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
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EXPLANATION, EXAMPLE |
1. Stay close to layman (business manager) interpretation and use ‘plain English’
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2. Use the present, active tense and personalise sentences
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3. Simplify: keep sentences short and delete unnecessary words
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4. Use the singular
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Never use, or delete, (s) and everything that it triggers. |
5. Be consistent (rigorously) |
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6. If possible, use shall + infinitive and not the notional verb as an auxiliary
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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
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8. Definitions will be marked bold and not underlined, and not placed between quotation marks
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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
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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 |
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12. Numbers in a provision should be simple and must avoid risks of mistakes
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13. Names and document references should be in italics if they are capitalised but not defined in the contract itself
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International Chamber of Commerce; REACH, Good Manufacturing Practices, IFRS, the U.S. Export Administration. |
14. Avoid referencing to statutory provisions
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For example, “group of companies as defined in article 2:24b of the Dutch Civil Code“. |
15. Do not use without limitation after including |
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16. Do not use it being understood
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17. Use be entitled to instead of may
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The use of may is susceptible to ambiguity. |
18. Name the ‘own party’ and use the functional reference for the ‘other party’
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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
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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 |
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Product |
Goods
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shall
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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. |