Contract Drafting Class Notes – D. C. Toedt III

The contract

1. Title: Why not just have the title be “Agreement”?
2. First paragraph: What is a one-word name by which this first, unnumbered paragraph is typically called?
3. First paragraph: The words “Agreement,” “Buyer,” and “Seller” are in bold-faced type and surrounded by quotation marks and parentheses. Why?
4. First paragraph: Why does this paragraph state (i) the type of organization of Betty's Used Computers, LLC ("BUCL") and (ii) the state in which BUCL is organized?
5. First paragraph: Why does this paragraph state Buyer’s principal place of business?
6. First paragraph: Why does this paragraph state Buyer’s initial address for notice? Why not just put that information in the Notices provision (if there is one)?
7. First paragraph: Why state Sam’s place of residence (which is not necessarily the same as his initial address for notice)?
8. First paragraph, comment [B]: What's a romanette?
9. Section 1: What advantages might there be in including so much information about "the deal” in this paragraph?
10. Section 1: This contract does not include recitals, a.k.a. "whereas" clauses, nor "words of agreement," e.g., "The parties agree as follows." Why might that be?
11. Section 1: “Seller will sell” and “Buyer will buy”: Why includes both of these?
12. Section 1: “Seller will sell”: Why not “Seller shall sell”?
13. Section 1.3: What’s the point of this section – as a matter of law, aren't the parties free, if they so agree, to change the Closing Time and Closing Location?
14. Section 1.4: What is a "safe harbor" clause in the context of a contract (as opposed to a statute or regulation)?
15. Section 1.4: What’s the significance of “for the avoidance of doubt”?
16. Section 1.4: Any danger in using “for example”?
17. Section 1.4: In the term "USD $800," what does the prefix "USD" mean?
18. Section 2: What types of agreement are likely to include this kind of clause?
19. Section 2: Note the phrasing, “Seller will not use the Computer ….” How else could that be phrased? Is there any significance to the “will not” phrasing?
20. Section 2.1: In the real world, would this sort of exception normally be included in a draft agreement prepared by Buyer? Contrariwise, if Seller had drafted the agreement, then would Seller have included section 2 at all?
21. Section 3: “Seller will cause” a clean install of Mac OS X: Why phrase the obligation this way — why not just say that Seller will perform a clean install?
22. Section 3: What type of covenant is this?
23. Section 4: What term might traditional contract drafters use here instead of “prerequisite”?
24. Section 4: Why include this section?
25. Section 4: Why cross-reference to “the obligation stated in section 3,” instead of just saying, “Seller’s obligation to do a clean install is a prerequisite ….”?
26. Section 5: How does this provision differ — significantly — from section section 3?
27. Section 6: (i) Why use the phrase, “so far as he knows, without any particular investigation”? (ii) Why not simply say "to Seller's knowledge"? [Note how in this paragraph the question marks are outside the quotation marks because the question marks aren't part of the text that's being quoted.]
28. Section 7: What options does Buyer have if Seller doesn’t allow Buyer to inspect the Computer before Closing?
29. Section 7: Why use the term “commercially reasonable” in this section?
30. Section 8.1: Why not use active voice here?
31. Section 8.1: This provision uses “must be paid” for emphasis — what are some other possibilities for phrasing this term?
32. Section 8.1: Any dangers in payment by cashier’s check? What are some possible alternative forms of payment?
33. Section 9: This section uses the term "notarized." Does that likely refer to an acknowledgement, or to a jurat?
34. Signature blocks: Is there any danger in having the signature blocks on a separate page for easier signing and FAXing of just the signature pages instead of the whole agreement?
35. Signature blocks: Why does the date line say "Date signed" instead of just "Date"?

1. PROVISION: "Alice represents that she will pay Bob net 30 days."
   QUESTION: What does "net 30 days" mean?
   QUESTION: Is anything wrong with the "net 30 days" part?
   QUESTION: Is anything else wrong with this provision?
2. FACTS: (A) Bob wants Alice to agree to the following provision: Alice will notify Bob of any dispute about a payment obligation no later than the due date of the payment. (B) Alice's lawyer objects to this provision.
   QUESTION: Should Bob push hard for this provision?
3. FACTS: A contract payment provision states that past-due payments will bear interest at 5% per month beginning on the due date. Texas law applies.
   QUESTION: Any problem with this provision?
   QUESTION: How could this provision be improved?

1. Pages 65-66: Does your group have a consensus about which of Versions 1 and 2 is easier to read?
2. Page 65, first paragraph: How can a preamble bind the wrong party?
3. Compare the all-caps name of the agreement in Version 1 on p.65 and the initial-caps ("nitcaps") name of the agreement at the bottom of p.67. Does your group have a consensus about which "looks better"?
4. § 6.2.2: When might it be a really bad idea to use an "as of" date?
5. Top of p.73: Why specify the state in which a corporate party is incorporated?
6. Top of p.74: Think of a reason for reciting the locations of the parties' principal places of business? (Hint: Think litigation.)

1. Page 95: A financing company includes a provision in a loan agreement stating that the borrower will not make any investments other than "Permitted Investments," which the loan agreement defines as any non-margined, non-"short" investments, so long as the borrower always has at least 35% of the principal amount in "liquid" investments. Why? (Hint: See Stark's footnote 3.)
2. Page 95, in the paragraph beginning "Second": In Stark's reference to the definition of business day, what might be wrong about her mention of holidays? (Hint: See the Common Draft definition of business day.)
3. Page 96: How does § 7.1.2 relate to the D.R.Y. principle?
4. Page 97: In Definition 1 of Force Majeure Event, what if any potential events might a party want to (i) add, or (ii) delete? (Hint: See the Common Draft force-majeure definition and notes.)
5. Pages 98-100: Name all the places Stark mentions as possibilities for where to put definitions in a contract. At this stage of your experience, which one strikes you as the "best," and why? (I'm interested in your personal, subjective perspective.)
6. Page 100, § 7.5.1: When might it be safe to re-use a defined term from an existing contract without modification?
7. Page 101, Item #3: Can you think of any circumstances in which it might be useful to have multiple defined terms for a single definition — e.g., using both Purchaser and Buyer in the same agreement. (Hint: Think of how contracts are sometimes drafted in the real world, with parties going back and forth under time pressure and possibly borrowing language from various document sources.)
8. Page 101: You are drafting a defined-terms section in a contract. You have already defined the parties' short names, Provider and Customer, in the contract's preamble. Do you include those short names in the defined-terms section? If so, how?
9. Page 102: Is there any reason you might want to define a term as having a specified meaning even if it's not capitalized? (See, e.g., the Common Draft definition of affiliate.)
10. Page 102, item 8: What term other than means could you use to introduce the meaning of a defined term? (Hint: Look at some of the Common Draft defined terms.)
11. Page 104: In the "Wrong" and "Correct" example in the top third of the page, do you agree with Stark's position?
12. Page 104, #15: How else could the "Wrong" example be fixed?
13. Page 105: What's wrong with the "Wrong" version at the bottom of the page?
14. Pages 105, 106-07: Do Stark's guidelines no. 18 and 20 violate the D.R.Y. principle?
15. Page 106, #20: Explain this guideline in your own words.
16. Page 108, #22: When might you want to "lock in" a reference to a particular version of another agreement, statute, arbitration rules, etc., as opposed to not doing so?
17. Page 107, no. 21: What's a danger of defining something in term of an outside reference source?
18. Page 107-08, nos. 21 and 22: What do these two guidelines have in common?
19. Page 111: What could go wrong with the "permitted successors and assigns" phrase in the wording of sample clause 1.2(d)?