drafting contracts language and layout contract administration office of the vice president for...
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Drafting ContractsDrafting Contracts
Language and LayoutLanguage and Layout
Contract Administration
Office of the Vice President
for
Finance and Administration
Barry C. Nelson, Ph.D.
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What’s the current state of What’s the current state of contract drafting?contract drafting?
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What are the costs of What are the costs of deficient drafting?deficient drafting?
•Time
•Money
•Loss of anticipated benefit
•Disputes
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What are the causes of What are the causes of deficient drafting?deficient drafting?
•Learning by osmosis
•Law as voodoo
•Everyone’s a great writer
•You can’t stop the machinery
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What’s the difference What’s the difference between good drafting and between good drafting and
deficient drafting?deficient drafting?
Smoking gun versus the cumulative effect of countless small changes
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The Goals of this SeminarThe Goals of this Seminar
• How to distinguish good drafting from bad drafting
• How to put that knowledge to use
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The Four Principles!The Four Principles!
• Be consistent
• Use standard English
• There’s no such thing as a “personal drafting style,” only efficient and less efficient drafting
• “Tested” contract language isn’t an obstacle to clear and efficient drafting
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Policies and Regulations Policies and Regulations on Contractson 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
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TAMUS Policy 25.07TAMUS Policy 25.07
TAMUS Policy 25.07 governs contracting and provides for the levels of approval required for
different types of contracts.
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TAMUS Regulation 25.07.01TAMUS Regulation 25.07.01
TAMUS Regulation 25.07.01 lists contract administration procedures and delegations.
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The Front of the ContractThe 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 The Layout of the Body of the Contractof the Contract
The Format
Arranging Provisions
Cross-References
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The Back of the ContractThe Back of the Contract
The Concluding Clause
The Signature Blocks
Attachments
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Contract Review ChecklistContract Review Checklist
Description of goods/services to be Description of goods/services to be received by component?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 ChecklistContract Review Checklist
Contractor’s name, address, phone, fax?Contractor’s name, address, phone, fax?
Verify current information. Use legal name.
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Contract Review ChecklistContract Review Checklist
Contact person(s) for contractor, name, address, phone, fax, email address?
Verify current information.
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Contract Review ChecklistContract Review Checklist
Date contract is to begin?Date contract is to begin?Date contract is to begin?Date contract is to begin?
This may or may not be the date the contract is signed.
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Contract Review ChecklistContract Review Checklist
Date contract ends?Date contract ends?
This refers to date the contract would normally end unless terminated earlier for any reason.
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Contract Review ChecklistContract Review Checklist
Other important dates (deadlines, Other important dates (deadlines, mileposts, reports due, etc.)?mileposts, reports due, etc.)?
Other important dates (deadlines, Other important dates (deadlines, mileposts, reports due, etc.)?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 ChecklistContract Review Checklist
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Procedure for renewal clearly identified and understood?
Caution when using an “evergreen” clause.
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Contract Review ChecklistContract Review Checklist
Procedure for termination clearly Procedure for termination clearly identified and understood?identified and understood?
Termination for cause and termination at will should be identified.
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Contract Review ChecklistContract Review Checklist
Verify highest level of approval within Verify highest level of approval within TAMUS needed from contract? TAMUS needed from contract?
Use current HSC President’s Delegation of Authority internal policy to identify highest level.
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Contract Review ChecklistContract Review Checklist
All exhibits, attachments, appendices, All exhibits, attachments, appendices, schedules, etc. attached?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 ChecklistContract Review Checklist
Title and authority of person Title and authority of person signing for contractor? signing for contractor?
Should be an officer or authorized agent of contractor.
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Contract Review ChecklistContract Review Checklist
This may cause problems for component and should be clearly understood prior to signature.
If contract can be terminated at will (for no cause or without cause), verify that this is
what component wants in the contract
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Contract Review ChecklistContract Review Checklist
Partial payments should be stated with due dates; amount tied to other amounts (e.g., royalties, percentages) should be stated in clear terms.
Clear description of amounts of money Clear description of amounts of money or other consideration for contractor other consideration for contract
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Contract Review ChecklistContract Review Checklist
All payments are in U.S. dollars?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 ChecklistContract Review Checklist
Method for providing notice of default Method for providing notice of default and opportunity to cure?and opportunity to cure?
Normally written notice and reasonable time to cure.
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Contract Review ChecklistContract Review Checklist
Rights, obligations, duties of every Rights, obligations, duties of every party clearly listed?party clearly listed?
Each party’s responsibilities identified in understandable wording.
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Contract Review ChecklistContract Review Checklist
Time and place for performance?Time and place for performance?
If performance extends over a period of time, include due dates if necessary.
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Contract Review ChecklistContract Review Checklist
Indemnification, liquidated damages, attorney’s Indemnification, liquidated damages, attorney’s fees, waiver of contractor’s liability, waiver of fees, waiver of contractor’s liability, waiver of
statutes of limitations clausesstatutes 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 ChecklistContract Review Checklist
Governed by laws of the State of Texas?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 ChecklistContract Review Checklist
State law (Sec. 85.18, Tex. Educ. Code) mandates this venue: it is not negotiable.
Venue for suits in county where Venue for suits in county where component’s CEO has main officecomponent’s CEO has main office
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Contract Review ChecklistContract Review Checklist
The TAMHSC Risk Manager, Matt Walton, should be consulted if there are questions about the
levels of coverage and/or carriers.
If insurance is required, types and If insurance is required, types and levels of coverage listed?levels of coverage listed?
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Contract Review ChecklistContract Review Checklist
Confidentiality Provisions?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 ChecklistContract Review Checklist
Act of God or force majeure clause?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 ChecklistContract Review Checklist
Written pre-approval of assignments is preferred but not mandatory.
Assignment by either party must be Assignment by either party must be approved in advance in writingapproved in advance in writing
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Contract Review ChecklistContract Review Checklist
Mandatory Alternative Dispute Resolution Mandatory Alternative Dispute Resolution clause (Ch. 2260) included?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 Alternative Dispute Resolution ClauseResolution Clause
Ch. 2260, Texas Government CodeCh. 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 ChecklistContract Review Checklist
Spelling, formatting, grammar, Spelling, formatting, grammar, punctuation, and general appearance of punctuation, and general appearance of document are professional and accuratedocument are professional and accurate
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Contract ReviewContract Review
Review by the DrafterReview by the Drafter
•Is this document going to work?
•Is this document serving the TAMHSC component’s objectives effectively, efficiently, and without the need to resort to litigation?
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Contract ReviewContract Review
Review for ContentReview 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 ReviewContract Review
Review for ContentReview 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 ReviewContract Review
Review for ContentReview 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 ReviewContract 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 ReviewContract Review
Review for Style and UsageReview 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.Do not argue. Revise it.
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Contract ReviewContract Review
Review by Other Party: CommentsReview 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 component’s position or the smooth operation of the document
•Valid points for future renegotiations47
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Contract ReviewContract Review
Proofread the DocumentProofread 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 commaThe case of the misplaced comma
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Contract ReviewContract Review
The Comma DisputeThe 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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