Contract drafting conventions
To facilitate consistency amongst the various model contracts used throughout an organisation and to enable the use of contract building blocks across different model contracts (whether in Word-form or as a template available in a contract assembly software application), it is strongly recommended to develop a reference set of contract drafting conventions. Such contract drafting conventions should not only establish the principles to be applied throughout the model contracts but should also reflect the choices made in relation to the model contracts and model contract clauses.
A complete book such as Willem Wiggers’ Drafting Contracts – Techniques, best practice rules and recommendations related to contract drafting (Kluwer 2011) may serve as a ‘contract drafting convention’ but for practical use a high-level summary and a short list of key choices is preferable. In case of doubt, reference may be made to this book. the integral text of it is on the website of Weagree.
Part A. – Best practices of contract drafting
If it is important, it should be addressed in the recitals, conditions or warranties. Less important matters should be self-explanatory.
|Best Practice Rule||Explanation, example|
|1. Use ‘plain English’ and stay close to layman (business-manager) interpretation||
|2. Use the present, active tense, personalise sentences and use the singular||
|3. Simplify: keep sentences short and delete unnecessary words||
|4. Be consistent (rigorously)||
|5. If possible, use shall + infinitive and not the notional verb as an auxiliary||This avoids contract assembly complications: if the notional verb is also the auxiliary verb, the automated contract should provide for the plural and the singular each time it is used (e.g. “Purchaser shall permit” as opposed to “[Purchaser permits] [Purchasers permit]” and everything this triggers).|
|6. Bring exceptions, limitations and qualifications together||
|7. Do not explain ‘why’ (avoid using enabling or in order to)||If it is important, it should be addressed in the recitals, conditions or warranties. Less important matters should be self-explanatory.|
|8. Avoid legalese||
|9. Do not use without limitation after including||
|10. Do not use it being understood||
|11. Use be entitled to instead of may||The use of may is susceptible to ambiguity.|
|12. Name the ‘own party’ and use the functional reference for the ‘other party’||For example, Weagree vs. Licensor.|
|13. Definitions will be marked bold and not underlined, and not placed between quotation marks||Example: Product means the products listed in…|
|14. Obligations (and covenants) will be strictly separated from recitals, definitions, conditions, and warranties or representations||
|15. Numbers in a provision should be simple and must avoid risks of mistakes||
|16. Names and document references should be in italics if they are capitalised but not ‘defined’||International Chamber of Commerce; REACH, Good Manufacturing Practices, IFRS, the U.S. Export Administration.|
|17. Avoid referencing statutory provisions||For example, “group of companies as defined in article 2:24b of the Dutch Civil Code”.|
|18. Reduce cross-referencing||Cross-references might trigger contract assembly complications: as such, there is no objection against cross-referencing, but both the referring and the referred-to clause should always appear in the resulting document.|
Part B – Preferred terminology in contracts
|Preferred terminology||To be replaced|
|Agreement (capitalised)||agreement, contract.|
|Party or Parties||party and parties.|
|Purchaser, Seller, Customer||Buyer, Vendor, Supplier, Service Recipient, Company.|
|in / of / to this Agreement||herein, hereof, hereto (i.e. also parties hereto, on the date hereof).|
|Article for articles; Section for sections (at ‘level 2’); and item for paragraphs, sub-sections and enumerations (level 3 and above)||Clause, sub-section, paragraph, subparagraph and (for articles) section.|
|Schedules for attachments to the main agreement and Annex for attachments to schedules||Exhibit, Appendix, Attachment.|
Part C – Presentation
- Cover page. An agreement must get a cover page if it exceeds ten pages or if it is confidential.
- Table of contents. An agreement should get a table of contents if it contains more than ten articles and more than ten pages.
- Position list of schedules. A list of schedules is included underneath the table of contents (unless it breaks over the pages, in which case it will be placed on a separate page).
- Headers & footers. Contracts must be marked confidential (and not strictly confidential or privileged) on each page. The footers will identify the title of the agreement and the short names of the (two or three main) contracting parties.
- Schedules, annexes. Use schedules to the main agreement. If a schedule itself contains exhibits, the exhibits will be called annex.
- Clause numbering and captions. If an article consists of more sections, they must be automatically numbering. Each level-2 numbered section gets an underlined, bold-print caption followed by a (non-underlined) full stop.