prepare agreements for some or other transaction with the expectation of paying either for the document they requested (the documents clients sometimes believe they need are not necessarily the correct documents) or the time it takes to create documents supporting the transaction. In the case of time, fees are indeterminate and increasingly a cause for concern for clients who are growing wary of paying exhorbitant fees based on a billing model that rewards inefficiency.
In the case of payment for a contract, clients balk at paying thousands and tens of thousands of Rands for agreements, as if a 20 to 30 page document can't possibly cost that much. Part of the reason for this, I think, appears to be a sense of a document's value based on its length. A one page agreement must cost less than a 20 to 30 page document and if a client wants to keep legal costs low, it makes sense to request a one or two page agreement instead. Unfortunately, this approach to legal services is fraught with difficulty. Contracts are increasingly complex as the legal landscape becomes more complex. Reducing page counts may be a way to simplify a document but its a bit like removing supporting pillars from a building because it makes it look cluttered rather than appreciating that the pillars keep the building up.
Time based fees are usually very lucrative for lawyers but one of the complaints about the billable hour is that they are indeterminate. Time based fees are practically synonymous with the rhetorical question, how long is a piece of string? They have also become synonymous with legal billing for legal services. No matter what you need done, the classic charge for legal services is the hourly rate. Clients pay whatever the lawyer's time is worth and lawyers are rewarded for being inefficient with their time. Lawyers in most firms have their performance measured by reference to how much they bill, relative to budgets. When a billable hour is divided into ten units of six minutes as a unit is logged for every six minutes, or part thereof, the billable hour becomes a very profitable proposition for clients. That said, it is also the standard way to charge for legal services and as expensive as it may be, a lot of clients are used to it and even expect it.
The value of legal services is more about the skill and knowledge that are employed to create and manipulate legal frameworks which may seem abstract but they govern almost every aspect of our daily lives, including those commercial aspects that clients concern themselves with. Legal services should not be valued by reference to page counts or the time involved in rendering them. When clients have a commercial legal challenge to overcome, that is usually best achieved by developing a better legal framework for what they intend doing (for example, structuring a transaction or some other contractual framework) or help understanding the parameters of the legal frameworks they operate within (for example, legislative requirements).
The billable hour is a convenient way to charge for legal services but it has little relation to value. Similarly, a document's page count is as much a measure of the framework's value as software code is a measure of the completed application's value (what is worth more to you: the reams of text comprising Microsoft Word's underlying code or Microsoft Word, the application itself?). Contracts are not the embodiment of the legal framework, their purpose is to describe it in sufficient detail, including both explicit instructions as well as the legal mechanics required to help achieve the parties' objectives and to satisfy legislative and regulatory requirements.
The current legal services model is broken and perceptions about it detract from the value of legal services from clients' perspective. These perceptions also place lawyers under pressure to perform according to the wrong metrics and that undermines their ability to deliver real value as opposed to artificial, perceived value.
Share this article