How to Keep Contracts Out of Court (part 2)

• Publication year: 2017
• Author: Posted on May 15, 2017 by Julie Brook, Esq.

How to Keep Contracts Out of Court (Part 2)

Posted on May 15, 2017 by Julie Brook, Esq.

Julie Brook, Esq. has been with CEB since 1995. Before that, she practiced civil litigation with Landels, Ripley & Diamond in San Francisco. She is a volunteer arbitrator with San Francisco's Department of Human Services.

This material is excerpted from the CEBblog™

Copyright 2017 by the Regents of the University of California. Reproduced with permission of Continuing Education of the Bar - California. (For information about CEB publications, telephone toll free 1-800-CEB-3444 or visit our Web site, CEB.com).

The key to keeping contracts out of the courtroom is drafting them well and making sure that they accurately capture the parties' intent. In Part 1 of this post, we discussed five common contract drafting mistakes and how to avoid them. Here are five more.

1. Ensure that notice procedures and default triggers work together. Default and notice procedures invariably come into play when problems arise. For example, a contract provides "If such default is not made good within ninety (90) days after the receipt of such notice, the notifying party may terminate..." but the notice clause states that "Notice shall be deemed to have been given for all purposes, and effective as of the date of mailing...." Instead of framing notice procedures in terms of "giving" and "receiving," you should cast all related notice clauses in terms of "effective" notice: "If such default is not cured within ninety (90) days after notice of default is effective under Section _ _[the notice procedure section]_ ___, the non-defaulting party may terminate, effective immediately on notice of termination."
2. Don't forget start and end points. Determine the most sensible, objectively measurable event in the context of the deal to use as a starting point for measuring time. "Accrual" of a cause of action is often not objectively measurable, at least not without litigation. On the other hand, the "effective date of notice of default" can be precisely defined. Often it's not a good idea to include the effective date of the agreement in the printed text, because it may take days or weeks to fully execute the document and the parties don't want to begin performance until both sides have signed. Define the effective date as the "later date of execution" and then instruct both sides to make sure that whoever signs the document also dates it.
3. Don't keep them guessing. Many problems in contractual relationships...