As I indicated in a previous blog, one of the general principles of contract drafting is to use plain English. This implies that you should keep sentences short.
In the language review of my forthcoming corporate booklet, Ronald Farrants advised me that several UK firms adopted a best practice rule that sentences should not exceed 17 words and that no word should have more than five syllables. This may seem excessively prescriptive but it imposes an excellent discipline.
In this blog, I will touch upon a few other techniques to keep your contracts short.
Everyone knows that short sentences are much easier to read than longer ones. Contracts are amongst the worst readable texts one can imagine. Apart from the abstract language, the typical reason for this is the use of lengthy sentences. Therefore, be concise and to the point, and address only those matters that must be elaborated on to avoid surprises or confusion or that have relevance in litigated disputes.
A true dragon is the following one-sentence-provision (just for the idea – do not read it):
Exclusivity. The Seller covenants and agrees that for a period of ninety (90) days after the date first written above (the “Effective Date”) or such shorter period as set forth below (as the case may be, the “Exclusivity Period”), none of the Seller, its affiliates or subsidiaries will, and they will cause their respective shareholders, directors, officers, managers, employees, agents, advisors or representatives not to, directly or indirectly, solicit offers for, encourage, negotiate, discuss, or enter into any agreement, understanding or commitment regarding, a possible direct or indirect sale, merger, combination, consolidation, joint venture, partnership, recapitalization, restructuring, refinancing or other disposition of all or any material part of the Company or its subsidiaries, any of the Company’s or its subsidiaries’ assets or issued or unissued capital stock or any of the Company’s or its subsidiaries’ business or contracts (a “Company Sale”) with any party other than Purchaser or provide any information to any party other than Purchaser regarding the Company in that connection; provided that, (i) for the time period commencing on the Effective Date and ending at 11:59 p.m. Central European Time on 26 May 2009 (the “Bid Confirmation Date”), the Parties shall work together in good faith and use commercially reasonable efforts to facilitate due diligence by Purchaser and their advisors to confirm, based on the information made available to Purchaser or their advisors prior to the Bid Confirmation Date, the intent of Purchaser to implement the Transaction pursuant to the terms of this Heads of Agreement and if Purchaser does not deliver notice to Seller of such intent by 11:59 p.m. Central European Time on (or otherwise prior to) the Bid Confirmation Date (such notice, a “Bid Confirmation”), then Seller shall have the right to terminate the Exclusivity Period effective as of (but not prior to) the Bid Confirmation Date by providing written notice to Purchaser by no later than 5 p.m. Central European Time on (but not prior to) the day following the Bid Confirmation Date; and (ii) if Purchaser delivers the Bid Confirmation or if such termination notice set forth in the preceding clause (i) is not given, the Seller shall have the right to terminate the Exclusivity Period effective as of (but not prior to) 11:59 p.m. Central European Time on the sixtieth (60th) day following the Effective Date by delivering written notice of such termination to Purchaser by no later than 5 p.m. Central European Time on (but not prior to) the sixty-first (61st) day following the Effective Date.
Techniques to simplify such sentences are to think first: does it really increase ‘certainty’ if you draft the long lists of persons, actions or matters?! The above sentence can be shortened easily by a better use of defined terms and definitions, by separating out the condition (i.e., the second half), and in particular by reducing:
- the exhaustive (?) list of related persons (i.e., “their respective een overvloedholders, directors, officers, managers, employees, agents, advisors or representatives“);
- their prohibited actions (i.e., “not to, directly or indirectly, solicit offers for, encourage, negotiate, discuss, or enter into any agreement, understanding or commitment“); and
- the possible transaction structures (i.e., “a possible direct or indirect sale, merger, combination, consolidation, joint venture, partnership, recapitalization, restructuring, refinancing or other disposition of all or any material part of the Company or its subsidiaries or any of the Company’s or its subsidiaries’ assets or issued or unissued capital stock“).
Capture the concept. You may realise that quasi-exhaustive lists can typically be reduced into concise wording addressing the relevant concept rather than listing its manifestations. If you attempt to capture the concept in the right words, you would be able to delete many of its manifestations or variants.
Make things concrete. Furthermore, wordiness (and potential ambiguity) can be taken out if abstract references are made concrete. A reference to time (e.g., “5 p.m. Central European Time on (but not prior to) the sixty-first (61st) day following the Effective Date“) can replaced by the actual date and time.
Indentation. A technique to increase legibility is to separate out the exceptions, qualifications or conditions. Often, the visual subdivision in separate (indented) subparagraphs increases readability. Sentences should be short-cut if they pile up clauses that could well stand on their own or if exceptions, qualifications or conditions can be separated and moved to a separate sentence. Alternatively, you could subdivide the exceptions, qualifications or conditions in separate (indented) subparagraphs:
Seller shall indemnify Purchaser against all costs and damages to the extent caused by the following facts or events preceding the Closing Date:
(a) any contamination on the Manufacturing Site related to discontinued activities as of Signing Date, provided that (1) Purchaser gives Seller full control in handling such contamination and related damages, and (2) promptly notifies Seller of all communications with Governmental Authorities and interested persons;
(b) the environmental remediation of the Manufacturing Site related to current activities, provided that:
- the remediation shall be initiated within 12 months from the Closing Date;
- Target and Purchaser shall have obtained written approval of Seller for remediation actions undertaken (which consent shall not unreasonably be withheld or delayed) and shall have kept Seller fully informed of all communications with Governmental Authorities and other interested persons; and
- the remediation shall be for the contaminations identified on Schedule 3 only and shall be substantially in accordance with a remediation plan agreed between the Parties and approved by the Governmental Authorities,
up to a maximum of EUR 1 million.
Please note that by the level of indentation, the limitation to one million euro applies either to both sections (a) and (b), or to section (b) only.