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Contract Drafting Seminar Spring 2011

Contract Drafting Seminar Spring 2011. Class 4 February 8, 2011 Adjunct Associate Professor Helen Winder. Review of Definitions. Complexity and frequency of term ABC’s accuracy, brevity and clarity Use only as defined Tailor language to your audience

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Contract Drafting Seminar Spring 2011

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  1. Contract Drafting SeminarSpring 2011 Class 4 February 8, 2011 Adjunct Associate Professor Helen Winder

  2. Review of Definitions • Complexity and frequency of term • ABC’s accuracy, brevity and clarity • Use only as defined • Tailor language to your audience • Distinguish by Initial Caps, ALL CAPS, Bold or Italics (try to avoid underlining)

  3. Conditions • Lay it out clearly- what and when • Who determines if the condition is met? • Who determines any following action? • Conditions generally trigger duties (shall) or rights (may).

  4. Conditions Exercise

  5. Materially Adverse Change • M&A, Loan documents • Define materiality threshold (what minimum threshold is acceptable?) • Carpet King fire example

  6. Time is of the Essence • Real estate, sales contracts, others • Must be explicit…never implied • Include…Timing is material to the agreement • Place throughout the agreement even in Consideration recitals • Include notice/cure provision

  7. Best Efforts • Helps weaker party • Qualify level of duty Best Efforts Commercially Reasonable Efforts Reasonable Efforts

  8. Representations • Statement of fact that induces action such as entering a contract. • Reps extinguish unless stated to survive. • Reps shift ROL. • Reps shift DD responsibilities. • Reps usually tied to Warranty

  9. More About Reps • Level of Knowledge is usually negotiated. • The Seller represents and warrants to the best of his knowledge that all licenses are current. • The Seller represents and warrants to a reasonable certainty that the property has not been subject to environmental waste storage. • The Seller, relying upon….. Represents and warrants….

  10. Warranties • Discloser promises that stated facts are as stated. • False reps with warranty create cause of action. • Must state that warranties survive closiing. • Express using past or present tense. Use of future tense may risk creating a covenant. • Not Warantee! (hairdryer) • Think of representation and warranty expressed together as deal insurance.

  11. Covenants • Promise to act or not act in the future • Shall Clause…Seller shall deliver all parts received post closing… • Use active voice. • Who is to do what to or for whom, when and in what manner, quality or quantity? • Is performance unqualified or qualified? • Examples…

  12. Best Efforts v. Good Faith What is the difference?

  13. Good faith has a moral duty and fairness basis • Best efforts promised no harm or a specified level of performance

  14. Indemnities Collateral contractual obligation where one party promises to hold the other party harmless from losses to third parties. (The indemnitor need not be the other party to the contract.) Limit by time, dollar amount, type of damages: punitive, incidental, consequential, liquidated, etc., and how claims are to be presented.

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