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Drafting A Contract Agreement

The document provides guidance on drafting contracts. It discusses the importance of contract drafting and outlines the process, which includes preparing multiple drafts and revisions. Guidelines are provided for revising drafts, including checking accuracy, organization, readability, and style. The document also discusses using defined terms to clarify meanings and simplify contracts. Defined terms should be used for concepts referred to multiple times or requiring lengthy explanations.

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ADIL IQBAL
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547 views23 pages

Drafting A Contract Agreement

The document provides guidance on drafting contracts. It discusses the importance of contract drafting and outlines the process, which includes preparing multiple drafts and revisions. Guidelines are provided for revising drafts, including checking accuracy, organization, readability, and style. The document also discusses using defined terms to clarify meanings and simplify contracts. Defined terms should be used for concepts referred to multiple times or requiring lengthy explanations.

Uploaded by

ADIL IQBAL
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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DRAFTING A CONTRACT

AGREEMENT

Adil Iqbal, Contracts Manager


Drafting a Contract Agreement

 Introduction
 Battle of the forms – boilerplate
 Contract Drafting Process
 Better ready with Multiple Drafts
 Guidelines for Revising Drafts of Contracts
 Use of define terms
 Other points
 Important terms and conditions of a contract – check list
 Final words
Introduction
Contract drafting is more of an art than science. A poorly drafted contract can create
enormous risks to the business which can turn out to be a going concern.
It is therefore important that companies must spend its substantial resources during
contract drafting phase. Having a verbal agreement is one thing and to put it into black-
n-white, complying to various national / international legal & financial requirements,
seems simple yet a very complicated task.
Majority of the time, Contracts are negotiated and drafted in a rush, lack of time for review
by Contract / Legal team could create a mistake which could have significant impact over
the businesses. A well drafted contract would use balance and perfect language which
expresses the contract parties intent in unambiguous and formal style. The person who is
going to draft the contract must be aware of at-least element relating to subject matter
and are being provided with the technical support in cases when required.
By following the steps/advices mentioned here, the task of contract drafting may be made
a less complicated one.
Battle of the forms – boilerplate
Before term battle of the forms is explained and we start drafting an agreement, the
parties to contemplated transaction must decide as to who will draft the agreement.
Parties are not clear to discuss about this, generally, the more established party with
the resources available, issues to other party(ies) the first draft for their review and
comments, if any.
If the entity is an established and experienced, invariably it must have its own contract
forms, including boilerplate terms as well. Mostly, the party which has the financial
muscle power or whose money, property, technology, etc. are at stake would like to
keep the drafting keys for itself and let the other party only make comments on the
draft. For example, you may have noticed that:
 the employer always issues the employment letter / agreement;
 the bankers always provide a draft of the loan agreement;

Above are only couple of the examples out of so many situation.


Battle of the forms – boilerplate
If however, there is an option to take responsibility for drafting an agreement, one
should go ahead. If drafted and negotiated properly, it is similar to have the first
mover advantage. Even if during further negotiation some of the terms stricken off,
there could be a chance to have some of the proposed terms still remain to be part of
the contract.
Now, the battle of the forms is the situation where one party makes an offer with a
contract for and other has responded with its own terms and conditions instead of
commenting. Usually, this situation is avoided by negotiation among the parties.
In case, if we received an offer from subcontractor with their own terms & conditions,
and we replied accepting the offer with subject to the terms and conditions enclosed.
Now, agreement takes into effect and if subcontractor do not reply then our terms &
conditions will be considered as prevailing contractual terms & conditions.
The winner of the battle of the forms is the one who has “fired the last shot”. Under
the last shot rule, a party implicitly assented to and thereby accepted a 
counter-offer by conduct indicating lack of objection to it. The last shot rule tended
in practice to favor sellers over buyers, because sellers normally “fire the last shot” –
i.e., send the last form.
Contract Drafting Process
Before starting contract drafting, make sure you are clear about what parts the
contract must include and what situations the contract must cover. Know what the
parties in fact want. Precisely because this is an obvious point, it is often overlooked.
Try outlining the contract to make sure that all the needed pieces are included and
are organized logically.
Normally in most of the businesses, we work on the previous executed contract. A
new Contract always brings its new requirements, which requires special attention.
Following are the guidelines which may proved to be helpful while commencing to
draft a contract:
 Be ready to prepare multiple drafts of the contract to get it right, more than often,
getting all the details right in the first draft means there are possibility to miss some
important larger points.
Contract Drafting Process
 Use clear, simple, businesslike language. Do not fall into the trap of overuse of
“legalese”. Use only the technical terms you need and define them, if necessary.
 Try to draft in a way that each clause do one thing, not more than one thing in a
single clause. Outlines can help you here by breaking down the whole contract into
a series of small points.
 When revising, check to make sure that you have used only one term for one item or
person. Referring to the same person, item or concept by two different terms
creates an ambiguity that invites misunderstandings later. It is advised to include a
definition section to define all key terms, so that the reader understands any
unusual terms.
 After polishing each clause in the contract, reread the document as a whole, looking
for larger contradictions between parts of the contract, rather than wording
problems within one clause. In your concern for the details, you may have
overlooked some larger ambiguities.
Contract Drafting Process
 Somewhere along the way, consult others. No one person can imagine all the
pitfalls that the parties to any contract are hoping to avoid. No one person can
imagine all the ways some reader can misconstrue a point.
 A lawyer is the last person to review the final draft before this all other relevant
departments must have reviewed shared their comments.
Better ready with Multiple Drafts
Always try to write more than one draft of any given legal piece.
Let the first draft be creative, thorough and imperfect. Include everything you think
necessary to the piece and all things that you think might be useful. Then use second,
third, fourth and other drafts for rewriting, revising, and polishing.
Guidelines for Revising Drafts of Contracts
Revising concentrates on small-scale organization, sentence structure, transitions,
paragraphing, grammar, and punctuation.
There are two things to remember about revising. First, do not revise while you write;
this slows down both the writing and the revising processes. When you are writing,
concentrate solely on your ideas, no matter how unpolished your writing may seem.
Revise later. Second, when you revise, do it in stages.
It is exhausting and inefficient to try to revise on every level at once. Use your time for
revising to move from general writing problems to more specific ones.
 Accuracy:
No amount of readability will replace accuracy, so make sure you check first for the
content of each legal point. Ask yourself the following questions:

 Is the content accurately stated?


Guidelines for Revising Drafts of Contracts
 Could any points be misunderstood because of ambiguity?
 Are irrelevant facts or other irrelevant information excluded?
 Are terms of art used correctly? e. Are key terms used correctly?
 Are paraphrases accurate?
 Are names of parties and their status correct?
 Are the citations accurate?
Organization:
 Are paragraphs internally logical?
 Are there clear and precise transitions between paragraphs and sentences?
Guidelines for Revising Drafts of Contracts
Readability:
 Are subjects and verbs close together?
 Are unnecessary modifiers eliminated?
 Are sentences not overly long?
 Are lists clearly structured?
 Are unnecessary prepositional phrases eliminated?
 Is the text generally concise?
Style:
 Is style consistent?
Guidelines for Revising Drafts of Contracts
 Is the tone and level of formality appropriate and consistent?

Try to give each of these categories your full attention for the specific amount of time
you have allocated for the task. After you have finished revising, you can move on to
polishing the draft.
Use of define terms
Our goal in drafting a transactional document is to make it speak unambiguously and
accurately. Future readers should know exactly what your document means — in
some cases a future reader could be a judge. A good technique for achieving this
goal is the use of defined terms.
When should you use defined terms?
 As soon as you know you will refer to the same concept more than once in a
document; and
 When it takes more than a few words to explain the concept.

How do defined terms work?


 “External” defined terms are unique to the external circumstances of this particular
transaction (names of parties, location of real property, etc.).
Use of define terms
 “Internal” definitions, by contrast, refer solely to concepts internal to the particular
document. They can also refer to external defined terms.
How can defined terms simplify transactional documents?
 They can assure that any particular laundry list will appear only once in a
document. If properly structured, defined terms can allow you to make a necessary
change only once—by fine-tuning or modifying a defined term—as the terms of the
transaction are negotiated and modified over time.
 Defined terms can help you prevent a maze of cross-references.

How should you create defined terms?


 Take a “structured” approach, setting up definitions as “building blocks” that work
together to form the whole structure.
 As much as you try to broaden or clarify a defined term, make sure it should still
mean what it intuitively seems to mean without close scrutiny of the definition.
Use of define terms
 Beware of setting up a “broad” defined term and then using it in a context where
you need a “narrow” defined term.
 Avoid using words like “applicable” or “actual” or “selected” or “operative”. They
don’t help the user remember what the term is about.
 When defining related concepts, the defined terms should interact in a way that
reflects the interaction of the underlying concepts
 Collect your definitions in one place.

Final advice:
Don’t get carried away. Some concepts are simple enough, basic enough, and
sufficiently well understood (or vagueness may work in your favor) that you don’t need
a definition.
Other points
General:
 No archaic terms (e.g., hereinafter, hereby)
 No legal pairs (e.g. good and sufficient)
 No Latin or foreign expressions (e.g., bona fide)
 Plain English, not legalese
 Mind your punctuation

Please always beware that users of the contract are generally technical and non-legal
personnel. So, avoiding legalese will allow the common users to better understand
and performed their actions required under the contract.
Important terms and conditions of a contract – check list
 Identity of the parties
 If businesses, what type? (partnership, corporation, etc.)
 Name of person signing on behalf of the business
 Signer's official title
 Does he or she have authority to bind the business? (asks for POA to clarify)
 Purpose(s) of the contract
 Underlying assumptions
 Duties of each party
 Rights of each party
Important terms and conditions of a contract – check list
 Relevant dates
 Relevant prices or other dollar amounts
 Relevant quantities
 Payment terms & due dates
 Mode of payment (cash, bank transfer, letter of credit, etc.)
 Taxes
 Interest
 Late fees
 Warranties
Important terms and conditions of a contract – check list
 Disclaimers
 Limitations on liability
 Liquidated damages
 Confidentiality provision
 Indemnification agreement
 Default
 Arbitration clause
 Governing law and Venue of lawsuits involving the contract
 Statement that contract constitutes entire agreement
Important terms and conditions of a contract – check list
 Notices – acceptability of notices via e-mail
 Severability of individual provisions
 Signatures of authorized signatories
 Notarization
Final Words
It is extremely vital that while drafting contracts one should pay full attention and
invest sufficient time. A well drafted contract is the one which ensure that contracts
serve everyone’s interests and figuring out how to help prevent a future contract
dispute.
A BALANCE CONTRACT with minimum mistake is what everyone looking for.
THANK YOU …

Contact me @ [email protected] for any question.

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