Contract Building Blocks | Brownman | Spring 2017
Contracts and contract drafting
Recurring themes for this semester
The 7 Building Blocks
A philosophy of writing
Writing for the reader, not the writer
Begin with the end in mind:
Once the reader has finished, what do you want them to do / understand / think?
Elements for a writing to be effective:
Easy to read / understand
Short; no longer than it needs to be
Consistent with writing principles
Clear and unambiguous
Goals of a contract
Reflect the terms of the deal – accurately; clearly; and without resorting to other sources (aka the “four corners” doctrine)
Anticipation … of issues / occurrences
“what if” scenarios
Tool to avoid (or, if necessary, assist) litigation
Organized – so that parties / litigators can find clauses easily later on, if and when needed
7 building blocks
The 7 “Building Blocks” (TOOLS) you will use to draft your contract
1: 2 different business issues
Grant of license – declaration;
Geographical limitation – covenant
2: 2 different business issues
Financial statements – representation;
Reliance on financials – warranty;
Right to terminate – condition to discretionary authority and the discretionary authority itself
3: term of agreement – declaration
4: 2 different business issues
Obligation to market – covenant;
Repurchase – condition to covenant and the covenant itself
(a) representation / warranty
6: monetary provision … 2 choices
Declaration and covenant
Covenant alone (with built-in statement of what the $$ are, and how calculated)
7: 4 different steps / actions
Mfr’s obligation to submit samples – covenant
Ralph must accept or reject – covenant
IF Ralph rejects, Mfr MAY change – condition to discretionary authority and the discretionary authority itself
IF Ralph accepts, Mfr MUST produce – condition to covenant and the covenant itself
8: 2 different business issues
assurance of exclusivity – representation / warranty
no other grant – covenant
9: IF sales > $7 million, Ralph WILL increase territory – condition to covenant and the covenant itself
Vagueness v. ambiguity
While you are drafting … be aware of / AVOID at all costs …
Ambiguity by deal lawyers is the “litigator’s lifetime lifestyle assurance program”
Ambiguity – Definition
Provision that can be interpreted …
… in 2+ mutually exclusively ways …
… each of which is reasonable
Where does ambiguity come from?
1. Word selection
2. Word usage
3. Sentence Structure
Employment agreement: where must the uniform be worn?
“The employee must wear the uniform in the employee.”
Who’s speaking, and who requires mental treatment?
The student said the teacher is crazy.
The student, said the teacher, is crazy,
From Jay Leno’s “Headlines” …
“Poverty Meeting Attracts Poor Turnout”
Indictment in N.Dist. of Texas for “the attempted sexual assault of a chile.”
Buyer will purchase from Seller three (33) units …
Found guilty on eight counts, Judge Howard sentenced Groman to eight months in prison.
Judge is found guilty according to this sentence structure
Guilt, vengeance, and bitterness can be destructive to your children. You must get rid of them.
Let’s eat Grandma and not wait for the
(a) uncertain outcome(s) … that matter
Measure: probability + consequences
(b) “the possibility of damage, injury or loss”
(c) always a negative event?
Combination: danger (crisis) + opportunity
Risk – Characteristics
Fear / scary
Everywhere / part of everyday life
Necessary & helps create innovation:
A characteristic of most successful companies
“Nothing ventured, nothing gained”
A necessary requirement for profit?
“no pain, no gain”
Risk – Step 1: Identify
Attorneys (unfortunately) especially good at this
Conundrum: “Deal Killers” and “Dr. No”
How? Three questions you MUST ask
“Why are you wanting to do this deal?”
Goals? What info do we need?
“What is your tolerance for risk?”
“What if …” / “What can go wrong?”
(Y & WI2)
Identifying Risk: Question 1 to Ask
1. Why … are they doing the deal / what is (are) their goal(s) and objective(s)?
2. Who is your client in this deal? [role] Seller?Buyer?
Lessor / Landlord?Lessee / Tenant?
Provider of service, or recipient?
I.D. Risk #1 – WHY Businesses Do “Everyday” Transactions? (e.g., buy/sell/lease goods, products and services)
Buyer / Recipient
Needs the goods / product / service to further its business
Space for ops or employees
Component of B’s product (new / cheaper / more readily avail. / better quality / better supplier / L-T deal)