Contract drafting is amongst the most important traits and art in armor of any outstanding legal professional.
Contrary to general belief, contract drafting is no easy job. It requires a lot of preparation before starting the process.
Half hearted attempts provide half baked results.
Similarly, a contract prepared with half / scant knowledge will end up resulting only in a half baked end-product. On the other hand, a contract crafted with more knowledge of client expectations, legal, business, economic and compliance aspects that lead to the requirement of contract drafting will result in crafting of tailor made contract more suitable to the parties' needs.
There are certain key things to learn before starting to work on the draft of contract. Simply stated, one should make effort to capture best possible information about of legal, business and compliance aspects of the subject contract before starting to worki on a contract.
Following are such key things one should focus on before starting drafting of a contract:
Understanding: Most crucial thing is to understand the purpose and objective of transaction or precise intended relationship between the parties. This provides crucial insights of the nature and scope of transaction or the business relationship. This, in turn, helps drafting person to understand which type of contract needs to be drafted by incorporating appropriate provisions cover legal, business and economic aspects of the transaction. For example, the purpose of business relationship is licensor to license the software product to licensee then appropriate agreement is software license agreement and drafting person will include appropriate licensing, legal and business terms accordingly.
Experience and Knowledge: Contract drafting person not only should know the art of contract drafting but should also know the application of different laws to a particular transaction. This is critical from legal, regulatory and compliance perspective. If the core aspect of a deal is to process personal data then the drafting person should be well aware of data privacy laws. Absence of knowledge about data privacy laws could prove to be a costly error; without such knowledge, it is impossible to draft an effective and comprehensive contract. The draftsman is likely to commit some error or the other leading to breach of data privacy laws. To avoid legal, compliance and regulatory errors, it is important to know the laws and their application in the context of the transaction.
Read, read and read: Scan and read the entire contract with eyes preying for mistakes; pay attention to even minute detail as one single error (punctuation, spelling error, or anything else for that matter) in drafting will be a deal or economic spoiler. Scanning and reading the entire contract word to word has its own significant and multiple benefits.
Such benefits are as follows:
First and the foremost benefit of reading the entire contract word to word is that draftsman has the advantage of identifying and listing all crucial legal and business terms of the transaction.
This listing of such crucial terms helps the draftsman in easily identifying and listing out 1) rights and advantages of the client and 2) duties, risks, liabilities and obligations of client. Striking an optimal balance between advantages and risks to the extent possible becomes easier with such knowledge.
Further, draftsman will be able to educate the clients about advantages and risks of entering into a contract thus, helping clients to form a well calculated and rationale decision about the risks and advantages of the contract; it will influence the decision or outcome of contract drafting process big time.
Another benefit is to figure out any ambiguities or point of high level conflicts within the contract. This will enable drafting person to resolve ambiguities or sort out high level of conflicts by coordinating with client or other party.
Ultimate benefit is risk mitigation and risk assessment. Scanning and reading of entire contract is the only way to assess risks, exposures, and obligations involved in the transaction or relationship. Once risks and liabilities are properly assessed then drafting person will have the opportunity to mitigate such risks and liabilities by striking right checks and balances within the contract.
Communication: Crisp and clear communication is the key to make the process of contract drafting and negotiation a seamless affair. Communication is a two-way channel, so draftsman should know when to talk and when to listen.
Draftsman should be proactive and interact with internal and external stakeholders and seek answers to pertinent questions to understand their expectations and outcome of the transaction. The moment draftsman has a clear understanding of expectations and concerns of all stakeholders involved, he has a clear vision to structure the contract, balancing expectations and concerns of all stake holders and to ensure the deal is a win-win deal for all stake holders involved.
Prior preparation for contract drafting and negotiation following above parameters will enable draftsman person to get ready for the battlefield of negotiation. Most importantly, if these parameters are followed, then half the battle is won even without entering into negotiations. All complicated negotiations can be handled with smartness and efficacy leaving little or no room for conflicts with any stakeholders involved.
Open to ideas and technology: Embracing new and innovative technologies helps in speeding up the process, enhancing the efficiency of review process, reducing unwanted errors and to get ahead of competitors. It is a must for drafting professionals to be well acquainted with new age innovative and emerging technologies or else they will fall short in catching up with competitors and contemporaries.
Originally published July 26, 2023.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
