In the complex web of business, legal, and operational activities, risk is a reality of business life. While risk can never be fully eliminated, risk mitigation techniques can relatively reduce the impact of probabilities. The techniques of strategic drafting are an excellent (and often overlooked) method of risk mitigation. Strategic drafting is much more than simply writing something down. Strategic drafting comprises a thoughtful, significant process of creating documents to perceive, preempt, and alleviate future issues.
Understanding Strategic Drafting
Strategic drafting is the creation of documents, whether it’s a contract, a policy, internal guidance, or a legal notice, with the future in mind. It involves thinking about each ambiguity, loophole, future, recognising problems, and then writing about them so they can be avoided. Drafting is not only about getting something right, but also about clarity, foresight and having protective intent. Businesses want to have documents that not only have legal strength but also practical strength for acting, anticipating expectations, and resolving disputes before they arise.
Case Study
An interesting case revealing the potential of strategic drafting to limit risk is Google LLC v. Oracle America, Inc., 593 U.S. 1 (2021). Though mainly a copyright litigation, the Supreme Court’s “fair use” analysis implicitly highlights strategic development. Simply put, Google’s development of the Android operating system only involved copying the “declaring code” of Java APIs and not the entire implementing code. This strategic attempt to ensure interoperability, while creating a new platform that would be transformative, was important to the Court’s finding that Google’s use was fair. In a way, the controlled copying, i.e., cautiously choosing how and what to copy, the strategic development in code and system design, limited the risk of a full copyright infringement decision, which could have severely affected the mobile market sector.
How Strategic Drafting Mitigates Risk
Strategic drafting contributes to risk mitigation in the following ways:
Clarity and Reduced Ambiguity
Ambiguities can cause misunderstandings, disagreements, and eventually disputes. Strategic drafting is done with language that is specific, clear, and unambiguous. These drafts strive for specificity, so there is little room for subjective interpretation. For example, definitions, obligations, or limitations are all defined explicitly, leaving little room for unforeseen ambiguity. Clear definitions will dramatically reduce the potential for misunderstandings that may have financial consequences, reputational consequences, or potential litigation.
Anticipating Future Scenarios
Draftspersons anticipate contingencies, changes in the marketplace, unexpected events, changes in technology or regulation, and they build in provisions to accommodate these contingencies. It may include a force majeure provision, dispute resolution procedures, termination rights or amendment procedures, all to provide a clear path when circumstances are not “normal.”
Facilitating Dispute Resolution
Disputes can arise with even the best drafting. With strategic drafting, however, it can help expedite and ultimately resolve the dispute. Drafting with clear clauses on governing law, jurisdiction, arbitration, or mediation provides an agreed-upon pre-existing way of resolving disputes without the possible expensive and time-consuming litigation.
Protection of Rights and Interests
Disputes can arise with even the best drafting. With strategic drafting, however, it can help expedite and ultimately resolve the dispute. Drafting with clear clauses on governing law, jurisdiction, arbitration, or mediation provides an agreed-upon pre-existing way of resolving disputes without the possible expensive and time-consuming litigation.
Facilitating Dispute Resolution
Disputes can arise even with the best drafting. If a lawyer drafts well, they can reduce the time, cost, and aggravation of dispute resolution. Good drafting also makes it easier for the parties to determine how to proceed in the event of a dispute. A stipulation in a contract on governing law, jurisdiction, arbitration, or mediation is much clearer to the parties if everyone is on standby for potentially expensive and time-consuming litigation.
Ensuring Regulatory Compliance
Risk of being regulated means compliance is a big deal, and that is to say, there are substantial penalties for non-compliance, including monetary penalties, sanctions, and reputational risk. Strategic drafting means ensuring documents align and adhere to applicable laws, regulations, and best practices in their profession. By having a strategic drafting approach, they will reduce the likelihood of regulatory penalties and demonstrate compliance with regulations.
Managing Expectations
Effective communication is an important tool for risk mitigation. Creating carefully written documents gives all parties realistic expectations of their (and others’) deliverables, timing, standards, and consequences of non-performance. When expectations are clearly defined up front, the risk of disappointment, misrepresentation claims, or broken relationships is greatly minimised.
Practical Applications in Risk Mitigation
Strategic drafting finds its application across numerous domains:
- Commercial Contracts: Effectively drafted contracts can manage the risk of scope creep, payment disputes, ownership of intellectual property, liability for defects, and breaches of confidentiality.
- Employment Agreements: Well-drafted employment agreements can alleviate the risk of employee rights, non-compete clauses, termination issues, etc.
- Internal Policies and Procedures: Efficiently written internal policies can mitigate organisational risk associated with inconsistent practices, misconduct, safety violations, and neglecting internal or external compliance obligations.
- Legal Notices and Correspondence: Strategically worded can assist in de-escalation of disputes, preservation of rights, and a history of communications. A legal notice can formally notify a party of a breach and demand remedies (as seen in consumer law cases, a clear demand for remedies is critical to receive proper compensation).
- Terms and Conditions: Strategically drafted terms and conditions manage user expectations, define acceptable use, limit liability, and address data privacy concerns.
Conclusion
Strategic drafting is not simply an administrative function; it is a key ingredient of robust risk management. By taking a proactive and future-thinking approach to the creation of documents, organisations can mitigate risk and limit exposure to the likelihood of legal insurance claims, financial loss, service disruption, and reputational damage.