In this blog post, I will give you some thoughts about the way contract articles, sections and clauses are numbered. Should you use Arabic numbering, sub-itemise the way Wittgenstein did in his Tractatus logicao-philosophicus (i.e. 184.108.40.206, 220.127.116.11 etc.)? There appear to be subtle differences between U.S. legal practice and what Europeans tend to do.
Article numbering. Typically, articles are given Arabic numbers with or without a full stop (1., 2., 3. or 1, 2, 3). In U.S. legal practice you will also find Roman numbering (i.e. Article I, Article II). If you decide to number articles in Roman numbers, you should revert to Arabic numbering for references to sections (i.e. section 2.3 would be the third section of Article II). U.S. originating contracts sometimes also place the word Article before the article number.
Note that dividing the agreement in articles and sections is not mandatory. However, not dividing the agreement into articles is uncommon, especially if the agreement exceeds six or seven sections, or if the various sections are dividable into two or three groups of a fairly different nature. Furthermore, in informal agreements, letter agreements and term sheets, a simple numbering style (i.e. 1., 2., 3.) would be perfectly appropriate.
The numbering and indentation style promulgated by me (and commonly used on the European continent) is the following:
Section numbering. Unless an article consists of one section only, each section should be numbered. Do not place the word Section in front of each section number. You can number sections consecutively (i.e. 1., 2., 3. or (1), (2), (3)) or you can number the articles and sections using a multiple-numeration system (i.e. the sections of article 2 being numbered 2.1, 2.2, 2.3). Do not number sections 2.01, 2.02, 2.03, or 2.1., 2.2., 2.3. (with an extra full stop).
All the text in the body of an article should fall within a section (and, accordingly, should be numbered if there) where enumeration is preceded with a single lead-in, the remainder of the article may need to be reflected as subsections. For example, the lead-in that the seller warrants to the purchaser that each of the following statements is correct would result in all those statements taking the form of subsections with room to add only one or two additional levels of paragraphs. Some drafters resolve this by placing the lead-in (without a number) between the article and the first section. This habit should be discouraged.
Numbering subsections. Like the articles and sections, the subsections and paragraphs or items should be numbered as well. However, you should consider not pursuing a further multiple-numeration (i.e. do not number 2.1.1, 2.1.2, 2.1.3). It is common to use lower case letters between parentheses or small roman numbering between parentheses (we prefer (a), (b), (c)). For paragraphs you should choose another style (e.g. in case of subsection numbering by small letters use small roman numbering between parentheses).
No hand-numbering. Do not attribute a number to each article or section yourself! At the end of the 1990s, it had become very common to apply automatic numbering: articles on level 1, sections on level 2, etc..
Many drafters might link this to the Heading-styles provided by Word, but because this is a considerable source of document corruption (causing your computer to crash or slow down) when the contract is opened in another Word-version or another Word-language-version, it is strongly recommended to apply custom-made styles. When applied correctly (but there is only one way to do so in Word) the use of custom styles also allows the automatic renumbering of subitems (and sub-subitems) in non-numbered definitions; a distinct numbering of the contracting parties and recitals and the automatic renumbering of contracts included in a schedule (where the schedule is integrated in the main document of the main agreement).