Business casual contracts

Is a memorandum of understanding a cry for help?

A common refrain in access to justice communities is that 80% of people who have a legal issue don't have access to legal help. The definition here of "legal issue" is a little self-referential: one definition is a problem where law might provide at least a partial answer on what the right resolution is, or might indicate a process for how it should be revolved. Another way to put it is there's some formal route to resolving (or at least concluding) the issue, and legal help can get people on that route.

Without legal help, or that formal route, legal issues still *resolve*—that is, they move toward some conclusion—they just do so informally. And that informality usually exposes some ugly power asymmetries: one side has access to a lawyer or money or resources or physical threats and so on, and the other doesn't. Think illegal evictions, predatory debt collection, ad hoc child support arrangements, and so on.

But outside of an A2J context (and maybe sometimes within it), informally resolving legal issues may not always be a dire risk. When I was in nonprofit-land, collaborations between organizations (say, a joint grant application) were commonly organized with memorandums of understanding (MoUs): brief, informal, sorta-kinda-binding-ish agreements usually written without a lawyer, even if the organization had one. Is this an unmet legal issue? Maaaaybe? It sounds sort of silly to say out loud: "Occasionally people or organizations need to agree on things and they don't always have a lawyer present to help them do so." But sometimes a non-binding or binding-ish "agreement" is what you need, say, to figure out a new partnership or a new partner.

And this happens with lawyers involved too. Here's a paper from Cathy Hwang about how early-stage M&A deals use non-binding term sheets that are intentionally unenforceable. Why?

Because complex business deals are highly collaborative design processes, using a contract-like tool, even (or especially) without enforcement, helps parties organize, clarify, and understand the metes and bounds of their deals and obligations, whether or not they plan to, or can, enforce them.

[…] parties use these early agreements and other activities to build a small relational ecosystem in which they feel enough trust to make further investments.

In another paper informed by two lab experiments (on undergrads, but still), Deepak Malhotra and J. Keith Murnighan argue that non-binding contracts build interpersonal trust, because parties attribute cooperation to the other party instead of the contract. Binding contracts, on the other hand, do the opposite. Parties attribute cooperation to the contract, and not their counterpart:

The use of binding contracts seems to have kept interacting parties from seeing each other's cooperative behaviors as indicative of trustworthiness.

I work a fair bit in data governance, and my unresearched impression (seriously, don't cite this), is that brief (~1 page) MoUs are super common, especially for casual data-sharing agreements. This isn't the case in regulated fields like health, but they're pretty common in say, environmental data. Is it ideal? Maybe not, eventually you'll want something more sophisticated as more people rely on data, or if the data is sensitive. But it works, mostly.

The trouble with these casual MoUs and non-binding agreements arrives when the figuring-out process ends and it comes time to define the relationship. One party might see an MoU as a placeholder to set up a more involved collaboration, and another might see the same the MoU as the collaboration itself, and therefore they don't need to do anything new or different. "No no", the head of an agency would say, "we're already sharing data, we have this MoU and we've been using it to send you PDFs with screenshots of our spreadsheets for months, why do you want it in a different format please go away". Sometimes when you build relationships you don't end up agreeing on what the relationship should be.

I don't think this is an argument against using MoUs or non-binding agreements. But for organizations without armies of lawyers handling their courtship, this is probably a place where a little advice-giving can help avoid some common messes, without requiring a step-up to a formal contract. They can keep the benefits of staying informal and non-binding (or binding-ish), but are maybe a little better equipped to navigate a still-developing relationship.

And you could imagine how a technical intervention—software—might be appealing here, as opposed to a really really limited-scope representation (if it's even a legal representation at all). But technical interventions on contracting are mostly focused on, well, contracts: on generating and redlining and managing them. They're directive: here is a template contract, please use it—or computational: here are some questions, we will use your answers to generate a custom contract, or ten thousand custom contracts and a database to help you manage it all. This is more…facilitative? Here are some ideas you ought to be considering as you work on building this relationship, and here's some possible language to address those concerns that may (or may not) be worth including in some MoU or non-binding agreement.

Traditional legal services are in some way a bridge to formality: some path to resolving a legal issue that law prescribes. But there's room for legal services or legal-adjacent services for organizations who are ok lingering in an informal space, or who are trying to figure out how to collaborate. And sure, eventually they'll probably need lawyers, but maybe right now they just need a legal relationship coach. One outcome of regulatory reform could be to help make those informal services just a bit more viable.

Casual reading

1. Demand Side Justice.

2. Street-level algorithms: a theory at the gaps between policy and decisions.

3. I've got a piece in the MIT Computational Law Report on Detain/Release, a simulation and lesson I built with Jason Tashea.

Share