(4) Skills in Contract Drafting

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Skills in Contract

Drafting

Masitoh Indriani Departemen Hukum Internasional Fakultas Hukum Universitas Airlangga

Contents

Klausul Boilerplate Teknik Penulisan

(Pendahuluan, Isi, Penutup, Amandemen) Outline Kontrak Internasional

3 4 2

Introduction : Skills in Contract

Drafting

Contract = Legal Document

The objective of Legal Document:

v To provide written evidence of transactions

v To prevent fraud

v To set out future rights and obligations

v To record rights and obligations already conferred

Accuracy in legal documents:

v Use words that should be as simple and clear as circumstances allow.

v Impenetrable language: Unusual and complex phrases or antiquated

may lead to difficulty in the interpretation of the document.

Ambiguity in drafting …

à A document which is ambiguous in some or all of its main provisions is

Outline Kontrak Internasional

1. Title

2. Introductory Paragraph 3. Recitals / Preambles

4. Definitions

5. Considerations (Perjanjian Utama)

6. Conditions Precedent (Syarat-syarat Pendahuluan)

7. Representations and Warranties (Pernyataan Para Pihak)

8. Covenants

9. Indemnities/Guarantees/Releases

10. Events of Default

11. Remedies

12. Boilerplate

13. Signature Blocks

“Anna ordered Rosie to deliver the

car to her”

vs

“ the Buyer must complete the payment of the House in a reasonable time”

Vs

Teknik Penulisan

1) Title

- Title menyebutkan jenis kontrak

- Praktik bisnis internasional_à “Agreement” rather than “Contract”

2) Introductory Paragraph

Memuat elemen-elemen:

a) Tipe kontrak

b) Penanggalan kontrak _{à ≠} tgl efektif berlakunya kontrak (effective date) _à penulisan “…as of…”

c) Identitas asli para pihak (nama dan tempat

kedudukan hukum) _à e.g. Johnson & Johnson _≠ Johnson and Johnson

d) sebutan untuk para pihak (defined terms)_à e.g. “Seller”, ‘buyer’, “tenant”, “landlord” ≠ _“party

3) Recitals / Preambles

- Bertujuan untuk menjelaskan fakta-fakta yang berhubungan dengan kontrak

- Fakta_à maksud para pihak, tujuan, sifat kontrak

- e.g.

“……….. Whereas,

a. The tenant proposes…

b. The tenants intends to…

4) Definitions

v  A word or term should be defined if

§  it is used frequently

§  It is intended to have a specific meaning in the document which would not ordinary be

ascribed to it. E.g. Children from the second marriage

v Definitions: to avoid constant

repetition of a cumbersome term or reference

Rule for the use of definitions…

v Definitions should be placed at the beginning or end of the document

v List definitions in alphabetical order

v First letter of definitions in capitals

§  e.g. The Company ≠ _{the company} v Redundant definitions

Methods of defining words/terms…

v Definitions which restrict the meaning of a word,

§  eg. ‘Company’ means a public company as

defined by the Companies Acts

§  ‘Notice’ means a notice in writing

§  ‘Employee’ means an employee whose

employment with the employer commenced after 1 January 2000

v Definitions which extend the ordinary meaning of a word

§  ‘Cash’ includes money in any form

v Definitions which give words an extraordinary meaning

§  ‘Motor Vehicle’ includes a bicycle or any horse

drawn carriage

§  ‘House’ includes a caravan

v Definitions which label long terms

§  ‘Taxes Act’ means the Income and Corporation

Taxes Act 1988

§  ‘Company’ means the Universal General

Manufacturing and Trading Company Limited

§  ‘Shareholders’ means persons listed for the time

v Definitions which substitute or delegate (to indicate that other

persons or things may fall within the definition by way of substitution or delegation)

§  ‘Auditors’ means Brown and Co or such other firm

of chartered accountants of internationally

recognized standing as are appointed auditors of the Borrower and its Subsidiaries

v Definitions which clarify

§  ‘Month’ is referred to calendar month

Common problems in drafting definitions….

v Omissions

§  ‘Old Members’ means members who joined before 31 December 2000

§  ‘New Members’ means members who joined after 1 January 2001 (Someone who joined on 31 Dec 2000 or on 1 Jan 2001???)

v Overlaps between definitions

§  ‘Excluded Person’ means a person who was born after 1 January 1990

v Multiple definitions for one meaning

§  ‘the Employer’ and ‘the Company’ (no

problem as long as both of them are the same person or legal entity)

v Loaded definitions

v Problems with vague words

§  ‘miscellaneous expenses’ --- may lead to a dispute as the parties differ as to what the terms include

§  ‘emergency work’ or work done outside ‘normal hours’

v But, vague words can also serve a useful purpose in legal drafting, esp. in the

negotiation phase (vague words --- as a compromise)

v e.g. In a building contract, --- by

stipulating that it is to be done in ‘a

reasonable time’ and if appropriate, in ‘a reasonable time but not later than 1

December 2007’

Tips…

v Use simple language and familiar words

§  e.g. (the sale of a washing machine): use terms

‘seller’ and ‘buyer’ instead of ‘vendor’ and ‘purchaser’ §  Mutatis mutandis or inter alia could be replaced by

v Single words

§  In the event that ... If

§  Under the provisions of ... Under §  At the time ... When

§  Covenant and agree ... Agree §  During such time as ... While

§  Enter into a contract with ... Contract with §  In the interest of ... For

v Short words

§  Falls into and becomes part of ... Becomes part of

§  For the duration of ... During

§  For the reason that ... Because §  In order to ... To

§  Is binding upon ... Binds §  It is the duty ... Shall

‘Now these presents witnessed that ...’ (this is often used to

introduce the operative part of an agreement or a deed) --- can be changed to:

‘This agreement witnesses that ....’ or ‘This deed witnesses that ... ‘

‘It is hereby expressly declared and agreed that ....’ or ‘It is hereby

declared that ...’ --- can be redrafted as:

v ‘In witness whereof the parties hereunto have set their hands to these presents as a deed on the day month and year

hereinbefore mentioned ....’ or

v ‘In witness whereof the parties have executed these presents as a deed ....’

v They may be revised to: §  ‘Executed as a deed on ....’

§  ‘Signed and delivered as a deed on ...’

§  ‘The parties have signed this document as a deed on ...’

Synonyms …

v Synonyms are words that have similar

meanings, so that one can be substituted for the other without affecting the meaning of a sentence or clause

v Synonyms are used: to ensure that

important matters are included, as a habit, other parties insist on them

§  The decision of arbitrator shall be ‘final and conclusive’

Synonym _àTwo

§  Rules and regulations §  Sell and assign

§  Terms and conditions §  Full and complete

§  Furnish and supply §  Have and hold

v Three words

§  Amend, vary or modify §  Build, erect or construct

§  Business, enterprise or undertaking §  Changes, variations and modifications §  Lands, tenements and hereditaments §  Legal, valid and binding

§  Loans, borrowings and advances §  Rest, residue and remainder

§  Right, title and interest §  Suit, claim or demand

Negative Sentence…

v e.g. He was driving at a not inconsiderable speed (‘He was driving fast’)

v John does not attend very often (‘John rarely attends’)

v Mary is not very well (‘Mary is unwell’)

Use positive!!!

‘$10,000 to my children, other than those who have not attained age 18’

e.g. An employee is eligible to join the Scheme if he or she is not:

(a) Under age 22 or over age 60; and (b) A casual or a temporary employee

This would be more direct in positive form:

An employee is eligible to join the Scheme if he or she is:

Consistency…

The object of a legal document is to set out rights, powers or privileges and obligations or duties with precision rather than to entertain the reader

§  ‘....never to change the form of words unless you are going to change the meaning ....’

• Eg. ‘the buyer’ ...it should not be changed to ‘the purchaser’ or ‘Mr Smith’

Date and time…

v Date and time play a crucial part in indicating when rights, powers or privileges and obligations or duties commence or end and their duration

v Examples:

§  Leases

§  Contracts of employment

v Year

§  The general rule: 12 months or 365 days/366 days in a leap year

§  Example:

• One year beginning on 1 July 2001 • One year ending on 30 June 2002

v Month

§  Means calendar month unless the context otherwise require

§  Example: “six months’ notice” in a lease or “three months’ notice” in a contract of

employment

§  It is advisable to indicate the date on which the notice commences and ends --- to avoid any ambiguity (Six months’ notice

v Day …

v A day is the minimum period of time in law and no account is taken of a fraction of a day

v Cartwright v MacCormack [1963] 1 WLR 18: an

insurance company issued a temporary cover note for motor insurance for ‘fifteen days from the commencement of the date of risk’.

§  The note was issued at 11.45 am on 2 Dec 1959 §  The insured had an accident at 5.45 pm on 17 Dec

1959

• The insurer argued, the policy ran from 11.45 am (2 Dec 1959 to 11.45 am on 17 Dec 1959)

“before” and “after”…

v As a general rule: the use of ‘after’ and ‘before’ to express dates will avoid

ambiguity, eg. Employees born after 1 January 1980; Employees born before 1 January 1980

v Lead to an omission

§  ‘Class A Members’ means members admitted before 31 Dec 2000

§  ‘Class B Members’ means member admitted after 1 January 2001

v Lead to an overlap:

v On or after 1 December 2000 (group A)

v On or before 1 December 2000 (group B)

v How about, someone who became

‘by’, ‘from’, ‘on’ …

v ‘By’ : e.g. A notice to quit ‘by 1 January’ will give the tenant the right to remain in the property until midnight on 1 January (the tenant should not be out on 31 Dec)

v ‘From’: where a notice is given ‘from’ a specified date, that day will not be

included in the computation: e.g. A rent

increase effective ‘from 25 March’ will only take effect on 26 March

’till’ and ‘until’…

v ‘till’ and ‘until’: the cases show that both terms may be construed by the courts as either inclusive or exclusive.

Consequently, they should not be used to express times and dates

§  e.g. An insurance policy is stated to be effective ‘until 1 September’ _à until may

‘between’…

v ‘between’: If time is expressed as

‘between’ two dates, the dates mentioned will not be included

v Between _à age

§  A clause in a trust referring to the settlor’s children ‘between the ages of 18 and 21

Klausul Boilerplate

- Klausul2 teknis dan standar

- Isi/Batang tubuh kontrak

- e.g. Choice of Law, Choice of Jurisdiction, Language, Force Majeure, Notice,

Duration/Term of Agreement, Severability, Integration, Amendment, Anti-waiver,

Next Week…..