Drafting and Negotiating Commercial Contracts

Preface
Table of Statutes
Table of Statutory Instruments
Table of Cases
Chapter 1 Legal formalities for a binding contract
Key points
1.1 Introduction
1.2 Checklists for legally binding contracts
1.2.1 Checklist for formation of the contract
1.2.2 Checklist of what will make a contract invalid or void
1.2.3 Checklist of matters which might make the contract or particular provisions unenforceable
1.2.4 Examples of when a contract will be found
1.3 Pre-contractual documents
1.3.1 Introduction
1.3.2 Terminology
1.3.3 Types of document
1.4 Must the contract be in writing?
1.5 Other requirements as to the form of the contract: advantages of deeds
1.5.1 Use of seals
1.6 No formalities for execution of contracts under hand
1.7 Formalities for execution of deeds by individuals
1.8 Formalities for execution of deeds by UK companies formed or regulated by the Companies Act 2006
1.9 Formalities for execution of deeds and contracts under hand (made under English law) by foreign companies
1.10 Signing before the provisions of the agreement are finalised (or other situations when a signature page is signed separately from the rest of an agreement)
1.10.1 Documents which are deeds or are contracts for the sale or other disposition of an interest in land
1.10.2 Documents which are contracts and are not signed as deeds
1.11 The use of electronic signatures
1.12 Information that a party needs to include about itself in contractual and non-contractual documents
Chapter 2 The structure and format of the contract
Key points
2.1 Introduction
2.2 Main elements of a typical contract document
2.3 Title
2.4 Date of agreement
2.4.1 Which date should be inserted?
2.4.2 Reasons for dating an agreement
2.4.3 What format to use for the date
2.4.4 Not adding a date of agreement
2.4.5 Date of agreement and the effective date (or the commencement date)
2.5 Names and addresses of the parties
2.6 Recitals or background
2.6.1 Purpose of recitals
2.6.2 What not to include in the recitals
2.6.3 Are recitals needed at all?
2.6.4 Wording to use, and not use, in a recital
2.6.5 Layout and number of recitals
2.6.6 Recitals and overseas practice
2.7 Operative provisions—introductory wording
2.8 Definitions
2.8.1 Location of definitions
2.8.2 Introductory wording
2.8.3 Use of capital letters
2.8.4 Order of definitions
2.9 Conditions precedent and subsequent
2.10 Sequence of clauses
2.11 Schedules
2.12 Signing the agreement
2.12.1 Execution clauses
2.12.2 Signature blocks
2.13 Clause numbering
2.14 Headings
2.15 Engrossments (final version ready for signature) and counterparts
2.16 Alternative formats—letter agreements; terms in schedules
2.16.1 Letter agreements
2.16.2 Provisions set out in a schedule
2.17 Obsolete drafting conventions
Chapter 3 Contract drafting techniques
Key points
3.1 Introduction
3.1.1 Legal interpretation
3.1.2 Intelligibility
3.2 The topics this chapter covers
3.3 Stating obligations clearly—who, what, when (and how)
3.4 Active and passive
3.5 Indicative and subjunctive
3.6 Avoiding jargon and archaic language
3.6.1 Old fashioned words and jargon
3.6.2 ‘Acceptable’ legal jargon
3.6.3 Using pairs of words when one will do
3.6.4 Use of Latin
3.6.5 Other jargon
3.7 Simplest forms
3.8 Plain, intelligible style (particularly for consumer contracts)
3.9 Definitions and consistent use of words
3.9.1 Means
3.9.2 Includes
3.9.3 Excludes
3.10 Avoiding unnecessary words
3.11 The use of pronouns (in non-consumer contracts)
3.12 Numbers
3.13 Formulas and the like
3.13.1 Formulas expressed mathematically
3.13.2 Formulas expressed in words
3.13.3 Formulas—suggestions
3.14 Sentence structure and length
3.15 Word order and use of punctuation
3.16 Conciseness and comprehensiveness
3.17 Length of individual clauses
3.18 Layout, use of paragraphs and tabulation
3.19 Size of typeface, justification, line length, and use of white space
3.20 Use of headings
3.21 Logical sequence of clauses
3.22 Grouping of clauses
3.23 Use of schedules
3.24 The question of gender
Chapter 4 Advanced drafting techniques
4.1 Introduction
4.2 The role of the contract drafter
4.2.1 First role: contract drafting
4.2.2 Second role: helping the client achieve their commercial objectives
4.3 Using negotiating and drafting policies
4.3.1 Areas that a policy should cover
4.3.2 An example
4.3.3 Commercial advantages of having a policy
4.4 Agreements with a large number of parties
4.5 International negotiations
4.6 The law in drafting and negotiating agreements
4.6.1 Knowledge of contract law
4.6.2 Other laws
4.6.3 Policies, checklists and workflows
Chapter 5 Basic commercial/legal issues affecting contract drafting
5.1 Introduction
5.2 Who should the parties be?
5.2.1 Related material
5.3 Commencement, duration, extension of term
5.3.1 Related material
5.4 Main commercial obligations
5.4.1 Related material
5.5 ‘Best endeavours’, ‘reasonable endeavours’, ‘all reasonable endeavours’ (and absolute obligations)
5.5.1 Measuring the effort needed
5.5.2 Use of the ‘best endeavours’ obligation
5.5.3 All reasonable endeavours
5.5.4 How to deal with best and reasonable endeavours provisions?
5.5.5 Related materials
5.6 Payment provisions
5.6.1 Related materials
5.7 Warranties
5.7.1 Related material
5.8 Liability and indemnities
5.8.1 Related material
5.9 Confidentiality and announcements
5.9.1 Keeping the information that the parties wish to disclose to each other confidential
5.9.2 Keeping the agreement confidential
5.9.3 Announcements
5.9.4 Related material
5.10 Termination and consequences of termination
5.10.1 Terminating the agreement
5.10.2 Specifying the length of the agreement and termination
5.10.3 Termination for breach
5.10.4 Termination for insolvency or bankruptcy
5.10.5 Specifying the content of a notice for termination
5.10.6 What is to happen on termination of an agreement
5.10.7 Related material
5.11 Boilerplate clauses
5.11.1 Notices
5.11.2 Force majeure
5.11.3 Entire agreement
5.11.4 Assignment of rights, transferring obligations and delegation
5.11.5 Contracts (Rights of Third Parties) Act 1999
5.12 Law and jurisdiction
5.12.1 Related material
5.13 Who signs the contract—are they authorised to do so?
5.13.1 Related material
Chapter 6 Interpretation of contracts by the courts—implications for the drafter/negotiator
6.1 Introduction
6.2 Establishing the terms of the contract and their meaning
6.3 Interpreting a given set of contract terms
6.4 General approach of the courts to interpreting contracts
6.4.1 How a court should interpret a contractual provision?
6.4.2 Intentions of the parties
6.4.3 Relevance of past court decisions
6.5 Which terms comprise the contract
6.5.1 The terms set out in the contractual documents
6.5.2 Pre-contract negotiations, drafts of an agreement and deleted provisions
6.5.3 Amendments to standard form agreements in common use
6.5.4 Post-execution deletions or amendments
6.5.5 The parol evidence rule, collateral contracts and misrepresentations
6.5.6 The meaning of words used in contract terms
6.5.7 Ordinary, dictionary meaning of words
6.5.8 Commercial contracts
6.5.9 Legal terms of art and lawyers’ jargon
6.5.10 Scientific and technical terms
6.5.11 Special meanings ‘in the industry’
6.5.12 Special meanings given by the parties and defined terms
6.5.13 Interpreting express contract terms
6.5.14 Documents should be read as whole and all parts of the document should be effective
6.5.15 Give effect to all parts of the document
6.5.16 Special conditions override standard conditions
6.5.17 Hierarchy of clauses
6.5.18 The ejusdem generis (‘of the same kind’) rule
6.5.19 Unclear contract wording will be construed against the interests of the grantor or the party which benefits from the wording (‘contra proferentem’)
6.5.20 The court is unlikely to interpret the contract so as to allow a party to take advantage of his own wrongdoing unless clear wording is used
6.5.21 Implied terms
6.5.22 Terms implied by statute
6.5.23 Special rules for exemption clauses
6.6 The five principles from Investors’ Compensation Scheme v West Bromwich Building Society
Chapter 7 Drafting consumer contracts
Key points
7.1 Introduction and key developments
7.1.1 The purpose of this chapter
7.2 The unfair term provisions: an introduction
7.2.1 Checklist: when the unfair term provisions do not apply
7.2.2 Checklist: basic factors to consider when preparing terms and conditions
7.3 Checklist of other legislation relevant to drafting consumer contracts
7.3.1 Contracts
7.3.2 Notices
7.3.3 Other
7.4 General points about the applicability of the unfair term provisions
7.4.1 Who is a trader?
7.4.2 Who is a consumer?
7.4.3 Does the CRA only apply to where a trader provides goods, digital content or services to a consumer?
7.4.4 Who has the burden of proving a person is not a consumer
7.4.5 Contract terms which reflect mandatory statutory or regulatory provisions
7.4.6 Core terms
7.4.7 Use of language which is plain, intelligible and legible in written contracts and, where relevant, prominent
7.5 Checklist of types of contract terms which are likely to be unfair
7.6 Words which should not appear in a consumer contract
7.7 Appendix: Consumer Rights Act 2015, Sch 2
Chapter 8 Legal terms and lawyers’ jargon
8.1 Introduction
8.2 Terms defined by statute
8.3 Expressions of time
8.3.1 Actions to be taken within a specified time period
8.3.2 Actions to be taken ‘forthwith’ or ‘immediately’ or ‘as soon as possible’
8.3.3 ‘From time to time’; ‘for the time being’
8.3.4 Other ‘time’ expressions that parties sometimes use
8.4 Other legal terms used in contracts
8.4.1 Agreement and contract
8.4.2 And/or
8.4.3 As amended
8.4.4 Assignment and novation
8.4.5 Best endeavours, all reasonable endeavour,s and reasonable endeavours (as well as absolute obligations)
8.4.6 Boilerplate
8.4.7 Breach and non-performance
8.4.8 Cash
8.4.9 Change of control
8.4.10 Comfort letter
8.4.11 Competition and anti-trust
8.4.12 Completion and closing
8.4.13 Conditions precedent and conditions subsequent
8.4.14 Confidential, confidentiality
8.4.15 Consent
8.4.16 Consideration
8.4.17 Consult
8.4.18 Covenants
8.4.19 Deemed
8.4.20 Delivery
8.4.21 Due diligence
8.4.22 Disclosure letter
8.4.23 Engrossments
8.4.24 Escrow
8.4.25 Exclusive, sole and non-exclusive licences
8.4.26 Exclusive and non-exclusive jurisdiction
8.4.27 Execution and executed
8.4.28 Expiry
8.4.29 FOB, ex works, CIF, etc
8.4.30 Force majeure
8.4.31 Further assurance
8.4.32 Good faith/agreements to negotiate
8.4.33 Gross negligence
8.4.34 Group companies
8.4.35 Guarantees (and full title guarantee)
8.4.36 Hereby
8.4.37 Hereinafter and similar words
8.4.38 Including, including without limitation
8.4.39 Indemnity
8.4.40 Injunctions
8.4.41 Instrument
8.4.42 Intellectual property
8.4.43 Interpretation
8.4.44 Joint venture
8.4.45 Law and jurisdiction
8.4.46 Licence
8.4.47 Material and substantial
8.4.48 Merchantable quality
8.4.49 Mutatis mutandis
8.4.50 Negligence
8.4.51 Negotiate
8.4.52 Nominal sum
8.4.53 Notarisation
8.4.54 Notices
8.4.55 Notwithstanding
8.4.56 Penalties and liquidated damages
8.4.57 Person
8.4.58 Power of attorney
8.4.59 Procure
8.4.60 Provisos (‘provided that …’)
8.4.61 Real property
8.4.62 Reasonableness
8.4.63 Representations, warranties and undertakings
8.4.64 Satisfactory quality
8.4.65 Set-off and retention of title
8.4.66 Severance
8.4.67 Signed and use of signatures
8.4.68 Sub-contract
8.4.69 Subject to
8.4.70 Subject to contract
8.4.71 Such
8.4.72 Such consent not to be unreasonably withheld
8.4.73 Term and determine
8.4.74 Territory
8.4.75 Time of the essence
8.4.76 To the intent that
8.4.77 Unless the context requires otherwise
8.4.78 Waiver
8.4.79 Whatsoever
8.4.80 Without prejudice to the generality of the foregoing
8.4.81 Without prejudice
Chapter 9 Termination
9.1 Introduction
9.2 The first step
9.2.1 Looking at the agreement the parties signed
9.2.2 The provisions a party will need to examine
9.3 What is to come
9.3.1 Disclosure and inspection of documents
9.3.2 Preservation of documents
9.3.3 Effort and timescale
9.4 Issues from the provisions of the agreement
9.4.1 Communication
9.4.2 Time periods
9.4.3 The contents of the notice
9.4.4 The quality of the breach
9.4.5 What happens at the end of a notice period?
9.4.6 Law and jurisdiction
9.5 Gathering the evidence
9.5.1 Finding out what’s been going on …
9.5.2 Records, documents and correspondence in control of a party
9.5.3 Records, documents and correspondence in the control of the other party
9.6 Contacting the insurers
Chapter 10 Techniques for checking contracts before signing them
10.1 Introduction
10.1.1 Obviousness and a step back in time
10.2 The top ten essential things to do (when you are right up against a deadline)
10.3 Things to do when there is time
10.3.1 Process steps
10.4 Factual information
10.4.1 Parties
10.4.2 Pricing and payment terms
10.4.3 References to official bodies, regulations, etc
10.4.4 Notices clauses
10.4.5 Start and termination dates (and other periods of time)
10.4.6 Timing
10.4.7 Consequences of termination
10.4.8 Third parties
10.4.9 Law and jurisdiction
10.5 Proofing and formatting
10.5.1 Removal of version draft data
10.5.2 Figures and words
10.5.3 Cross referencing
10.5.4 Definitions
10.5.5 Schedules
10.5.6 Spell checking
10.5.7 Clearing the document of metadata
10.6 Catching the cheats, the use of revision marks and lesser crimes
10.6.1 How to deal with a ‘cheat’
10.6.2 Not all ‘mis-use’ of revision marks is cheating
10.6.3 The settings
10.6.4 Stopping the cheating – the American way
10.7 Commercial issues
10.7.1 Other methods of considering commercial points
10.8 What to do if the agreement is signed and someone spots an error?
Chapter 11 Drafting, exchanging and protecting documents electronically
11.1 Introduction
11.2 Exchanging documents electronically
11.2.1 The problem
11.2.2 What to do about the problem
11.2.3 Should parties exchange drafts of agreements electronically at all—and how should they do so?
11.3 Metadata
11.3.1 What kind of information does metadata consist of?
11.3.2 Why is metadata important?
11.3.3 How to remove metadata
11.3.4 Should a lawyer look at the metadata in a document received from another party?
11.4 Electronic signatures
11.5 Email (and other forms of communications) policies
11.6 Security of files
11.6.1 Protection of individual documents
11.6.2 Protection of computer on which documents reside
11.7 And finally…
Appendix Sample Agreements
Index