UK LEGAL PROFESSIONALS CITE CONTRACTS AS A MAJOR OBSTACLE TO BUSINESS SUCCESS

A new report by World Commerce & Contracting, in collaboration with Deloitte, reveals that only 39% of legal professionals believe contracts meet their intended goals and 76% report inefficiencies in contract processes.

LONDON, Nov. 11, 2024 - A comprehensive study has found that the effectiveness of contracts is plummeting, leaving businesses struggling to drive growth and success. With 76% of professionals citing inefficiencies in contracting processes, the findings of 'The Purpose of Contracts' report serve as a wake-up call for organizations worldwide.

According to the report, only 39% of legal professionals believe contracts are achieving their intended goals, while just 16% feel that contract negotiations address the most critical business needs. This growing disconnect highlights a need for radical change in how contracts are perceived and utilized.

The study reveals several alarming trends:

• Declining Effectiveness & Value: Contracts have an average decline in effectiveness of 40% since a 2017 study, failing to foster collaboration, nurture business relationships, or reflect company values.
• Misalignment & Complexity: Companies struggle with the complexity of contracts, with 50/50 split between those finding them easy and difficult to understand. This creates misalignment and hinders their usability.
• Inefficient & Fragmented Processes: The contracting process itself is riddled with inefficiencies, including unclear ownership, resource limitations, and misaligned goals between teams.

The repercussions of ineffective contracts can be severe. Businesses risk missed opportunities, damaged relationships, and even facing legal hot water due to poorly drafted or outdated agreements that fail to address evolving compliance requirements and business realities.

Tim Cummins, President of WorldCC, stated: "Courts are more than just legal safeguards; in many situations, they should be dynamic tools that support collaboration, mitigate risk, and create value. This report highlights the urgent need for fresh thinking in how businesses approach and manage contracts."

To rectify this situation, the report advocates for a shift towards a more strategic and collaborative approach to contracting, prioritizing clarity, flexibility, and alignment with business goals in contract design and management. It urges organizations to invest in training and technology to streamline processes and improve decision-making.

With 75,000 members from over 20,000 companies across 180 countries, the not-for-profit association dedicated to helping global businesses achieve high-performing trading relationships is calling for a fundamental shift in how contracts are perceived and utilized. By embracing this radical change, organizations can unlock the full potential of their contracts, driving business success.

The report concludes that contracts have the power to be powerful tools for economic instruments designed to support commercial value but require a fundamental transformation from traditional approaches to modern methods.