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Drafting contracts

Part I Contract drafting: matters of style

1 General drafting principles

1.1 Plain English: simple and clear

(a) Short sentences
(b) Keep subject and verb together – left-right principle
(c) Use the active tense and personalise sentences
(d) Delete unnecessary words

1.2 Accuracy

(a) Think analytically and draft ‘MECE’
(b) Examples of improved accuracy

1.3 Consistency

1.4 Vagueness and ambiguity

(a) 'Avoid vague terms'

(i) Vague terms: reasonable
(ii) Vague terms: material
(iii) Vague terms: substantially
(iv) Vague terms: without undue delay

(b) Ambiguity

2 Matters of style and legal culture

2.1 Being exhaustive (US-style) or Conceptual (European style)

2.2 Some considerations on contract interpretation

(a) Legal cultures and determinative interpretation factors
(b) Statutory guidelines on contract interpretation

2.3 Degrees of binding and non-binding commitments

Part II Structure and presentation of contracts

3 Main contract outline

3.1 Setting up an agreement

3.2 Presentation styles: European vs. US style

3.3 A cover page and table of contents

3.4 First part of an agreement

(a) The contract title
(b) Definition of 'this Agreement'
(c) Date
(d) Made or entered into
(e) By, between and amongst
(f) The contracting parties
(g) The parties defined
(h) Preamble
(i) Words of agreement:

3.5 The body of the agreement

3.6 Blank space after the body of the contract

3.7 Signature blocks, seals and witnesses

3.8 Aspects of signing, and initialling

3.9 Notarisation, legalisation and apostilles

4 Structuring the transaction documents

4.1 Cross references
4.2 Schedules, annexes and exhibits

5 Presentation: the look and feel

5.1 General matters: fonts, spacing, alignment and margins

(a) About fonts: nature and legibility

(i) Letter families
(ii) Characteristics: Helvetica, Times New Roman and Garamond

(b) About spacing, alignment and margins: readability

(i) Line spacing
(ii) Alignment: justified, left aligned, right aligned
(iii) Margins

5.2 Layout and numbering

(a) Articles and sections
(b) Numbering
(c) Indentation
(d) Enumerations
(e) Bullet points

5.3 Headings and captions

5.4 House style rules

Part III Drafting contracts and contract clauses

6 Typical drafting habits and 'legalese'

6.1 Certain funny phrases

(a) For the avoidance of doubt, …
(b) ‘…, as the case may be’
(c) The issue of ‘include’ and ‘without limitation’
(d) ‘Subject to…’
(e) 'Notwithstanding...'
(f) ‘Except as otherwise agreed…’
(g) …provided, however, that…
(h) ‘…from time to time’
(i) ‘…not to be unreasonably withheld or delayed'
(j) Shall be 'deemed'
(k) ‘Third parties’
(l) 'Hereby'
(m) ‘To the maximum extent permitted by law’
(n) Intentionally left blank…

6.2 Do's and don'ts

(a) Think first: and/or
(b) 'In order to' (avoid explanations)
(c) Not shall and will (but only one of them)
(d) 'Said', 'such' and links
(e) – Do not write (s) and do not use /
(f) ‘The same’ and ‘that certain’
(g) Herein, thereof, everywhereof
(h) 'Mutual' is a pleonasm
(i) Do not emphasise the unnecessary
(j) Use of ‘when’, ‘if’ and ‘to the extent that’
(k) Use of synonyms and hendiadyses
(l) Certain vague terms: without undue delay

6.3 Numbers and formulae

(a) Best practice rules on drafting numbers
(b) Drafting fractions
(c) Ranges of figures
(d) References to dates
(e) References to time

7 Definitions and contract interpretation clauses

7.1 Definitions and defined terms – best practice rules

(a) Principles related to the use of defined terms in contracts
(b) Principles related to the place and presentation of defined terms
(c) Principles related to drafting the text of a definition

7.2 Interpretation guidelines for standard words and phrases

(a) Standard words and phrases ‘defined’
(b) ‘Subsidiaries’ and ‘Affiliates’
(c) ‘Best endeavours’ and ‘commercially reasonable efforts’
(d) ‘In the ordinary course of business’
(e) An arm's length away
(f) ‘To the knowledge of…’

8 Particular types of contract clauses

8.1 Conditions, conditional clauses and triggering events

(a) General observations about conditions
(b) Subject matters adjacent to conditions
(c) Best practice rules on drafting conditions – intro and overview
(d) Common conditions

8.2 Covenants

(a) Covenants vs. conditions
(b) Covenants in various contracts
(c) Covenants in M&A transactions
(d) Credit-facility-related covenants
(e) Carve-outs and baskets: exceptions to covenants

8.3 Reps and warranties

(a) Warranties – a quick introduction
(b) Statements of fact, not obligations
(c) Warranties, not representations and warranties
(d) A warranty is incorrect (or untrue), but not breached
(e) Smoking out the facts
(f) Allocation of risk
(g) Fitness for purpose and merchantability
(h) Bringing down warranties
(i) Survival of warranties
(j) Disclosures in M&A agreements
(k) Warranties in ordinary course business contracts
(l) Warranty aspects in major transactions (M&A)

8.4 Limitations of liability and indemnities

(a) Limitations of liability
(b) Indemnities

8.5 Confidentiality clauses

8.6 Miscellaneous ('boilerplate') clauses

(a) Notices clause
(b) Amendments
(c) No subcontracting
(e) Severability
(f) Waivers
(g) Entire agreement and merger clauses
(h) Further assurance (duty to cooperate)
(i) Force majeure
(j) Announcements
(l) Independent contractors (‘no partnership established’)
(k) No termination or dissolution
(m) Time is of the essence
(n) No general conditions to apply
(o) Language (translations)
(p) Counterparts
(q) Independence of the notary
Non assignment

8.7 Applicable law clauses

(a) International nature
(b) Dispense with "…excluding its conflicts of law provisions"
(c) Exclude the applicability of the Vienna Convention?

8.8 Dispute resolution provisions

(a) Court or arbitration?
(b) Choices of court
(c) Arbitration or expert determination?
(d) Arbitration institute or ad hoc arbitration?
(e) Points of attention in an arbitration clause
(f) Mediation, dispute boards and escalation

Part IV Miscellaneous

9 Contract assembly software

9.1 Contract assembly software generally

9.2 Advantages of contract assembly

9.3 A workflow within contract assembly applications

9.4 Implementing contract assembly

Leading a change to contract automation
Contract automation mindmap for implementation of Weagree

10 Drafting certain specific types of legal documents

10.1 Letter agreements and side letters
10.2 Amendments, supplements and addenda
10.3 Shareholder and board resolutions and powers of attorney

Annex 1 Ten steps to a successful upgrade of your contracts

(a) Step 1: Selection of contracts and scope of contract automation
(b) Step 2: Establishing a best practice group
(c) Step 3: Collecting and stripping the model contracts and precedents
(d) Step 4: Prioritising the model contracts
(e) Step 5: Establishing the procedure and setting the agenda
(f) Step 6: Preparing handsome proposals for discussion
(g) Step 7: Discussing and establishing the model building blocks
(h) Step 8: Determining the company's contract house style
(i) Step 9: Identifying approval requirements and business access
(j) Step 10: Automating the documents and implementing the workflow

Annex 2 Document marking conventions

Annex 3 Contract drafting conventions (sample)

Annex 4 House style rules (sample)

8.8 Dispute resolution provisions

It is strongly advisable to provide for a dispute resolution mechanism. This paragraph addresses the various drafting issues arising in this context.

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Drafting contracts

8.8 Dispute resolution provisions

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