Creative Thought Structures

Good business relationships are furthered through good contracts. Companies enter into relationships—business relationships—to advance their business goals and companies use contracts to define and structure those relationships. The better the contract, the better the chances that the actual relationship will come closer to matching the envisioned one. A good agreement is like a roadmap in that it helps define objectives, establishes the means to reach those objectives, and sets out what happens when those objectives are achieved.

The best companies develop stronger, clearer, more resilient business relationships, whether they are relationships with customers, suppliers, vendors, bankers, investors or government officials at local, state, federal, or administrative levels.

A contract of any sort is a form of structured creative thought—a Creative Thought Structure™—that has the potential to turn the outline of or initial thoughts about a relationship into a binding arrangement. Contracts can be from the very simple and informal all the way up to the complex and highly formalized, but the concept and purpose surrounding each one is the same: the agreement by some or all of the parties (and there can be multiple parties to an agreement) to forego some degree of freedom of action in the future. In other words, parties can bind themselves or the other parties to certain actions or inactions, in order to gain some measure of predictability in the future.

Like any physical structure, a Creative Thought Structure™ can be highly functional or just the opposite. That is, a business contract being discussed and negotiated between the parties can be highly useful in forming and maintaining the business relationship or not at all useful, and with many steps and possibilities in between. If the proposed agreement is in the “not useful” category, a lot of work may have to be done after the contract signing to clarify the proposed obligations and responsibilities in order to match the concept that the parties envisioned.

This process of aligning the terms of a contract with the expressed intention of the parties has its analogue in the physical world. Take, for example, an automobile that has been in a collision. It’s likely that the body of the car has been dented, but depending upon the severity of the collision, it’s also possible that the car may need mechanical and electrical repairs and even straightening of the frame itself. Repairing a contract that hasn’t met the needs of the parties can feel like taking a wrecked auto body and putting it on the frame stretcher to straighten it out. The process of realigning thoughts with expectations feels almost as if it were a physical process.

This may sound a bit offbeat, but it makes sense because I see the physical world as a manifestation of thought. If the thoughts underlying it are straight and clear, the outcome in the physical world of what the parties intend by seeking to do business with each other is much more likely to be straight and clear as well.

In constructing and negotiating an agreement, it’s always important to be aware of and focus on the boilerplate details; that is, some of the finer legal points of the contract. But it is a mistake to be so focused on the “legalisms” as to lose sight of the business purpose of the agreement—the reason the parties are seeking to form a business relationship. Staying aware of the purpose of the business relationship is an important part of the 

attorney-client relationship.

A contract can be a very effective business tool and give clarity and structure to a business relationship if that contract is a Creative Thought Structure™. That is, a vehicle whereby ideas about business are turned into relationships between people in those businesses.

An effective Creative Thought Structure™ is understandable, concrete and durable. My goal is to construct agreements that are understandable, concrete and durable so that if unforeseen or unexpected circumstances arise, the contract itself, and the relationship built on it, will help lead the parties to the negotiating table to address what business people do for a living—address and apportion risk—rather than lead them to the courthouse door. A lawyer’s tools are words, which he or she uses to translate the parties’ “meeting of the minds”—the essence of any contract—into legally actionable and enforceable obligations. The clearer the practitioner can be about conveying the intentions of the parties, the less likely it will be that a party will seek court action to resolve contract issues between the parties. And I believe it is far better for business people to negotiate a resolution than to ask a judge or jury to  

determine the outcome.

• Understandable: It’s always important to keep in mind that business contracts are agreements between people. Though the parties to the contract may be companies, it takes an agreement between people to establish relationships to undertake, or refrain from undertaking, certain actions in the future. Another way of saying this is that the human element is always a factor. Paper and signatures may document the terms of the relationship, but they don’t make the agreement itself.
• Concrete: Creating a business contract starts with defining what is to be achieved. Ideas are, by their very nature, intangible wisps of thought and need to be made material and enforceable so that the parties to these ideas have a good roadmap and a good understanding of how the relationship they are creating will function. It’s important to create a living document that details the relationship and is written so that the parties can clearly understand what that relationship is, not only on the date the contract is signed, but also months or years later.
• Durable: Companies enter into business contracts for various periods of time; some are very long while others are quite short. Whether the term of the contract is long or short, however, all contracts are ways of trying to address the risks inherent in life. By their very nature, contracts deal with risks beyond the present. It’s important, then, for the parties and their legal advisors to deal with the issues of clarity, predictability and security regarding potentially disruptive factors.

Contracts that address these issues well have greater durability, meaning that they are both flexible enough and strong enough to have within them the mechanisms to adjust to unforeseen occurrences. I often visualize a durable contract as a bridge over a little creek on the day a cement mixer truck needs to cross it. Can you stress that bridge and have it still hold up? Will it still be able to function as a bridge and support that weight? In short, will a contract hold together and support the parties at those times when it is needed the most?

I’m very pragmatic and I see my work not just about constructing understandable, concrete and durable contracts, but also what happens after a contract is signed. Will the contract have the capacity to promote a more vibrant and engaging business relationship? Will it be a useful tool for a growing, thriving company?

Interestingly, my guiding concept in creating a good contract started with a toy I had when I was just a toddler. It was a toy made of gears and cogs. You lined up gears and shafts, and if they were all lined up correctly, harmoniously, by turning the one gear with the handle all of the gears and shafts would turn smoothly together. That’s what contracts are all about—putting the parts together so when you turn one part all the other parts turn harmoniously and products or services go one way and money flows the other way, like a smoothly run machine. Not literally, of course, but when an agreement works well, it helps both companies grow and prosper. And if it jams up, as agreements may periodically, the parties can tinker with it until it starts rolling again.

I have planned, structured, created, drafted and read thousands of business contracts by this point in my career and one of the things that has struck me so clearly is that a company’s past experiences always become embedded in the dry legal language of the company’s contracts. When presented with a contract to review, I find it is like reading a short novel, because every company’s hopes, dreams, wishes and fears are woven into the legalese. If previous ways of doing business were good, they are carried over into all future contracts. If those experiences turned out badly or were full or problems, the contract will contain language to prevent all such reoccurrences, whether they apply to the deal at hand or not.

Many times during a negotiation session, I have asked the other party why a certain unlikely clause is in the contract. The answer almost invariably is because of some previous experience that went badly off the rails and a decision from the executive suite was made that all future contracts must contain the clause. When I read a contract that’s been presented to me from the other party, I begin to understand what’s really important to them.

If you give it a moment’s thought, it’s only natural that a company’s important agreements reflect the company’s past. A company is a corporate person and, as with any human person, every present action that a person takes is built on his or her past experiences, whether those experiences were positive or negative.

My firm belief is that a contract should act as the blueprint or wiring diagram of the parties’ relationship with regard to the subject matter of the contract. That is, a well-designed and well thought out contract informs each party of their obligations and responsibilities, especially after the parties have inked the deal. The contract should be able to address questions such as “Is this what I’m supposed to do?” and “Is this how our relationship is supposed to work?”, or have set up a mechanism for the parties to enter into a discussion to answer these and other important questions. After all, a company signs a contract because it wants the deal to work out so it can reap the benefits, not so that it will fail and it can sue the other party.

However, life being the unpredictable journey that it is, problems can arise during the term of the agreement. Again, if the contract was well-designed and well thought out, it can act as the blueprint to help deal with unexpected issues and help the parties stay within the relationship they have already established. It should help the parties work together to move their relationship in the direction it needs to go to address the unexpected issues.

The process of constructing a business contract starts with a clear understanding with my client of the objectives to be attained through the business relationship. Yes, a company’s hopes, dreams, wishes and fears inform its approach to each deal, but mainly the company focuses on making the outcome of each deal as predictable as possible in order to continue its growth. However, if a company’s contract is unclear or ambiguous, it may cause important relationships to become less certain, possibly impeding the company’s development.

My first objective is to develop an outline or overall concept as a kind of blueprint of the client’s needs and its understanding of its relationship with the other party. I work to make sure that I fully understand not only the overall concept, but also some of the important background information that may not have been expressed, which forms an important part of the company’s decision-making process. I also bring this approach to negotiation sessions.

As contracts are human inventions created by humans and based upon the human concept of “agreement,” it is sensible to be aware of human psychology and how people think and respond. Simply put, people don’t always say what they mean or mean what they say during negotiations. This is not necessarily because they are nefarious, although this may be the case, but most often because in the stress of many business situations, ideas may not be expressed as clearly as the situation might require.

In constructing the well-designed and well thought out business contract, it’s vitally important to listen to the other party’s needs. That may not be what a party to the contract would most like to do, but very few deals give one side such enormous leverage that it can both fully dictate terms and have the full expectation that it can get adequate compensation if the other side fails to perform. At first glance, it may not seem that listening to the other party’s needs can advance one’s own needs, but it does, since contracts—and their fulfillment—are based upon agreement; that is, the willingness of a party to perform its obligations. Yes, contracts are regularly breached and lawsuits on contracts are common, but a lawsuit is not the reason parties enter into binding agreements. It is, rather, to get the benefit of the agreed upon deal.

It’s important to be aware of the other party’s needs, including both those expressed and not expressed. Part of a good negotiation prior to constructing the contract is to allow, and possibly even encourage, the other side to express their needs and concerns. The chances of a successful deal are enhanced if both sides feel their interests are protected by the agreement. It’s important to know the law behind the proposed transaction, but it is also important to take human psychology into account, since the objective of the negotiation is to try to get to “yes” for both parties.

After creating and reviewing thousands of business contracts and agreements over my career, I have been able to make a layman’s study of human behavior and psychology as it relates to making agreements and forming contracts. The ultimate question is usually very similar in concept, though varied in its specifics: Where do the points of agreement lie and how does one go about finding them? Over the years I believe I have developed an “ear”—maybe it’s intuition or just experience—for where the lines cross between the parties in negotiations and when an agreement becomes possible. There are essentially two parts of what needs to be included and how to structure it to satisfy both sides.

First, because I’m a disinterred party in negotiations, insofar as it is my clients hopes, dreams, wishes and fears that are on the line and not mine, I can “hear” what each party is really striving for, which may go unarticulated. It has happened to me more than once that what initially appears to be two parties taking past each other is really two parties whose trajectories are off by a relatively small amount. By “hearing” this miscalculation, I have been able to suggest alternative “trajectories” that appear to be where the parties could  
form agreement.

And second, once that mutual trajectory or objective has been agreed upon, I have developed the ability to turn a general verbal agreement into the legalese of a good binding contract. To me, a good agreement is like a good piece of music. The difference, of course, is that the “music” of a contract is written in words, not notes. But the similarity is that a good agreement, even one that is quite lengthy, has a sense of harmony and rhythm. A good agreement “feels” right, while one that merely dots the I’s and crosses the T’s, but fails to capture the spirit of the parties’ agreement, doesn’t have that same feel. The difference between these two types of agreements is like the difference between a grammatical and an ungrammatical sentence—with the latter type you just know something doesn’t fit together well.