(a) Short sentences

Everyone knows that short sentences are much easier to read than longer ones. Contracts are amongst the worst readable texts one can imagine. Apart from the abstract language, the typical reason for this is the use of lengthy sentences. Therefore, one of the leading principles of contract drafting is to be concise and to the point, and address only those matters that must be elaborated on to avoid surprises or confusion or that have relevance in litigated disputes.

A true dragon is the following sentence:

Exclusivity.  The Seller covenants and agrees that for a period of ninety (90) days after the date first written above (the “Effective Date”) or such shorter period as set forth below (as the case may be, the “Exclusivity Period”), none of the Seller, its affiliates or subsidiaries will, and they will cause their respective shareholders, directors, officers, managers, employees, agents, advisors or representatives not to, directly or indirectly, solicit offers for, encourage, negotiate, discuss, or enter into any agreement, understanding or commitment regarding, a possible direct or indirect sale, merger, combination, consolidation, joint venture, partnership, recapitalization, restructuring, refinancing or other disposition of all or any material part of the Company or its subsidiaries or any of the Company’s or its subsidiaries’ assets or issued or unissued capital stock (a “Company Sale”) with any party other than Purchaser or provide any information to any party other than Purchaser regarding the Company in that connection; provided that, (i) for the time period commencing on the Effective Date and ending at 11:59 p.m. Central European Time on 7 July 2007 (the “Bid Confirmation Date”), the Parties shall work together in good faith and use commercially reasonable efforts to facilitate due diligence by Purchaser and their advisors to confirm, based on the information made available to Purchaser or their advisors prior to the Bid Confirmation Date, the intent of Purchaser to implement the Transaction pursuant to the terms of this Heads of Agreement and if Purchaser does not deliver notice to Seller of such intent by 11:59 p.m. Central European Time on (or otherwise prior to) the Bid Confirmation Date (such notice, a “Bid Confirmation”), then Seller shall have the right to terminate the Exclusivity Period effective as of (but not prior to) the Bid Confirmation Date by providing written notice to Purchaser by no later than 5 p.m. Central European Time on (but not prior to) the day following the Bid Confirmation Date; and (ii) if Purchaser delivers the Bid Confirmation or if such termination notice set forth in the preceding clause (i) is not given, the Seller shall have the right to terminate the Exclusivity Period effective as of (but not prior to) 11:59 p.m. Central European Time on the sixtieth (60th) day following the Effective Date by delivering written notice of such termination to Purchaser by no later than 5 p.m. Central European Time on (but not prior to) the sixty-first (61st) day following the Effective Date.

Sentences should be short-cut if they pile up clauses that could well stand on their own or if exceptions, qualifications or conditions can be separated and moved to a separate sentence. The above sentence can be shortened easily by a better use of definitions, by separating the condition (i.e. the second half), by reducing the exhaustive (?) list of related persons (i.e. “their respective shareholders, directors, officers, managers, employees, agents, advisors or representatives“), their prohibited actions (i.e. “not to, directly or indirectly, solicit offers for, encourage, negotiate, discuss, or enter into any agreement, understanding or commitment“) and transaction structures (i.e. “a possible direct or indirect sale, merger, combination, consolidation, joint venture, partnership, recapitalization, restructuring, refinancing or other disposition of all or any material part of the Company or its subsidiaries or any of the Company’s or its subsidiaries’ assets or issued or unissued capital stock“) into concise wording addressing the same. Uncertainty can be taken out if references to time (e.g. “5 p.m. Central European Time on (but not prior to) the sixty-first (61st) day following the Effective Date“) are replaced by the targeted date.

Techniques to short-cut sentences are to think first (i.e. is it really necessary to add the ‘certainty’ conveyed by the long list of persons, actions or matters?) and to subdivide the exceptions, qualifications or conditions in separate (indented) subparagraphs. Often, the visual subdivision in sub-paragraphs will increase readability:

Seller shall indemnify Purchaser against all damages to the extent caused by the following facts or events preceding the Closing Date:

(a) any contamination on the Manufacturing Site related to discontinued activities as of Signing Date, provided that Purchaser promptly notifies Seller of all communications and gives Seller full control in handling such damages and contamination;

(b) all costs and expenses resulting from the environmental remediation of the Manufacturing Site, provided that:

(i) the remediation shall be initiated within 12 months from the Closing Date;

(ii) Target and Purchaser shall have obtained written approval of Seller for remediation actions undertaken (which consent shall not be unreasonably withheld, conditioned or delayed) and shall have kept Seller fully informed of all communications with Governmental Authorities; and

(iii) the remediation shall be for the contaminations identified on Schedule 3 only and shall be substantially in accordance with a remediation plan agreed between the Parties and approved by the Governmental Authorities, up to a maximum of EUR 1 million.

Please note that by the level of indentation, the limitation to one million euro applies to section (b) only.