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Principles of Effective Contract Drafting Endi Piper

Principles of Effective Contract Drafting Endi Piper. Overview. Why Study Contract Drafting. Contract negotiation and drafting is an exercise in selling. Selling the parties on executing the documents, now; 2. Selling the parties on voluntary

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Principles of Effective Contract Drafting Endi Piper

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  1. Principles of Effective Contract Drafting Endi Piper

  2. Overview

  3. Why Study Contract Drafting • Contract negotiation and drafting • is an exercise in selling. • Selling the parties on executing the • documents, now; • 2. Selling the parties on voluntary • performance, after execution; and • 3. Selling a court or other entity on • performance after voluntary • performance has ceased.

  4. Purpose of a Contract • Contracts attempt to articulate: • The rights and obligations of the • parties; • Provisions for events or contingencies • that while not expected, may occur. • Provisions that avoid any • undesired default provisions of any • applicable law. • Remedies and means of enforcing • or avoiding the rights and • obligations.

  5. Role of the Attorney • Counselor to client • Advocate • Planner • Negotiator

  6. Important Principles of Contract Law • 1. Mutual assent – intent to contract. There must be a “meeting of the minds.” • 2. Offer and acceptance. • 3. Consideration – bargain for exchange. • 4. Conditions – precedent and subsequent. • 5. Representations, warranties, covenants and conditions. • 6. Conclusion of a contract – expiration, termination, rescission.

  7. Exercise #1 – Bobby Cool Rims and the Vintage 1954 Rolls Royce

  8. The Deal Time Line • Most transactions follow a standard time line or chain of events. • General rule of thumb is that simple transactions take a shorter • period of time than longer transactions.

  9. The Goal of Drafting – Precise Documents Four elements of precision: • Accuracy. • Completeness. • Exactness. • Able to withstand hostile, critical • review.

  10. The Form of Transactional Documents • Title • Introductory paragraph • Preambles/Recitals • Definitions or defined terms • Core substantive provisions • Representations, warranties, • covenants, indemnities, • guarantees, releases • Events of default and remedies • Boilerplate • Signature block • Exhibits and attachments

  11. Characteristics of Plain English Drafting • 1. Short sentences. • Definitive, concrete, everyday • language. • 3. Use the “active” voice. • 4. Use tabular presentation. • Separate paragraphs and sections • with headings for individual or • different concepts. • Avoid the use of “legal jargon,” • Latin or other foreign terms. • 7. Avoid the use of double negatives.

  12. The Drafting Process • Investigate the facts. • Investigate applicable law as needed. • Develop a contact list and task schedule by deadlines and • responsible party. • Prepare initial drafts, use precedents and templates where • appropriate. • Circulate drafts for comments and revise as necessary. • Negotiate and memorialize the final definitive documents. • Execution of documents. • Closing. • Post Closing adjustments and clean-up.

  13. Who Drafts the Contract • Contract usually drafted by • the party with the most • leverage • Can control which issues are • addressed • Can control the pace of the • transaction

  14. Drafting the Contract – Where to Start

  15. Drafting the Contract Involves… • Determining what the parties agreed to • Putting those terms into • words

  16. Talk to your Client • What is the deal? • Are there any relevant documents? • Letters or correspondence? • Financial statements? Etc. • Ask detailed questions about • conversations with the other party • Possibly have an initial conversation • with the other party…what do they • believe are the primary deal points?

  17. Use of Precedent

  18. Use Precedent? Why or Why Not? • WHY? • Saves Time • Contains Standard Terms • WHY NOT? • Hard to find perfect match • Precedent may be poorly drafted • May not contain necessary Standard • Terms • **Make sure the precedent was the first • draft and does not contain negotiated • terms

  19. Use Precedent or Draft from Scratch? • Depends On: • 1. Type of Transaction • 2. Experience of the Attorney • How much time Attorney • has to draft

  20. Prepare the First Draft • Draft based on information you have • Use precedent or draft from scratch • Discuss all questions/issues with client • while drafting to make sure draft mirrors • deal points • Re-draft after speaking with client • Send to client to review and possibly • redraft again before sending to other • party • Always send contract to other party • “subject to review of client”

  21. Reviewing First Draft if From the Other Party • Review and have comments/questions • for your client • Review entire contract with Client • Prepare red lined mark-up for other • party • Include reasons for changes if • necessary • Review with other party in meeting or • via phone

  22. Exercise #2: Halle Berry Independent Contractor – Use of Precedent Vukani wants Halle Berry to provide marketing services in the United States. You represent Halle Berry. In groups of 3, go through the precedent and make a list of what you would change prior to sending to Vukani. We will then discuss your proposed changes in each paragraph as a group.

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