Top 10 problems with contract drafting

In the next few days, this blog will pass the milestone of 950,000 views. IP Draughts is looking forward to achieving one million views, which he expects to happen next year, shortly after the 10th anniversary of the start of this blog.

Of those views, roughly half come from readers in the UK and USA. There is then a big gap before other common law jurisdictions, and other major European countries, feature. Languishing at the bottom of the league are countries from which this blog has only been viewed once, including Vatican City and North Korea.

By far the most popular article on this blog has been one on the subject Damages Are Not An Adequate Remedy. IP Draughts surmises that the reason for this popularity is that the phrase appears in thousands of confidentiality agreements, and is mystifying to many readers of those agreements.

That article is a launch point for the following list of things that are badly wrong with the drafting of many commercial contracts. Some of the following categories overlap, and they are presented in no particular order. IP Draughts is as guilty as the next person of some of these things, particularly when drafting in the heat of urgent negotiations. What matters, to him, is the overall effect – has the drafter tried to draft clearly or does he tick all of the following boxes?

  1. Bad template. Most contract drafting nowadays starts with a template, rather than a blank sheet of paper or blank Word document. But, as computer programmers used to say, Garbage In, Garbage Out. If you choose the last document you worked on, rather than a well-drafted template, the risk of flawed drafting increases.
  2. Magic words. Too many contracts include wording that have, or are thought to have, a hidden meaning. The previous article on this blog, about the phrase “time is of the essence” is a good example. Others include “with full title guarantee” and “represents”. We should stop using magic words wherever possible.
  3. Legal engineering. As with the example about damages being an adequate remedy, drafters sometimes attempt to improve their legal position with language that is directed to an outside body such as a court or competition authority, to try to persuade them to exercise a discretion or interpet an obligation favourably to one or both parties. The commercial parties may not know why the wording is included. Mostly, this should be avoided in commercial contracts.
  4. Moving the goalposts. Some contractual language is not concerned with points that are of immediate interest to the commercial parties. Instead, it focuses on secondary issues such as moving the consequences of breach away from what they would be under general law. For example, do we really need so many indemnities in contracts, particularly those in respect of breach of contract? Can’t we spell out the consequences more clearly and simply?
  5. Extreme risk aversion. Linked to the previous point is the issue of clients who are very averse to taking risks. Perhaps they think they might be blamed if something goes wrong with the contract that they didn’t anticipate, and this causes them to require very lengthy and legalistic contracts. This is a fault of business people as well as lawyers. IP Draughts’ USP when drafting contracts has been based partly on keeping things simple where possible, while being meticulously accurate when necessary. Some clients appreciate these priorities, others don’t.
  6. Bad writing. Some of the worst examples of contract drafting would be bad in any form of writing, not just in contracts. For some reason, poor writing is allowed to lurk undisturbed in many contracts. This may be because neither the lawyer nor their client is good with words, and nor do they care about this issue.
  7. Leaving in irrelevant boilerplate. Too many drafters leave in clauses that they have seen before in contracts, without giving them a critical scrutiny to see if they are likely to be useful in the case before them.
  8. Half-baked ideas. Sometimes, one’s colleagues or clients come up with an idea that they want to include in the contract, but they haven’t thought it through enough. It might work for scenario A, but not for scenarios B to K. Stress-testing contractual language against a range of scenarios is sometimes necessary, but not done.
  9. Jargon. No, not lawyers’ jargon this time: sales jargon, technical jargon, accounting jargon, and so on. All jargon is a kind of shortcut, and if you recognise the jargon you may think you understand it. But it is generally better to spell out what is meant in detail, so that everyone can understand it.
  10. General indifference. You may share IP Draughts’ preference for clear, accurate, concise, and consistent contract drafting. But the unwelcome reality is that many people really don’t care much about the wording of contracts, and some of those people influence the general standard of contracts. If you have been the only person in a large negotiation who seems to care about getting the wording right, you will know what IP Draughts means.


Filed under Uncategorized

2 responses to “Top 10 problems with contract drafting

  1. Just spotted a clause that you would [not] like, an asset purchase agreement transferring many patents which requires that “Seller shall sell, convey, transfer, assign and deliver to Purchaser” [the assets].

    Which raises the rather obvious question – does Seller have to do them simultaneously, or sequentially? Presumably all of them, too, given the “and”.

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.