(4) Skills in Contract Drafting

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Skills in Contract
Drafting
Masitoh Indriani
Departemen Hukum Internasional
Fakultas Hukum Universitas Airlangga
masitoh@fh.unair.ac.id

Contents

Review
Introduction : Skills in Contract Drafting

Outline Kontrak Internasional
Teknik Penulisan
(Pendahuluan, Isi, Penutup, Amandemen)
Klausul Boilerplate

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2

3

4

Introduction : Skills in Contract
Drafting
Contract = Legal Document

v To
v To
v To
v To
v To

The objective of Legal Document:
provide written evidence of transactions
prevent fraud
set out future rights and obligations

record rights and obligations already conferred
set out the details of complex transactions

Accuracy in legal documents:
v Use words that should be as simple and
clear as circumstances allow.
v Impenetrable language: Unusual and
complex phrases or antiquated
may lead to difficulty in the interpretation
of the document.
v Indigestible documents may require other
lawyers to unravel their mysteries, or the
assistance of the court to determine their
construction

Ambiguity in drafting …
à A document which is ambiguous in
some or all of its main provisions is
WORSE than no document at all
will lead to disputes

Outline Kontrak Internasional
1.  Title
2.  Introductory Paragraph
3.  Recitals / Preambles
4.  Definitions
5.  Considerations (Perjanjian Utama)
6.  Conditions Precedent (Syarat-syarat Pendahuluan)
7.  Representations and Warranties (Pernyataan Para Pihak)
8.  Covenants
9.  Indemnities/Guarantees/Releases
10.  Events of Default
11.  Remedies
12.  Boilerplate
13.  Signature Blocks
14.  Exhibits/Schedules

“Anna ordered Rosie to deliver the
car to her”
vs

“Rosie shall deliver the car to
Anna”

“ the Buyer must complete the payment
of the House in a reasonable time”
Vs
“the Buyer must complete the payment
of the House on 31 December 2015”

Teknik Penulisan
1)  Title
-  Title menyebutkan jenis kontrak
-  Praktik bisnis internasionalà “Agreement” rather
than “Contract”
-  E.g “License Agreement” ≠ “License Contract”

2) Introductory Paragraph
Memuat elemen-elemen:
a) Tipe kontrak

b) Penanggalan kontrak à ≠ tgl efektif berlakunya
kontrak (effective date) à penulisan “…as of…”
c)  Identitas asli para pihak (nama dan tempat
kedudukan hukum) à e.g. Johnson & Johnson ≠
Johnson and Johnson
d)  sebutan untuk para pihak (defined terms)à e.g.
“Seller”, ‘buyer’, “tenant”, “landlord” ≠ “party
I”, “party II”

3) Recitals / Preambles
-  Bertujuan untuk menjelaskan fakta-fakta
yang berhubungan dengan kontrak
-  Faktaà maksud para pihak, tujuan, sifat
kontrak
-  e.g.
“……………..
Whereas,
a.  The tenant proposes…
b.  The tenants intends to…
c.  …….”

4) Definitions
v  A word or term should be defined if
§  it is used frequently
§  It is intended to have a specific meaning in the
document which would not ordinary be
ascribed to it. E.g. Children from the second
marriage
v Definitions: to avoid constant
repetition of a cumbersome term or
reference
§  Eg. The Income and Corporation Taxes Act
------ “the Taxes Act” or “the 1988 Act”

Rule for the use of definitions…
v Definitions should be placed at the
beginning or end of the document
v List definitions in alphabetical order
v First letter of definitions in capitals
§  e.g. The Company ≠ the company

v Redundant definitions
§  e.g. “Deed” means a legal document ;
“Agreement” means a contract

Methods of defining words/terms…
v Definitions which restrict the meaning of
a word,
§  eg. ‘Company’ means a public company as
defined by the Companies Acts
§  ‘Notice’ means a notice in writing
§  ‘Employee’ means an employee whose
employment with the employer commenced after
1 January 2000
v Definitions which extend the ordinary
meaning of a word
§  ‘Cash’ includes money in any form
§  ‘Wife’ includes a former wife

v Definitions which give words an
extraordinary meaning

§  ‘Motor Vehicle’ includes a bicycle or any horse
drawn carriage
§  ‘House’ includes a caravan

v Definitions which label long terms
§  ‘Taxes Act’ means the Income and Corporation
Taxes Act 1988
§  ‘Company’ means the Universal General
Manufacturing and Trading Company Limited
§  ‘Shareholders’ means persons listed for the time
being as shareholders in the Company’s register
of shareholders

v Definitions which substitute or
delegate (to indicate that other
persons or things may fall within the
definition by way of substitution or
delegation)
§  ‘Auditors’ means Brown and Co or such other firm
of chartered accountants of internationally

recognized standing as are appointed auditors of
the Borrower and its Subsidiaries

v Definitions which clarify
§  ‘Month’ is referred to calendar month
§  ‘Stocks and Share’ is referred to all forms of
investment dealt with on the stock exchange

Common problems in drafting
definitions….
v Omissions
§  ‘Old Members’ means members who joined before 31
December 2000
§  ‘New Members’ means members who joined after 1
January 2001 (Someone who joined on 31 Dec 2000
or on 1 Jan 2001???)

v Overlaps between definitions
§  ‘Excluded Person’ means a person who was born
after 1 January 1990

§  ‘Included Person’ means a person who was born
before 31 December 1991

v Multiple definitions for one meaning
§  ‘the Employer’ and ‘the Company’ (no
problem as long as both of them are the same
person or legal entity)
v Loaded definitions
§  ‘Class C Member’ means any Member who
joined the scheme before 17 March 1987
provided that the Member may elect, at any
time, before the Relevant Date to be deemed
to have become a Class A Member on 1 June
1989

v Problems with vague words
§  ‘miscellaneous expenses’ --- may lead to a
dispute as the parties differ as to what the
terms include
§  ‘emergency work’ or work done outside

‘normal hours’
v these vague terms should be defined
or leave it to third person to define

v But, vague words can also serve a useful
purpose in legal drafting, esp. in the
negotiation phase (vague words --- as a
compromise)
v e.g. In a building contract, --- by
stipulating that it is to be done in ‘a
reasonable time’ and if appropriate, in ‘a
reasonable time but not later than 1
December 2007’
v e.g. To obtain consent or permission from
a third party ---- ‘reasonable steps’ or to
use ‘reasonable endeavors’ to obtain such
permission

Tips…
v Use simple language and familiar
words
§  e.g. (the sale of a washing machine): use terms
‘seller’ and ‘buyer’ instead of ‘vendor’ and ‘purchaser’
§  Mutatis mutandis or inter alia could be replaced by
‘the necessary changes being made’ and ‘amongst
other things’
§  e.g: Cease ---- stop
•  Deemed .......... Considered
•  Effectuate ......... Carry out
•  Indicate ............ Show
•  Lessee ............ Tenant
•  Lessor ............ landlord

v Single words
§  In the event that ........... If
§  Under the provisions of .......... Under
§  At the time .......... When
§  Covenant and agree ........ Agree
§  During such time as .......... While
§  Enter into a contract with ....... Contract with
§  In the interest of .............. For
§  To have and to hold .......... have

v Short words
§  Falls into and becomes part of ....... Becomes
part of
§  For the duration of ....... During
§  For the reason that ....... Because
§  In order to ............. To
§  Is binding upon .......... Binds
§  It is the duty ........... Shall
§  Last will and testament ............. Last will
§  Or, in the alternative .............. or

‘Now these presents witnessed
that ...’ (this is often used to
introduce the operative part of an
agreement or a deed) --- can be
changed to:
‘This agreement witnesses that ....’ or
‘This deed witnesses that ... ‘

‘It is hereby expressly declared and
agreed that ....’ or ‘It is hereby
declared that ...’ --- can be redrafted
as:
‘It is declared that ...’ and ‘It is declared and agreed
that .... ‘

v ‘In witness whereof the parties hereunto
have set their hands to these presents as a
deed on the day month and year
hereinbefore mentioned ....’ or
v ‘In witness whereof the parties have
executed these presents as a deed ....’
v They may be revised to:
§  ‘Executed as a deed on ....’
§  ‘Signed and delivered as a deed on ...’
§  ‘The parties have signed this document as a deed
on .....’
§  ‘This is the last will and testament of ...’ change to
‘This is the will of ....’

Synonyms …
v Synonyms are words that have similar
meanings, so that one can be substituted for
the other without affecting the meaning of a
sentence or clause
v Synonyms are used: to ensure that
important matters are included, as a habit,
other parties insist on them
§  The decision of arbitrator shall be ‘final and
conclusive’
§  The liabilities of the payer and the right of the payee
in respect of ‘all cost, charges and expenses’

Synonym àTwo
words:
§ 
§ 
§ 
§ 
§ 
§ 
§ 

Act and deed
Agreed and declared
Alienate and set over
All and every
Null and void
Fit and proper
Bind and obligate

§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 

Rules and regulations
Sell and assign
Terms and conditions
Full and complete
Furnish and supply
Have and hold
Power and authority
True and correct

v Three words
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 
§ 

Amend, vary or modify
Build, erect or construct
Business, enterprise or undertaking
Changes, variations and modifications
Lands, tenements and hereditaments
Legal, valid and binding
Loans, borrowings and advances
Rest, residue and remainder
Right, title and interest
Suit, claim or demand
Terminate, cancel and revoke

Negative Sentence…
v e.g. He was driving at a not inconsiderable speed
(‘He was driving fast’)
v John does not attend very often (‘John rarely
attends’)
v Mary is not very well (‘Mary is unwell’)
Use positive!!!
‘$10,000 to my children, other than those who have
not attained age 18’
‘$ 10,000 to such of my children as have attained
age 18’

e.g. An employee is eligible to join the
Scheme if he or she is not:
(a)  Under age 22 or over age 60; and
(b)  A casual or a temporary employee
This would be more direct in positive
form:
An employee is eligible to join the Scheme if
he or she is:
(a)  Age 22 and under age 60; and
(b)  A permanent employee

Consistency…
The object of a legal document is to set
out rights, powers or privileges and
obligations or duties with precision
rather than to entertain the reader
§  ‘....never to change the form of words unless you are
going to change the meaning ....’
•  Eg. ‘the buyer’ .....it should not be changed to ‘the
purchaser’ or ‘Mr Smith’
•  ‘the house’ ... It should not be altered to ‘the premises’,
‘the property’, ‘the building’ or ‘the estate’ ---- it is felt
that ‘too many references to ‘the house’

Date and time…
v Date and time play a crucial part in
indicating when rights, powers or
privileges and obligations or duties
commence or end and their duration
v Examples:
§  Leases
§  Contracts of employment
§  Insurance proposals and policies
§  Contracts, etc

v Year
§  The general rule: 12 months or 365 days/366
days in a leap year
§  Example:
•  One year beginning on 1 July 2001
•  One year ending on 30 June 2002
•  One year beginning on 1 July 2001 and
ending on 30 June 2002

v Month
§  Means calendar month unless the context
otherwise require
§  Example: “six months’ notice” in a lease or
“three months’ notice” in a contract of
employment
§  It is advisable to indicate the date on which
the notice commences and ends --- to avoid
any ambiguity (Six months’ notice
commencing on 1 July and ending on 31 Dec
2007

v Day …
v A day is the minimum period of time in law and
no account is taken of a fraction of a day
v Cartwright v MacCormack [1963] 1 WLR 18: an
insurance company issued a temporary cover
note for motor insurance for ‘fifteen days from
the commencement of the date of risk’.
§  The note was issued at 11.45 am on 2 Dec 1959
§  The insured had an accident at 5.45 pm on 17 Dec
1959
•  The insurer argued, the policy ran from 11.45 am
(2 Dec 1959 to 11.45 am on 17 Dec 1959)
•  This was rejected: since 11.45 only referred to the
time the insurance became effective and the 15
days began at midnight on 2 December and,
therefore, ended at midnight on 17 December

“before” and “after”…
v As a general rule: the use of ‘after’ and
‘before’ to express dates will avoid
ambiguity, eg. Employees born after 1
January 1980; Employees born before 1
January 1980
v Lead to an omission
§  ‘Class A Members’ means members admitted before
31 Dec 2000
§  ‘Class B Members’ means member admitted after 1
January 2001
§  How about: Members who were admitted on 31 Dec
2000 (?), and on 1 January 2001?

v Lead to an overlap:
v On or after 1 December 2000 (group A)
v On or before 1 December 2000 (group B)
v How about, someone who became
employee on 1 December 2000 (--- s/he
will fall into both classes)

‘by’, ‘from’, ‘on’ …
v ‘By’ : e.g. A notice to quit ‘by 1 January’
will give the tenant the right to remain in
the property until midnight on 1 January
(the tenant should not be out on 31 Dec)
v ‘From’: where a notice is given ‘from’ a
specified date, that day will not be
included in the computation: e.g. A rent
increase effective ‘from 25 March’ will only
take effect on 26 March
v ‘On’: à means, that day is included

’till’ and ‘until’…
v ‘till’ and ‘until’: the cases show that both
terms may be construed by the courts as
either inclusive or exclusive.
Consequently, they should not be used to
express times and dates
§  e.g. An insurance policy is stated to be
effective ‘until 1 September’ à until may
mean that it expires at midnight on 31 August
or that 1 Sept is included so that it expires at
midnight on 1 Sept

‘between’…
v ‘between’: If time is expressed as
‘between’ two dates, the dates mentioned
will not be included
v Between à age
§  A clause in a trust referring to the settlor’s
children ‘between the ages of 18 and 21
years’ would not include children aged exactly
18 or exactly 21(only include children aged 19
and 20) --- can be re-draft as: ‘aged not less
than 18 years or more than 21 years’

Klausul Boilerplate
-  Klausul2 teknis dan standar
-  Isi/Batang tubuh kontrak
-  e.g. Choice of Law, Choice of Jurisdiction,
Language, Force Majeure, Notice,
Duration/Term of Agreement, Severability,
Integration, Amendment, Anti-waiver,
Counterpart, Assignment

Next Week…..
INCOTERMS

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