Draft better contracts: tips and pitfalls to avoid

Effective contract drafting is critical, yet it’s rarely a skill that’s taught well in law schools. Many lawyers learn to draft contracts on their own, often leading to their use of tired, myth-laden techniques.

Ken Adams, author of A Manual of Style for Contract Drafting, Second Edition, is one of the leading authorities on the language and format of contracts. YourABA asked Adams to share some of the pitfalls of contract drafting and tips to avoid them.

Why should lawyers care about the language they use in contracts?

Many lawyers act as if the deal between any given contract parties exists independently of the contract, and that articulating the deal in the contract is something of a formality. In fact, the deal is what the contract says it is, and if you’re not careful a contract can hold unpleasant surprises. Much litigation has its roots in defective drafting.

Furthermore, contracts are so full of archaisms, redundancies and other glitches that they’re a chore to negotiate and use as models. As a result, companies waste inordinate amounts of time and money in the contract process.

What makes for efficient contract language?

You should use standard English, namely English as it is spoken and written by the average-educated English speaker. Using standard English has nothing to do with dumbing-down contract prose to make it accessible to the average person. That wouldn’t make sense, as any contract needs to be as simple or complex as the underlying transaction. Instead, using standard English is simply a matter of having a drafter articulate a transaction without resorting to usages that gratuitously interfere with the ability of any reader—lawyer or nonlawyer—to understand the contract.

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You say that many drafting practices are long overdue for the trash heap. What are some of those practices and why are they ineffective?

Some drafting usages are patently ludicrous. A prime example is witnesseth, which occurs as a heading after the introductory clause and before a set of recitals. It’s a bizarre archaism, yet it survives in many contracts. For example, there it was in all its glory in the merger agreement between JPMorgan and Bear Stearns.

In the case of other usages, the deficiencies are less evident. For example, the phrase indemnify and hold harmless is a staple of contract language, but it’s pernicious. Because hold harmless doesn’t have a clear meaning, it gives sharp-eyed litigators leeway to argue that it conveys whatever meaning works best for their client. Saying instead indemnify against all losses and liabilities covers the necessary territory and renders hold harmless redundant.

And I’m fighting a lonely battle against represents and warrants. I think it’s a pointless and confusing phrase, and the law and semantics are clearly on my side. Instead, use just represents.

What are some tips that lawyers can put in place today to improve their contracts?

The prime directive for the contract drafter should be “Take nothing for granted!” Just because a given provision was in a previous deal, or is a fixture in innumerable contracts, doesn’t mean that it makes sense in your contract, or in any other for that matter. Ideally, you would be able to justify every word you include in a contract.

But in the precedent-driven world of contract drafting, that’s generally an impossible task. No deal lawyer has the time to research the wording of every single provision. Instead, you should focus on avoiding potentially serious problems, such as ambiguity caused by a poorly organized sentence, or a condition that’s expressed in a way that makes it seem like an obligation. And try to build, over time, a body of provisions that you’ve thoroughly vetted.

You mention an important difference between ambiguity and vagueness. Please explain.

Lawyers and judges tend to describe any source of uncertainty in contract language as arising from ambiguity. But in general usage ambiguity has a narrower meaning than that—something is ambiguous if it’s capable of conveying two or more inconsistent meanings. Ambiguity crops up in many different forms in contracts, and it’s pernicious, in that it can lead to a dispute that results in one party’s being deprived of a benefit that it thought it had under the contract.

Another source of uncertainty is vagueness, which arises whenever a concept provides for the possibility of a borderline case. For example, tall is vague—one cannot say exactly what height someone needs to be in order to be deemed tall. Words such as promptly and reasonable are vague. Unlike ambiguity, vagueness isn’t inherently pernicious. Drafters invoke vagueness whenever future circumstances are sufficiently uncertain as to render precise standards unworkable.

What impact will technology have on contract drafting?

Drafting should be a commodity task. After all, any given deal likely resembles countless others. But the traditional way of drafting contracts—by revising contract models of questionable quality and relevance—forces drafters to reinvent the wheel imperfectly, day in and day out.

But with technology, you can turn the precedent-driven nature of contract drafting to your advantage by automating the drafting process. That would allow lawyers to instead focus on work that adds the most value, namely determining strategy and negotiating the deal. That approach has already caught on in some industries, for example construction and lending. I expect it to become more widespread.

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