Why Do Business Contracts Have to Be So Long and Complicated?

The purpose of a business contract is straightforward: to prevent future disputes and avoid the need for court intervention. However, the necessity for contracts to be long and detailed stems from the inherent mistrust between parties and the unpredictability of future events.

Business contracts aim to prepare for every possible scenario. They cover everything from the inability to perform certain obligations to changes in contract terms and unforeseen events such as a warehouse fire. Imagine you’re drafting a prenuptial agreement that is 42 pages long, and the signatories thought they had covered every possibility. They were wrong.

A Real-life Example: A Prenuptial Agreement Gone Wrong

Consider the case of a 15-year-old prenuptial agreement that stipulated the husband would pay the wife $500 per month while the divorce was pending. However, the wife delayed the divorce proceedings, leaving the husband to bear all financial burdens while she maintained her lifestyle. The agreement did not anticipate such a scenario, and a single sentence could have prevented the ensuing complications.

The husband is now in intensive care, unable to communicate, and dependent on a feeding tube. The financial and emotional fallout of such a situation is far-reaching and could easily have been mitigated with a few additional clauses.

The Core of the Issue: A Lack of Trust

The root cause of the complexity in business contracts lies in the mistrust between parties. This mistrust necessitates attorneys to draft detailed, extensive documents that cover every possible issue and resolve it in writing. The complexity is further exacerbated by historical challenges and court precedents that must be addressed.

Before, when people and transactions were simpler and trust was more prevalent, business contracts were much shorter. However, as society has become more complex and people less trusting, contracts have grown in length to ensure both parties are aware of their responsibilities and liabilities.

Is There a Solution?

Some might jokingly suggest a “Short Abbreviated Easy to Read Book on Understanding Relationships.” While this is obviously not a serious suggestion, it highlights the irony and inefficiency of long and complex contracts. Imagine if the core issues and responsibilities were succinctly laid out, eliminating the need for extensive legal documentation.

The reality is that as long as humans and attorneys are involved in business dealings, contracts are unlikely to become simpler. This is a fact of life that businesses must accept and adapt to.

Conclusion

Complex business contracts are a necessity in today’s society, driven by mistrust and the unpredictability of future events. While this length and complexity can be frustrating, it serves to protect both parties from potential disputes and legal entanglements. The key is to strike a balance between thoroughness and simplicity, ensuring that contracts are both comprehensive and easy to understand.