‘Contracts Are Not Data, Or a Word Puzzle, They’re a Business Relationship’ – Bonterms

Bonterms is one of a growing number of standardised contract businesses and is launching its full platform in beta in 2023. Artificial Lawyer spoke to San Francisco-based founder, Todd Smithline, about where the company is going and his views on contracts and standardisation.

First, where are things now? After getting started in early 2022 (see here) they have made available a range of standard contracts in the build-up to fully launching their platform. These documents, which include NDAs, SLAs, cloud terms and DPAs, have been downloaded now over 5,500 times by a wide range of lawyers and organisations. They allow for some modification and are not set in stone – but more on that aspect later.

So, that’s the basics, but what is Bonterms trying to do, how does it see standard contracts fitting into a world where lawyers tend to want to control every aspect of their documents?

Smithline, who already has had a successful career as a business lawyer, is clear on the central purpose of contracts.

‘We do not see contracts as data, or artefacts, or a weird and unpleasant word puzzle, they are a business relationship between two parties,’ he states.

I.e. he thinks in practical terms based on decades of experience: people and organisations use contracts to form relationships, whether those engagements are very short or for the long-term. That’s his starting place. The tech, the data science, and everything else, comes after that.

‘There’s always two users [of a contract],’ Smithline underlines, making a key point that although it is right in everyone’s faces and implicit in the nature of contracting, we can sometimes forget that contracts have to work for both parties, and the same goes for standardised contracts. It can never just be one party chucking a document (standardised or super-bespoke) at another party and just expecting them to go along with it without any recourse to changes.

(Although, and this is another subject, but consumers, i.e. you and me, are continually forced into contracts that are sent to us with the expectation that we will just accept their terms. That said, from personal experience, I have found that even the largest corporates will sometimes negotiate a little if you can find someone to speak to. Of course, they never encourage you to do that. But it does underline a key aspect of modern life, i.e. that the majority of all people on this planet have to agree to things where they are not expected – or it’s made impossible – for them to negotiate or improve an arrangement with a business in any way. The key aspects here are massive economic scale and an information asymmetry imbalance. Citizen A is buying product B from Big Corp. Z, and they have no power to negotiate (or are not expected to have any), but the same Big Corp Z naturally expects to negotiate any deal with fellow Big Corps X and Y with plenty of lawyers on all sides. Why do we take it as an immutable rule of life that people are powerless in this way? One last point here is the piece this site did on ‘My AI Will Talk to Your AI’ re. DoNotPay, GPT-3 and consumer rights. Maybe that is the future for consumer contract negotiation, at least one day?)

But back to standards. What is the right balance between variability and the unchangeable?

Smithline takes the view that there has to be some variability and users of Bonterms have to be able to change things. However, he notes that certain types of contract always have a limited number of key areas where people want such changes.

‘It’s an 8 or 10 issues list [that people focus on for each contract]. We allow people to go right to the issues list [and make changes]. However, we have found that most will just ride on the rails and adjust 3 or 4 things,’ he explains.

‘For this to work there has to be a good base contract and it also needs to be adjustable. Getting the balance right is where the jazz is,’ he says.

Smithline then makes another observation: ‘If lawyers do not think the contract is well done they won’t engage with it. So, we do not release a [standard] contract until we have tuned it right. It’s like releasing a product.’

He adds that from what they have seen so far, lawyers either like the contracts and maybe make a few small changes or they just don’t get involved at all.

‘The decision to use [this approach] is binary. People either use Bonterms or not. And if they do, then they will not change the document much,’ he concludes.

This underlines the fact that standard legal documents are as much about a philosophy as anything else. You either buy into the idea, or it’s an ideological no-no.

Let’s take an example. All of the contracts they make are founded on months of work with a committee of experienced lawyers, with around 60 members now representing major law firms and companies.

‘The DPA was a 6-month process and went through 10 drafts. It was a collaborative experience.

‘There is so much cynicism [about lawyers collaborating], but that coming together has been a great surprise,’ he explains.

Smithline adds that despite the cliché that lawyers all want to do their own thing, that if you can provide a way for them to collaborate then they actually like doing it. Artificial Lawyer then noted that perhaps this is because lawyers are so often pitched against each other, or their work is rarely ever recognised, but here they can contribute to something that will help everyone and have a lasting impact across the market – they’re really building something.

As an aside, Smithline notes that he doesn’t think lawyers should expect Bar organisations to step in here, it’s up to the lawyers working at the sharp end of legal life, who are advising clients every day and who viscerally feel the need for standard contracts, who should be leading here. And they are – or at least some of them. The same goes for the pioneering work of oneNDA and more recently Common Paper.

To sum up, Smithline notes that what they have now is a suite of standard contracts to help lawyers get over the initial hump of a deal.

‘We start with the first meeting, so there is an NDA. Then we get to cloud terms, then there’s an SLA, and then a DPA. It’s the journey [of two parties] getting the deal done,’ he concludes.

Will there be other, more complex and highly negotiated contracts on top of this? In many cases, yes. Will law firms still be able to show their great value and expertise? Of course. But, what’s happening here – and elsewhere – is an effort to remove friction from a process that really doesn’t need to be complex or costly for the users. The legal sector can either embrace this reality, or dig itself into a hole of unnecessary inefficiency and one that won’t make the clients especially happy either.

And perhaps we can simply use this mantra: automate and standardise the simple* and recurring. After all, one could argue that’s the basis of the world’s economy since the Industrial Revolution of 1760 onwards.

(And for the quibblers…..yep, it’s true, ‘simple’ is a relative term, but as we have seen, there are clearly levels of complexity in the legal world.)