MODULE_P1New_M4

LEGAL WRITING
AND CONTRACT
DRAFTING

CERTIFICATE COURSE

DEVELOPED BY

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MODULE - 4

DRAFTING A CONTRACT

4.1 WHAT TO INCLUDE

“A verbal contract isn't worth the paper it's The points clearly intend to define the rights,
written on” - Samuel Goldwyn liabilities and duties of each party related to the
contract. There are many kinds of contract, and the
Writing a contract is an art. It is a step by step subject matter for each one of it differs, therefore
process. It should be done with great amount of there can be no set format on which it can be based.
care and caution. Every contract depends on the exact requirements
of the parties. Every clause is tailor made to suit their
Drafting comes with huge responsibility since specific wants. But there are certain clauses which
everything that is important and related to the are there majorly in almost every contract.
agreement is dependent on the final written draft
presented in the form of written contract. Every contract has some points which are the
reasons for its existence. Each point deals with an
Contractual terms are classified differently
depending upon the context or jurisdiction. Terms explicit feature related to the subject matter of
establish conditions precedent. English (but not the contract.
necessarily non-English) common law distinguishes
between important conditions and warranties, with
a breach of a condition by one party allowing the
other to repudiate and be discharged while a
warranty allows for remedies and damages but not
complete discharge. In a less technical sense,
however, a condition is a generic term and a
warranty is a promise.1

1 Gillies P. (1988). Concise Contract Law, p. 105. Federation Press.

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For the purpose of common clauses, a contract can mentions the “time of essence” i.e. the time
be divided into three sections: frame in which the terms have to be fulfilled.

SECTION 1: PREAMBLE ü LIABILITIES: Every contract gives certain rights to
the parties. But as it is known that every right
Like any other important document, the preamble is comes with a duty. A duty to fulfil their
the most important section of a contract. It is like an responsibility with honesty. This clause contains
introduction and gives a bird’s eye view of the complete details of the legal obligations of the
whole contract. It tells about who are the parties parties that they have to comply with to avoid
entering into the agreement and why are they doing any kind of action against them.
so? It explains the purpose and scope of the contract
and includes some most important details of it. ü JURISDICTION: In this clause the parties mutually
submit themselves to a particular jurisdiction.
SECTION 2: TERMS OF THE CONTRACT They agree on laws of a specific state according
to which there contract would be interpreted. In
These are the conditions which both the parties the case of any dispute, which forum would be
agree to and have to perform for successful chosen is the main object of this clause. To be
completion of the contract. Some of the common enforceable, they should not be in conflict with
conditions which are found in almost every the general requirements of the law.
contract are:
ü REMEDIES FOR BREACH: This portion of the
ü NAMES OF THE PARTIES: Every contract has contract contains all the remedies that the
certain parties who promise each other parties mutually agree to get at the time of a
something. Thus, it becomes important to know proven violation or breach of contract. These
who they are to avoid any confusion. Therefore, can be compensation, injunction etc.
the very first thing that the contract should have
is the names and full details, like address, there ü LIMITATION CLAUSE: According to the law of the
job portfolio etc., of the contracting parties. land, there is a fixed period for filing of any case
in the court of law. Therefore, this clause
ü CONDITIONS OF PERFORMANCE: This clause mentions the time frame in which a lawsuit can
includes the mandatory terms which the parties be filed after a breach of contract or any other
have to fulfil. Not fulfilment of these terms violation.
would result in a breach of contract and the
party at fault can be sued in the court of law for
non-performance or a breach of contract. It also

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ü INTELLECTUAL PROPERTY CLAUSES: If the ü TERMINATION: If any party wants to cancel the
subject matter of the contract contains anything contract at any point of time then, they can do
that can be protected by intellectual property so under this clause. This clause mentions all the
law i.e. trademarks, copyrights, trade secrets or situations under which a contract can be
patents, then the contract should have a clause terminated or cancelled and also if this option is
wherein full details of the subject-matter is opted for then the cost the terminating has to
given and the kind of intellectual property it is. pay to legally end the contract.
Since, violation of IP is a different dispute
altogether and is dealt with in completely ü SCOPE FOR REFORMATION: Reformation means
different manner. rectification. Therefore, if at any point of time
there is any kind of time any party feels that
ü CONFIDENTIALITY2: What is confidential, and something is lacking in the contract or they want
what is not-confidential? to add to delete something or revise the
contract, then this clause comes into play and it
ü INDEMNIFICATION CLAUSE3: These agreements can be done after proper discussion with the
indemnify (release from liability) the other party other party or parties.
in the event that losses or expenses are
incurred. These should be used with caution, as ü REPRESENTATIONS & WARRANTIES CLAUSE:
they could limit the ability to recover damages This clause is added to the agreement to ensure
for losses. that the rights, duties and obligations of parties
under the contract are adequately captured.
ü DISPUTE RESOLUTION CLAUSE: ADR stands for
Alternate dispute resolution. It is a speedy and ü SURVIVABILITY CLAUSE: This clause is inserted
quasi-judicial process of solving a dispute. If into the agreement to capture the intent of the
both the parties agree, then in the case of a parties as to which clauses would survive the
dispute it can be resolved through ADR methods termination/expiry of the contract. Usually, the
like arbitration rather than litigation. clauses that survive the expiry/termination of
the agreement are Confidentiality clauses, IP
ü DETAILS OF PAYMENT: If the contract requires clauses, representations and warranties clause,
any payment to be made by one party to the indemnification clauses. The other clauses that
other, then this clause becomes important as it the parties would like to survive the
will contain all the necessary details, like where, expiry/termination of the agreement should be
when, on the fulfilment of which prerequisite expressly mentioned in the agreement
condition etc., of the payment to be made.

2http://www.mondaq.com/india/x/193518/Contract+Law/Contract+Review+amp+Drafting+Rules+One+Should+Know
3 http://www.acquisition.gov/far/html/Subpart%2016_6.html#wp1080953

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SECTION 3: END that they have properly read and understood the
contract and agree to each and every point and
This is the last section of the contract. The parties clause mentioned in it.
to the contract put their signature here which tells

4.2 CHECKLIST FOR
PREPARING CONTRACTS

While writing the contract the writer should keep in Terms of contract should be reasonable and capable
mind following points: of performance. It should not be an impossible act.

v To start with it is good to make a complete To decide the possibility certain question that would
outline structure of the contract. The first step be helpful can be5:
should be determining the scope of the contract
and how important is it? þ ARE ALL THE CONDITIONS POSSIBLE FOR YOUR
ORGANIZATION - I.E. CAN YOU CARRY THEM OUT AS
v Simple English should be used. Avoid jargons. DESCRIBED IN THE CONTRACT? CAN YOU DO IT IN THE
v There should be clarity in writing. Be precise TIME SPECIFIED, FOR INSTANCE?

(accurate, complete and, exact), specific, and þ IS ANYTHING IN THE CONTRACT DANGEROUS TO THE
focused.
v Sequence logically by a chronology of events.4 FUNCTIONING OR THE LIFE OF YOUR
v Terms of contract should not be drafted vaguely.
It should appear to be free of ambiguity and ORGANIZATION? WILL IT COST YOU MONEY YOU DON'T
uncertainty. HAVE? DOES IT PUT YOU IN CONFLICT WITH THE
v Think from the reader’s point of view while PRINCIPLES OF YOUR ORGANIZATION, OR REQUIRE YOU
writing the contract. TO USE A METHOD YOU DON'T BELIEVE IN?
þ ARE THE RESOURCES SPECIFIED IN THE CONTRACT -
FUNDING OR OTHERWISE - ADEQUATE FOR YOU TO BE
ABLE TO DO THE WORK? IS COMPENSATION ADEQUATE
TO PAY FOR EVERYTHING YOU HAVE TO DO? IF YOU
HAVE TO SPEND THE MONEY FIRST, THEN SUBMIT A BILL

4 http://www.con-tracts.com/id29.html
5 http://ctb.ku.edu/en//tablecontents/sub_section_main_1873.htm

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TO BE REIMBURSED, CAN YOU HANDLE THE CASH FLOW? þ IS ANYTHING IN THE CONTRACT DIFFERENT FROM WHAT
þ ARE THERE PROTECTIONS WRITTEN IN FOR YOU, AS YOU'VE BEEN TOLD PREVIOUSLY?

WELL AS FOR THE FUNDER, IN THE CASE OF þ THE LENGTH OF CONTRACT SHOULD NOT BE A MATTER
DISAGREEMENT, OR CHARGES OF VIOLATING THE OF CONCERN. IT CAN BE LONG OR SHORT. RATHER IT
CONTRACT? SHOULD BE OF A REASONABLE LENGTH AS IT’S THE
þ ARE THE RESTRICTIONS AND REGULATIONS, IF THERE CONTENT THAT MATTERS.
ARE ANY, REASONABLE AND NOT DISRUPTIVE TO THE
OVERALL OPERATION OF YOUR ORGANIZATION? ARE þ THE TIME LIMIT OF THE EXISTENCE OF THE CONTRACT
THERE LIMITS ON WHOM YOU CAN SERVE, FOR SHOULD BE STATED CLEARLY.
INSTANCE, THAT WOULD MAKE OTHER PARTS OF YOUR
WORK DIFFICULT? þ THE OBLIGATIONS OF THE PARTIES SHOULD BE

EXPLAINED CLEARLY AND HOW THEIR PERFORMANCE IS

EVALUATED. ALSO, WHAT WILL HAPPEN IF ANY PARTY
FAILS TO DELIVER WHAT IT HAS AGREED TO?

4.3 BEST DRAFTING PRACTICES

Contracts pervade our daily lives. When we buy food the parties entering into it. The lives of deals
or clothing we are under contract, when we buy a between the contracts depend largely on the
home and have gas, electricity, and water furnished contract. With the increasing level of the
to the house, we sign separate contracts. When we competition in the economies around the world
marry, we enter into a contract. When we write a what is the key to success is a good drafted contract.
check we act under a contract with our bank to
honor the check, and the check itself may fulfil our Effective drafting strategies also are critical. Drafters
obligation under another contract. When we go to should inculcate and develop the art for designing,
the doctor or dentist, we act under contracts. We negotiating and drafting agreements, in order to
earn our livelihood under contract. The daily reduce risks and to maximize business influence. In
business of not only our households, but of the today’s supply chain, it is becoming increasingly
world, is conducted under a series of contracts. important for drafters to understand key provisions
in supply agreements is critical to negotiating and
The focus should stay on the content but a good approving supply agreements, managing supply
drafting practice views a contract from every
possible angle. A good drafted contract can be a
noteworthy defining factor in the profitability of all

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relationships, and resolving potential and active should be there irrespective of the style of
disputes.6 writing is that the document should be:

As already mentioned drafting is an art. Best Ø Crisp
drafting practice is no set format or guide, rather it Ø Understandable
is an applying best points of drafting that is Ø Complete
incorporated while drafting a contract. Let’s see Ø Logical
some of these points that can be include into the Ø Clear
contract to convert into a good drafting piece. These
are: The simpler the document the better it would
be. Simplicity is the assurance of best drafting
ü PRE-DRAFTING STAGE: In the very beginning the practice. One might think bringing into more
focus should lay on what to include, how to flowery language; using complex words make
organize the document and the process of any document strong. But the truth is the
creating that document. The importance of the simpler it is, the more effective it would be. It
pre-drafting stage is often underestimated but it would be advised that while writing the drafter
is vital to invest time and effort at this point not should keep an eye on how they will read and
only for the clarification of the respective roles seek to write in a style that is easy and pleasant
and responsibilities but also to facilitate the to read.7
drafting process and minimize the risk of future
misunderstandings. That said, it is important to ü RECOGNIZE THE WHY: Before beginning to
avoid going into excessive and potentially draft, the drafter should identify the reason
confusing detail. behind formulating the document. Discuss in
detail the reasons with the parties involved,
ü STYLE: Style is the way the contract is written. note it down and figure out as to what is
The clauses, points and everything that can be essential and what is not for the document and
called as content should be easy to read and then finally structure them.
readily understandable. Every drafter has their
own style. They should follow that but the only Best drafting practices shows that the structure
thing that they should not loose is the easily should be in a manner that the points are
understandable contract. Some points which logically placed. The agreement should start
with introduction, then move on to the clauses
and then finally end with the consent of the

6 http://www.autoindustrylawblog.com/2015/01/08/best-practices-for-designing-negotiating-and-drafting-supply-chain-agreements/
7http://www.aat.gov.au/Publications/SpeechesAndPapers/Downes/ExcellenceDecisionMakingOctober2010.htm

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parties. The most important clauses should be agreement shall have the terms related to
mentioned at the outset itself and then move on reference to arbitration, appointment of
in the decreasing order of importance. arbitrator(s), choice of arbitration law and fees
of arbitrator(s) etc.
ü ESSENCE OF THE CONTRACT: As mentioned
above the opening of the contract should be ü NOTHING IRRELEVANT: In the world of business
with introduction of the parties, immediately the most important aspect is time. Nobody has
after that the object of the contract should be time to go through irrelevant stuff. Therefore,
laid down. The object should clearly convey the need of the hour and best drafting practices
anyone who reads the contract the reasons and suggest that the deal should be reduced to
aim of the contract. Best drafting practice says essential elements put together in a contract.
that it should be done in a way which is
comprehensible by the ordinary reader. Parties want the result and the shortest, clearest
explanation through the contract. Nobody
8The purpose or the object of the contract is wants to know how the clauses were decided,
instrumental in the construction of the contract. why only these particular persons are party to
It should be understood properly and should be contract, why is the deal being sealed. The only
clearly conveyed to the parties by the way it is important point is the essence of the contract,
structured. The purpose defines the scope, rights and liability of the parties and the other
design, and requirement of the terms to be clauses mutually agreed by the parties. They
included in the contract. For example: a only want a contract for a particular deal that
franchise agreement shall have the terms would be profitable for them. Therefore:
related to duration of franchise, area restriction
of franchise, royalty, and intellectual property • Omit anything not relevant.
etc.; a supplier agreement shall have the terms • The clauses of the contract should be clear,
related to delivery of goods and services, price
payment schedule, quality standards, indemnity, logical and comprehensive.
rejection and re-delivery of goods, and dispute
resolution mechanism etc.; a confidentiality ü KEY DETAILS SHOULD NOT BE LEFT: A contract
agreement shall have the terms related to must accomplish the objectives of the parties
definition of confidential information, duration even while it protects the client’s interests.
of confidentiality, exceptions to confidentiality, Occasionally, clients want to omit material
and breach of confidentiality etc.; an arbitration information from the contract and rely on vague
descriptions to be determined later. For

8http://www.mondaq.com/india/x/193518/Contract+Law/Contract+Review+amp+Drafting+Rules+One+Should+Know

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example, it’s not uncommon to see contracts for concepts, it is often instructive and perfectly
“consulting services” that do not specify the acceptable to provide a "worked example" to
nature and type of services. Unfortunately, these illustrate and underline the form of wording
contracts leave the door open to disputes. To used.10
ensure precision and completeness, review a
checklist with your client to flesh out the ü IDENTIFY THE LAW APPLICABLE: A well-written
material terms. For example, to add precision to contract of any kind takes into account legal
the broad term “consulting services,” it is a good issues. It should clearly describe the law that
idea to attach an annex that lists the specific will apply on it, the jurisdictions and the rights
consulting activities, service levels, and other and liabilities of the parties. The contract
details. Clients will appreciate the clarity that should always be drafted keeping the parties in
results from this process, and the contract will mind and not as a lawyer, as they are the
better reflect the parties’ bargain.9 audience with the greatest need for the
information required to be disclosed in a
ü SHORT MEANINGFUL SENTENCES: The longer contract. It makes it easier for the parties to read
the sentences the complex the document and understand the contract and their correct
becomes. A single sentence should express only position in the whole scenario.
one idea i.e. the meaning of the sentence
should be clear in the first go. The reader should ü Use the active voice11: It is generally easier to
not feel lost in the sentences. The length understand the active voice as it is engaging
sentence should never kill the purpose. The and easier to read. The active voice generally
length of the sentence should always be what is uses fewer words and permits the use of strong
required. verbs that highlight who the action-taker is.
While the passive voice may be preferred on
ü SIMPLE ENGLISH: The key point is that all occasion, it should be used sparingly as it may
aspects of the contract, whether clauses or add length to sentences and obscure the
schedules, should (where possible) be written identity of the action-taker.
in plain English with short succinct sentences
that are easy to follow and understand. In those ü USE PLAIN, EVERYDAY WORDS:12 It is always
cases involving complex legal issues and easier to read plain, everyday words that are

9 http://www.acc.com/legalresources/publications/topten/ttdp.cfm
10 https://cips.org/Documents/Resources/Knowledge%20Summary/Writing%20Contracts.pdf
11http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/150205%20Consultation%20paper%20on%20Guid
elines%20on%20Good%20Drafting%20Practices%20for%20Prospectuses.pdf
12http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/150205%20Consultation%20paper%20on%20Guid
elines%20on%20Good%20Drafting%20Practices%20for%20Prospectuses.pdf

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commonly understood. You should avoid using ease of reference. The explanation for such
complex, abstract or formal words whenever terms should be clear and simple so that the
there are simpler and clearer alternatives. parties would be able to understand your
explanation.
ü AVOID THE USE OF LEGAL, FINANCIAL OR
TECHNICAL BUSINESS JARGONS EXCEPT WHEN ü AVOID “CUTTING AND PASTING”:13 Cutting and
NECESSARY: Whenever possible, you should pasting contractual terms in its entirety from
always use plain, everyday words to get your legal documents is a big NO No. Lengthy
point across to parties. However, if using legal, contractual terms and legalese are difficult to
financial or technical business jargons is a must, read and understand. Instead, the key points of
it should be explained the meaning of these the legal documents should be summarized
terms clearly when it is first used and clearly and concisely in plain English to facilitate
considered putting the terms in a glossary for easier understanding.

13http://www.mas.gov.sg/~/media/MAS/News%20and%20Publications/Consultation%20Papers/150205%20Consultation%20paper%20on%20Guid
elines%20on%20Good%20Drafting%20Practices%20for%20Prospectuses.pdf

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