“Legal certainty is one of the basic preconditions to successful business.”1
"Proactive Law" is a school of thought that uses legal knowledge to prevent problems before things go wrong."
For too long lawyers have written contracts to deal with potential problems. Traditionally contracts are written to deal with what happens if something goes wrong. Who has to pay whom? What is the extent of the damages to be paid? When are damages to be paid?
"Proactive Law" seeks to be value additive. It seeks to achieve this by:
• promoting the relationship between the contracting parties; and
• recognising that contracts are for business people to use as management and business tools; not as bats to bash a contracting party with should things go wrong.
"Proactive Law" is based on business people working collaboratively with their lawyers. It concentrates on lawyers working with their clients to achieve the client's objectives. The aim is to have the contracting parties working together for each parties financial well being.
As Helena Haapio a leading exponent of "Proactive Law" has stated, the focus of "Proactive Law" is on:
• balancing risk and reward;
• achieving desired outcomes;
• eliminating causes of problems;
• shared care and team approach; and
• lawyers supporting client's self-care.
The move to "Proactive Law" is not an easy one. It is not easier because of the way lawyers have been viewed by non-lawyers. Lawyers rightly or wrongly, are seen as "Fighters". This view is re-enforced by US television series that typify lawyers as "Guns for Hire". It is arises from the description of court cases in Australia as being adversarial. A business person who has not worked closely with a lawyer would only see a need for a lawyer when there is a problem: A person of last resort.
In the "Proactive Law" environment, business people have to view their lawyers as a "Problem Solver". As I explain it to clients my role as a lawyer is to be their "Travel Planner". The embark on a journey with another party in business, and our role is to get them their safely and without a problem. We have to do this by designing their travel plans, (their contract) having regard to their budget in regards to costs and time.
"Proactive" Lawyers in the role as "Planners" are legal architects, trusted counsellors, business advisers and mentors. The figure below from H Haapio illustrates the role of lawyers, with a focus on the role of the contract draftsperson as a "Planner" or "Designer".
The "Proactive Law" lawyer needs to understand what a client wants to achieve and the risk the business is willing to take. With this information, the "Proactive Law" lawyer plans a solution to the business issues the client faces. To do this the client and lawyer must work together. The lawyer needs to find out from the client the answers to the following three basic questions:
What is it that the parties to the contract are to do for one another?
When is each party to do what they are promising to do for the other?
How are the promises to be performed? Are there any particular requirements that a party must adhere to. If so those requirements need to be documented.
While these questions appear simple, it is surprising that when I first meet a client, they usually cannot answer the questions. Business people who are not used to a "Proactive Law" approach often say to their lawyer: Draft me a gas supply contract.
A lawyer can always write a generic contract that covers the supply of gas. But such a contract would not deal with special requirements of the parties and would then in the event of a dispute between the contracting parties result in the issue having to be answered by a court; not themselves. For example, A smart lawyer could write a contract that A will supply gas to B as follows:
1. A agrees to supply gas to B for five years.
2. A will invoice B for the gas supplied monthly in arrears based on the amount of gas supplied.
3. B will pay A for all gas supplied and invoiced seven days of B receiving A's invoice at the end of each calendar month.
What B has not asked A, and what A has not told B, is that A only supplies gas by cylinder. Whereas, B requires gas by pipe line, so it is available without a stoppage in supply, 24 hours a day, 7 days a week, 365 days a year. The contract as drafted works from a legal perspective but not from a business perspective. This difference would have been avoided if A answered the question: How are the promises to be performed?
By working with a business client and having a client answer the three basic questions a "Proactive Law" lawyer merges business and legal knowledge to achieve the wishes of a client having regard to the client's risk profile, financial and temporal budget.
"Proactive Law" treats contracts as risk management and business checklists. Contracts are checklists of who is to do what, when it has to be done and how it has to be done. But to achieve this, you and your lawyer have to work collaboratively. You need to know what it is that your business is to do. You cannot abdicate your role to the lawyer to write a satisfactory but not specific contract.
Taking a proactive approach as a “Planner” and team player makes the practice of law in the transactional setting more effective and more satisfying, for both the client and the lawyer. Being a continuous learner, using legal skills to plan, design and implement new creative solutions, and working for the common good give a feeling of being of valuable service to others – of making a difference, and building a better future. The power of proactivity can increase the motivation, dedication, and commitment of everybody involved – even reshape business and personal lives.
1. H Haapio, "Introduction to ProactiveLaw: A Business Lawyer's View", Scandinavian Studies in Law Volume 49: A PROACTIVE APPROACH. Edited by Peter Wahlgren. Published under the auspices of the Stockholm University Law Faculty. Figure from this paper.