Corporate & Securities Law

Can Contracts Be Counterproductive?

By Ken Adams

Without any editorializing by me, here’s an extract from this article by Sathnam Sanghera in the Times Online:

On the one hand, written agreements protect parties if things go wrong and provide a useful framework for engagement. But, on the other, drafting contracts slows business down?something Stephen Covey emphasises in The Speed of Trust: The One Thing that Changes Everything, with the words: ?When trust goes down, speed goes down and cost goes up?. It also creates work for lawyers?in itself something worth avoiding?promotes bureaucracy and undermines trust by discouraging spontaneous displays of goodwill.

This last point is something that a decade-long study of outsourcing contracts by Warwick Business School demonstrated when it found that deals conducted on the basis of trust, instead of precisely worded agreements, could lead to benefits for both parties to the tune of as much as an additional 40 per cent of the total value of a contract.

Full post as published by AdamsDrafting on February 22, 2010 (boomark / email).