We were astonished (in a nice way) by the popularity of our recent posting, Top 10 Howlers When Preparing Contracts for Signature. Very quickly, it became the most-viewed article on IP Draughts.
Can you have too much of a good thing, we wonder? To test the theory, here are another 10 howlers that we have seen in practice.
- The contract that uses very similar defined names for each party, eg Licensor and Licensee, or Company and Contractor. Although there is no problem with this per se (other than being less readable than using abbreviated names such as GSK and Microsoft), in practice it leads to mistakes. By the time you get to clause 15.3 (say), concentration levels are waning, and your eyes may not spot the small difference between an “-or” and an “-ee” suffix. As a consequence, you find that the wrong party has, say, an obligation to pay for patent filings.
- The contract that uses different abbreviated names for a party in different clauses, eg Customer in one clause and Client in another. This has happened because some of the contract terms were cut and pasted from another document and the party names were not cleaned up.
- The contract that has been prepared using the Cross-Reference function in Word, and some of the cross-references are wrong, or (an even greater sin) don’t work, and the cross-referencing code has producted text in the final agreement that says “Error: reference source not found” or similar.
- The notices clause that refers to notices being sent by telex. Younger readers may need to consult Wikipedia to find out what a telex is, or was.
- The contract that uses traditional signature blocks that have brackets (parentheses) down the centre of the page. See example below. In the absence of legal advisers to guide him, the director signs the contract at position A rather than position B – he is supposed to write or type his name at position A and sign at position B, but it is not not obvious from looking at the signature block. We avoid using that type of signature block, but it is commonly seen in many English law firm templates.
- The contract that has gobbledygook text that was lifted from another agreement (as in the example given in the final paragraph of this earlier posting), and was probably treated as boilerplate that did not need to be reviewed.
- The contract that has two clauses that say the same thing, but in a different way. For example, this can arise where boilerplate interpretation clauses are pasted immediately after the definitions in clause 1 and also towards the back of the contract, among the general boilerplate clauses. Where we have seen this happen, it is surprising how often a different source document was used for the boilerplate clause in each place, so that different wording is used.
- The contract that has a schedule containing terms that contradict terms in the main body of the agreement. For example, we have seen a contract that contained delivery terms that incorporated the Incoterm “Ex Works”, while in a schedule to the contract there was a further, but conflicting delivery term, “FOB”.
- The contract that has a liquidated damages clause, but there is also a boilerplate clause that states that any remedy stated in the contract is without prejudice to any other remedy that a party may have. Usually, when parties agree a liquidated damages clause, they intend it to apply “come what may”, even if damages are higher or lower than the amount stated as liquidated damages. Thus, the boilerplate clause is inappropriate as it would allow the party suffering from the breach to choose to sue for general damages instead of the liquidated amount.
- The contract that uses really archaic legalese, eg “this Agreement shall inure to the benefit of X”, and a party assumes that the word “inure” is a typo and substitutes a more modern (but incorrect) word, eg “insure”.
Eagle-eyed readers will have noticed that the above list is concerned largely with mechanical drafting points, and not with points of commercial or legal substance. Points of substance will have to wait for another day.