Table of contents

Drafting contracts

1.3 Consistency

Contract drafting and consistency. Rather than being a novelist, a contract drafter must be consistent. A variety in wording to express the same concept is a source of ambiguity (or even a starting point to seek a favourable interpretation of words) and in any case confusing. Examples of concepts that are sometimes used inconsistently:

  • modify, adjust, amend, change…
  • rules, regulations, laws, statutes…
  • clause, article, section, subsection, paragraph, item…
  • goods, product, equipment, tooling
  • end-result, deliverable, milestone

Consistent order of words. A drafter should ensure that there is consistent usage of all terms when drafting a contract. For example, if you repeatedly refer to a course of related actions, apply the enumeration or natural order for such actions rigorously throughout the contract. Once a certain sequence is adopted, use it consistently (so avoid using both Seller and Purchaser and Purchaser and Seller in one document). If you started to refer to its Subsidiaries, do not also refer to Subsidiary of it.

You should preferably use the enumeration or natural order in which they appear or occur in practice. Do not tinker with a natural order or sequence of actions used elsewhere in the contract for no reason. It makes contract negotiations easier for both parties. This is also because once aggravating inconsistencies are discovered the reader will be suspicious about any other yet unidentified inconsistency. This does not facilitate contract review and negotiations.

Consistent with real life. Consistency should not only exist within a contractual framework but also between the contract and its reality: the actual performance under a contract should be consistent with what was agreed (or better) and vice versa. This means that contract provisions need to be consistent with how a debtor or creditor, or the industry or business environment in which they perform, actually operates.

More burdensome are differing standards of conduct required by one-sided provisions used as model contracts. For example, do all definitions of Confidential Information strictly require that:

disclosed written information is marked ‘confidential’ or ‘proprietary’ (and oral information summarised in writing and identified as ‘confidential’ within 30 days after its presentation)

or do you also define Confidential Information to cover:

disclosed information, which must reasonably be deemed to be confidential?

Any such definition should not contradict the general discipline of your own employees. Also, merely changing the provisions of a model confidentiality agreement will not drive organisational discipline into marking documents as ‘confidential’. On the other hand, using both definitions can be appropriate depending on the context. If you do choose to work with both, think first: there may well be a good reason to require the above discipline in a patent department whereas it might be completely obsolete for a sales department. Your contracting policy should be consistent with real life.

A similar example of inconsistency: many divestment transactions include post-closing business relationships with a mutual element. In such case, the mutual delivery of services (or products) will probably be dealt with in different contracts. Ensure that you apply one payment term consistently for both parties: very few people acknowledge the reasonableness of agreeing on a short payment term for one party and a long payment term for the opposite party.

Consistent definitions. ‘Definitions’ are an important tool to improve consistency throughout a contract or throughout transaction documents (on using and drafting defined termssee section 7.1). Lawyers often use different terminology to point at the same concepts: the Buyer (alternative: Purchaser), Affiliates (Affiliated Companies or group companies), Parties (the parties hereto), of this Agreement (hereof). It happens too often that a contract includes both terminologies as a consequence of copy-paste drafting. To avoid this, differing definitions used throughout an organisation for the same defined terms should be made consistent. Tuning the defined terms used in all model contracts, should be part of contract upgrading work.

Readability and consistency. In her A writer’s reference[1], Diana Hacker recommends that when two or more concepts are parallel, they are easier to grasp (and remember) if they are expressed in parallel grammatical form. A single word should be balanced by single words, phrases by phrases and clauses by clauses. It basically means that by summing up those concepts, the same grammatical structure should be repeated consistently. For example:

Open Source Licence Terms” means the provisions in any licence for software, which require, as a condition of use, modification or distribution of any part of such software (a Work): (a) the making available of source code or design information regarding the Work; (b) the granting of permission for creating derivative works regarding the Work; or (c) the granting of a royalty-free licence to any party under intellectual property rights regarding the Work.

Open Source Licence Terms” include: (a) the GNU General Public Licence (GPL) or Lesser/Library GPL (LGPL), (b) the Artistic Licence (e.g. PERL), (c) the Mozilla Public Licence, (d) the Common Public Licence, (e) the Sun Community Source Licence (SCSL), (f) the Sun Industry Standards Source Licence (SISSL), (g) the Sun Industry Standards Licence (SISL), and (h) the Open Software Licence.

In case of claims related to a defect in the Software, Licensee shall …; in case of claims related to an infringement of intellectual property rights, Licensee shall…; in case of claims related to the Hardware, Licensee shall…

On the Closing Date, each indicated person shall take the action as follows:

  1. Acquired Companies to enter into the Transitional Services Agreement with Seller;
  2. Purchasers to pay to Seller the Purchase Price;
  3. the Parties to execute the Deed of Transfer and to execute the Deed of Pledge, in each case in the presence of the Public Notary;
  4. the Public Notary to register each Purchaser in the share­holders register of Acquired Companies as the holders of the Shares;
  5. Purchasers to hand over letters of resignation as members of the management bodies of companies of Seller’s Affiliates in Spain; and
  6. Seller to hand over letters of resignation for each of its appointed members of the management bodies of companies of the Acquired Companies’ Affiliates outside Spain.
  7. Seller to hand over letters of resignation for each of its appointed members of the management bodies of companies of the Acquired Companies’ Affiliates outside Spain.

Diana Hacker obviously gives some other examples, which include the consistent use (or consistent non-use) of adjectives in enumerations.

Mark-ups and negotiations. Inconsistencies often arise when a provision is drafted and redrafted during the negotiation process. Do not refrain from reinstating consistency in a subsequent mark-up, even in sensitive provisions, as long as you do so consistently (and accurately). An example of this is a provision with several exceptions, qualifications or conditions. Particularly if they are added at different stages in the drafting process, they may not be expressed in a consistent or grammatical fashion. For example:

Borrower may not incur or permit to subsist any Encumbrances on any of its assets, other than:

(a)        Encumbrances arising in the ordinary course of business;

(b)        Borrower may grant Encumbrances on equipment to secure indebtedness incurred to finance the purchase price of such equipment; and

(c)        Encumbrances described in Schedule 3 shall be permitted.

The approaches reflected in the three exceptions are each correct. Nevertheless, each item reflects an approach inconsistent with the others, making the provision more difficult to follow. In the example, the approach reflected in item (a) is preferable, because it prevents unnecessary repetition with the lead-in provision.

Consistency amongst model contracts. Ideally, all model contracts and model clauses used throughout a company or firm should apply terminology in a consistent manner. It happens very often that the various lawyers use different terminology to point at the same concepts: the Buyer (alternative: Purchaser), Affiliates (Affiliated Companies), Parties (the parties hereto), of this Agreement (hereof). It happens too often that a sales contract includes both defined terms as a consequence of copy-paste drafting. Streamlining this terminology is where the exercise of the company or firm may end.

[1] Diana Hacker, A writer’s reference, Bedford/St. Martin’s, Boston/New York, 6th ed. 2009, S1.

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Drafting contracts

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