By Katri L. Nousiainen.
Adopted summary from Nousiainen, K. (2022). Legal design in commercial contracting and business sustainability New legal quality metrics standards. Journal of Strategic Contracting and Negotiation, 6(2), 137–158. https://doi.org/10.1177/20555636221138972
Analyzing Legal Design and Contracting within the Lenses of Law and Economics
The law and economics theory on contracts can be applied to legal design, shedding light upon how markets, people, and law interact in society. In general, this theory is necessary to conduct the scientific measurement indispensable for the legal design to be regarded as being at the scientific level. Law and economics – which is the application of the economic theory to the practice and analysis of law – is a well-founded tool and approach to analyze, investigate, and to measure the impact and value of legal design within negotiation and contracting practice.
Works, such as, General Theory of Legal Design in Law and Economics Framework of Commercial and Legal design in commercial contracting and business sustainability - New legal quality metrics standards https://doi.org/10.1177/20555636221138972 provide a foundation for further research and understanding on the general theory of legal design in negotiation and contracting through the lenses of law and economics.
Contract Drafting Evolution
The current contract drafting practice often tries to make the drafting processes less time-consuming and intends to benefit from the wisdom and knowledge of predecessors. Contract drafters and lawyers frequently aim to learn from their predecessor or seniors, and thus the copy-paste culture is strongly represented in the legal industry. The copy -paste- contract drafting evolution often leads to a situation where contracts have become increasingly lengthy, repetitive, overly excessive, and needlessly complex. Unfortunately, this contracting practice also raises concerns about whether it is socially optimal, and whether it serves the best interest of the client. Hence, it is argued that there exists room for improvement in the legal quality, and within the clarity of the current contract drafting practice to best serve the people to whom contracts are drafted for.
It is presented that the contract drafting practice could benefit from improved comprehensibility – namely, higher legal quality. Legal design could provide the needed clarity - Comprehension, a legal quality metric is presented.
Legal Design Increasing Comprehension and Reducing Transaction Cost
The idea behind legal design is to make judicial information, services, and products more approachable and comprehensible by employing human-centred design.
Design thinking process grounds legal design. Legal design intends to create a systemic impact through empowering people with law. It works in at least 4 major ways (Figure 1.).
Figure 1. Functions of Legal Design
It learns from other disciplines and professions and applies these best practices to law (Figure 2.).
Figure 2. Legal design learns from other disciplines and applies these best practices to law (not
an exclusive list)
More human-centred approach to law is reached by combining design methods as well as the innovations in the field of technology. Other fields of science are employed to find the best practice solutions to challenges at hand. Legal design intends to create a more equal standing, to reduce knowledge and information asymmetry in society, to increase transparency and access to legal processes and justice. It employs user-centered design making legal information, products, services, and processes more comprehensible. By comprehension, I mean that the users can understand their legal rights and obligations—even without having a prior or advanced legal knowledge, or any legal assistance.
Comprehension - a Novel Legal Quality Metric
As legal design increases comprehensibility on legal information, it acts as a legal quality tool for tackling complexity in negotiation and commercial contracting - a tool that every legal and business professional should have in their toolbox to foster their businesses’ sustainability and quality. Thus, the measure of comprehension is presented as a novel legal quality metric, that assist to evaluate the true quality in the legal profession. Instead of employing the easily misleading metrics such as time, won cases, and billed hours, this novel legal quality metric would better serve both clients and lawyers in assessing legal processes, services, products. Furthermore, it is presented that comprehensibility could be seen as another way for assessing efficiency in negotiation and contracting practice.
Besides of various incentives and benefits that can be acquired by employing legal design to bring more comprehensibility, it is acknowledged that comprehensibility is not the only goal in negotiation and contracting - but here it is presented why it is however particularly important in the legal profession going forward.
Legal Industry is Undergoing a Transition
In the recent years, legal profession has faced an irreversible change – it has become an industry in transition. This change should not be ignored, and it inevitably affects the legal profession by pressing the urge for a more human-centered approach in negotiation and contracting practices within the field. Legal professionals are in a crucial position to create value for their clients and to help them mitigate possible risks. Increased clarity and comprehensibility work as a risk management tool but also fosters client’s possibility to make more empowered strategical decisions – when they understand their legal rights, obligations, and related procedures. Lawyers can improve the quality in the legal profession, and generally industry wide, when they provide comprehensible services, products, and processes.
The legal metamorphosis further provides incentives for legal and business professionals, as well as organizations and other operators, to reduce complexity in negotiation and contracting practice to foster business sustainability, improve legal quality, and increase value creation for all stakeholders.
In the context of business sustainability, the increased comprehension is regarded to help, for instance, avoiding damage to business brands, reclamations, disputes, and other legal conflicts – as now there would be less misunderstandings on one’s legal rights and obligations. Furthermore, the legal design is regarded to provide various benefits and incentives, such as fostered business sustainability, reduced transaction costs, more positive image, and competitive business advantage.
Introduces a Novel Legal Quality Metric: Comprehension
The article, Legal Design in Commercial Contracting and Business Sustainability- New Legal Quality Metrics Standards claimed for the first-time comprehension to be regarded as a legal quality metric, and as another way of assessing the efficiency in commercial contracting – and generally in the legal profession.
New cumulatively applied legal quality metrics such as usability, plain language, time, and length were also introduced within the legal design framework. This work has provided a foundation for further research on legal quality metrics on negotiation and commercial contracting in law and economic framework.
About the Author
Katri Nousiainen is a Lawyer and Professional in Legal Education. She holds a Resident Research Fellow position at Harvard Law School at the Program on Negotiation (PON). In addition, she is affiliated with the University of Cambridge, Faculty of Law, and Hanken School of Economics.
Nousiainen conducts empirical research on legal design and ethics in commercial contracts from the perspective of law and economics. Her current work intends to scientifically measure the impact and value of legal design, and to find, for example, metrics to assess efficiency and quality in negotiation and contracting practice. She is especially interested in employing technology within law, economics, and legal design.