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Contract Drafting – DOs and DON’Ts

Martin VincentPartner

0161 214 0553Imartin.vincent@weightmans.com

date

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Basic Requirements for a Contract

1. Offer;

2. Acceptance;

3. Consideration;

4. Intention to create legal relations; AND

5. Certainty

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Offer

▪ Offer or invitation to negotiate? ▪ Invitations to negotiate▪ Incorporating terms

- offeree aware of terms;- after performance- via course of dealing;

Tips- single document;- ensure standard terms and conditions are plainly visible

(not on the reverse of a document sent by fax/pdf);- sign last;- word communications as invitations to treat rather than

offers capable of acceptance or use plain English to describe what is meant;

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Acceptance

▪ Acceptance/counter offer;▪ Battle of the forms▪ Email correspondence▪ Performance before agreement▪ Tips

- finality of acceptance;- acceptance by behaviour (performance);- ensure clarity throughout;

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Consideration

▪ Goods/services for cash;▪ Not necessary to be adequate;▪ Past consideration (when varying terms);▪ Tips;

- Always include monetary consideration (£1); or- Draft as a deed (limitation and consideration points);

Intention▪ Intention to create legal relations is always

assumed in commercial agreements.

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Certainty

▪ Filling the gaps (MRI Trading AG v Erdenet Mining Corporation LLC [2013] );

▪ Best endeavours (Jet2.com Ltd v Blackpool Airport Ltd [2012] );

▪ Tips- Would several small agreements work better than one

comprehensive agreement to aid certainty?

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Form of Contract

▪ Written;▪ Oral▪ Email▪ On line▪ By conduct

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Contract Formation

▪ Conditions precedent

▪ Legal capacity

▪ Illegality

▪ Proper form

▪ Entered into by person lacking authority

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Pre-contractual Representations

▪ Sales literature;

▪ Discussions;

▪ Correspondence;

▪ Restriction of liability

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Pre-contractual documents

▪ Letters of intent;▪ Memoranda of understanding;▪ Heads of agreement;▪ Heads of terms.▪ Usually non-binding▪ Strict interpretation of wording

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Terms implied by statute

▪ Supply of Goods and Services Act 1982 (SGSA)

▪ Unfair Contract Terms Act 1977 (UCTA)

▪ Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

▪ The Provision of Services Regulations 2009 (POS Regs)

▪ Bribery Act 2010

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Terms to Consider

Services▪ Clear description of services;▪ Creating obligations;▪ Standard of services;▪ Deliverables;▪ Time for performance;▪ Intellectual Property Rights (IPR)▪ Charges▪ VAT▪ Payment (interest & deductions)▪ Boilerplates

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Terms to Consider

Goods▪ Description of goods - quality;▪ Quantity – tolerances▪ Acceptance/rejection of goods▪ Delivery of goods▪ Price – items included▪ Payment terms▪ Risk and title;▪ boilerplates

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Standard terms and conditions?

▪ Pros• Opportunity to introduce

favourable terms.

• Avoid the time and expense of drafting and negotiating bespoke agreement.

• Provide consistency throughout business and familiarity with how contract works.

• Standardisation allows businesses to utilise more junior staff

▪ Cons• Greater restrictions imposed

by UCTA.• Can lead to confusion over

which terms and conditions are effective if other side also has standard terms and conditions.

• Over use of standard terms in unsuitable contracts.

• Require regular review in respect of updates to the law and changing business practices.

• May be a requirement for more than one standard set of terms and conditions depending on the business’s purpose.

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DOs

▪ Ensure absolute clarity when making offers and acceptances.▪ Where appropriate include all terms in one document.▪ Remember to include mention documents/information relied upon to enter into

the agreement.▪ Ensure that consideration is recorded accurately in the agreement.▪ Remove/minimise uncertainty as far as possible.▪ Consider whether there ought to be conditions precedent which require

satisfaction before commencement of the agreement.▪ Ensure individual on the other side has authority to enter into contract.▪ Carefully consider pre contractual representations and documents and ensure

that agreement is reached as to their applicability in order to draft agreement accordingly.

▪ Consider terms implied from statute and whether they ought/ought not to apply.

▪ Very carefully word each of the terms covered in the ‘terms to consider’ slide. Consider from both buyer and seller points of view.

▪ Where standard terms and conditions are proposed as being suitable consider whether it is economical for a separate agreement incorporating all terms may be beneficial.

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DON’Ts

▪ Make offers where it can be helped, use invitations to negotiate.

▪ Do not accept offers until terms are agreed unequivocally.▪ Agree to use ‘best endeavours’ to do something when it

could be narrowed.▪ Create obligations upon one’s self in pre-contractual

documents that are unnecessary.▪ Rely on statutory implications where clarity could be added

by use of an agreement▪ Sacrifice detail in an agreement for the sake of containing all

terms in one agreement where 3 or 4 agreements covering in detail each stage of the contract would assist.