Drafting contracts

Annex 3 Contract drafting conventions (sample)

In order to facilitate consistency amongst the various model contracts used throughout a law firm or company and to enable the use of contract building blocks across different model contracts (whether in Word-form or as a template available in a contract assembly software application), it is strongly recommended to develop a reference set of contract drafting conventions. Such contract drafting conventions should not only establish the principles to be applied throughout the model contracts but should also reflect the choices made in relation to the model contracts and model contract clauses.

This book in its entirety may serve as a ‘contract drafting convention’ but for practical use a high-level summary and a short list of key choices is preferable. In case of doubt, reference may be made to this book.

Part A. Best practice rules of contract drafting

 

BEST PRACTICE RULE

 

EXPLANATION, EXAMPLE

1.    Stay close to layman (business manager) interpretation and use ‘plain English

 

  • Prefer ‘British English’ to ‘U.S. English’, especially regarding spelling.
  • Avoid fashionable wording.
  • Avoid overly legalistic wording or phrases (e.g. “among and between“, “agree and covenant“, “any and all“, “by and between“, “adjust, amend or otherwise modify“, “confirm and represent“, “if and to the extent” – however, any replacement should not affect appropriate particularities of common law or other actual national-legal concepts).
  • Do not use and/or.

2.    Use the present, active tense and personalise sentences

 

  • Avoid “It is agreed” and “… by [ABC]“.
  • Obligations should point to a contract party.
  • Avoid nominalisations (i.e. verbs transformed into nouns).

3.    Simplify: keep sentences short and delete unnecessary words

 

  • Preferably, no sentence should exceed 17 words and no word should exceed five syllables.
  • Delete, where possible: “The Parties agree that” (in most cases, it would be followed by the obligation that “Seller shall …”).
  • Do not overload a contract with boilerplate clauses; preferably, use them only where necessary or desirable.
  • Delete superfluous wording (e.g. in most cases: “during the term of this Agreement“).

4.    Use the singular

 

Never use, or delete, (s) and everything that it triggers.

5.    Be consistent (rigorously)

  • Do not vary words or phrases for no reason.
  • Apply enumerations in a consistent (and natural) order.
  • Avoid imposing obligations that contradict real-life practices (retain your company’s character, style and policies).

6.    If possible, use shall + infinitive and not the notional verb as an auxiliary

 

This avoids contract assembly complications: if the notional verb is also the auxiliary verb, the automated contract should provide for the plural and the singular each time it is used (e.g. “Purchaser shall permit” as opposed to “[Purchaser permits][Purchasers permit]” and everything this triggers).

7.    Bring exceptions, limitations and qualifications together

 

  • If the exceptions, limitations and qualifications are (very) short, put them at the beginning of a provision. Preferably, they should follow the main principle or obligation.
  • Exceptions, limitations and qualifications spanning over more than one line should be enumerated in subparagraphs.

8.    Definitions will be marked bold and not underlined, and not placed between quotation marks

 

Example: Product means the products listed in…

9.    Do not explain ‘why’ (avoid using enabling or in order to)

If it is important, it should be addressed in the recitals, conditions or warranties. Less important matters should become clear from the obligatory text (or be self-explanatory).

10.  Obligations (and covenants) will be strictly separated from recitals, definitions, conditions precedent and representations

 

Recitals (whereas-clauses) and representations should be no more than a statement of fact. Obligations remedying any failing representation should be addressed separately (i.e. in a separate clause).

11.  Avoid legalese

  • Reduce the use of ‘doublets’ and ‘triplets’ to those that are relevant and important.
  • Avoid “said” (use “such” reluctantly – “the” is often unequivocally clear).

12.  Numbers in a provision should be simple and must avoid risks of mistakes

 

  • Numbers up to ten (inclusive) shall be written out, except for percentages, prices, hours, days of the month and numbers in ‘enumerations’ (e.g. five days, 10:30 a.m., 6 percent and between 9 and 15). Numbers above ten shall be expressed by the figure only (e.g. 45, 90, 1,500).
  • Avoid both using numbers and writing them out (i.e. the risk that a typo is made in the number is probably smaller than the risk that upon an update of the numbers its written counterpart is not updated).
  • Use figure + percent” instead of %.

13.  Names and document references should be in italics if they are capitalised but not defined in the contract itself

 

International Chamber of Commerce; REACH, Good Manufacturing Practices, IFRS, the U.S. Export Administration.

14.  Avoid referencing statutory provisions

 

For example, “group of companies as defined in article 2:24b of the Dutch Civil Code“.

15.  Do not use without limitation after including

  • Only exceptionally and not in day-to-day English, including would be understood to be followed by an exhaustive listing.
  • The same applies to but not limited to.

16.  Do not use it being understood

 

  • The words do not add anything to what follows.
  • The same applies to “Service Provider understands and agrees”, it is acknowledged that and words of similar import.

17.  Use be entitled to instead of may

 

The use of may is susceptible to ambiguity.

18.  Name the ‘own party’ and use the functional reference for the ‘other party’

 

For example, Weagree vs. Licensor.

19.  Reduce cross-referencing

Cross-references might trigger contract assembly complications: as such there is no objection against cross-referencing, but both the referring and the referred-to clause should always appear in the resulting document.

Part B. Preferred terminology in contracts

PREFERRED TERMINOLOGY

 

TO BE REPLACED

Agreement (capitalised)

agreement, contract.

Party or Parties

party and parties.

Purchaser, Seller, Customer

Buyer, Vendor, Supplier, Service Recipient, Company.

in / of / to this Agreement

herein, hereof, hereto (i.e. also parties hereto, on the date hereof).

Affiliate

  • Affiliated Company; group company.
  • Use Subsidiary if necessary only.

Product

 

Goods.

shall

 

  • Replace will and must (except in letter agreements or amendment letters).
  • Do not use both shall and will.

Article for articles; Section for sections (level 1 and 2); and item for paragraphs, sub-sections and enumerations (level 3 and higher)

 

Clause, sub-section, paragraph, subparagraph and (for articles) section.

Schedules for schedules to the main agreement and Annex for attachments to schedules

Exhibit, Appendix, Attachment.

Part C. Presentation

  • An agreement must get a cover page if it exceeds ten pages or if it is confidential.
  • An agreement should get a table of contents if it contains more than ten articles or more than ten pages.
  • Contracts must be marked confidential (and not strictly confidential or privileged) on each page.
  • Use schedules to the main agreement; if a schedule itself contains exhibits, the exhibits will be called Annex.
  • A list of schedule is included underneath the table of contents (unless it breaks over the pages, in which case it will be placed on a separate page).
  • The footers will identify…