FIFTY TIPS FOR WRITING THE 21ST CENTURY CONTRACT
THAT STAYS OUT OF COURT
Published in The Florida Bar Journal, Nov. 2000
Note: This article is for background purposes only and is not intended as legal advice.
Welcome to the 21st Century. Where practicing law requires us to don the garb of computers and the Internet. And where litigation is as costly as ever. Lawyer bills running $10,000 a month are not unusual in a hotly contested breach of contract lawsuit. With every word, phrase and sentence carrying the potential for winning or losing, the stakes are high. Simple logic, therefore, directs us to cautious and thoughtful drafting.
Drafting contracts is actually one of the simple pleasures of practicing law. Just 3 years ago at this Convention I presented 50 tips for contract writing. This article updates those tips in the context of our new tools and abilities. Following these tips could result in your writing a contract so clear no one will want to litigate it, saving your client from the trials and tribulations of litigation, truly a good reason to write the contract that stays out of court.
These tips apply to writing all kinds of agreements: office leases, real estate contracts, sales agreements, employment contracts, equipment leases, prenuptial agreements. They even apply to stipulations and settlements in litigation, where you want an agreement so clear that it avoids future litigation. Wherever clarity and simplicity are important, these tips will guide you there. The Appendix provides a few sample forms to illustrate these tips.
Before You Write the First Word
1. Ask your client to list the deal points. This can be in the form of a list, outline or narration. Doing this will help the client focus on the terms of the agreement.
2. Engage your client in "what if" scenarios. A good contract will anticipate many possible factual situations and express the parties‘‘ understanding in case those facts arise. Talking to your client about this will generate many issues you may not otherwise consider.
3. Ask your client for a similar contract. Frequently, clients have had similar transactions in the past or they have access to contracts for similar transactions.
4. Search your office computer or the Internet for a similar form. Many times you can find a similar form on your computer. It may be one you prepared for another client or
one you negotiated with another lawyer. Just remember to find and replace the old client‘‘s name. Starting with an existing form saves time and avoids the errors of typing. Here are some Web sites where you can find forms:
5. Obtain forms in books or CD-ROM. Typical forms of contracts can be found in form books, such as West‘‘s Legal Forms (a nationwide set) and Florida Jur Forms, as well as in treatises and Florida Bar CLE publications. These can be used as the starting point for drafting the contract or as checklists of typical provisions and wording to include in the contract. Many treatises and form books now come with forms on disk or CD-ROM.
6. Don‘‘t let your client sign a letter of intent without this wording. Sometimes clients are anxious to sign something to show good faith before the contract is prepared. A properly worded letter of intent is useful at such times. Just be sure that the letter of intent clearly states that it is not a contract, but that it is merely an outline of possible terms for discussion purposes. See Appendix C.
Writing that First Word
7. Start with a simple, generic contract form. The form in Appendix A is such a form. It provides a solid starting point for the structure of the contract. Like a house, a contract must have a good, solid foundation.
8. State the correct legal names of the parties in the first paragraph. As obvious as this is, it is one of the most common problems in contracts. For individuals, include full first and last name, and middle initials if available, and other identifying information, if appropriate, such as Jr., M.D., etc. For corporations, check with the Secretary of State where incorporated.
9. Identify the parties by nicknames. Giving each party a nickname in the first paragraph will make the contract easier to read. For example, James W. Martin would be nicknamed "Martin."
10. Be careful when using legal terms for nicknames. Do not use "Contractor" as a nickname unless that party is legally a contractor. Do not use "Agent" unless you intend for that party to be an agent, and if you do, then you better specify the scope of authority and other agency issues to avoid future disagreements.
11. Include a blank for the date in the first paragraph. Putting the date in the first paragraph makes it easy to find after the contract is signed. It also makes it easy to describe the contract in other documents in a precise way, such as the "December 20, 2000, Contract for Sale of Real Estate."
12. Include to provide background. Recitals are the "whereas" clauses that precede the body of a contract. They provide a simple way to bring the contract‘‘s reader (party, judge or jury) up to speed on what the contract is about, who the parties are, why they are signing a contract, etc. The first paragraph in the body of the contract can incorporate the recitals by reference and state that they are true and correct. This will avoid a later argument as to whether or not the recitals are a legally binding part of the contract.
13. Outline the contract by writing out and underlining paragraph headings in their logical order. The paragraphs should flow in logical, organized fashion. It is not necessary to write them all at once; you can write them as you think of them. Try to group related concepts in the same paragraphs or in adjacent paragraphs. For example, write an employment contract‘‘s initial paragraph headings like this:
14. Complete each paragraph by writing the contract terms that apply to that paragraph. This is simple. You learned this in elementary school. Just explain in words what the parties agree to do or not do paragraph by paragraph.
15. Keep a pad at hand to remember clauses to add. It is normal to think of additional
clauses, wording and issues while writing a contract. Jot these down on a pad as you write; they are easily forgotten. Also keep your client‘‘s outline and other forms in front of you as you write, and check off items as you write them.
16. Repeat yourself only when repetition is necessary to improve clarity. Ambiguity is created by saying the same thing more than once; it is almost impossible to say it twice without creating ambiguity. Only if the concept is a difficult one should you write it in more than one way. In addition, if you use an example to clarify a difficult concept or formula, be sure that all possible meanings are considered and that the example is accurate and consistent with the concept as worded.
What to Watch Out for When Writing
17. Title it "Contract." Do not leave this one to chance. If your client wants a contract, call it a contract. A judge now sitting on the federal bench once ruled that a document entitled "Proposal" was not a contract even though signed by both parties. The lesson learned is, "Say what you mean." If you intend the document to be a legally binding contract, use the word "Contract" in the title.
18. Write in short sentences. Short sentences are easier to understand than long ones.
19. Write in active tense, rather than passive. Active tense sentences are shorter and use words more efficiently, and their meaning is more apparent. Example of active: "Sellers shall sell the Property to Buyer." Example of passive: "The Property shall be sold to Buyer by Seller."
20. Don‘‘t use the word "biweekly." It has two meanings: twice a week and every
other week. The same applies to "bimonthly." Instead, write "every other week" or "twice a week."
21. Don‘‘t say things like "active termites and organisms". Avoid ambiguity by writing either "active termites and active organisms" or "organisms and active
termites." When adding a modifier like "active" before a compound of nouns like "termites and organisms", be sure to clarify whether you intend the modifier to apply to both nouns or just the first one. If you intend it to apply to both, use parallel construction and write the modifier in front of each noun. If you intend it to apply to just one noun, place that one noun at the end of the list and the modifier directly in front of it.
22. Don‘‘t say "Lessor" and "Lessee." These are bad nicknames for a lease because
they are easily reversed or mistyped. Use "Landlord" and "Tenant" instead. The same applies to lienor and lienee, mortgagor and mortgagee, grantor and grantee, licensor and licensee, party A and party B. This is where you can use your creativity to come up with a different nickname for a party, as long as you use it consistently throughout the contract.
23. Watch out when using "herein." Does "wherever used herein" mean anywhere in the contract or anywhere in the paragraph? Clarify this ambiguity if it matters.
24. Write numbers as both words and numerals: ten (10). This will reduce the chance for errors.
25. When you write "including" consider adding "but not limited to." Unless you intend the list to be all-inclusive, you had better clarify your intent that it is merely an example.
26. Don‘‘t rely on the rules of grammar. The rules of grammar that you learned in school are not universal. The judge or jury interpreting the meaning of your contract may have learned different rules. Write the contract so that no matter what rules they learned, the contract is clear and unambiguous. Follow this test for clear writing: Remove all periods and commas, then read it. Choosing the right words and placing them in the right place makes the writing clear without punctuation.
27. Don‘‘t be creative with words. Contract writing is not creative writing and is not meant to provoke reflective thoughts or controversies about nuances of meaning. Contract writing is clear, direct and precise. Therefore, use common words and common meanings. Write for the common man and the common woman.
28. Be consistent in using words. If you refer to the subject matter of a sales contract as "goods" use that term throughout the contract; do not alternately call them "goods" and "items." Maintaining consistency is more important than avoiding repetition. Don‘‘t worry about putting the reader to sleep; worry about the opposing lawyer a year from now hunting for ambiguities to get your contract into court.
29. Be consistent in grammar and punctuation. The rules of grammar and punctuation you learned may differ from others, but you had better be consistent in your use of them. Be aware of such things as where you put ending quote marks, whether you place commas after years and states, and similar variations in style.
30. Consider including choice of law, venue selection, and attorneys fee clauses. If your contract gets litigated, you might as well give your client some "ammunition" for the fight. Examples of these clauses appear in Appendices A and C.
Write for the Judge and Jury
31. Assume the reader is a knowledgeable layman. If your writing is so clear that a layman could understand it, then it is less likely it will end up in court. 32. Define a word by capitalizing it and putting it in quotes. Capitalizing a word indicates that you intend it to have a special meaning. The following are two sample clauses for defining terms:
Wherever used in this contract, the word "Goods" shall mean the goods that Buyer has agreed to purchase from Seller under this contract.Buyer hereby agrees to purchase from Seller ten (10) frying pans, hereinafter called the "Goods."
33. Define words when first used. Instead of writing a section of definitions at the beginning or end of a contract, consider defining terms and concepts as they first appear in the contract. This will make it easier for the reader to follow.
34. Explain technical terms and concepts. Remember that the parties might understand technical jargon, but the judge and jury who interpret and apply the contract do not. Therefore, explain the contract‘‘s terms and concepts within the contract itself. Let the contract speak for itself from within its four corners.
Keep Your Client Informed While You Write
35. All contracts should come with a cover letter. This gives you a place to instruct your client on how to use and sign the contract.
36. Tell your client the ideas that come as you write. Many ideas will occur to you as you write: things that could go wrong with the deal, things that might happen in the future, things that happened in the past, ways to structure things better. Write these in your letter to the client.
37. Inform your client of the risks. Writing a letter to the client as you write the contract is the perfect way to inform the client of the risks and rewards of entering into the contract. Frequently, problems do not become apparent until time is spent trying to word a contract.
What To Do After the First Draft Is Written
38. Check spelling, paragraph numbering, and cross references both manually and with your word processor‘‘s spelling and grammar checker. This almost goes without saying today, especially since Microsoft Word now checks your spelling and grammar as you type. (Unfortunately it also changes "per stirpes" to "per stupid" if you fail to watch it closely.) And now there are even computer programs that check contract documents for undefined terms. DealProof is packaged with Corel WordPerfect for law offices, and DocProofReader is available for download for MS Word 97 and 2000.
39. Let your secretary or paralegal read it. Not only will your staff frequently find spelling and grammar errors missed by your word processor‘‘s spell checker, but they
will find inconsistencies and confusing areas that you missed when drafting.
40. Stamp "Draft #1 6/22/2000" on it. This may be the first of many drafts, so avoid
confusion early by numbering and dating all drafts at the top of the first page. It is also a good idea to write "DRAFT" across the face of each page to preclude the possibility of an impatient client signing a draft rather than waiting for the final version.
41. Let your client read it. Letting the client in on reading the first draft assures that your drafting will stay in tune with the client‘‘s wishes.
42. Save the drafts as multiple files on your computer. If you save the first draft on your computer as two files, you will have one file identified as the first draft and the other identified as the current version. This can be done by naming the current version "contract" and the first draft as "contract.d1." Then, subsequent versions can be named "contract.d2", "contract.d3," etc., where the "d" in the extension indicates draft. (Of course, if you‘‘re not using WordPerfect 5.1 for DOS, as I do, you can use long file names to show the contract name, draft number and draft date, such as "Contract Smith Jones draft 2 datd 6 22 2000.")
43. Compare the current version to prior versions. If you save draft versions, it is very easy to compare one version to another using the word processor‘‘s compare feature or using the CompareRite computer program. When you compare "contract.d1" to "contract.d2", save the comparison as "contract.c21" and print it to show the client what changes were made.
How to Print and Sign the Final Draft
44. Print the contract on 24 pound bond paper instead of 20 pound copier paper. Using a heavy bond paper will make it easy to tell the original contract from copies. It will also last longer.
45. Print on pages using the same paper, and if pages are changed, reprint the document using the same paper. This will avoid an argument that pages were substituted after the contract was signed.
46. Sign the contract in blue ink, not black ink. This, too, will make it easier to differentiate the signed original contract from photocopies.
47. Initial every page of the contract. Having each party initial each page of the contract will make it less likely that anyone could claim a page was changed after the contract was signed.
48. Identify the parties and witnesses who sign by providing blank lines below their signature lines for their printed names and addresses. This will make it easier to find the witnesses if the contract is contested. And remember to include two witnesses for commercial leases.
49. Be sure that corporate officers include their titles, the corporation name and the word "as." Failure to do this can result in personal liability of the officer. The proper way to sign in a representative capacity is as follows:
ABC Corporation, a Florida corporation
John Jones, as its President
50. Add a notary clause that complies with the notary law. The notary acknowledgement in Appendix B is such a clause.
If these 50 tips don‘‘t keep your contracts out of court, try mastering Strunk & White‘‘s Elements of Style*. I hear it‘‘s real handy in appellate work.
Appendix A (Basic Form of Contract)
AGREEMENT made this _______ day of ____________, 20_____, between
______________________, hereinafter called "_______________", and
______________________, hereinafter called "_____________".
WHEREAS, ________________; and
NOW THEREFORE, in consideration of their mutual promises made herein, and for other good and valuable consideration, receipt of which is hereby acknowledged by each party, the parties, intending to be legally bound, hereby agree as follows:
1. Recitals. The parties agree that the foregoing recitals are true and correct and incorporated herein by this reference.
___. Miscellaneous. Time is of the essence of this agreement. This agreement is made in the State of Florida and shall be governed by Florida law. This is the entire agreement between the parties and may not be modified or amended except by a written document signed by the party against whom enforcement is sought. This agreement may be signed in more than one counterpart, in which case each counterpart shall constitute an original of this agreement. Paragraph headings are for convenience only and are not intended to expand or restrict the scope or substance of the provisions of this agreement. Wherever used herein, the singular shall include the plural, the plural shall include the singular, and pronouns shall be read as masculine, feminine or neuter as the context requires. The prevailing party in any litigation, arbitration or mediation relating to this agreement shall be entitled to recover its reasonable attorneys fees from the other party for all matters, including but not limited to appeals. Pinellas County, Florida, shall be proper venue for any litigation involving this agreement. This agreement may not be assigned or delegated by either party without the prior written consent of the other party.
IN WITNESS WHEREOF, the parties have signed this agreement as of the day and year first above written.