One of the puzzles I faced as a new in-house lawyer was the lack of standardization for generic documents. Why does every lawyer have their own versions of documents that are practically never negotiated anyways?
Example: Non Disclosure Agreements (NDAs)
The NDA has been the low hanging fruit kicking off many legal tech projects. There are only so many ways you can say “please don’t share my confidential information”. It should be completely templated. However, every firm and every lawyer seemingly has their own NDA. The waste isn’t just the time it takes to tweak and customize the document initially. It forces everyone else to scrutinize each NDAs that pass through their door. Granted, it’s a 10 minute task, but it certainly adds up when NDAs mark the start of most business relationship. If it were standardized, lawyers could read the template once and never again.
The Pessimist’s View
When I first spitballed standardizing the NDA across in-house teams across the board, lots of my colleagues and friends laughed at me. How many times has the profession talked about standardization? But for whatever reason, it’s never going to happen.
The realists talk about how our industry thrives on charging way too much for menial work, others think we just don’t get along well enough to collaborate. Once in a while, I hear about a legitimate quirk a lawyer might need for their industry or business. I’ve interviewed dozens of lawyers with this specific question. Though they often want to standardize, there is a real pessimism about any prospect for success.
The Many Successes
We often forget that contract standardization is incredibly successful in many large industries already. Just a few great examples:
- Open source licenses like GNU GPL v3
- Arbitration rules like the ones offered by the AAA
- Derivatives agreements offered by ISDA
- Construction agreements like the forms by the CCDC
- Financing documents like YCombinator’s SAFE Agreement
- Government form contracts
These success stories touch diverse industries and greatly affect how we contract. If we peer into the effects of open source licenses, they have become so common that hobby programmers without access to traditional legal services are able to easily attach licenses to small, commercially infeasible projects.
Standardization isn’t just a matter of reducing a lawyer’s workload. Services have cropped up to summarize and compare common licenses, they become part of the everyday parlance and information is readily available for anyone to select appropriate licenses for their work. Society at large has greater access and understand to more complex agreements. Imagine if these services for open source licenses existed for other every day documents, like leases, employment contracts, loans, etc. I sincerely believe standardization of contracts will lead to downstream positive externalities that we cannot predict.
How do we establish a standard?
Acknowledging that there have been great successes, the natural question is how did those projects succeed? My answer is simplicity. Though all of the examples above tackle the issue slightly differently, none of them required sophisticated software, a Word plugin, etc. Instead, they are mostly documents just placed on the web. We forget there are even successes because of how simple they really are.
I believe legal tech’s recent focus on artificial intelligence and blockchain are leaving behind the simple solutions (which I discussed in an earlier post). Standardization only works with wide adoption, and wide adoption is held back by installations, time investments, or subscription fees. The mantra here is keep it simple.