Group conditions clearly, subject-by-subject

Part three in a series of best practice rules on drafting conditions is closely related to the second one posted earlier today (click here). The example somewhat fits that previous rule.

3)     Divide conditions clearly, subject-by-subject and consider enumerating them.

Because the effect of a condition can be drakonic, it is strongly recommended to formulate and present each condition in a clear and unequivocal manner. For example, a drafter should prevent that two conditions are mixed up and interpreted as one consisting of two sub-conditions (of which each must be met).
An example is the following clause taken from an escrow agreement in which the escrow agent should be able to apply clear and strict criteria:

The Escrow Agent shall release the Technology and Know How to Customer immediately:

(a)     upon receipt of a joint written instruction to that effect from Supplier and Customer, stating the deposit code and date;

(b)     upon receipt of a notice that Supplier shall be dissolved or liquidated, is declared bankrupt or otherwise insolvent pursuant to the laws and regulations of a jurisdiction to which Supplier is subject;

(c)     in case Supplier is in material breach of its obligations arising from the Principal Agreement, upon receipt of a copy of Customer’s notice of default to Supplier, provided that if the Escrow Agent deems that such breach was capable of being remedied, also a reasonable term for remedy permitted in such notice has expired. The Escrow Agent may deem:

(i) a breach by Supplier to be “material” if Supplier failed to deliver the Product ordered by Customer (X) within the period specified in the purchase order, or (Y) strictly in accordance with the agreed specifications, as stated in the notice of default.

(ii) a period for remedy any breach to be “reasonable” if it is no less than 30 days;

(d)     in case of a court judgment that has become final and conclusive or has become provisionally enforceable, to the effect that the Escrow Agent is obliged to deliver the Material to Customer.

As is the case for enumerations generally, the legibility of conditions improves if they are listed subject-by-subject. Apply a logic to the order of the conditions. An exception to this can be that the legibility of a listing of items, one of which is verbose and the other just a few words, may require that the short conditions are listed first and the lengthier ones thereafter.

Often, conditional clauses are placed together at the beginning of a sentence. However, it is recommended to follow the general drafting principles discussed my previous blog (i.e., explaining the left-right principle – click here): make the reader comfortable by first driving your point home (and start with the principle).

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