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The story of the Upscale Salon that gave birth to Contract Sprint.
Early in my career, I worked as an associate attorney for a midsized law firm in Atlanta. The law firm represented a hair salon. The Salon had successfully positioned itself in the market as “the salon” for high-end clientele, with an average haircut priced at $150. Upon entering the Salon, receptionists and concierges greeted you and attended to your every need, including offering complementary champaign and a massage. The Salon made substantial investments in marketing. Not only did the Salon’s marketing budget generate new leads, which would then be distributed to the stylists, it also helped support the retention of clients that stylists sourced directly (based on their own networking efforts). The Salon maintained a Customer Relationship Management (CRM) database to keep track of all its current and past customers and any prospects. Along with contact information (i.e. phone number, email address, and home address), the CRM also kept track of a client’s product preferences and monthly, quarterly and annual expenditures and services performed. For good reason, the Salon considered its CRM database its most valuable business asset. The Salon tied one hundred percent of its revenue to the information kept in its CRM.
The Salon uses legal documents to protect its business assets.
To protect this business asset, the Salon required each stylist to execute a Restrictive Covenants Agreement. If the stylist ended its business relationship with the Salon, then this Agreement restricted the stylist from causing a mutiny (whereby all other employees left) or making copies of the CRM client list or otherwise marketing to the Salon’s former and current clients and active prospects. If a former stylist took any of the described actions, it could cause severe financial hardship to the Salon.
The Salon reached out to our law firm when its top stylist left. The stylist left on bad terms and decided to convince a few other key employees to leave with her. She also made a copy of the client list and had begun directly contacting clients to switch from the Salon to her newly formed business. According to the Salon owners, this former stylist had already cost the Salon more than $100,000 in business and they wanted it to stop. We asked for the Restrictive Covenants Agreement. Upon a quick review, we realized our law firm had not drafted the agreement.
The Salon's DYI solution to legal document creation. Was it worth it? No.
When we confronted the Salon owners about the source of the agreement, the owners admitted they downloaded the document from the internet. We suspected as much because the Agreement was plagued with grammatical and formatting mistakes. When I asked the owners why they did not request our firm to draft it, they responded, “We just didn’t have time to wait on attorneys. We needed something quick. And we figured this was a fairly standard document.” Here was the problem. After a more thorough analysis of the agreement, it became clear a court would likely find the restrictive covenants unenforceable. The covenants were overly broad and worse, they contained numerous ambiguous terms. The Salon still had some claims against the former stylist based on trade secret law and tortious interference. So, the Salon decided to file suit against the former stylist. Ultimately, the Salon spent well over $100,000 in protracted litigation and finally settled its case just before trial on terms it did not desire.
Mistakes in legal documents are a real problems.
Attorneys often trade war stories about different client situations like this. Every business and contracts attorney has his or her own version of the Salon story. And it’s not just regarding documents downloaded from the internet. These war stories also concern documents drafted by other business attorneys. Between 2004 and 2007, lawsuits against attorneys increased 36% for legal mistakes, the most common being simple administrative errors, like missed calendar dates and clerical screwups, as well as errors in applying the law. Attorneys make mistakes. They’re human.
Unfortunately, their mistakes can cause their clients substantial sums of money.
Combine mistakes with ambiguity and you get poorly drafted legal documents.
Ambiguity has become so commonplace in contracts that courts have developed an entire framework for dealing with ambiguous language and missing terms. This framework comes up under the Parol Evidence Rule in contract law. If a contract is unambiguous, complete, and final, then the Parol Evidence Rule requires the court to enforce the provisions and obligations of the parties as contained within the four corners of the contract. In other words, the court enforces the plain language of the contract and will not consider any external statements made or conversations had between the parties, even if related to the contract drafting or execution. If, however, the contract contains missing terms or ambiguous language, then the court will make an exception to the Parol Evidence Rule and allow the parties to introduce evidence outside the four corners of the document. This evidence is meant to help the court interpret or understand the incomplete or ambiguous terms. The introduction of outside evidence, however, increases litigation costs and makes it possible for courts to interpret a contract in a manner inconsistent with the intention of one or
more of the parties. If a court is considering outside evidence, then the parties clearly have different understandings of the document they executed. That’s why they’ve decided to file suit against each other because they disagree about how to interpret the contract. A business owner should never leave it up to a court to decide on what one or more parties meant. That’s not good business strategy. And yet, this situation happens repeatedly with attorney-drafted documents. Why?
More training for attorneys is not the solution because attorneys are human.
It is because of something Atul Gawande discovered as a general surgeon at Brigham and Women’s Hospital in Boston and discussed in his book, The Checklist Manifesto: How to Get Things Right. It is the nature of human fallibility. As Gawande explains, human fallibility causes even the best-trained surgeons and lawyers to fail at consistently and correctly applying knowledge. Humans simply cannot manage the volume and complexity of information required to perform a single surgery or draft a single contract. Many contracts contain over 4,000 words. Every word in a contract has meaning. If any one word is misused or misapplied, it can cause $100,000s to one or more of the parties in sunk litigation costs or missed business opportunities. Additionally, attorneys like to use big words or worse, big words thrown together in long sentences, which makes ambiguity or misunderstanding that much more likely. Also, attorneys recognize they can only spend a certain amount of time drafting a contract. This often results in cutting corners to meet client deadlines and ensure clients pay the bill. Imagine receiving a bill with the line item: “Draft Employment Agreement; 40 hours.” A client will complain about 40 hours and likely refuse to pay. By cutting corners, simple but critical language gets overlooked (like inadvertently keeping in a different client name because the attorney used a previously negotiated contract – happens all the time). Imagine the time, energy and cost the Salon would have saved by having a properly drafted agreement in place.
Using a simple checklist produces better legal documents.
Whereas most industry experts will attempt to solve the “human fallibility” problem by advocating for more training and experience, Gawande discovered the better strategy is simply a checklist.
As Gawande recounts in Checklist Manifesto, a critical care specialist at John Hopkins Hospital, Peter Pronovost, decided to incorporate a checklist for preventing central line infections from occurring in the Intensive Care Unit. The results were staggering. By incorporating a checklist, Pronovost reduced the 10-day line-in-infection rate from 11 percent to zero, thereby preventing 43 infections and eight deaths. While working with the World Health Organization (WHO), Gawande then spearheaded a global effort to improve surgical care by developing a surgical checklist. Gawande first studied the status quo. He discovered surgical care was routinely flawed and inconsistent in both rich and poor countries. After introducing the surgical checklist in nine major hospitals
around the world, the results were impressive. The checklist reduced the rate of major surgical complications by 36 percent and deaths fell by 47 percent. With these results verified, Gawande launched a campaign to implement the checklist in surgical operations across the US. Despite the results, physicians resisted. In some cases, Gawande was literally thrown out of operation rooms. Physicians viewed the checklist as an irritation. They preferred to rely solely on their years of training and experience and in-the-moment individual judgment to conduct a surgical operation. Gawande summed it up as the result of physicians holding a “central belief that in situations of high risk and complexity what you want is a kind of expert audacity.”
Unlike the medical and legal industries, other industries have evolved by adopting the checklist. The construction industry, for example, cannot afford mistakes. If a roof collapses, people die. Accordingly, they use construction and submittal schedules (types of checklists) to ensure no task is overlooked. As Gawande observed, the medical industry has been slow to evolve and adopt a tool proven to improve patient care.
The legal industry is also slow to evolve. Like Gawande’s peers, attorneys resist adopting a checklist to help with drafting a contract. They prefer, instead, to rely on their experience, training, and individual judgment, without giving any consideration to the dangers caused by faulty memory or distraction, like missing one or more key provisions in a contract. Most attorneys hold the central belief of “expert audacity.”
Attorneys might argue there is no straightforward recipe for drafting a contract. And they’d be right. The attorney must orchestrate different combinations of legal risks and business objectives for different businesses. That’s why business owners can’t trust the generic documents sold by the Legal Zoomers and Lawyers on Rockets. These online companies use simple algorithms and mathematical functions to merge a user’s business information directly into an otherwise generic document that is the same for every user. No two businesses are identical. So, can automated contract creation software, which serves as a sort of checklist, adequately address this situation? Or, must business owners solely rely on licensed attorneys and their expert audacity for their contract drafting needs?
Contract Sprint makes custom legal documents done in minutes reliable for business owners.
At Contract Sprint, we developed a reliable and trustworthy solution, that provides business owners and entrepreneurs quick, convenient, and easy access to legal documents in minutes (not weeks). Contract Sprint functions as a robust checklist. Our proprietary Consultative Forms simulate an ideal attorney consultation, thereby ensuring the most critical and important issues are addressed in the contract, the same issues that even the most highly skilled attorneys could miss. Any consultation has three components – questions, answers, and explanations. After a client provides an answer to a question, the consultation can go in many different directions. When the attorney conducts the consultation without a checklist, this often results in the attorney overlooking key issues specific to the client and business situation. In contrast, our forms capture this complexity and ensure all relevant legal risks are covered. Video and written explanations improve comprehension and allow the user to understand how certain answers might impact their deal. Users can then make better business decisions about how to structure their contracts to protect their business interests and achieve their goals. Our software provides a precise, efficient, and easy to use process for getting better legal documents. And by using this robust checklist, Contract Sprint improves the quality of the contract and helps users achieve better business results.
My name is Jonathan Page. I'm a licensed attorney in Georgia and a co-founder of Contract Sprint. When it comes to preparing legal documents, I'm convinced business owners and entrepreneurs can get better business results by simply incorporating the right checklist at the right time in the right way.
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