About Conscious Contracts

With thanks to Susanne Hoogwater of www.sketchthinking.com

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Contracts That Turn Conflict Into Creativity

Pro Se Nation – A new approach to contracts with Linda Alvarez from MaryLynn Schiavi on Vimeo.

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Conscious Contracts for Conscious Business

Conscious Business

“Conscious Business” is a phrase used to identify companies that operate according to the fundamental principle that business can be a force for positive change in the world.  These companies believe (and have demonstrated) that creating value for all stakeholders–customers, employees, society, the environment, and future generations–brings greater success than putting primary focus solely on generating profits. 1

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Conscious capitalists take seriously Gandhi’s admonition to “be the change you want to see in the world.”  In their dedication to creating positive value for all, they not only seek to offer products and services that serve a higher purpose, but also to integrate social, environmental, moral, and even spiritual values into the goals, operations, strategies and cultures of their companies.

But conscious companies must operate within the larger conventional business culture and the established legal system that permeates every aspect of business.  The existing culture and system were formed by the conventional mindset and act to perpetuate that mindset. They exert counter-pressure on conscious practices by orienting perspectives and defining the logic of decision-making in terms of conventional norms rather than higher purpose.

This counter-pressure is readily apparent when parties (and their lawyers) negotiate a contract.  Businesses want their contracts to provide safety, predictability, and optimum benefits. Lawyers are trained to see deal making as a competitive, adversarial process.  Their job is to ‘win’ the deal for their client and they understand their role as representing the client ‘against’ the other party.

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In this way, traditional practices pit contracting parties against one another, laying a foundation of mistrust and sowing seeds of dissent at the outset of the relationship.  Typically, once signed, a contract becomes ‘dead letter.’ The document goes in a drawer and the parties move forward doing what makes sense in the moment until there’s a problem.  Then, the contract is pulled out, consulted and the duel over interpreting terms begins.

Aggressive backward-looking analysis focused on laying blame and allocating loss consumes energy and attention, often at the expense of the underlying business imperatives. The contract that was meant to ensure safety, predictability, and optimum benefit now is used as a weapon – damaging (often destroying) the parties’ relationship and undermining the beneficial purpose that they envisioned when they entered the deal.

Conscious businesses need a way to interrupt the habits and logic of the conventional mindset – a way for them to stay aligned with their higher purpose and core values without sacrificing power or safety in the negotiation and in the ultimate contractual relationship.

Conventional Logic of Contract Negotiation

When we take a clear-eyed look at conventional negotiation and drafting practices, what do we see?


Attempts to predict all possible problems and then control potential outcomes – pre-allocating the imagined burden of loss.  But realistically, how’s that working for us? How good are we at predicting and controlling the future?  And what is the cost to the relationship of taking this posture of ‘future enemies’ at the outset?

Conventional thinking understands power and safety as the ability to control or coerce the actions and choices of others. The orthodox approach is to try and draft a contract so that its terms will give us the ‘win’ if we ever have to try and force the other party to behave in a certain way.  Perversely, this approach places all the power in the document and casts the parties as supplicants who must petition a third-party (government, courts, arbitrator) to interpret their contract language and tell them how that document will impact their business and circumstances in times of conflict.

Conventional dispute resolution has a backward focus, laying blame and allocating loss.  The typical conversation focuses on interpreting contractual language rather than on solving the parties’ problem.  The conventional process is slow, expensive and destructive.

Conscious Contracts 

It is possible, however, for conscious businesses to create ‘conscious contracts’ that harness the power of the existing system to support and sustain their commitment to positive change.  Applying the precepts of contract law from a conscious-business perspective, parties can design their ideal relationship, and set in place their own values-oriented structures and systems for addressing change, engaging conflict and managing crisis.  The parties can use the contract and the power of the larger system to support and sustain their commitment to the core values and beneficial purpose that brought them together in the first place.  They can draft a contract that will serve to evoke a new, positive logic for responding to change, conflict, and crisis.

Consciously Shifting Perspectives and Creating Support Structures

The conventional system sees the contract as the parties’ ‘private law’ that they’ve agreed will govern their relationship.  So long as the terms of the contract do not conflict with the laws of the larger system, that system will enforce the terms of the contract – holding the parties to their agreed commitments.  As the parties’ private law, the contract can be used to establish a proprietary system for sustaining and regenerating the parties’ alignment and to establish their own private ‘justice system’ for dealing with disagreement.

5393562780_a2e5648bd9_bInstead of trying to predict and control the future, conscious negotiators use the bargaining and contract drafting process to set in place a navigational system designed to help the parties sense and respond to arising tension and unexpected change.  Using consciously drafted provisions, the parties can retain the power of self-determination and provide themselves with effective structures for co-creative problem-solving in the face of crisis.

When I work with a client using a ‘conscious contract’ approach, I call it “Discovering Agreement” – because my client is not negotiating for advantage and concessions. Instead, they explore whether and where they are in agreement with the other party, and how they might design a working relationship that will bring greater benefits than either could achieve alone or with a different partner.

We start with a conversation about what really matters–the Vision of a better world that forms the conscious business’ higher purpose, and the Mission that the parties are joining forces to accomplish (in service of their Vision/s).   We also consciously consider and articulate the parties’ core business Values, Constraints and Imperatives.  By doing this, we establish what are the keys to satisfaction for each party in entering and continuing the relationship and the endeavour.

The parties put their Vision/s, their shared Mission, and their core Values, Constraints and Imperatives in writing, creating a “Recitation” that serves as a touchstone during negotiations and throughout their ongoing relationship.  They use this touchstone to assess the quality and integrity 3 of a given proposal, plan, or course of action. The conversation and the resulting Recitation provide the foundation for a conscious, intentional, productive working relationship.

In addition to creating the Recitation, the parties decide on a structure for how they’ll conduct conversations dealing with unexpected change, conflict, and crisis in the future.  In essence, they determine how they will engage crisis and disagreement consciously.  Rather than merely designating a third-party adjudicator who will have the power to assign blame and allocate loss, the parties establish their own system for handling conflict.  They set out in the contact language a conversational structure designed to reorient them away from conditioned responses and adversarial posturing and, instead to focus their efforts towards creative, side-by-side problem solving.

A key component of this ‘conscious conflict’ provision is language affirming the parties’ express commitment that, should they find themselves in disagreement, they will engage in conversation according to the described structure and focused on bringing themselves and their shared endeavour back into alignment with the Vision, Mission, Values, Constraints and Imperatives expressed in the Recitation.

With the Recitation as touchstone, negotiation shifts from being a competitive adversarial process to a conversation in which the parties calibrate their alignment and establish the framework for maintaining integrity.  By linking their conscious conflict structure to the Vision, Mission, Values, Constraints and Imperatives laid out in the Recitation, the contract provides a frame for their conversation, as well as a structural framework for evoking in the parties a co-creative, problem-solving response to crisis and conflict.

compass rose north pointNow the parties have a contract that is not a weapons cache – but a navigational tool.  They’ve retained the power of self-determination in the face of crisis or conflict, and they’ve pre-qualified one another based on a meaningful conversation about what really matters and what really drives their actions and choices.

From the outset, their relationship is based on mutual comprehension, self-responsibility, and a co-created, agile action plan that gives them the power and capacity to respond creatively and productively to crisis, change and conflict.


(C) Linda G. Alvarez, Esq., 2013


  1. Sisodia, Rajendra, David B. Wolfe, and Jagdish N. Sheth. Firms of Endearment: How World-class Companies Profit from Passion and Purpose. Upper Saddle River: Wharton School Pub., 2007. Print;

    2013 NACD Board Leadership Conference — Raj Sisodia, Keynote: Conscious Capitalism. By Rajendra Sisodia. Perf. Rajendra Sisodia. YouTube. NACD, n.d. Web. 20 Oct. 2013. http://www.youtube.com/watch?v=YRNXvIq5GlA.

  2. “What Can I Learn?” Conscious Capitalism. N.p., n.d. Web. 20 Oct. 2013. http://www.consciouscapitalism.org/.
  3. “Integrity” as used here means, conscious alignment of actions with deeply held values.

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Beyond Boilerplate

Workable Legal Documents

I was contacted by a friend last year. She and her business partner were considering a drastic change in their relationship and they wanted my help.  I asked her if they already had an agreement that defined their relationship and responsibilities.  She sheepishly paused before admitting that two years earlier another lawyer had drafted some documents.  The documents were full of legal jargon and boilerplate paragraphs which they didn’t understand and they weren’t even sure those issues applied to them. One document alone was over 30 pages of fine print. The documents didn’t capture the love and hope of their partnership or say anything about who they were and why they were creating the business. It didn’t even mention their relationship, except in reference to ways they might take advantage of each other. It was a scary document, not one full of possibility.

They were embarrassed to admit that they had been afraid to sign on the dotted line and now that they were at a crossroads where the agreement was needed, they had nothing as a guideline.

I spent a few hours with the business partners, sorting out the agreements they’d already made between them, writing those down, and figuring out how the new changes would be handled.  We wrote up the new agreements and they breathed a sigh of relief.  Their friendship was preserved.  The roles were clear. They had a plan that worked for both of them. Eventually, the business was transferred to one of the partners.  The other went on an international trip.  When she returned, she went to work as an employee of the company.

Too often, businesses either cede their power to their lawyers or they avoid lawyers, thinking they will endanger the deal.  Policies, procedures, operating agreements, shareholder agreements, and contracts are all legal documents that are designed to make your business work! They’re there to serve you and the business.  Often, the real agreements and relationship are lost in the legalese.  That doesn’t have to be so.  Just as businesses are evolving to a more conscious approach, so are many lawyers.  Instead of being the obfuscators of information, integrative lawyers are facilitators and problem-solvers who make things work. There is a trend in legal practice that focuses on values-based legal documents.

Here are some of the guidelines for these more conscious agreements:

1.  They use plain language that everyone can understand.

My clients’ initial embarrassment about not understanding the agreement was misplaced. It was probably best that they didn’t sign the other agreement.  In the attempt to cover everything, boilerplate documents don’t fit anyone. Legal jargon doesn’t clarify issues for non-lawyers, it obscures meaning and sometimes prevents people from keeping the agreements because they don’t understand what they are supposed to do.  They showed me the unsigned agreements. With over 20 years as a lawyer, I still had a hard time deciphering what their documents were trying to accomplish in some paragraphs.  How could a business owner with no legal training possibly use this agreement to run her business?

2.  All business documents should be working documents that serve the business.

Contracts, policies and procedures are about creating clear understandings so everyone can work together better. They should reflect and embody the values of the company.

While providing a foundation, they are not inflexible. Business agreements should be organic, to the extent possible. If there are two parties working together every day, changes to the agreements may be constant and responsive to the changes that will happen in any business. At the same time, the agreements help to ensure that one person does not go off in a different direction and that changes can be on an agreed-upon schedule.

3.  They should cover both the context and content.

Legal documents are written records of what is agreed and sometimes what is un-said but assumed. They help us see what was not understood and to clarify and align.

In law school, there is a lot of conversation about a “meeting of the minds” but boilerplate contracts have not reflected the mindful relationship. This Meeting of the Minds includes information about who the parties are, why they are entering the agreements, their values and principles. Of course, legal documents also cover the basic terms:  How will profits be divided? Who will be responsible for making sure that taxes are filed?  How often will payments be made?  What is the expected duration of the project?

Legal documents should cover the most likely issues then create a plan for how to handle the unlikely ones.  The trouble with a lot of boilerplate is that it attempts to predict every possible issue that could come up but almost always fails. The likely events will vary with the type of business and the circumstances.  For example, a standard boiler plate personnel policy that prohibits hiring family members is irrelevant in a mom and pop business but may be something to think about in a less personal environment where family relationships could complicate matters.

4.  Focus on maintaining a good working relationship with your business associates.

A business partnership is like a marriage and can be very intimate. Deep hopes and fears can be triggered. Conflicts are inevitable and you need a foundation for resolving them, something short of dissolving the company or heading to court in the business equivalent of divorce. The agreement should lay the groundwork for addressing change and managing conflict.

The purpose of the conflict and change provision is to set out a system to interrupt a situation before it escalates. Too much focus on legal documents, policies and procedures can be a sign that something isn’t working with the relationships in your business. Don’t lean on your legal documents and create new rules when a face to face conversation is what is needed.. Sometimes businesses pass more rules about behavior to try to control behavior rather than exploring the underlying motivations.

5.  Find a lawyer who shares your values…or at least understands them.

Not all lawyers are like those you see on television. Only around 2% of cases are actually settled in courtrooms.  The integrative law movement is a more holistic, system-based approach that is preventive and oriented toward meeting your needs. Such lawyers can help you avoid pitfalls and legal traps while bringing clarity and workability to your relationships. That being said, make sure you interview your lawyer to make sure they have the holistic, preventive and coaching approach to law practice.  If not, find one who does.

Lawyer and consultant J. Kim Wright, J.D. is the author of the best-selling Lawyers as Peacemakers, Practicing Holistic, Problem-Solving Law (American Bar Association, 2010). She is the managing editor and publisher of www.CuttingEdgeLaw.com and an international advocate for the integrative law movement.


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What’s Being Born

“What’s being born is…something that we can feel in many places across Planet Earth. This future is not just about firefighting and tinkering with the surface of structural change. It’s not just about replacing one mindset that no longer serves us with another. It’s a future that requires us to tap into a deeper level of our humanity, of who we really are and who we want to be as a society. It is a future that we can sense, feel and actualize by shifting the inner place from which we operate. It is a future that in those moments of disruption begins to presence itself through us.” – Otto Scharmer in his new book, Leading from the Emerging Future. 1

Good companies make quite a lot of money for their shareholders

Great companies make HUGE amounts of money for their shareholders

But in the process of making huge amounts of money:

  • millions of employees are overworked and underpaid
  • the planet is being destroyed
  • products are being made that are bad for our health – because cheap substitute ingredients are used as they increase the company’s profit

There is nothing very good or great about this.

Smart business people, who care about other people and the planet as well as making a profit, are developing new ways of running businesses that have happy employees and happy customers, do not harm the planet and also do make a profit. As the number of these types of businesses increases, it has turned into a movement: The Conscious Capitalism Movement 2

The 4 main pillars of Conscious Capitalism are:

1.       Higher purpose and core values,

2.       Stakeholder integration,

3.       Conscious culture and management,

4.       Conscious leadership.

These companies realise how important great relationships are and invest significant effort to build strong relationships between the company and its employees, the company and its clients and the company and its suppliers.

In a company, every relationship the company has needs to be embodied in a legal contract. The contract contains the “rules” of the relationship. It sets out what everyone has to do and how they should do it so that the relationship is fair and all parties know what to expect and feel good about playing their part to the best of their ability.

So what is the problem?

All companies, including the Conscious Capitalist Companies leave the writing of these contracts to their legal department. The legal department is full of lawyers who are trained to be Fighters. Lawyers who are trained to see each party as an adversary and  each negotiation as a situation in which people must fight to defend their rights, a world in which there can only be one winner and the lawyer needs to make sure that his client is the winner.

We can see this in the contracts companies have with their customers. These are often called T & C’s or terms and conditions. They are written in very tiny writing and are not about being friendly and fair. They are about a power struggle in which the lawyer has carefully chosen words to ensure the company always wins.

Conscious Capitalist companies try to hire open-minded employees who are aligned with the company’s vision and values. Often they go to great lengths and have many meetings to select the right person for the job and to build a strong relationship. Once they have decided to hire a person, the company gets their legal department to draw up an employment contract. A contract then has so many big words the employee might not even understand them unless he has enough money to consult his own lawyer! Those contracts make it clear the company has all the power. They tell the employee if he does something the company doesn’t like, they will take him to court to fight!  The employee goes into the relationship feeling at a disadvantage, defensive and cautious.

We need to change the way contracts are drafted. We need multi-dimensional lawyers who are not only Fighters but also Designers and Problem Solvers. These lawyers know that they play a vital part in building relationships and restoring harmony and resolving conflict if it does arise. These lawyers also know that conflict is a part of any human relationship! This means they put procedures in place for resolving conflict that don’t involve rushing off to a court room where a judge who has never met any of the people involved gets to make a decision about who is right and who is wrong.

We need lawyers who understand their role is to prevent conflict where possible and restore peace where necessary. We need lawyers who can integrate important information from other disciplines like psychology and economics and organisational development because they are not too busy only being lawyers for 16 hours a day.

These lawyers are called Integrative Lawyers.   They are part of the Blue Economy which celebrates collaboration, innovation and the collective strength of organisations to create transformational change. The Blue Economy is about facilitating shifts in the currently accepted paradigm. In law, the currently accepted paradigm is the Fighter mentality.

If you are building a Conscious Capitalist business or simply trying to improve the relationships your business has with its employees, its suppliers and its customers, you need to train your legal department in Integrative Law. Or hire an Integrative Lawyer.

Conscious contracts offer integrative, values-based ways to align your legal documents with your purpose and create strong relationships with stakeholders. This article, originally written for a magazine for entrepreneurs, will help you understand the direction we’re heading.

Beyond Boilerplate, Workable Legal Documents

And Linda Alvarez has a wonderful website at DiscoveringAgreement.com which describes her particular brand of conscious contract services.

A group of us lawyers from around the world have been working on this model and have only recently decided to form an alliance.  We’re working on our own conscious contract and will be posting more soon.  Until then, we’re collecting resources and sharing them.


  1. Thanks to Kosmos Journal for the quote.
  2. http://www.consciouscapitalism.org/

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