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The Case for Open Contract Templates
Modern life is full of contracts.
Some of these contracts are very important, in the sense that if you make a bad decision to sign a contract, it might ruin your whole life, or at least it might have very bad consequences, such as losing a large sum of money that you can't afford to lose.
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For most people, there aren't too many contracts like that, but sometimes they can't be avoided.
For example -
Anything to do with real estate, be it buying, selling, taking out a mortgage, building a new house or renovating a house.
Work contracts - including actual employment contracts, but also many non-employment contracts, especially those where large companies hire many of their workers as non-employees in a legal sense, even though for all practical purposes those workers are employees.
Contracts are an important part of the legal system in all modern societies.
The reason we have legal systems is to prevent bad things happening to people as a result of other people doing bad things to them.
The problem with contracts is that quite often the contract itself is the bad thing that a person does to another person.
The Ingredients of a Bad Contract
The optimistic view of a contract is as follows:
The first party provides a contract for the second party to sign.
The second party reads the contract and understands it fully.
The second party understands the benefits that the contract will provide, and they sign the contract.
They all live happily ever after.
A minor variation of this is as follows:
The second party reads the contract and finds some part of the contract which they are not happy with.
The first party responds by providing an amendment to that part of the contract.
The second party reads the amended contract, and understands it fully, and they sign the contract and everyone lives happily ever after.
Unfortunately the reality is sometimes very different.
The terms "first party" and "second party" are somewhat neutral.
To describe a bad contract it will be easier to follow if we use less neutral terms. In particular:
The first party I will call the "Contract Provider", because they are providing the full content of the contract.
The second party I will call the "Victim". (When we consider scenarios to mitigate the causes of bad contracts, I might have to think of a different name for this party, but I will worry about that when I get there.)
In the bad contract situation, it plays out something like the following:
The Contract Provider provides a contract for the Victim to sign.
The contract contains a large amount of boilerplate text.
The contract contains a small amount of non-boilerplate text that is specific to the relationship between the Contract Provider and the Victim.
In some cases the specific non-boilerplate text may be sprinkled throughout the body of the boilerplate. In other cases the specific text may be concentrated in one or more "schedules" at the end of the contract.
The Victim tries to read all of the contract, including the boilerplate and the non-boilerplate.
The Victim feels uncomfortable about some aspects of the boilerplate, but they are not sure how bad those aspects actually are.
There are also some bad things in the boilerplate that the Victim fails to notice at all.
Despite their reservations and uncertainty, the Victim feels pressured to sign the contract. In some cases they may feel they are in a situation where they have no better alternative.
The Victim has the option to consult a lawyer.
Due to the length of the boilerplate, the lawyer will charge quite a lot of money to read the whole contract and explain it to the Victim.
The content of the contract may be deemed to be secret, so that no one else other than the Victim and the Victim's lawyer can read the contract and have an opinion about it.
The Victim signs the contract.
The Victim does not live happily every after.
I have described the scenario relating the Contract Provider and a single Victim.
However, an important aspect of these scenarios is that usually the Contract Provider has multiple Victims.
For example, an employer that employs multiple employees. Or a bank that lends money to multiple mortgagees.
The Contract Provider will almost certainly hire a lawyer to help formulate the text in the contract. There is an economy of scale, because the contract only has to be written once, and the same contract can be offered to different Victims.
But for each Victim, they are in a "bubble", where they have no easy visibility on whether or not the same contract is being offered by the Contract Provider to other parties.
When it comes to analysing the contract, the Victims lack economy of scale, because they can not freely share with each other information about the bad contract that they are all being asked to sign. (They may not even know how many other Victims are being asked to sign the same kind of contract.)
Each Victim has to pay the full costs of the review of the contract and all the boilerplate that it contains.
A Possible Solution - Unhiding The Boilerplate
The main problem in the bad contract is the Boilerplate.
Those non-boilerplate parts of the contract that are specific to each Victim are usually relatively small, and also usually not so difficult to understand. For example, a predatory employment contract might list specific details of job description, hours to be worked and rate of pay. By themselves these details are not too difficult to understand. Also they are the sort of details that necessarily have to be stated and reviewed by the victim anyway, even in a good contract. (Of course if an employer is hiring many different victims all to do the same job, then the job description might become part of the boilerplate.)
Unfortunately boilerplate cannot be fully avoided.
Whether it be an employment contract, or a building contract, there is always a long list of things that have to be detailed in each contract, to provide for all the different types of eventualities that might arise.
We can't avoid having lengthy boilerplate in contracts. But we do need to manage the ability of the Victim to understand what the boilerplate means, and to give the Victim easy and not expensive means to find out if the boilerplate contains bad things which should not be there.
At this point in my article I am starting to consider a possible solution, so it is time to give the "Victim" a new name, while not forgetting the possibility of victimisation that we are trying to avoid.
So from now on I will call that party the "Potential Victim".
A main cause of the risk to the Potential Victim comes from the fact that no one else other than the Potential Victim has easy access to the content of the contract, in particular it is not freely available to the general public.
If the content of a particular contract was made available to the general public, then any number of people might express an opinion on the reasonableness and fairness of the contract, even though most of those people might have no personal interest in the matter. This would help to provide useful feedback to the Potential Victim, without requiring major expenditure on lawyers. (Indeed some of the members of the public willing to express an opinion on the badness of the content of a freely available contract might themselves be lawyers.)
And if multiple Potential Victims all knew that they were being offered bad contracts based on the same boilerplate, then they might take collective action to do something about it. For example they could discuss the pros and cons of the contract's boilerplate on social media - and if it becomes generally known that a particular contract has bad things in it, then no one will want to sign it. (Which is what we want to achieve.)
"Standard Contracts" are a thing. There are organisations that design and publish contracts, or contract templates, for certain purposes, that are deemed to be “standard” contracts. These organisations may be government organisations, or they may be associations that act for the interests of the business of the Contract Providers. In the latter case, the associations are usually providing templates for contracts that can be publicly perceived to "fair and reasonable" for the type of contract in question.
Sometimes these Standard Contracts exist, but they are not freely visible to the general public, for example they might exist behind a paywall and be protected by copyright - this might be to enforce payment of a fee that has to be paid to the author of the contract for anyone who wishes to use it. Such a situation is better than nothing (for example, if the contract is often used, then lawyers will likely be familiar with the content of that standard contract), but it is not as good as a contract that is completely open and freely visible to everyone.
Proposal: A Legal Framework For Open Contract Templates
If it is recognised that Open Contract Templates are a good thing, then a government of a country could choose to create a legal framework that encourages and enables use of such templates, without necessarily requiring anyone to use such a template for any particular contract if they don't want to.
How would this work?
The government would legislate to create an official registry of Open Contract Templates
Each template would be identified by four values:
The name of the registrant, ie the organisation or individual that created the template
The name of the template (unique across templates registered by the registrant)
The version of the template (because inevitably they will want to change the text sometimes)
The date of the version
Fees would be charged by the government to cover the actual costs of registering and updating templates.
Templates would be required to be in a standard format, eg plain ASCII text with maximum line length such as 80 characters. In particular it should be a format that makes it easy to diff different versions. (Or alternatively, a standard markup language for contract templates could be defined, for example a subset of HTML.)
If a Contract Provider wanted to use an Open Contract Template for a contract, then they would be required to do the following:
The contract would refer to the template, as identified by registrant, name, version and date.
The contract would have to follow the exact wording of the template.
Non-boilerplate items would be marked as such. (Anything specifically contained in a "Schedule" would be deemed non-boilerplate, and it would follow that Schedules in a boilerplate could only contain a description of what type of information would be included in each schedule.)
Any additions or deletions in the final contract would be marked as such (for example deletions might have to be shown in strikeout format).
If it should turn out that the contract differs from the template it is meant to be based on, without such difference being properly visible and annotated, then any decision to change from the actual contract to what it should have been based on the template will be resolved according to the preferred choice of the Potential Victim.
In such a system it could perhaps still be possible for the registrant of an Open Contract Template to restrict who can use the template, if they really wanted to. For example the registrant might require a fee to be paid. Or a company might publish a template for its own contracts, and not allow anyone other than themselves to use it for contracts.
But in all cases the template registry would allow the content of all registered contract templates to be freely available for anyone to download, analyse and read. And each version of each template would be assigned a readable and permanent URL that could be used to reference that version of the template from anywhere that people might choose to post public discussion about it.
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