Introduction to Transactional Drafting

Introduction to Transactional Drafting

Introduction to Transactional Drafting Las Vegas, Nevada Saturday October 10, 2015 1:45-3:00 p.m. NALS 64th 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 Johnson Outline of a contract Building blocks of a contract

Effectively assisting with drafting, reviewing and editing contracts Drag picture to placeholder or click icon to add 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) Definitions Business 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 In-text

Property means the Union Park Mall. 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 Trial Arbitration Indemnification

Severability and Integration Notices Amendments Some resources Client forms Firm databases

Form books (Local Law Library) Fee-Paid Online legal sources BloombergLaw 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 Sellers 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 Property 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? 1. You want your client to be sure that a company has a certain level of inventory before purchasing the company. 2. You do not want your client to be forced to supply additional materials unless the previous invoice has been paid. 3. 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) Definitions

Business 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 Buyer Avoid legalese and doublets when possible consider synonyms:

Aforesaid = previous Circumstances in which = when Null and void = void Avoid the use of and/or Be very specific A or B but not both Lets try a quiz!! Questions Thank you!

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