Drafting Contracts

Language and Layout

Contract Administration
Office of the Vice President
for
Finance and Administration
Barry C. Nelson, Ph.D.
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Whats the current state of

contract drafting?

What are the costs of

deficient drafting?
Time
Money
Loss of anticipated benefit
Disputes
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What are the causes of

deficient drafting?
Learning by osmosis
Law as voodoo
Everyones a great writer
You cant stop the machinery
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Whats the difference

between good drafting and
deficient drafting?
Smoking gun versus the cumulative
effect of countless small changes

The Goals of this Seminar

How to distinguish good drafting from
bad drafting
How to put that knowledge to use

The Four Principles!

Be consistent
Use standard English
Theres no such thing as a personal
drafting style, only efficient and less
efficient drafting
Tested contract language isnt an
obstacle to clear and efficient drafting
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Policies and Regulations

on Contracts
SPRM 01.04: Items requiring action by the Board of
Regents
SPRM 25.07: Contract Administration
SPRM 25.07.01: Contract Administration and
Delegations of Authority

TAMUS Policy 25.07

TAMUS Policy 25.07 governs contracting and
provides for the levels of approval required for
different types of contracts.

TAMUS Regulation 25.07.01

TAMUS Regulation 25.07.01 lists contract
administration procedures and delegations.

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The Front of the Contract

The Title
The Introductory Clause
Recitals
Cover Sheet, Table of Contents, and
Index of Defined Terms
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The Layout of the Body

of the Contract
The Format
Arranging Provisions
Cross-References

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The Back of the Contract

The Concluding Clause
The Signature Blocks
Attachments

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Contract Review Checklist

Description of goods/services to be
received by component?
Clear and understandable description of the
subject of the contract.
Limit use of highly technical terms when possible.

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Contract Review Checklist

Contractors name, address, phone, fax?

Verify current information. Use legal name.

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Contract Review Checklist

Contact person(s) for contractor, name,
address, phone, fax, email address?
Verify current information.

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Contract Review Checklist

Date contract is to begin?
This may or may not be the date the contract is signed.

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Contract Review Checklist

Date contract ends?
This refers to date the contract would normally end
unless terminated earlier for any reason.

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Contract Review Checklist

Other important dates (deadlines,
mileposts, reports due, etc.)?
Dates should be clearly identified. Use full dates (ex:
June 3, 2004) whenever possible. NOTE: in many
foreign countries dates expressed in numerals use the
Day/Month/Year format (e.g., June 3, 2004 would be
written as 3/6/04 rather than 6/3/04).
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Contract Review Checklist

Procedure for renewal clearly
identified and understood?
Caution when using an evergreen clause.

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Contract Review Checklist

Procedure for termination clearly
identified and understood?
Termination for cause and termination at
will should be identified.

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Contract Review Checklist

Verify highest level of approval within
TAMUS needed from contract?
Use current HSC Presidents Delegation of
Authority internal policy to identify highest level.

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Contract Review Checklist

All exhibits, attachments, appendices,
schedules, etc. attached?
Office of General Counsel normally will not
approve an agreement until all of these
documents have been provided for review.

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Contract Review Checklist

Title and authority of person
signing for contractor?
Should be an officer or authorized agent of contractor.

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Contract Review Checklist

If contract can be terminated at will (for no
cause or without cause), verify that this is
what component wants in the contract
This may cause problems for component and
should be clearly understood prior to signature.

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Contract Review Checklist

Clear description of amounts of money
or other consideration for contract
Partial payments should be stated with due dates;
amount tied to other amounts (e.g., royalties,
percentages) should be stated in clear terms.

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Contract Review Checklist

All payments are in U.S. dollars?
If any part of the contract is performed or
payable outside the U.S.

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Contract Review Checklist

Method for providing notice of default
and opportunity to cure?
Normally written notice and
reasonable time to cure.

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Contract Review Checklist

Rights, obligations, duties of every
party clearly listed?
Each partys responsibilities identified in
understandable wording.

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Contract Review Checklist

Time and place for performance?
If performance extends over a period of time,
include due dates if necessary.

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Contract Review Checklist

Indemnification, liquidated damages, attorneys
fees, waiver of contractors liability, waiver of
statutes of limitations clauses
These types of clauses are not allowable for TAMHSC components
because of state constitutional restrictions.
AFTER attempting to have these deleted, if contractor refuses to comply, the
following wording must be inserted before the wording:
To the extent permitted by the laws and constitution of the State of Texas,.
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Contract Review Checklist

Governed by laws of the State of Texas?
TAMHSC components may not agree to be
governed by the laws of another state.

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Contract Review Checklist

Venue for suits in county where
components CEO has main office
State law (Sec. 85.18, Tex. Educ. Code) mandates
this venue: it is not negotiable.

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Contract Review Checklist

If insurance is required, types and
levels of coverage listed?
The TAMHSC Risk Manager, Matt Walton, should
be consulted if there are questions about the
levels of coverage and/or carriers.

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Contract Review Checklist

Confidentiality Provisions?
TAMHSC cannot agree to keep information
confidential if it is subject to public disclosure
under the Texas Public Information Act
(Ch. 552, Texas Government Code).

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Contract Review Checklist

Act of God or force majeure clause?

Provides relief if performance impaired by unexpected

events including weather and civil disturbances.

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Contract Review Checklist

Assignment by either party must be
approved in advance in writing
Written pre-approval of assignments is
preferred but not mandatory.

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Contract Review Checklist

Mandatory Alternative Dispute Resolution
clause (Ch. 2260) included?
Not required for contracts with other agencies of the
State of Texas or the U.S. Government.

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Alternative Dispute
Resolution Clause
Ch. 2260, Texas Government Code
Most contracts entered into by state agencies
must include language about the dispute
resolution process used by the agencies.

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Contract Review Checklist

Spelling, formatting, grammar, punctuation,
and general appearance of document are
professional and accurate

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Contract Review
Review by the Drafter
Is this document going to work?
Is this document serving the TAMHSC components
objectives effectively, efficiently, and without the need
to resort to litigation?

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Contract Review
Review for Content
Substantively, does it cover everything that it needs to
cover?
Does it satisfy all the legal requirements?
Does it contain fatal ambiguities?
Does it contain potential loopholes that a hostile
reader could exploit?
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Contract Review
Review for Content
Is it internally consistent?
Are the rights, duties, and other legal consequences
clearly and unequivocally stated?
Are the objectives of the document properly
conceptualized?
Does the document identify the correct parties in their
proper capacities (use of legal name)?

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Contract Review
Review for Content
Are the dates correct?
Are all currency amounts correct and complete?
Do the provisions clearly state mandatory duties?
Who does what to or for whom or what, when?
Does the document contain representations and
warranties in favor of the contractor?
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Contract Review
Review for Content
Will the document provide sufficient guidance to
govern the relationship?
Will it provide sufficient guidance to a court
interpreting the document?

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Contract Review
Review for Style and Usage
If a reasonable reader thinks a provision is unclear,
then that provision is, by definition, unclear.
Do not argue. Revise it.

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Contract Review
Review by Other Party: Comments
Beneficial to all parties or to the document and the deal
Matters of style of opposing party and that do no
harm to the document or TAMHSC component
position
Harmful to either components position or the smooth
operation of the document
Valid points for future renegotiations

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Contract Review
Proofread the Document
After all the corrections and revisions have been
made as a result of the review process, it is still not
final until it has been proofread one final time.
The case of the misplaced comma

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Contract Review
The Comma Dispute
Contract language at issue:
Subject to the termination provisions of this agreement,
this agreement shall be effective from the date it is made
and shall continue in force for a period of five (5) years
from the date it is made, and thereafter for successive five
(5) year terms, unless and until terminated by one year
prior notice in writing by either party.
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