Many of the following points are commonly seen in contracts, and may be in the template agreements that you use when you start to prepare an individual contract. In IP Draughts’ view, these points should usually be removed or corrected when preparing the first draft of a contract.
- All the parties are named in a single paragraph. This practice, commonly seen in US contracts, makes it harder work to identify the parties. This is particularly true where there are more than two parties. Put them in separate, numbered paragraphs and use capitals or bold text to make the party names easy to find.
- Recitals that include obligations. The recitals, sometimes called whereas clauses or background clauses, are there to provide some brief background or a summary of what the contract is about. They should not include any contractual or other obligations (eg representations). They are not compulsory. Sometimes (eg in some short contracts) recitals are best omitted from the contract.
- No introductory text before the start of the substantive obligations. Some contracts fail to make a clear distinction between recitals and substantive obligations. It is useful to put in some brief text that signals, in effect, “now the contractual obligations are starting, before now was just an introduction”. But don’t include that lengthy stuff that runs on for several lines, again from US contracts, about “for other good and valuable consideration,” etc. Keep it short, eg “the parties agree as follows”.
- Interpretation clauses that appear immediately after the definitions, eg as clause 1.2. If you must say that the masculine embraces the feminine, or similar tosh, put it at the back of the contract, with the other boilerplate.
- Long sentences. Sentences that run on for several lines are difficult to understand. If the sentence seems too long, put in a full stop and start a new sentence.
- Long paragraphs of contractual obligations. Keep them short, eg less than 12 lines and ideally less than 6 lines. Put in plenty of headings to aid readability.
Inconsistency. Don’t start one obligation with “undertakes to”, the next with “agrees to”, the next with “shall”, the next with “will” etc. It is sloppy and suggests a lack of care and attention to detail. Similarly, if you have a set of definitions, don’t end some with a semi-colon, and some with a full stop, and don’t start some with “shall mean” and others with “means”. Clean this stuff up before you send out your draft.
- Muddled structure. Keep similar topics together, eg don’t put some warranties in clause 3 and others in clause 10. Try to make the contract flow logically, eg by putting any conditions precedent at the beginning, and termination clauses towards the end.
- Obligations on people who are not parties. It doesn’t make sense to state that the Principal Investigator must do something, if he or she is not a party. If such a reference is considered necessary, think about how to structure it, eg should it be an obligation on one of the parties to ensure that the Principal Investigator performs the stated activity.
- Signature blocks that the parties don’t understand. Avoid the old-fashioned signature blocks with brackets down the middle of the page. Very few business clients know where to sign them. Keep the format simple and easy to use.