Litigation & Arbitration

Contract writing is difficult because the writer must perfectly encompass, no more no less, the terms of the offer made as it was accepted, thus articulating the agreed-upon exchange of legal rights, responsibilities or liabilities, as it were in each case.

The responsibility is ominous; it is law-making.

The goal of a written contract is to represent the bargain or agreement between the parties which, in the event of a dispute between them as to its terms, will represent to the court the private law between the parties, whether, at the time of trial, they like it or not.

In a person's life, the occasion inevitably presents itself (usually many times), to write a contract; just to be sore of an agreement. It is not rocket science and lawyers are not always needed, although where money is no issue, or where the subject matter of the contract could deplete your life's savings if messed up, see a lawyer to write the contract!

At the same time, what follows are basic rules that lawyers should live by as well.

The vast majority of contracts are oral - including the consumer contract for the purchase of the coffee I now have before me.

When money is the consideration of one party, the contract is usually a straight exchange: so much money for such-and-such a thing. No need for a writing - the deal completes by the money-for-thing exchange.

But many contracts are not that simple and involve delays or other obligations, all begging for a written contract.

In some rare cases the law requires a written contract such as, in some jurisdictions, contracts for the sale of real property or guarantees or indemnities.  In such a case, the chickens can cluck all day long; failing a written contract, there would never be, in the eyes of the law, a contract.

Even where the contract itself is more complex than a simple money-for-thing deal, there are many different scenarios that might present themselves but each with different legal consequences. For example, the parties may arrive at an oral contract and then seek to set it down in writing. If the parties trip over points of detail in the writing of the contract, they would still be able to fall back on the terms of their oral contract assuming, of course, that those terms were clear.

On other occasions, the parties do not agree on terms of a contract. They might have an understanding of what the terms of an agreeable contract might be (eg. a MOU) but they have deferred that moment of truth to their ultimate agreement to the terms of a written contract. In that case, if the drafting process fails, the budding contract fails with it.

To be applied in either situation, here are the 10 Commandments of successful contract writing:

I. Write legibly. Use a computer, block writing or even a typewriter but avoid script handwriting at all costs.

II.Date the contract on the last page next to the signature blocks. The date represents the date of birth of the obligations and liabilities that flow from the contract.

III.Make sure the contract is signed by both parties. Duh! But as a lawyer who does a fair amount of litigation and has seen enough real contract issues to last several lifetimes,  is always astonishing to see the number of contracts that show the signature of only one party. Banks are notorious for asking clients to sign contracts leaving the space for the bank signature blank. Rarely does the customer receive a copy of the bank's contract back in the mail with the bank's signature on it. Lawyers are not much better, often presenting retainer contracts to clients with the lawyer's signature block empty.

IV.Do not use archaic terms like witnesseth, heretofore, henceforth or whereas, or such similar legalese. Even lawyers should not be using these types of words except in the rare situation where they might be the only fit. Use plain language - just state the plain terms of the contract. There is no need for the contract to sound like it's to be read by an 92-year old male British judge.

V.Leave a healthy margin around each page. Contracts are routinely faxed or scanned and essential information or even amendments that are scribbled on the edge of the page might get lost in the scan and cause all kinds of difficulties.

VI.Use a black ink pen if the contract has to be hand-written (in BLOCK LETTERS) and for signature. blue ink signatures often disappear when the scan is not properly calibrated leaving the impression that the contract was not completed, un-endorsed.

VII.Choose easy-to-use numbering. If the paragraphs need to be numbered, disregard the numbering system used by most lawyers which is an archaic combination of regular numbers, Roman numerals and both lowercase and uppercase letters (unless, of course, you're doing a Ten Commandments thing!). Break up the contract into numbered paragraphs using 1,2,3 etc. Smaller paragraphs are better than short ones: if in doubt, break it up.

VIII.Beware using standard clauses especially if cut from a set. If the contract is ever interpreted by a judge, they will hold you to each letter and comma of your contract. You will not be able to avoid the unintended and catastrophic consequences of a cut-and-paste standard clause by crying to the court that you did not mean it; that you just took those clauses from another contract without really reading them. Be very careful in using Self-Counsel or Internet contract style packages.

IX.Be careful in your choice of words. For example, if you use the word material, the courts may have to choose between two different interpretations, depending on the context. Material can mean that something is very important; highly significant. Or it can mean that something is merely relevant. The difference can be, well, material!

X.Never sign a contract without reading it. Many, many court cases are fought over contracts which one of the parties say they didn't really read. They'll usually add that the contract was thrust upon them and they were pressed to sign it without a real opportunity to read it. This defence would work well for a 15 year old but for most adults, it falls on deaf judicial ears. There is no contract you are forced to sign and even if you were, it would be unenforceable. The courts are well aware of this - they are citizens themselves. They, too, are presented with waivers at health clubs etc. and they too, have the option to sign or not sign.

This is but a primer on the art of writing a contract; a beginner's guide only. But these rules will hold even the most experienced contract writer in good stead whether it's for a one pager or a multi-page contract. However, writing a contract is a professional job. We strongly recommend you to consult our China contract lawyer to perform this task and provides you a perfect contract or agreement. You should keep in mind that a mere US$500 for a contract will help you avoid possible legal risk and business loss!

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