A company’s Contract Drafting Conventions

When a company or law firm upgrades its model contracts and contract clauses, it should do this consistently. This means that the legal department or firm should make certain choices and abide by the consequences (i.e., use it from then on in all model contracts). Such attitude improves the exchangeability of contract building blocks in a contract assembly software application such as the Weagree Wizard. Consistency also implies that the in-house lawyers or the attorneys-at-law should apply the same drafting principles.

By way of a workable example, this blog gives an exerpt of such choices: a firm’s Contract Drafting Conventions. If you want to have a workable Word-version, let me know. Note that I intend to re-address this subject from time to time.

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 ‘US 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 (stay close to yourself: to the 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 in 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 of 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 – “de” 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 en soepel 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 likely 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 to 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’

 

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.

 

B. PREFERRED TERMINOLOGY IN CONTRACTS

PREFERRED TERMINOLOGY

 

TO BE REPLACED

Agreement (capitalised) agreement, contract
Party or Parties party en soepel 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 (except in letter agreements or amendment letters).
  • Do not use both shall en soepel will.
Article for articles and sections (level 1 and 2); and item for paragraphs, sub-sections and enumerations (level 3 and higher).
Clause, section, sub-section, paragraph, subparagraph.

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