A contract drafter should either use shall or will and always use it consistently. Often, in combining contract provisions from different sources or in marking up a draft contract, a party easily introduces the other verb. Do not hesitate to mark-up any inserted shall or will wording to restore consistency.
Oxford dictionary. The Oxford English Dictionary (OED) makes the most helpful distinction: the traditional use of shall and will prescribes that when forming the future tense, shall should be used with the first person I and we, while will should be used with the second or third person you, he, she, it and they. When emphasising determination or a command (including obligations?) the rule is reversed: will is used with I and we; and shall with you, he, she, it and they. This distinction largely aligns with the above distinctions. In contracts, the distinction made by the OED becomes visible in letter agreements (in which the parties are often referred to as you and we; as opposed to contracts where parties act as “it” or anyhow as the third person).
The OED continues to explain that in real life, the rules are not followed so strictly and that the contracted (!) forms I’ll or we’ll are often used instead, albeit in particular in spoken or informal context. In contracts, you should never contract will or shall!
Differentiating approach. There are drafters, such as Kenneth Adams[1], who distinguish types of contract language to help choose among must and will (and avoid shall altogether):
(a) provisions imposing an obligation on a party (e.g. “Seller shall deliver the Product”), where shall could be replaced by has an obligation to;
(b) provisions signalling an obligation on a third party (e.g. “the Parties agree that 3X shall first deliver the raw materials”), where shall would preferably be replaced by must (and where replacing it by has an obligation to is ineffective in view of 3X being an outsider to the contract);
(c) provisions addressing, as a matter of policy (not necessarily requiring any action), a consequence upon the occurrence of a specified event (e.g. “this Call Option shall terminate upon the Majority Shareholder selling its Shares”), where shall would more appropriately be replaced by will.
The distinction between several types of contract provisions suggests that ‘consistent drafting’ means that shall should always be used for party obligations and that contract policy rules should be signalled by will (implying that both shall and will may properly co-exist in one contract). Others would dispose with such distinction if the use of will psychologically smoothens the sharp edges from the obligatory shall helping the other party to assume such obligation.
Simple approach. If you are not a native English speaker, your best approach is probably to be consistent. To use shall for a party who assumes an obligation, and will to indicate a future event or consequence.
[1] See Kenneth A. Adams, A manual of style for contract drafting.
