How to simplify a contract: simple contracts explained

By Juro Knowledge Team on September 28, 2021

Most business contracts create complex commercial relationships. How can you simplify a contract to make it easier to agree?

What springs to mind when you imagine a contract? For most, it’s probably a long old document with tonnes of legal jargon, complex wording and bad design. The truth is, contracts are renowned for being dense and difficult to understand.

But this doesn’t have to be the case. By simplifying your contracts, you can make them more accessible to everyone and bring your counterparties closer to signing the deals that matter most.

This deep dive explores how businesses would benefit from creating simple contracts, which contracts can be simplified and how to get started. Keep reading or use the navigation below to find out more.

What is contract simplification?

Contract simplification is the process of making legal documents clearer and more user-friendly for contracting parties. It is typically achieved by delivering plain language and better legal design, but more broadly, a simple contract aims to provide the information parties need to know in a way that is accessible to non-lawyers, rather than just leading legal counsel.

But what does a ‘simple contract’ look like and when should we simplify our contracts? Let’s find out.

Simple contract examples

1. Vendor / supplier agreements

Supplier and vendor agreements regulate the terms on which companies buy and sell goods and services. Whether your company is a food marketplace buying produce, or a technology business buying new software, these contracts play an important role in business transactions, so positive user experience is key to increasing the chances of repeat business and capturing more revenue.

If the content and process for these contracts are too burdensome, counterparties are likely to look elsewhere for these deals. Contract simplification prevents this.

Not only that, but when a business is building a marketplace, like Deliveroo, speed is everything. You will naturally want to get counterparties signed up as quickly as possible to build out the options and value you can offer customers. With simple contracts and a strong contract management system in place, scaling businesses like Deliveroo can close all-important deals, like those with restaurants, without wasting time.

2. SaaS agreements

A SaaS agreement is a commercial contract that sets out the formal relationship between the SaaS company and its customer. These types of business contracts facilitate the provision of services to the customer in exchange for recurring revenue to the business, and they are a key touchpoint between company and customer. By making your SaaS agreements needlessly complicated and difficult to read, it will set a bad tone for the relationship that follows and at worst, deter potential users from signing the agreement altogether.

3. MSAs

A Master Services Agreement (MSA) is where a business and its customer agree most of the terms that will govern their commercial relationship. An MSA can be used to define any number of business-critical factors, like data privacy obligations, reporting obligations, indemnity caps, breaches and, of course, headline commercials like renewal dates and financials.

As you can imagine, they are long, detailed and valuable documents. However, they are worthless if they never get over the line. At the risk of stating the obvious, a contract that’s off-putting will put people off. On the other hand, an MSA that’s simple, clear and accessible will lead to faster signing and more deals closed.

4. Option agreements

An option agreement outlines the terms and conditions that give a party a right (not an obligation) to buy an asset. For the business, option agreements give employees a stake in the company’s success and allow the business to distribute equity in a controlled way.

However, many employees may not have a financial background, and the options might be intimidating if they are accompanied by lots of jargon. By simplifying an option agreement, you can make the contract more accessible to everyone within the company, and invite more employees to take this stake in a way they understand.

5. Software license agreements

Software license agreements offer an individual or business the right to use software that legally belongs to someone else. Businesses distribute software license agreements to control use of the software, protect legal ownership and strengthen commercial relationships. Again, these contracts are an important touchpoint during the sales process, and can bring a lot of value to a company.

By simplifying a software license agreement, you can minimize the time it takes to close a deal and improve the counterparty’s signing experience, which increases your chances of capturing this value.

6. Channel partner agreements

In a channel partner agreement, two businesses set out and agree the terms of their commercial partnership. An example of a channel partner agreement is the contract between two SaaS companies, whereby one party agrees to include the other in its marketplace or to provide referral traffic in exchange for a percentage of any revenue that this generates.

Agreeing a mutually beneficial channel partnership can be a hugely effective growth tactic. However, as these contracts grow in value, they grow in complexity too, which causes friction.

This friction and complexity slows down deal cycles and makes legal a blocker, rather than an enabler. To ensure this isn’t the case, you should do everything in your power to simplify channel partner agreements, and ensure that they run smoothly.

7. Employment offer letters

Employment offer letters are delivered to a candidate who has been offered a role within a business, and they outline what each party could expect from the other if the candidate chooses to accept. It will typically include basic information about the role, as well as detailing the salary, terms and conditions, start date, and more.

The offer letter provides an outlet for negotiations between the candidate and the employer, but they also give a feel about what a company is like. If an employment offer letter is riddled with complex language and poor design, it’s possible that the candidate will feel put off, or have reservations about the company. A simplified employment letter will communicate the most important information to a candidate and make the candidate’s signing experience a more memorable one – for all of the right reasons.

Who benefits from simple contracts?

As you have heard, a wide range of different contracts could, and do, benefit from being simplified in the business world. Simplified contracts will not only enhance the experience of the counterparty to a contract, though.

By simplifying a contract, you are also reducing the strain on the various stakeholders in the contract lifecycle. These parties typically include:

Legal counsel, who will be involved in overseeing virtually every contract that runs through the business in some way. Most often, the legal team will own the contract templates.

Sales teams, who deal with contracts like MSAs, SaaS agreements and software license agreements on a regular basis. Simple contracts will empower the sales teams to self-serve on these contracts and improve the pace at which they get deals signed.
Finance teams, who typically authorize spend on various agreements. For companies without an established finance team, these interactions will be handled at an executive level.
Approvers, who will vary depending on the contract being signed and the business itself. These approvers can range from members of the sales team to the leadership team and even legal counsel, depending on the value of the contract.

The people team, who will also be involved in the contracting process for simplified contracts such as option agreements and employment offer letters, for example.

Marketing teams, who may have some involvement in contracts such as channel partner agreements, will want sight of their responsibilities when it comes to promotion and revenue sharing, for example.

Why simplify a contract?

Just because contracts establish a formal relationship, with all the legal rights and responsibilities that involves, that doesn’t mean they have to be intimidating and unpleasant.

Business contracts form a key touchpoint between the two parties. Making a legal agreement needlessly complex and difficult to read will set a bad tone for the relationship that follows. And given that relationship may continue for years to come, you need to make sure it’s built on solid foundations. All of this begins with having a simple contract.

There are also a few, more specific benefits of contract simplification that make simplifying your legal agreements well worthwhile.

The benefits of creating a simple contract

1. Reduce risks and improve relationships

By making contracts that both parties can understand, you will inevitably reduce the risks associated with legal agreements, particularly where these stem from misunderstandings and miscommunication. Clear and concise contracts will allow for a smoother negotiation process and increased trust between parties, which will hopefully result in positive and long lasting relationships in the long term.

2. Maintain version control

Business contracts are usually negotiated in Word, which results in multiple versions of the same document doing the rounds. This increases the risk that wrong or out-of-date documents will be shared through human error, which will make the business seem unprofessional and can lead to a messy signing experience. You may lose the counterparty altogether and lose revenue in the process.

By using a contract collaboration platform as your single source of truth, you can create dynamic, digital contracts made up of searchable and structured data, helping you simplify the way you send and store your contracts and avoid costly mistakes.

3. Speed up the contract process

Many businesses still rely on Word and hard copy contracts. With no automated alternative and an unnecessarily complicated workflow, the end-to-end process is time-consuming and can cause friction. In turn, this slows down time-to-sign and can lead to a backlog of contracts to manage. A contract collaboration platform that does the heavy-lifting can make a huge difference – especially as the company continues to grow and contracts need to be managed at scale.

5. Total workflow visibility

Creating and negotiating contracts using emailed Word and PDF documents is neither simple nor transparent. Documents may be stored on a shared drive, as a hard copy in a filing cabinet, or, even worse, on someone’s desktop.

With such limited visibility, maintaining an open channel of communication with the contract parties can be a challenge. To reduce the risk of misunderstandings and poor engagement, you should try to simplify the way you manage your contract workflow.

Juro gives users full visibility of the contract process. Teams can see when parties have viewed the document, allowing them to follow up when things stall and to reduce bottlenecks. Plus, integrations with platforms such as Slack mean teams can receive regular or real-time notifications of contract updates, meaning those all-important moves are made quicker.

6. Capture contract data

If your contracts aren’t simple enough, they will be cluttered and chaotic – even post-signature.

The unstructured nature of these contracts, the data within them and how they’re stored means these agreements aren’t searchable. As a result, legal teams may struggle to keep sight of important contract data like renewal dates and often get the blame when, for example, a contract auto-renews and the business incurs unwanted costs.

Unlike smart contracts which pose a real challenge when it comes to extracting and auditing data due to their complexity, simple contracts can provide business and legal teams with a wealth of data, often on demand.

Ready to simplify your contracts with Juro?👇