The Many Facets of Contracting Part 5: Contract Drafting

This is the fifth and final installment in this blog series. Click on the links below to access any of the other four entries: Part 1, part 2, part 3, and part 4. 

Contract management requires quick thinking and a keen attention to detail. As a result, it is crucial that a company's contracts are drafted well. Here are some things to consider when drafting contracts to ensure that the final agreements are actually manageable.

Use Clear and Concise Language

The language of a contract should be clear and concise to facilitate the management process, not hinder it. This is sometimes a difficult balance to strike when the contract addresses complicated matters, but the drafting team must strive to make it happen. Otherwise, once the management team takes over, an overly complicated contract may become so difficult to manage that it leads to compliance issues and possibly a substantial breach of the agreement. It is unfair to expect the management team to spend an inordinate amount of time trying to decipher the meaning of contractual language when they need to focus on fulfilling the contractual obligations, so drafters need to ensure that this will not happen.

Define Ambiguous Terms

Contracts often contain special or unusual terms, especially those that deal with unique technology or products. Although there may be a general understanding as to the meaning of such terms, no one should ever assume that everyone's interpretation will match. Thus, any and all ambiguous terms should be clearly defined. Ideally, a contract will contain an alphabetized glossary of these terms and their detailed definitions. This will make it clear what both parties' understanding of a term is and serve as a quick reference guide for the management team who likely did not play a significant role in the drafting process.

Separate Topics with Headings and Subheadings

Contracts should not be a mess of paragraphs on paper. There should be a clear outline with specific headings and subheadings identified by Roman numerals, capitalized letters, Arabic numerals, and then lowercase letters, generally in that level order. These headings serve as guideposts for anyone reading through the agreement, and finding a pertinent portion will be easy with a quick scan of the document. Obviously, this is particularly helpful for the management team when they need to quickly find something so that they can assess how to approach it.

Reference Specific Appendices and Attachments

It is common for contracts to briefly mention facts or figures that are fully delineated somewhere else in the document. In general, graphical representations of data are included in an appendix or attachment to the contract. When there are multiple attachments, it is important that each one is clearly labeled with a unique identifier. In addition, drafters must ensure that they specifically identify which attachment they are referencing, rather than including a vague description like "as reflected in the attached appendix." Without these identifiers, the management team will waste precious time flipping around the contract trying to determine what information is being discussed.

For many professionals, contract drafting is a routine part of their job responsibilities. Yet, despite these folks having ample experience in this arena, there continues to be countless contract disputes due to poor drafting and the ensuing impact that this has on contract management. But, with a little extra effort on the front end, these problems are less likely to occur down the line.