Characteristics of Optimal Contract Language PDF

THE CHARACTERISTICS OF OPTIMAL CONTRACT LANGUAGE 1.1 Form follows function. The limited function of contracts —regulating conduct, stating facts, and allocating risk— has implications for the nature of contract language. Treating contracts as just another form of legal writin...

THE CHARACTERISTICS OF OPTIMAL CONTRACT LANGUAGE 1.1 Form follows function. The limited function of contracts —regulating conduct, stating facts, and allocating risk— has implications for the nature of contract language. Treating contracts as just another form of legal writing can lead you astray. 1.2 This chapter considers the general characteristics of clear and concise contract language. It identifies principles this manual invokes in analyzing individual usages. You might find it worthwhile to revisit this chapter occasionally, just to remind yourself of the underlying principles. You can apply these principles when considering usages not examined in this manual. CONTRACT LANGUAGE SHOULD BE CLEAR 1.3 Obviously, contracts should be clear, but traditional contract language is unclear in different ways. 1. Omit Archaisms Traditional contract drafting is full of 4 archaic usages. This manual considers many—for example, use of whereas in recitals (see 2.143). 1.5 Inertia might explain how archaisms survive, but it’s also likely that many drafters think, at least subconsciously, that archaisms add gravitas, making it more likely that clients and others will take contracts seriously. (Occasionally some are bold enough to say so publicly.) It’s preposterous to think that despite the time and cost involved in entering into a transaction, and despite the importance to the parties of whatever goals they seek to accomplish, parties need contract archaisms to put them in an appropriate frame of mind. 1.6 Instead, archaisms create distance between the text and the reader—they tell the reader that they’re entering into an occult, counterintuitive world. If readers expect archaisms, it’s only because they’re unaware that there’s an alternative. It’s hard to imagine that once presented with a contract free of archaisms, any rational reader would miss them. 1. Omit Problematic Terms of Art Contract language 7 includes legal terms of art—words and phrases that have a specialized doctrinal meaning. They serve as shorthand for legal concepts, allowing those concepts to be articulated with a minimum of fuss. 1.8 Legal terms of art add complexity, but that can be difficult to avoid. Contracts are as complex as the transactions they embody, and many transactions are highly technical. Expressing that complexity usually requires specialized terminology. Purging contracts of all that terminology can result in contracts that fail to articulate the intended meaning clearly and efficiently. 1.9 For example, it would be awkward not to use the term of art security interest in drafting a contract in which a party grants a security interest. Similarly, it likely would be awkward to draft a security agreement without using the noun perfection or the verb perfect, both of which are terms of art relating to security interests. 1.10 But a feature of traditional contract drafting is reliance on three kinds of flawed legal terms of art, namely those that are unnecessary, those that are improvised, and those that are unduly complex. (More generally, this manual uses the word jargon as shorthand for unhelpful terms of art.) UNNECESSARY TERMS OF ART 1.11 Lawyers are prone to using doctrinal terms of art in contracts even though simpler terminology is available, rendering those terms of art unnecessary. 1.12 For example, in a security agreement, why use hypothecate regarding a security interest? Why not simply use grant? Hypothecate means to pledge without delivery of title and possession. That meaning goes beyond the function required of the verb in language granting a security interest. And that meaning isn’t otherwise necessary, as the security agreement itself will specify what the terms of the security interest are. Hypothecate might have value as shorthand for court opinions or scholarly texts, but that’s very different from what’s required for a contract. Using grant in granting language in a security agreement wouldn’t prevent that grant from being a hypothecation, if the remainder of the granting language is consistent with that meaning. If it isn’t, using hypothecate instead wouldn’t fix that. 1.13 What characterizes an unnecessary term of art is a discrepancy between the meaning conveyed by the term of art and the semantic function required of it in a contract—an unnecessary term of art is a dollar word or