Tips for drafting a contract that stays out of court
When setting up contractual arrangements, the aim is that the parties have a clear agreement in place between them so that each party knows what is allowed and what is expected of them. Some call it “arranging your divorce before you get married”, and we believe that is a brilliant summary of what contract drafting really is.
But there is always a chance that disagreements will arise and your contract will have to stand up in court. You better make sure your contracts are so clear that no one will even consider going to court because they know they would lose.
That is why we give you 6 important tips to make sure that your contract stays out of court:
- Prepare a clear outline together with your client
Ask your client to prepare the contract outline and list the deal points. They can write this down as a story, use a bullet points list, or simply elaborate on the proposal face-to-face, with a good cup of coffee on the side. Formulating the outline will force the client to focus on what they think is most important in the contract. This outline will help you identify the client’s core deal terms, but also allow you to identify certain issues or loopholes that they have not thought of themselves but that need to be addressed to create a solid contract. Often, you will need to present your client with several “What if” scenarios to come to a structured decision-tree to implement in your draft.PS: A little bonus tip from us to you. Before you start drafting, ask your client if he/she still has a similar contract from the past somewhere or look for precedents in your own database. Starting with an existing contract can save you a lot of time. Just remember to adapt it to your client’s details. - Write with the 3 C’s in mind: clear, concise, and consistent
Clear – Ambiguous terms and language of which you know that you are actually beating around the bush should be avoided at all costs.
Two golden tips here are;
a. Make sure that your contract is so clear that a layman can understand its terms. So think like a lawyer, but don’t sound like a lawyer. If your client, or someone else (proof)reading the contract, questions the meaning of certain wording: adjust or clarify. If something is already unclear in a first draft, chances are they’ll be unclear if there is a conflict situation.
b. Only repeat yourself if it’s necessary to improve clarity. It is almost impossible to say the same thing twice without creating ambiguity.
And above all, remember to be clear in your use and placement of conjunctions (i.e. “and,” “or,” and “but”), modifiers (i.e. “active,” “knowingly,” and so on), and correct punctuation (i.e. “I like cooking my family and my pets” is (dramatically) different from “I like cooking, my family and my pets”)
Concise – Cut unnecessary words or phrases to ensure a straightforward contract. Avoid unintended obligations, conditions, distinctions, etc.
Consistent – Once you have defined a party or term, use it consistently. Remember, your aim when drafting a contract is not to make it enjoyable. Unlike in creative writing, consistently using the same terminology is not a vice but rather a virtue. - Remember the recitals
At the beginning of a contract you typically find the “whereas” clauses, better known as recitals. They provide context for outside parties to quickly grasp what the contract is about, who the parties are, why they are signing a contract, and so on.
Don’t forget to include a reference to the recitals in the first paragraph of the body of the contract. In order to avoid later disputes as to whether or not the recitals are a legally binding part of the contract, state that they are true and correct.
Further, the recitals may be a good place to provide some context for the collaboration that might come in handy when setting the scene in a court case. So even though we’re trying to avoid court at all costs, pay attention to your recitals and don’t treat them as just a boilerplate section. They might make all the difference one day. - Define terms and parties as you go
Instead of starting off by writing a list of definitions, it might be a good idea to keep track of all the important terms and parties as you are writing the contract, in the order of appearance. It could help you not to forget any. Also, remember to explain technical terms and concepts. Try to make it easier for a reader unfamiliar with the deal to follow. In any event, whichever approach you choose, double-checking definitions in the end is worth your while. Nothing creates confusion (or a basis for discussion) like misused definitions. - Measure twice, cut once
Don’t forget to check paragraph numbering and cross-references. And remember to do a thorough spelling check with your spelling checker and manually. You wouldn’t want to have to explain why autocorrect changed the word “list” to “lust”.
Teamwork makes the dream work, so ask your partner, associate, or paralegal to proofread your contract. They will find spelling and grammatical errors, inconsistencies and confusing areas you overlooked while drafting. As a general principle, we recommend always applying the four-eye principle in your organisation. No level of seniority protects you from making typo’s or the occasional error, and a proofreader may also identify elements that may not be entirely clear or open for debate. If it’s only clear to you, but not for every other person reading the contract, you’re likely to end up in conflict. - Use henchman 😉
Last but not least, use Henchman. Henchman is an add-in that helps you draft faster and better contracts by retrieving your previously written clauses from your, or your firm’s, existing contract repository and presenting these clauses to you within Microsoft Word.In the add-in you can easily recycle and indicate best practices. It’ll help your firm’s contracts to become stronger and more consistent because you can build on each other’s experience and adopt each other’s words and nuances. A great way to make sure your entire firm is drafting contracts that stay out of court.