Drafting Contracts

26 January

• Language of the day: affect/effect. Each can be a verb or a noun.
• Handout 1: language tip, sample answer, my answer (graded).
• Actual construction contracts have a lot of red tape: there's a construction lender and a permanent lender. Payments are made to the constructor when requests for money are submitted along with lien waivers from subcontractors. There are hold-backs pending acceptance, etc.
• Resist the urge to create superfluous terms. When defining a term, be careful with "includes:" "shall mean" is preferred.
• "Notwithstanding," "provided that," etc. When you have two somewhat contradictory statements, especially near one another, you need to acknowledge which one is the limitation on the other.
• "The lesser of" or "the greater of" is a nice way to create a limitation also. Concise and precise.
• Of course, making certain terms too clear might scare one party off. On the other hand, that's a bit of an ethics issue. It's better to sign a contract that both parties understand and agree to. Still, sometimes leaving a little room for play might not be all bad.
• Avoid passive voice "Owners shall pay to Contractor" (not "Owners' liability is limited to")
• This week, we are once again avoiding ambiguity: use language that is subject to only one possible interpretation.
• Ambiguity is not the same as vagueness: imprecision is not the same thing as having more than one possible inconsistent meaning. Words like "reasonable" or "best effort" are possibly vague, but might have standard business meanings, and might be acceptable. What you want to avoid is ambiguity, because that's where bad drafting can produce conflicts.
• Ambiguity can destroy what the parties thought they agreed to, or they might be exploited by one party. Note that the differing interpretations might not be equally plausible: just that the language is subject to two interpretation.
• If a court says your document is ambiguous, you might be dealing with an ambiguity exception to the parol evidence rule, or a rule that says ambiguous language should be interpreted against the party that drafted it.
• Handout 2: examples of ambiguous provisions.
• Avoid synonyms: be consistent about what you call things.
• Ambiguity about deadlines is one of the biggest sources of trouble: nobody does anything until the last minute.
• Is "Thursday at midnight" 12:00AM on Thursday, or 11:59:59PM?
• Age restrictions are problematic in the same way.
• Ambiguity can be semantic or syntactic, so be careful of both.
• Remember, if the other side spots an advantage, they will try to read your contract in bad faith and against you.
• "The doctrine of the last antecedent:" when in doubt, the modifier only modifies the noun nearest to it. This rule is not universally applied-- don't rely on it.
• Tabulated sentences use format to indicate visually what is meant. Each tabulated item should flow like a normal sentence, but the format guides the reader to understand the scope of modifiers. Don't overdo it, though: it's not always needed.
• Handout 3: syntactic ambiguity. From Kenneth McAdams, A Manual of Style for Contract Drafting