Verbose Contracts

Posted: 12 Nov 2013

See all articles by Thomas Lundmark

Thomas Lundmark

University of Hull - School of Law; University of Münster

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Date Written: 2001

Abstract

Written agreements drafted by Anglo-American lawyers are often more lengthy than those drafted by their counterparts in continental Europe. This article identifies unique features in the Anglo-American legal culture in general, and its laws of civil procedure in particular, that result in the incorporation of three classes of extra clauses in Anglo-American contracts, namely; recitations of applicable law (boilerplate), provisions for contingencies in performance, and detailed specifications of business terms. The author draws on various sources, such as court decisions, specific contracts and clauses, texts, commentators’ views, and his own personal experience as a practicing lawyer to explore both spurious and valid reasons for the incorporation of the three classes of extra clauses.

The article identifies four key, interrelated explanations for lengthy Anglo-American written agreements. Firstly, the limitation of remedies for breach of contract to an award of compensatory damages dramatically increases the need for clarity and specificity in written agreements. The lack of court-ordered remedies which are routinely awarded by Continental courts, such as specific performance, in terrorem penalty clauses, and punitive damages, necessitates both the repetition of uncontroversial general principles of law (boilerplate) and the detailed specification of performance contingencies, as a means to spur voluntary performance of the contract. Secondly, the informal, oral tradition of the common law business and legal culture means that written Anglo-American contracts are exceptional in nature. Lawyers are therefore only consulted in cases which are perceived as risky. They do not have an on-going practice of advising clients on such matters, and the legal advice provided is of an “all or nothing” character. These factors are contributory reasons for common law lawyers to draft lengthier written contracts. Thirdly, jurisdictional diversity in Anglo-American legal systems is more common. Thus, for example, in the United States, where private law is state law instead of federal law, reciting the law (boilerplate) in some length is common, and makes good sense, so that out-of-state lawyers, clients, and other parties are reassured. Finally, the relatively high value American and British businessmen place on private, individual solutions denotes a generally higher level of distrust of the state compared to their Continental counterparts. Thus, a higher intensity of legal practice manifests a preference for the private structuring of one’s affairs and, likewise as a result of cumbersome civil procedure rules, demands greater control over the resolution of disputes. Although some commentators argue that Anglo-American contracts are longer because the substantive law in common law legal systems is less predictable than on the Continent, this article illustrates through specific examples the falsity of this line of reasoning.

The article concludes that the detail seen in Anglo-American contracts of sale is due fundamentally to four factors: an unresponsive, cumbersome dispute resolution practice; an oral, informal business climate and tradition; jurisdictional diversity; and a preference for private/individual, rather than public/communitarian, structuring of one’s affairs. As Anglo-American companies and their attorneys continue to gain experience with formal contracts, one would expect those contracts to become shorter. However, as more and more disputes in international business are being submitted to arbitration, and neither companies nor their counsel yet exhibit high levels of trust in arbitrators, to the extent specificity and verbosity are caused by the involvement of counsel in the negotiation of contractual clauses, one may expect these clauses to remain long, or to become even longer.

Keywords: extra clauses in Anglo-American contracts, dispute resolution, jurisdictional diversity

Suggested Citation

Lundmark, Thomas, Verbose Contracts (2001). American Journal of Comparative Law, Vol. 49, No. 1, 2001, Available at SSRN: https://ssrn.com/abstract=2352828

Thomas Lundmark (Contact Author)

University of Hull - School of Law ( email )

University of Hull
Hull, HU6 7RX
United Kingdom

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