REUTERS | Ralph Orlowski

Show me the way (in contract drafting)

I recently looked at some bespoke drafting that, as Eric Morecombe might have put it, had all the right words, but not necessarily in the right order. To avoid a fracas, I suggested that using a familiar standard form might be a better starting point and would save quite a bit of time. My idea was received with surprising enthusiasm.

There will always be aspects of the standard forms that don’t achieve the collective hopes and dreams of the parties, hence the practice of amending them. But, if you start with the right form, you often find that most of the drafting fits the bill.

We are fortunate in the construction and engineering sector to have a wide selection of forms to choose from and they have improved greatly over the years. Over the last few months, I have witnessed the useful deployment of  the JCT D&B, JCT Prime Cost, NEC Option A, NEC Option C, IChemE Red Book and MF/1 standard forms. Sometimes bespoke contracts are the best option but, even then, using the general approach of the most proximate standard form can reduce the scope for disagreements over wording.

The standard forms are tailored to the practices in the industries which they serve. Just one example is the strong focus on testing provisions (and the consequences of the failure to pass tests) in the IChemE Red Book and MF/1 forms. But I’m not convinced that there has to be a sector approach to all contractual provisions. In fact, I have recently started wondering why there are any differences in the standard forms in relation to what might be termed boilerplate – topics that are not typically subject to controversy or prolonged debate. The words tend to be similar, although not exactly the same.

As an example, compare the following descriptions of one insolvency event:

  • The JCT D&B contract refers to a party becoming insolvent on the “… passing of a resolution for voluntary winding-up without a declaration of solvency…”.
  • The IChemE Red Book provides that “If the Contractor goes into liquidation (other than a voluntary liquidation for the process of reconstruction or amalgamation)…”.
  • NEC 3 uses “… passed a resolution for winding-up (other than to amalgamate or reconstruct)…”.
  • MF/1 uses “… commences to be wound up (not being a members’ voluntary winding up for the purposes of amalgamation or reconstruction)”.

Where there are no standard forms available, I have seen parties agree to use the Practical Law draft as the starting point. The Practical Law standard for this insolvency event is similar apart from the use of square brackets in relation to solvent amalgamation or reconstruction:

“… a resolution is passed… for or in connection with… winding up… [other than for the sole purpose of a scheme for a solvent amalgamation… with one or more other companies or…  solvent reconstruction].”

Public Sector Contract

It was with great interest that I saw the Public Sector Contract on the UK Government website, which is described as a “standard template for framework contracts for common goods and services”. Some of the Core Terms are clearly focused on framework contracts, but the majority of clauses could, with a bit of selectivity (and subject to copyright issues), serve as useful boilerplate for what might otherwise be bespoke drafting.

However, some of the clauses are different from the standard forms. The equivalent of the insolvency event clauses above occurs when:

“… a shareholders’ meeting is convened for the purpose of considering a resolution that it be wound up or a resolution for its winding-up is passed (other than as part of, and exclusively for the purpose of, a bona fide reconstruction or amalgamation).”

The same general idea but the use of the words “convened” and “considering” make the timing of the event different from the others listed above, to the advantage of the purchaser.

Should drafting be harmonised?

No doubt others will correct me if I have missed something, but I really can’t think of a good reason why the standard forms should have different wording for the same provisions, apart from the avoidance of plagiarism:

  • Have we reached the point where we should encourage harmonisation or alignment?
  • Should we encourage the publishers of the standard forms to use exactly the same words where the intention is consistent?
  • Have we reached the point where a published set of clauses with no square brackets would be useful to deal with all boilerplate, thereby reducing the drafting burden on a wide range of commercial agreements?

Or, as Mr Frampton concluded, I wonder if I’m dreaming?

Hill Dickinson LLP Edward Davies

One thought on “Show me the way (in contract drafting)

  1. There are publishers already taking this route such as WeAgree and IACCM who are choosing to develop a clause library. Together with a sector specific framework this would create a workable contract. Clause libraries will enable more consistency across boilerplate clauses and less need for individual negotiation. It should also lead to better quality drafting!

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