Introduction to Transactional Drafting PowerPoint Presentation, PPT - DocSlides

Introduction to Transactional Drafting

Las Vegas, Nevada

Saturday October 10, 2015 – 1:45-3:00 p.m

.

NALS 64

th

Annual Education Conference & National Forum

Lori D. Johnson, Esq.

Assistant Professor

University of Nevada, Las Vegas

William S. Boyd School of Law

Program Overview

Prof.

Lori

JohnsonOutline of a contractBuilding blocks of a contractEffectively assisting with drafting, reviewing and editing contracts

Why drafting matters…

Contract Law Basics

Acknowledgments:

Thomas R. Haggard & George W.

Kuney, Legal Drafting in a Nutshell (3d ed., West 2007).Tina L. Stark,

Drafting Contracts: How and Why Lawyers Do What They Do

(Aspen 2007).

Andrea B.

Yelin

,

Contract Law for Legal Professionals

(Prentice Hall 2009).

Forming a Contract

Mutuality

 Consideration  Competence

Need not be in writing, except where required.If written, parol

evidence rules applies.

Contract can later be modified.

Basic Contract Components

Preamble (or Introductory Paragraph)

Recitals (or Background)

Consideration Clause (or Words of Agreement)DefinitionsBusiness provisions

Representations, Warranties, Covenants, Indemnities, Conditions, etc.

Events of Default/Termination

Boilerplate

Signatures

Exhibits and Addenda

Preamble & Recitals

Traditional

Contemporary

Consideration Clause

Traditional

NOW, THEREFORE, in consideration of $10 paid in hand and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

Contemporary

Accordingly, the parties agree:

Definitions

Use of defined terms increases clarity and reduces ambiguity in contracts.

Roles of definitions within contracts:

Explain the meaning of a word or technical term.Enlarge or limit the meaning of a word for purposes of a contract. Provide clarity / avoid ambiguity.

Options for drafting:

Stand-alone definition (“Price” means…)

Textual definition (…eight thousand dollars (the “Price”).)

A quick exercise…

Create a stand-alone defined term for the following sentence, and also re-work the sentence so that it would work as a definition in context:

The property being sold is the Union Park Mall.

Examples

Stand-alone

“Property” means the Union Park Mall.

In-text

2.2 Upon closing, Seller agrees to transfer to Buyer the Union Park Mall (the “Property”).

In the Definition section:

“Property” has the meaning set forth in Section 2.2.

Boilerplate

Choice of Law

Waiver

of Jury TrialArbitrationIndemnificationSeverability and IntegrationNoticesAmendments

Some resources

Client forms

Firm databases

Form books (Local Law Library)Fee-Paid Online legal sourcesBloombergLaw Dealmaker

Edgar (SEC Website)

Signatures

Introductory language:

The Parties agree to the terms of this Agreement above.

Proper identification of parties.

Seller

_______________________

John Doe

Sonoma Properties, LLP

By: Cabernet Associates, LLC,

its Managing Partner

By: __________________

John Doe,

Managing Member

Where to find this information

http://

nvsos.gov

/sosentitysearch/

Business Provisions

The building blocks of legal obligations

Representations

A statement of fact as of a particular date.

Requires reliance to be actionable.

Ex: Party A represents to Party B as follows: The car has been driven 38,000 miles.

Tip for drafting:

Avoid reps regarding future facts.

If your client is giving the rep, make the rep narrow in scope and attempt to qualify it.

If your client is receiving the rep, make it broad and unqualified.

Warranties

Similar to a representation.

No requirement of reliance.

Ex: Party A represents and warrants to Party B as follows: The car has been driven 38,000 miles.

Tips:

Be more careful as the maker of warranty, as the measure of damages differs and risk of successful lawsuit is higher (no need to prove reliance).

Consider qualifying warranties appropriately.

A quick exercise…

Based on who you represent – draft and rep/warranty that the Property to be sold is free of liens other than those disclosed by the Seller.

Proposed Seller version:

To Seller’s knowledge, without investigation, the Property is free and clear of liens other than those specifically disclosed in Schedule 1.1.Proposed Buyer version:

The Property is free and clear of any and all liens and encumbrances other than those listed in Schedule 1.1.

Covenants

Promise to act (or not act) in the future.

Use “shall” rather than “will” to signal a covenant.

Flipside of a covenant = a right. Ex: Tenant shall pay rent on the first Thursday of every month.

Drafting Tips:

When making covenants, be careful of obligating your client to elements out of their control.

Use qualifiers as appropriate (e.g., “best efforts”).

Conditions

A condition to an obligation is a state of facts that must exist before a party

is obligated

to act.A condition to discretionary authority is a state of facts that must exist before a party may

choose to act.

Exs

:

If the house passes inspection, the Buyer shall provide a deposit.

If the house does not pass inspection the Buyer may rescind this contract.

Drafting Tips:

If your client needs to satisfy the condition, make it easier, provide flexibility.

Think of conditions in terms of an if/then relationship.

You can phrase conditions by using “must” instead of shall.

Interplay of Building Blocks

Rep and Warranty

The P

roperty is not subject to any liens.

Covenant

Seller shall not

incur any liens upon the Property.

Condition

In order for Buyer to be obligated to close on the Property, Seller

must have complied with all covenants.

Which building block to use?

You want your client to be sure that a company has a certain level of inventory before purchasing the company.

You do not want your client to be forced to supply additional materials unless the previous invoice has been paid.

Your client wants to agree to provide interior design services for a friend.

Termination / Events of Default

Consider drafting for earlier termination based upon breach of one of the business terms.

Ex: Either Party may earlier terminate this Agreement by giving 10 Business Days notice to the other party, if the latter party materially misrepresented a fact or materially breached a warranty or covenant included in this Agreement.

Recap: Basic Contract Components

Preamble (or Introductory Paragraph)

Recitals (or Background)

Consideration Clause (or Words of Agreement)DefinitionsBusiness provisions

Representations, Warranties, Covenants, Indemnities, Conditions, etc.

Events of Default/Termination

Boilerplate

Signatures

Exhibits and Addenda

Drafting Style Tips

Whenever possible – use the active voice.

Buyer shall pay the Purchase Price.

The Purchase Price shall be paid by the BuyerAvoid legalese and doublets when possible – consider synonyms:Aforesaid = previousCircumstances in which = when

Null and void =

void

Avoid the use of “and/or”

Be very specific – “A or B but not both”

Let’s try a quiz!!

Questions

Thank you!