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Principles of Effective Contract Drafting Endi Piper. Overview. Why Study Contract Drafting. Contract negotiation and drafting is an exercise in selling. Selling the parties on executing the documents, now; 2. Selling the parties on voluntary

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Principles of Effective Contract Drafting

Endi Piper


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Overview


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Why Study Contract Drafting

  • Contract negotiation and drafting

  • is an exercise in selling.

  • Selling the parties on executing the

  • documents, now;

  • 2. Selling the parties on voluntary

  • performance, after execution; and

  • 3. Selling a court or other entity on

  • performance after voluntary

  • performance has ceased.


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Purpose of a Contract

  • Contracts attempt to articulate:

  • The rights and obligations of the

  • parties;

  • Provisions for events or contingencies

  • that while not expected, may occur.

  • Provisions that avoid any

  • undesired default provisions of any

  • applicable law.

  • Remedies and means of enforcing

  • or avoiding the rights and

  • obligations.


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Role of the Attorney

  • Counselor to client

  • Advocate

  • Planner

  • Negotiator


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Important Principles of Contract Law

  • 1. Mutual assent – intent to contract. There must be a “meeting of the minds.”

  • 2. Offer and acceptance.

  • 3. Consideration – bargain for exchange.

  • 4. Conditions – precedent and subsequent.

  • 5. Representations, warranties, covenants and conditions.

  • 6. Conclusion of a contract – expiration, termination, rescission.


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Exercise #1 – Bobby Cool Rims and the Vintage 1954 Rolls Royce


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The Deal Time Line

  • Most transactions follow a standard time line or chain of events.

  • General rule of thumb is that simple transactions take a shorter

  • period of time than longer transactions.


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The Goal of Drafting – Precise Documents

Four elements of precision:

  • Accuracy.

  • Completeness.

  • Exactness.

  • Able to withstand hostile, critical

  • review.


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The Form of Transactional Documents

  • Title

  • Introductory paragraph

  • Preambles/Recitals

  • Definitions or defined terms

  • Core substantive provisions

  • Representations, warranties,

  • covenants, indemnities,

  • guarantees, releases

  • Events of default and remedies

  • Boilerplate

  • Signature block

  • Exhibits and attachments


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Characteristics of Plain English Drafting

  • 1. Short sentences.

  • Definitive, concrete, everyday

  • language.

  • 3. Use the “active” voice.

  • 4. Use tabular presentation.

  • Separate paragraphs and sections

  • with headings for individual or

  • different concepts.

  • Avoid the use of “legal jargon,”

  • Latin or other foreign terms.

  • 7. Avoid the use of double negatives.


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The Drafting Process

  • Investigate the facts.

  • Investigate applicable law as needed.

  • Develop a contact list and task schedule by deadlines and

  • responsible party.

  • Prepare initial drafts, use precedents and templates where

  • appropriate.

  • Circulate drafts for comments and revise as necessary.

  • Negotiate and memorialize the final definitive documents.

  • Execution of documents.

  • Closing.

  • Post Closing adjustments and clean-up.


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Who Drafts the Contract

  • Contract usually drafted by

  • the party with the most

  • leverage

  • Can control which issues are

  • addressed

  • Can control the pace of the

  • transaction


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Drafting the Contract – Where to

Start


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Drafting the Contract Involves…

  • Determining what the parties agreed to

  • Putting those terms into

  • words


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Talk to your Client

  • What is the deal?

  • Are there any relevant documents?

  • Letters or correspondence?

  • Financial statements? Etc.

  • Ask detailed questions about

  • conversations with the other party

  • Possibly have an initial conversation

  • with the other party…what do they

  • believe are the primary deal points?


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Use of Precedent


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Use Precedent? Why or Why Not?

  • WHY?

  • Saves Time

  • Contains Standard Terms

  • WHY NOT?

  • Hard to find perfect match

  • Precedent may be poorly drafted

  • May not contain necessary Standard

  • Terms

  • **Make sure the precedent was the first

  • draft and does not contain negotiated

  • terms


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Use Precedent or Draft from Scratch?

  • Depends On:

  • 1. Type of Transaction

  • 2. Experience of the Attorney

  • How much time Attorney

  • has to draft


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Prepare the First Draft

  • Draft based on information you have

  • Use precedent or draft from scratch

  • Discuss all questions/issues with client

  • while drafting to make sure draft mirrors

  • deal points

  • Re-draft after speaking with client

  • Send to client to review and possibly

  • redraft again before sending to other

  • party

  • Always send contract to other party

  • “subject to review of client”


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Reviewing First Draft if From the Other Party

  • Review and have comments/questions

  • for your client

  • Review entire contract with Client

  • Prepare red lined mark-up for other

  • party

  • Include reasons for changes if

  • necessary

  • Review with other party in meeting or

  • via phone


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Exercise #2: Halle Berry Independent Contractor – Use of Precedent

Vukani wants Halle Berry to provide

marketing services in the United

States.

You represent Halle Berry. In groups

of 3, go through the precedent and

make a list of what you would

change prior to sending to Vukani.

We will then discuss your proposed changes in each paragraph as a group.


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