Innovation versus risk – how do visual contracts stack up?

John McGuire & Professor Camilla Andersen | 27 March 2019 | 24:35



 

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Show notes

The law and innovation are not natural partners. All law emerges from an historical context. So, how can innovation be encouraged when often the contracts that determine the nature of business relationships are inherently risk-averse? Could contracts themselves be simplified, and even engaging and innovative, to drive the behaviour required?

Around the world, visual contracts resembling a cartoon comic strip are gaining traction with a small but growing group of businesses, lawyers and academics rethinking contract design. But while they may drive innovation, what is the risk? And can they be legally binding?

In this episode of Engineering Reimagined, Aurecon’s Managing Director for Built Environment John McGuire and Professor Camilla Andersen discuss the complexities of innovation versus risk and the vital role visual contracts can play. We also explore why using images is a powerful way to engage people and what’s next for visual contracts, particularly in the engineering and construction sector.

“Even when there is resistance initially to the notion that a visual contract is not going to work, that it's just a gimmick, when they actually see it and they engage with the whole process – the images, and the language, and the dialogue – most of them find it incredibly powerful,” says Camilla.

Meet our guest and host

Learn more about John McGuire and Professor Camilla Andersen.

John McGuire

Aurecon’s Managing Director Built Environment

“We’re working together to find out how lawyers and engineers might be able to come together to innovate, and perhaps, disrupt engineering and the law at the same time.”

John is the Managing Director, Built Environment at Aurecon. In his role, he leads up to 2,000 people across 20 countries to use design-led thinking and innovative approaches to co-create solutions that lead to sustainable outcomes for our built environments. John has been involved in the successful delivery of a wide range of technically sophisticated and challenging projects and is highly regarded for his creative design approach to engineering and project leadership. He is also a periodic guest lecturer in building environmental design at Schools of Architecture in the University of Western Australia and Curtin University. Follow John on LinkedIn:

Camilla Andersen

Professor at University of Western Australia

“Our project is very much about making sure that the contract is a facilitative instrument that can frame a good relationship between people, rather than something that nobody ever reads or engages with.”

Camilla Baasch Andersen is a Professor at the University of Western Australia where she runs the Master of International Commercial Law. Camilla works closely with businesses, governments and academes in pursuit of Commercial Law facilitating trade, and has written extensively on the Contracts for the International Sale of Goods (CISG), international commerce, pro-active approaches to law and comparative commercial law. She has trailblazed the development and adoption of visual contracts as a way of improving understanding of legal documents and therefore the relationships between the parties to the contract. Follow Camilla on LinkedIn:

Episode resources

Podcast transcript

Innovation versus risk – how do visual contracts stack up?

Kalay Maistry: Hi, I’m Kalay Maistry and welcome to the 4th episode of Engineering Reimagined.

Humanity depends on engineering to help solve the wicked problems our world faces.

In this podcast series we explore how, like engineers, people from all walks of life are reimagining the future and their leadership roles in it. What can we learn from our guests’ compelling and inspiring stories to help us shape and design a better future and reimagine engineering?

All law emerges from an historical context. Yet, in a world where organisations need to look forward to navigate the future, and challenge the status quo, it might be said that the law and innovation don’t make natural partners.

If one of the primary legal instruments of commerce is a contract, and if companies wanting to trade need to be innovative to compete, it makes sense that contracts themselves need to find a way to enable innovation to flourish, rather than diminish.

This starts with parties to a contract understanding the nature of the contractual relationship and their respective obligations. With many contracts containing legal jargon beyond the comprehension of most people, are visual contracts the answer? And can they be legally binding?

Our guest today is Professor Camilla Andersen, professor of law at the University of Western Australia, and a passionate researcher and advocate for visual, or comic book, contracts.

Interviewing Professor Andersen is John McGuire, Managing Director, Built Environment, at global engineering and infrastructure advisory company, Aurecon.

John and Camilla have worked together on developing the world’s first visual employment contract for a large organisation, Aurecon. They will discuss how that project came about, and what’s next for visual contracts, particularly in the engineering and construction sector. Will they transform the way we negotiate and agree terms and conditions in the often dispute-ridden world of engineering and construction in the future? Let’s find out!

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John: Welcome Camilla. It's great to have you here.

Now, we've known each other for probably the last two years, working together to find out how lawyers and engineers might be able to come together to innovate, and perhaps, disrupt engineering and the law at the same time. Isn't that a cool project?

Camilla: It's very cool, and it's been an awesome two years. I couldn't have had a better sponsor than you and Aurecon. It's been a great ride, and it's led to so many big things. So, yes, I often define this project as changing the moment you walked through my door, and it really did. So cool and thank you.

John: We're going to learn all about it now. If we go back to the beginning, and you recently mentioned to me that in Australia, two insurance companies are refunding more than 60 million Australian dollars to over 110,000 consumers after selling insurance that the corporate regulator ASIC said was of little value.

This just highlights that contracts and agreements are so often incomprehensible, that we don't bother to read them, let alone understand them.

So, taking that as background, my first question to you is, what prompted you to go down the path of researching and developing a visual contract?

Camilla: Well, as I often say when I'm asked about where this crazy project of comic book contracts came from, it was never really meant to be a project. It sort of happened, as I think some of the best things in life do. I was doing a favour for a friend, Adrian, from the engineering department. He wanted me to draw up a contract, but as he said, oh, he bloody hates lawyers and they're always being so argumentative and putting things out that people don't really want to read and making enemies out of people.

And we agreed that on the back of some of the design thinking that was going on in Scandinavia, and thinking about visuals in contracting, why not just take the leap and do a comic contract. So, we did this, and we had fun with it and I didn't think much more of it. Then I informed my research colleagues in Scandinavia in the Proactive Nordic Think Tank about what we'd been doing. They got very excited, and they linked me up to Robert De Rooy in South Africa who was doing similar contracts, but for very different reasons. Not to try and make people read contracts, but to make sure that they could, because most of the people that he was contracting with were illiterate domestic farm workers, or domestic workers.

So very different avenues into a very similar project. The moment that Robert and I linked up, the media got wind of it and they were very excited about what we were doing in terms of visualising contracts, and bam! Suddenly, we were getting all this interest, and then you walked in my door saying that you would be very keen for us to work with Aurecon on your employment contract. The rest is more or less history.

It is really shocking to me as a lawyer when I realized exactly how broken contract law has become: to the extent that people not only don't read their contracts, they don't expect to be able to read them. They don't expect to be able to engage with them at all, and the contracts are just punitive instruments for lawyers.

So, our project is very much about making sure that the contract is a facilitative instrument that can frame a good relationship between people, rather than something that nobody ever reads or engages with, and then maybe they can use it later to hit someone in the head with if something goes wrong.

John: So, as I understand, Rob had created a comic book contract for fruit pickers, many of whom were illiterate. Do you think, therefore, that visual contracts are only suitable for vulnerable parties? Or, in your opinion, can they be applied more broadly across contracting.

Camilla: Well, I think they can be applied extremely broadly. I think what Robert is doing is very important, and it really hits that access to justice note. But, some of the work that we've been doing, and my team has also been very strong to accentuate, we've done a contract for the West Australia Individualized Services, about allowing disabled people in the home to employ their own caretakers and domestic care workers.

But, the interesting question is, why should it be confined to people who might struggle to understand a contract, when it's so clear that even those of us who don't struggle to understand the contract, don't have the time or the inclination; or, perhaps even just the willingness to try and read through it in the first place.

Images are powerful, not just in simplifying the contract itself, but making it more attractive and designing something that people want to engage with.

John: So, if I declare how this story between you and Aurecon came about, and I wind back to two years ago, I was actually listening to you on a podcast speaking about visual contracts whilst I had taken my daughter...

Camilla: To ballet

John: To her ballet lesson, absolutely. This is one of the things that you do...

Camilla: I love that story!

John: Is you listen to the law report while your daughter's in ballet, and I contacted you about the possibility of developing a contract for Aurecon, starting with our employment contract. That's a very important contract to us. It's the first relationship, it's the defining relationship of us as the employer with our people, and therein how we want our people to behave.

Through that project we eliminated four thousand words from our previous employment contract. What was the process, and what were some of the challenges of developing this contract?

Camilla: Well, before I answer your question, and I promise I will answer it, I just want to pick up something that you said. When you talk about the importance of the employment contract and setting up the relationship with your people, and how important it is to you, it was exactly that, that made you the ideal sponsor for this project, because very few employers understand the spirit of a legal relationship. Most of them are quite confined to thinking of it as a legal framework for rights and obligations, but you brought to the table a willingness to experiment with so many of these rights and obligations, because the spirit of the relationship and the culture that you were embedding into the contract itself was at the forefront of your priorities: putting all the legal aspects very much in the background, and almost putting in nuggets of law-- drivers of human behaviour like communication and collaboration, which we've done. If we want this behaviour, then we need to communicate these expectations so that we very clearly define what it is we think the employee needs to know.

One of the best feedbacks that we're getting from the young engineers who are seeing these contracts for Aurecon is, oh, timesheets! How wonderful. We actually need to fill in timesheets. Now, as you know that wasn't actually in any of the contracts that you gave to us. But, because it was defined and risk-assessed as something that young employees struggle with, we used two whole panels in the contract that has relatively few visual panels dedicated specifically to that. So, all about bringing to the forefront the behaviour that's important for a new employee to understand so that we can minimise any misunderstandings or discomfort.

John: Conscious that we're speaking and we're talking about a visual contract...

Camilla: I know! We're not showing them. It's very strange.

John: We're not showing something, so it would probably be worthwhile if you could explain what were the sorts of images that we used and adopted to illustrate the key aspects of the contract. What were the types of things that we went with?

Camilla: So, the vision that I think we all had from the beginning was to share something that was quite immersive for the employee, and to eliminate some of the rather tedious onboarding documentation that one had to go through - the confidentiality, and the behaviour, and the ethical stuff. So, we always wanted to create a shell within which there were online links as there are in the current contract to do all of that onboarding training as you sign up.

So, I think human resources now can tell me it takes about forty to forty-five minutes to go through the whole signing up process. It's only eighteen pages, but there are so many different links of onboarding training that have to be looked at before you can go to a next page.

What we did with the images was Aurecon already had its own brilliant graphic illustrator, Gemma Young, who worked with us on this, and she had already a lot of experience with the kind of imagery that Aurecon likes to work with.

So, the avatar for the Aurecon employer, yeah, is this beautiful white Michelin man almost, the chubby figure with the green Aurecon logo on his belly. Absolutely perfect. And I don't know whether I need to explain what we mean by the word avatar, but we mean a visual representation of the people involved. What we then had to do was crack how to determine the avatar for the employee.

The light bulb was such a genius idea. I think it was Gemma's because she's such a clever young woman. She said, "Oh, everyone likes the idea of being a light bulb because you're bright, you're clever." And that is, again, a good communication for the company to send out there for the employee – we think of you as bright young sparks. Who doesn't like that, right? So, I think we found something that most people can identify with and really like.

Then, of course, we have these very simplistic images and a very clean style where the light bulb and the Aurecon avatar sort of walk through this whole process of becoming an employee, and they explain to each other expectations and mutual obligations.

Even when there is resistance initially to the notion that visual context is not going to work, that it's just a gimmick, when they actually see it and they engage with the whole process – the images, and the language, and the dialogue – most of them find it incredibly powerful.

John: So, there's a playfulness almost... that's underneath the contract. When you first look at it, it comes across as appealing and something that you want to engage with.

Do you think that's a feature now of part of the theory with visual contracts, that rather than having to read through pages of text, what's there is something that engages you immediately? It's playful, and therefore the participants of the contract are more likely to get to the end of it and understand it. Do you think that's a key principle here?

Camilla: I certainly do, and when you first explained to me the six cultural principles of Aurecon that you'd recently developed when we first met, when you said playful with serious intent, it really struck a chord because it was exactly what we wanted to do with comic book contracting. Each and every contract that we worked on, both before and since then, they are different. Some of them have a little bit more playfulness and some of them have a little bit less. It very much depends on what they are trying to do. But, I think the engagement and the powerful aspects of the image itself - and I've been able to catch up on a lot of research on why images are so powerful, and it's really very interesting – they engage many more centres of the brain than words do. So, it's no surprise that they are able to engage people in a much deeper way than words.

John: So, no doubt, all the lawyers out there will be interested in my next question, Camilla, which is how confident are we that visual contracts will actually be legally binding. What's your view on that?

Camilla: I'm very confident that they can be legally binding. I'm getting to a point where the question makes me a little bit dizzy with repetition. Because everyone is asking this. I don't think it's the right question to ask, and I can explain that in two simple steps. The first step is that I have now, thanks to former Chief Justice, Robert French, a very strong article that he's written that lends a lot of force to the opinion that as long as these contracts are clear, their intention is clear, then of course they're binding. Because contracts don't have a specific format that they have to take. That's just tradition in common law that we've chosen to put so much emphasis on words.

Contracts are all about intention, and if the images can help to clarify the intention then of course it just makes the contract all the more stronger.

The same opinion has also been voiced by the South African legal Attorney General. Robert De Rooy has asked for his opinion on this. I think it's probably worth noting that the reason why we're asking for legal opinions instead of having these contracts tested in a courtroom is that they give rise to no disputes. We have thousands of comic book contracts out there, and even in the industries where you would average between three and four disputes a year in employment in South Africa, there have been zero, zero, zero, and zero through that last four years. These are amazing statistics and that is, of course in itself, something to be proud of.

Would we like to see it tested by a court room? Well, academically it might be nice, but we don't need to. I don't think so. They're clearly binding. So, let me go back to what I said before about I don't think it's the right question to ask. I think the right question to ask is, when are the images not clear enough to adequately communicate a clear unilateral intention, and therefore not a binding contract because there is no meeting of the minds. That's the right question.

John: So, this is a relatively radical concept for a lawyer.

Camilla: It is.

John: And for the law. To create something that by the design of the contract, encourages the behaviours that the parties to the contract want, as opposed to the penalisation that I will impose upon you when you don't live up to your promises. So, obviously Aurecon and the faculty of law at UWA have worked together in constructing this employment contract.

Camilla: And that one is legally binding.

John: But do you think that this will now become more commonplace? Do you see this to become a place in the normal part of the law where parties could get together and start to express things visually in lieu of words, or perhaps, in conjunction with words, and where do you think it might apply?

Camilla: I think the sky's the limit, John. Originally, I used to think the one place where we couldn't have visual contracting was in contract negotiation. But now that we've worked with a couple of contracts where we've developed pick and mix, we've got potential clauses which you can choose from in building your own contracts. Now, I can actually see it having a place in negotiations. Lawyers are always asking me, do you think I need to learn to draw? And, I'm saying, no. Not at all. I think what you need to learn to do is accommodate the skillsets of the people who can visualise and draw and find a place for them in your practice to help accentuate what you do.

John: So, if we now think about taking this further ... So, yes, what we created was a visual contract for employment of staff, but two-thirds of all industrial disputes are in the construction sector - the sector renowned for litigation. Could you see that this could now move into agreements between parties for the delivery of services, for the delivery of construction elements, the delivery of buildings? Do you think that would be possible? What would be the barriers to making that happen?

Camilla: I think the primary barrier is the willingness, especially on the side of the law teams to accommodate other skills and other forms of communication to allow change. Before you and I even met, I was meeting with some people in Hong Kong who were running a very successful construction practice and they had started printing out visual posters for timeframes. So, for every contract that they were involved in, they would print out huge visual comic posters with timelines and expectations for all the parties.

The contracts themselves, I've seen them, they're still legalese and effuse and not something that anyone would want to engage in unless they were being paid to do so. The visual tools that support the implementation of the contract, they work really well and they have been doing so for years. If you can imagine a contract that implemented those visual tools as well, simplified the language, tried to make all these expectations very clear using charts, timelines, whatever it takes to try and communicate these expectations – that works really well.

My team also worked with another law firm with trying to visualise some of the communication protocols around collaborative contracts. This was in the resource extraction industry, where there has been a forced collaboration so they have to share pipelines or they have to share certain production stages even though they're technically competing. So, they do collaborative contracts where they share resources. But, the communication around these expectations have been really interesting and some of the feedback that we were getting was, yeah it's all fun and games in the beginning when we get together and we're collaborative and it's like a honeymoon, but then when the honeymoon is over, that's when the challenges with how to communicate and how to collaborate really starts.

So, we developed some visual tools to try and build a better culture around the little icons of people playing football and going to picnics and reminding management of how important it is to maintain that psychology of the team, a bigger team. We've also seen a number of construction resource engagements directly into our project. So, we've recently been given a large amount of money to look at how the indigenous communities and the mining communities can perhaps collaborate a little bit better on maintaining better relationships. So really a lot of interesting visual stuff going on in the mining sector.

John: And probably the catalyst is coming to two parties coming together with a mindset and a desire and a willingness to think differently about how the relationship between two parties is going to work?

Camilla: Yes, and those are very well-chosen words. Those are exactly the motto of the Proactive Scandinavian Law Movement, which I've been a part of for decades – this notion that the mindset must change for innovation to function. That's at the heart of the whole movement so that's very good phrasing.

John: So, we've now had the employment contract, the comic contract in Aurecon for over a year; and we have had eight hundred plus employees engaged on this new contract. The results to date have been beyond all our wildest expectations. Clearly, we haven't had a dispute, which is a positive thing, but it is the other benefits that we are seeing – just the immediate engagement with employees to Aurecon understanding this notion of playful with serious intent, this notion of innovation, and this notion of culture. That has been really important to us. What else has been happening in this space? Where is this now going? Is there a large amount of interest in this particular field?

Camilla: There certainly is. I've been engaging more industry over the last year and a half than I have the whole rest of my career, in terms of prospective engagement with what they actually do, which is very gratifying. I've always had industry engagement but now it's gone completely amok and that's great.

So I can't tell you who they are, but I can confirm, we have a large research project with a major bank and they are hoping to do to their banking client contracts what you've done with your employment contracts, change the face of banking and change the way that their clients engage with their legal rights, because clients don't read their contracts but they really should. They're hoping to increase transparency and a lot of different aspects of the relationships with clients which is very encouraging.

John: What does this mean to you as a lawyer, starting in Europe and coming to Australia, and practising the law and teaching the law? What does it mean to you to be able to, at this part of your career, changing the face of law, changing how parties come together? How does it make you feel?

Camilla: I think you just made me blush, John. That's a very rare feat, well done. I think it's humbling. People call me an innovator and an entrepreneur, and I get cagey about that because I don't see myself as an innovator and entrepreneur. I'm a researcher, it's my job. I'm supposed to rattle the cage and see what new things work, what doesn't work.

The real credit lies with the companies that are not afraid to take a chance and experiment with something. I can look you in the eye and say, I don't know if it's going to be binding, and you're like, yeah, let's do it anyway. That's where the real risk lies, because I'm not really taking any chances as a researcher. Now that we've had a lot of legal opinion and lot of impetus behind the movement, perhaps, it's not as risky as it was. But, it certainly was risky when you and I first met. So, I think you share some of that credit, John.

For me, I think the biggest revelation about this project has been that it has been such a sensation. But, it really is such a weird thing to use a really common psychological tool to make things better. Why should that be so odd? Why should that be so strange and so difficult for my profession to accept to the point where I'm being called an innovator for doing it? It really is very straightforward. If things are difficult to understand, or difficult to engage with, then put images in them.

John: Well, it's been an absolute pleasure to collaborate with an innovator in the law...

Camilla: Thank you, John.

John: And to learn, and for a lawyer to teach so much to an engineer about how we can be innovative. So, thank you very much for joining us today on Engineering Reimagined. I know that we are going to continue our research project together-

Camilla: We are. And I'm thrilled about that. That's great.

John: And hopefully we'll look forward to coming back again to this podcast to share some of the learnings and some of the findings of what we've been able to do. So, Camilla Anderson thank you very much for joining us today.

Kalay Maistry: We hope you enjoyed this conversation. Don't forget to share this episode on social media and leave a review for us where you’re listening – we want to know what you think! Tell a friend or colleague about us, they can find the podcast by searching Engineering Reimagined wherever they listen to podcasts.

Links

Aurecon's Visual Contracts

Aurecon is the first company in Australia using visual employment contracts from March 2018, eliminating more than 5 000 words from their employment contracts to create a succinct and meaningful visual contract that uses illustrations to complement the text.

Aurecon is now using these innovative visual contracts in South Africa and New Zealand as of August 2018.

Watch this video to learn more about them.

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