Category Archives: Contract drafting

Contract drafting tips: avoid such and said

Good contract drafters usually try to avoid vague or ambiguous language in their contracts. Except, of course, when they are indulging in constructive ambiguity – a concept that brings IP Draughts out in a rash, particularly when combined with a client who mistakenly thinks that his personal intentions during negotiations are relevant to the interpretation of the contract. Under English law, evidence of a party’s subjective intent, or the drafting history, is generally not admissable when the court interprets contractual language.

Regrettably a lot of people don’t realise this, including at least one US Federal judge. See the recent, US case of Bayer CropScience AG v Dow Agrosciences LLC (links to the several case reports here) in which, in IP Draughts’ view, the judge makes a complete hash of applying English law rules of contractual interpretation in relation to the grant clause of a patent licence agreement. But that is not the main subject of this posting.

One of the areas where drafting precision is important is where the text refers to an item (eg an obligation) set out in another clause, or to another sentence in the same clause. Contracts sometimes vaguely refer to “the said …” or “such …” as a shorthand, and this vagueness can lead to disputes, particularly if there is more than one preceding example and it is not clear which one is being referred to. A classic example of this can be found in the Rainy Sky case, which IP Draughts blogged about in 2011 and re-posted earlier today.

Consider the following, fictitious example:

At the start of each monthly meeting, the Vendor shall perform a handstand before bowing three times to the Purchaser’s representative.

During such meetings with the Purchaser, the said Vendor shall…

In this example, “said” is completely redundant, assuming that Vendor is a defined term. If, however, vendor is not defined, and in the unlikely case that it is appropriate to cross-refer to an earlier usage, “said” is not the word to use, as it has an old-fashioned, lawyerly, off-putting ring to it.

Often, no linking word is needed, because it is obvious in context that the term means the same as it meant in the earlier reference. Lawyers are sometimes too ready to reach for legal-sounding jargon, and a few seconds spent thinking about the point may lead to the conclusion that there is no plausible ambiguity.

If a word really is needed, “that” sounds better than “such”, and “such” sounds better than “said”, at least to IP Draughts’ ear. But if a word is used several times with the same meaning, IP Draughts often finds that defining the word, and then using the defined term, is a simple way of avoiding these types of vague links. Alternatively, one could refer more precisely to the previous usage, eg by referring to the “[item] described in clause X” or “[item] referred to in the previous sentence”.

Without seeing the rest of the agreement, it is impossible to know whether the second sentence in the above example would be ambigious without the word “such”. Are there any other references in the contract to meetings, eg annual meetings? Will the second sentence only apply to the monthly meetings referred to in the previous sentence? And if so, does “such” remove the ambiguity?

Depending on context, it may well be better to use one of the following phrases in place of the second sentence:

  • During meetings with the Purchaser…
  • During monthly meetings with the Purchaser…
  • During all meetings with the Purchaser…

Other formulations may be even better. And “At each meeting…” may be better than “during meetings”, again depending on context.

In IP Draughts’ view there is no hard-and-fast rule about this issue, but “such” is an over-used word that sometimes gives a misleading impression of precision, and sometimes is best avoided in contracts.

 

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Contract drafting tips: word order

Techniques for drafting contracts – we all use them, whether we consciously follow a formal guide such as the Manual of Style for Contract Drafting, or take an ad hoc approach based on our previous experience. Older readers in the UK, and perhaps a larger number of readers outside the UK, tend to apply rules of grammar and other writing techniques that they were taught at school. Sometimes those techniques are now considered out of date or discredited. Most of us have moved on from rigid obedience to rules (if we were even taught them) such as never start a sentence with a conjunction, or never split an infinitive.

IP Draughts finds that some techniques keep coming back to him when drafting contracts. A particularly valuable technique is to critically review the order of the words in the sentence. An example that IP Draughts uses when teaching is the following:

Being ignorant of the law, the attorney argued that his client should receive a light sentence.

The phrase “being ignorant of the law” is in a weak position in the sentence. If it is put immediately after “attorney” or “client”, the meaning becomes clear and unambiguous.

Consider the following example from a consultancy services agreement:

MegaCorp shall provide all access to documentation in its possession and to personnel under its control where required by Consultant within 7 days and if notified in writing to Megacorp.

Several techniques can be used to improve the clarity of this sentence, but for now let’s focus mainly on word order.

Within 7 days of the Consultant’s written request, MegaCorp shall provide access to (a) documentation in its possession and (b) personnel under its control.

Alternatively, the 7-day deadline point could be moved to after “access” or could be addressed in a second sentence. It is clearly in the wrong place in the original version, as it suggests that the obligation to provide access only applies where the Consultant needs access within 7 days. If the Consultant’s needs are less urgent, the obligation will not apply.

In a full review of the wording, many other points of drafting and substance might need to be addressed, including:

  • Who is the access to be given to – employees of the Consultant?
  • Confidentiality obligations
  • What does “access” mean in practice? Free rein to rummage in the company’s files, or something more controlled?
  • Are there any limits on access to documentation? Eg is access to pricing information on the Consultant’s competitors allowed?
  • Are there any limits on access to personnel, eg if they are busy or on holiday?
  • Cost implications

The careful drafter will be thinking about all of these points and more, even if some of them are quickly dismissed in the context of the deal.

Applying a scalpel to the sentence, and moving bits around, is often a good way of removing potential ambiguity, cutting out redundant wording, and improving clarity generally.

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“We have copyright over our intellectual property” [?]

Last week’s blog post invited you to suggest how IP Draughts might expand its readership while not losing the main purpose of the blog. Alex Kryzhanovski suggested a legal review of clauses found on the internet. He was, perhaps, thinking of our post, Do No Evil Drafting, which reviewed the terms of Google’s patent purchase programme. That article was popular (perhaps because it was critical), so here is another on a similar theme.

Preparing for this article, IP Draughts looked at several sets of contract terms that users of online services must “accept” before they can use the service, but nothing caught his interest. He struggled with the Gorgon of a document that tries to protect Microsoft’s interests in Word across multiple jurisdictions, multiple distribution channels and multiple customer types. The terms are so tedious in their length and tone that no sane person would want to read them, unless they are paid to do so.

Finally, he decided to focus on something plainer and simpler. He found the website of an Australian organisation, the Plain English Foundation, which provides services and training in making documents “engaging and effective”. According to their website, they “edit texts such as …legal contracts, deeds and agreements”.

IP Draughts spent time rummaging around their website terms. In general they are not bad, as one would expect from an organisation that makes a living from producing clear documents. But the quality goes down when the terms focus on IP rights. Consider the following extract from their “copyright policy and intellectual property terms”:

1. We have copyright over our intellectual property

Unless otherwise shown, we own all the intellectual property on our website. This includes all copyrightable material such as our:

  • writing tools, guidelines, checklists, quizzes, examples and edits
  • other resources we make available to you, including our PowerPoint presentations
  • designs, images and branding
  • trademarks
  • inventions including databases, compilations and codes.

IP Draughts struggles with the heading quoted above. If you take the view, as IP Draughts does, that “intellectual property” refers to patents, copyright, trade marks and the like, saying that you have copyright over your copyright is meaningless.

A possible way of making sense of the heading is if you assume that “intellectual property” refers to the written materials and images on the site. IP Draughts is aware that some people use the term “intellectual property” in this way, and use the term “intellectual property rights” or IPR to refer to copyright, trade marks and similar types of intangible property in those materials. IP Draughts doesn’t agree with that usage, but it is sufficiently common that he should, perhaps, let that one go.

On the other hand, the text that follows the heading shows that the drafter is mixing up materials and the IP that protects those materials in a random way, so IP Draughts is not inclined to give the benefit of the doubt. For example, “trademarks” are listed as an example of “copyrightable material”, which makes no sense.

Several further issues jump out at IP Draughts from the above text, including:

  1. Why does the heading focus on copyright when the text that follows mentions several types of IP including trademarks?
  2. Why does the text refer to “copyrightable” materials rather than just copyright works. Under UK and Australian law, copyright arises automatically and it is not subject to registration. Has this wording come from a US source document?
  3. It looks odd to see inventions lumped in with code (presumably software code).

Later in the same set of terms the following text appears:

As part of your purchase agreement with us, you agree:

  • …not to copy, record, stream, distribute or assign our training materials in any form to another person or entity.

The word “assign” jumps out in the list of verbs in this extract. The other verbs refer to acts that might infringe the copyright owner’s rights. Assign is a technical expression that usually means transfer of ownership, presumably of the copyright in the training materials. But other terms make clear, repeatedly, that the Plain English Foundation retains ownership of the copyright. Perhaps the author meant that the user should not “transfer” or “provide” the materials to anyone else.

IP Draughts supports the objectives of organisations like the Plain English Foundation. His point of criticism is that good editing skills can only take you so far when you are dealing with technical subject-matter. The good drafter needs to understand that subject-matter, which in this case is IP law and practice. In IP Draughts’ view, the drafter or editor of Plain English Foundation’s IP terms lacked that understanding, and as a result some of those terms don’t make much sense.

 

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Judging the quality of contract drafting

itamaeIt is said that Japanese sushi chefs undergo years of training, learning from a master the fine arts of cooking the rice to a house style, preparing the fish and other ingredients, shaping the nigirizushi, conducting oneself in front of the customers, and even making diplomatic mistakes in the calculation of the bill.

Such devotion to detail may be thought excessive for what is regarded, at least in the UK, as a mass-produced snack item that can be found in most supermarkets, its place now well-established in the chiller cabinet next to Cornish pasties and coronation-chicken sandwiches.

Similar thoughts are prompted by the subject of contract drafting. Should we treat contracts as a commodity to be bought from an online supermarket (such as PLC or PSL), or are they a bespoke item whose preparation requires the skills of a dedicated expert?

pizza-baseIn fact, they are often a hybrid. Typically, a drafter will use a template agreement as a starting point for preparing an individual contract. The quality of the end-product will depend on both the suitability and drafting quality of the template, and on the drafter’s ability to adapt the template to the individual transaction.

Sometimes, there is little choice in the starting document, either because it has been prepared by the other side in negotiations, or because the client’s policy is to use one of its standard agreements or a well-known, third-party template such as a Brunswick collaboration agreement. There may be limited client appetite for incurring time in making changes to a source document that are not specific to the deal, or of major importance. The fastidious drafter may need to avert their gaze. What cannot be cured must be endured.

When it comes to the drafting of individual clauses, the drafter’s skills are put to the test. The drafting should be good in itself, but it should also be made consistent, where appropriate, with the content and style of the template that is being used. Careful accuracy is required for both of these tasks.

Where a tailored clause is inserted into a template agreement, the clause will itself often be ‘cut and pasted’ from another template, with or without changes. This can and does result in drafting mistakes and inconsistencies, which the drafter should correct. When IP Draughts is reviewing a draft agreement, he focuses on both the substance and the detailed drafting. It is sometimes possible to gauge how careful the drafter has been from the smallest of details.

sushiFor example, if new definitions have been inserted in the definitions clause of a template agreement, do they follow the same drafting conventions? Do they start “shall mean” when the template uses “means” or, to be really picky, do they start “Means” when the template uses “means”? Does the definition end in a full stop when the template definitions end in a semi-colon? If a semi-colon is used in the template, and the penultimate definition ends with an “and”, has the position of the “and” been moved when a new definition is added to the end of the list of definitions?

There are dozens of points similar to the above, where different templates follow different conventions, but it is appropriate to stick with the approach taken in the source document.

Spotting and correcting these points may not result in any significant improvement in the legal effect or commercial clarity of the document, but they are an indicator of how careful the drafter has been. If she can spot points like this one, she is likely also to spot more significant drafting defects.

After years of practice, the apprentice will become a true itamae, who can spot even the tiniest flaw. Examples of tiny flaws in contracts include:

  • the automated clause numbers that are in a slightly different typeface or font to the text that follows
  • the spacing between clause number and text that changes by a millimetre or two, half-way through the contract

stampSome flaws are so tiny that, even if we spot them, we may not always bother to correct them; for example, the comma that is in italic text when all the others are in normal text.

Readers, do you have pet stylistic peeves that you like to correct in contracts, or those that you regard as too trivial to correct? IP Draughts would like to hear from you.

By the way, and just getting his defence in first, IP Draughts often makes typing mistakes in this blog, which tend to be corrected after the blog has been published, rather than before. Some of his readers are good enough to point these out!

 

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