A Contracts Self-Defence Guide

Some tips on how to handle contracts

1/ Last week my union Australia’s National Tertiary Education Union launched its Jobs Protection Framework: an accord-style agreement with several members of the Australian Higher Education Industrial Association to save casual jobs in Australian universities. The JPF led to a vigorous Twitter debate with a rival ‘no’ campaign, and to censored union branch meetings. My employer the University of Melbourne rejected the JPF on 15th May 2020. The Australian Catholic University, the University of Sydney, and the University of Newcastle amongst others have also rejected the JPF. I will be voting ‘no’. But rather than go into NTEU politics and the JPF’s flaws I want to use this as an example to write about how to handle contracts and their negotiation.

2/ During my freelance journalism career (1994-2004), I signed some bad contracts. Most of these were ‘work for hire’ variants that vested my created intellectual property in the hands of publishers. Perhaps the worst contract I signed was with The Disinformation Company Ltd - $US100 a week for website editorial and writing work - for what was in reality a very long internship (compared to the value for the firm that I created). It was only later when I began to handle university research contracts - and worked closely with university lawyers - that I better understood the nature of key clauses - and my own pattern of escalated commitment. This pattern also became clear when I read Haruki Murakami’s Underground interviews of Aum Shinrikyo members for my PhD thesis.

3/ A bad contract is rarely presented to you as such. It may be dressed up like the JPF was in emotional language and flashy marketing imagery that is longer than the contract itself. It is usually anchored in a narrative about the broader situation that you are in - what the Nobel Prize winning economist Robert Shiller calls narrative economics. There may be psychological pressure to sign. There may be groupthink or restrictions on what a former manager calls the individual ‘freedom to operate’. You need to be able to step back in such circumstances and not just sign.

4/ Many people assume that you have to sign the contract that you are given. However, contracts lawyers think differently. Instead of signing, they mark-up the specific clauses that they want to change. Contracts lawyers understand that this is because when you are first given a contract it may reflect the desires of your counter-party or an attempt in a negotiation to gain an upper hand. By marking up the clauses with suggested changes you are turning a potentially adversarial signing into more of a negotiation. You are signalling what your needs and desires in a negotiation are, as well. You are then able to reach a better, final agreement through iterative negotiation.

5/ Another strategy is to look for ‘show-stopper’ clauses that are definitely against your negotiated best interest. For me, JPF’s Heads of Agreement (HoA) Clause 29 - and its 12-18 month hiring freeze - was just such a ‘show-stopper’ clause. There was no way as a recent PhD graduate that I could agree to a clause that would restrict my ability for this time period to apply for Postdoc, Lecturer, or Research jobs. Clause 29 restricted my individual ‘freedom to operate’. I basically didn’t need to read the rest of the HoA at that point. I had all of the information and the answers that I needed to make a firm decision.

6/ An important aspect of contracts is to understand their scope, the parties who are involved, the length of the contract, and any dispute resolution mechanisms that are embedded in the contract. The parties involved may have a particular vision of what they want the contract to achieve and will have instructed their lawyers. There may be clauses such as on the handling of confidential information or intellectual property protection that survive the contract in perpetuity. Whilst there may be dispute resolution mechanisms in a contract they may specify an organisation for mediation or a legal jurisdiction for hearings that advantage a particular party. It is good training to read through the clauses and to look for such issues.

7/ Every contract is not an end in itself - it reflects the goals of the respective parties, the skill of the lawyers in drafting it, and the legal jurisdiction that it takes place in. The respective parties may not be equal - or they may be under the positive illusion that they are equal when they are in fact not. It is helpful here to have an awareness of common cognitive biases and how they can affect potential decision-making. You can get anchored in a fear driven narrative about uncertainties that may or may not come to pass. Or if they come to pass you may have differential power and may actually be able to act in a different way. You don’t concede major concessions early on. One model of this is philosopher Nassim Nicholas Taleb’s Incerto series which builds on his expertise as an options trader in financial markets.

8/ For academics, one of the key clauses to consider is about intellectual property. Background intellectual property is the expertise, knowledge and skills that you bring to a project. You should always seek to protect it. Project created intellectual property is the expertise, knowledge and skills that you gain in a specific, time-based project. You might seek to horse trade the project created intellectual property in return for higher fees, for example. You might also seek to have the ‘freedom to operate’ to use this latter intellectual property in future projects. By having some basic knowledge of intellectual property then you can make a more informed decision. The first step to do so is to take an inventory of what intellectual property - know how - you might have, and how you might best protect it.

9/ A particular kind of intellectual property is the trade secret: confidential information that is material and non-public. In research contracts this confidential information is dealt with very carefully and specifically. For example, access controls, named staff who have access, computer facilities, secure site visits, and destruction of copies at the end of a project may all be specified. There may be ethics or privacy reasons for the confidentiality, and relevant legislation to consider. Information may also be confidential if it concerns business competitiveness or national security issues.

10/ These are some possible tips for handling contract negotiations and what to look for when reading clauses. You should seek the advice of a qualified lawyer or legal representative in doing so. By having some awareness of these issues you are better able to protect your individual ‘freedom to operate’ and things like your background intellectual property. You are also able to deal with a contract situation more dispassionately when others may get carried away by emotions, anchoring, or positive illusions. The result is that you will be able to understand and help to negotiate contracts that better meet your needs.