Nature abhors a vacuum - the power of interdisciplinary thinking for lawyers

In organisations one often sees the legal function come down from on high to provide their (often self-perceived) wisdom on an issue only to retreat back into the shadows and let the other business teams do what they will with that advice.   It is easy to do as a lawyer (and I confess I have certainly done it) which is say “well I gave my advice, it’s a matter for you to decide what to do with it”.  Legal hands washed, over to you company.  Amen.

My view is that law shouldn’t be practiced in a vacuum.   Lawyers are not omnipotent and infallible.  Lawyers necessarily think differently to the CEO, the commercial team, the engineers, the accountants, HSE, human resources, sales etc however approaching issues from a diverse range of perspectives can and should factor into a properly formulated legal advice, review or strategy.  

What’s a practical example?  Assume that you have been given a construction contract to review that is identical in both scenarios and with a reasonably balanced risk allocation as a starting point.

Scenario 1

Your company has been operational for 5 years and is in a precarious financial state.  The company is bidding for a high safety risk piece of work (say scaffolding) in a high compliance risk jurisdiction (say Indonesia).  Winning and delivering this work achieving margin is critical to the ongoing financial viability of the business.   The company has had some project performance issues including safety issues particularly on overseas projects.

Scenario 2

Your company is a historically 100-year-old well established company with a good reputation for delivery performance and a healthy balance sheet.   You are bidding for lower risk work in Australia for a blue-chip client with whom the company already has a long-term relationship.  While it would be good to win the work, it will not materially impact the company’s ongoing viability if the company does not win it. 

Divorced from the context of the scenarios above, given the terms of the contract in both scenarios are identical, the review would likely be identical.  However, in my view, when the context is factored in it should result in two fundamentally different reviews of an identical contract.    

In scenario 1, you are being asked to a review a contract for an all-round high-risk project with existential consequences for the business for failure to win and deliver the project profitably.   It’s really a beggars can’t be choosers scenario where there is a certain heightened level of risk which much be accepted in order to give the business a chance to survive and be viable.   Starting with an identification of the risks then developing a genuine understanding of the risks as viewed from different interdisciplinary perspectives allows us as lawyers to drill down on the absolute “must-haves” from a contractual perspective having regard to the extra contractual context and strategies also in place.  Such as, for example: the pricing mechanism and estimate, client and proposed subcontractor relationships, project schedule, HR strategy and HSE strategy. 

Particularly in these types of “put it all on red” contexts, a useful question for the bid review team to ask the company lawyer is: “what are next three departures which didn’t make it into the departures list and why?”   Lawyers don’t (usually) need to provide too much justification for why a liability cap or consequential loss exclusion is included in the departures, however, broader context and strategy much more closely informs questions of whether to include or exclude departures no. 8, 9 and 10 in the submission.   My view is that lawyers who have a greater appreciation of the broader risk profile, context and strategy should have a persuasive and cross-functionally informed answer to this question.  Business stakeholders can derive a level of comfort that the legal departures have been made on a pragmatic, considered and not mechanistic basis.

In contrast, scenario 2 is a significantly lower risk scope where the company is in a position of increased leverage over others in terms of winning the work given historical performance and relationships.  It is also not business critical to win the work.  In such circumstances, the company will likely be able to be much more liberal with the departures sought subject to the caveat that they may be somewhat constrained by the previous contractual positions agreed to with that same client.   There will need to be less analysis of the risks (in contrast to scenario 1) as there will more known knowns and be fewer known unknowns associated with the performance of the work. 

As you can see the extra-legal context significantly drives the form and ambit of a contract review even in circumstances where the contractual terms are identical.   Approaching legal reviews with an interdisciplinary mindset enriches the usefulness and quality of that legal review significantly.

And you can save the vacuum for the carpet.