The Contract Drafter’s Guide to Contract Drafting. George M. Fox, Esq. Fox+Mattson, P.C. 4788 Long Island Drive Atlanta, GA 30342 www.GaLaw.com November 17, 2017

Section 1: This isn’t about offer and acceptance . . . Slide #3 Section II: Avoiding ambiguity. . . . . . . . . . . . . . . . . . . . . . Slide #10 Section III: A contract’s building blocks. . . . . . . . . . . . Slide #31 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . ………... . . . . . . . . . . . . follow Slides Thanks to the following for their contributions and permissions: Professor Sue Payne, Director of the Center for Transactional Law and Practice, Emory University School of Law. Professor Tina L. Stark and Stark Legal Education, Inc. Chadwick Busk, Esq. Claire Mattson, Esq. and Jennifer Thomas, Esq. John Larkins, Esq., who literally “wrote the book.” The material in this presentation does not constitute legal advice. It is also not intended to be definitive. So do not rely on anything in here in any transaction or other legal matter without doing your own research.

The Contract Drafter’s Guide to Contract Drafting Section 1: This isn’t about offer and acceptance. Introduction: that’s what I thought, too. Getting to a contract which means what it says and says what it means. How to unearth what’s meant, or conversely, how to write what you mean. The parts of a contract, their legal significance and how to un-blur them for the right remedies.

As a litigator, when would this ever, ever apply to me? In case you’re asked: For an opinion letter. To review a contract. By general counsel. To submit a pleading, and you want your client’s punch line right up front.

“ ” I write to the ear and speak to the eye. “When people read what I write, I want them to hear me talking. “And when I talk, I want them to see what I’m saying. “I think good writing and good speaking are deeply intertwined. ” McElhaney on Litigation:“Stop Sounding Like a Lawyer” ABA Journal, Nov. 2008. Used with permission.

An example: would you ever use “and/or” in a sentence? Three times? And could you say this sentence out loud with one breath? Unless otherwise expressly provided in this Agreement or required by the Delaware LLC Act, whenever a potential conflict of interest exists or arises between any shareholder or an Affiliate thereof, and/or one or more Directors or their respective Affiliates and/or the Company, any resolution or course of action by the Board of Directors in respect of such conflict of interest shall be permitted[.]” Quote from Kahn v. Portnoy, C.A. No. 3515-CC (Del. Ch. 12/11/08); for a GA case on “and/or”: Bank Bldg. & Equipment Corp of America v. Georgia State Bank, 132 Ga.App. 762 (1974).

Unless otherwise expressly provided in this Agreement or required by the Delaware LLC Act, whenever a potential conflict of interest exists or arises between any Shareholder or an Affiliate thereof, and/or one or more Directors or their respective Affiliates and/or the Company, any resolution or course of action by the Board of Directors in respect of such conflict of interest shall be permitted [.]”

So: when would this apply? The conflicts considered: Any Shareholder vs. any Director. Any Shareholder vs. several Directors. Any Shareholder vs. the Company. Any Shareholder vs. one/more Directors and the Company. Any Affiliate vs. any Director. Any Affiliate vs. several Directors. Any Affiliate vs. the Company. Any Affiliate vs. one/more Directors and the Company. Any Shareholder and Affiliate vs. Directors. Any Shareholder and Affiliate against the Company. Any Shareholder and Affiliate against one/more Directors and the Company. Any Directors vs. the Company.

Evidence of Satisfaction of Conditions - Any condition of this Agreement which requires the submission of evidence of the existence or non-existence of a specified fact or facts implies as a condition the existence or non-existence, as the case may be, of such fact or facts and Lender shall, at all time, be free independently to establish to its satisfaction in its absolute discretion such existence or non-existence. The 451-word sentence: See Exhibits, Page 1. 9

Translating What They Meant It To Say. Section II: Avoiding Ambiguity. or Translating What They Meant It To Say.

Isn’t there enough to deal with? Consider the Toronto Comma Case: “This Agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party.” In Georgia: Kushner v. McLarty, 165 Ga.App. 400 (1983); Berman v. Rubin, 138 Ga.App. 849 (1976). 11

“Hereof,” “hereto,” “thereof,” “hereafter” and other old words. Original: The Escrow Fund shall be held by the Escrow Agent under the Escrow Agreement pursuant to the terms thereof. Redraft: The Escrow Agent shall hold the Escrow Funds in accordance with the Escrow Agreement’s terms.

Original: Employment Agreement, dated March 13, 20XX, between Rollerblades Inc., a Delaware corporation (hereinafter, the “Employer”), and Maria Rodriguez, residing at 21 Melmartin Road, Chicago, Illinois 60606 (hereinafter, the “Employee”). Redraft: Employment Agreement, dated March 13, 20XX, between Rollerblades Inc., a Delaware corporation (the “Employer”), and Maria Rodriguez, residing at 21 Melmartin Road, Chicago, Illinois 60606 (the “Employee”).

Provisos Typical drafting: Bathroom Tile. The Contractor shall change the color of the bathroom tile, provided that the Owners notify the Contractor on or before September 30, 20XX. More precise drafting: Bathroom Tile. If the Owners notify the Contractor on or before September 30, 20XX that they want to change the color of the bathroom tile, then the Contractor shall change the color of the bathroom tile.

Typical drafting: Maintenance. The Tenant shall maintain the Premises; provided, however, the Landlord shall maintain the boiler.   More precise drafting: Maintenance The Tenant shall maintain the Premises, except that the Landlord shall maintain the boiler. Typical drafting: Notice. The Manufacturer shall notify the Wholesaler of any anticipated delays of longer than five days, provided that it shall also notify the Wholesaler of any anticipated early shipments. More precise drafting: Notice. The Manufacturer shall notify the Wholesaler of any anticipated delays longer than five days and any anticipated early shipments.

Ambiguities in setting standards. Alterations. The Landlord shall not unreasonably withhold permission from the Tenant in determining whether the Tenant may proceed with making changes or alterations to the Premises.   Alterations. The Tenant shall not make any changes or alterations to the Premises without the Landlord's prior consent, which Landlord shall not unreasonably withhold.

Ambiguities because of vagueness. 12.1 Assignment. With the prior written consent of the other party, either party may assign any right under this Agreement to any Person. Manufacturer consents, without any further consent being required, to the assignment by Purchaser to any affiliate of Purchaser that is as creditworthy as Purchaser. 12.1. Assignment. Manufacturer consents, without any further consent being required, to the assignment by Purchaser to any affiliate of Purchaser that is at least as creditworthy as of the date of the assignment as Purchaser is as of the date of this Agreement.

Eliminating unnecessary couplets and triplets. : Original: At the Closing, the Seller will sell, transfer, assign, convey and deliver to the Buyer, and the Buyer will purchase, accept and acquire from the Seller, all of the Purchased Assets. Redraft: At the Closing, the Seller shall sell the Purchased Assets to the Buyer, and the Buyer shall purchase them.

Doubles you don’t need. And why. free and clear: the Old English “free” and the French word “clair.” acknowledge and confess: Old English and Old French. breaking and entering: Old English and French. goods and chattel: right, title and interest: Old English, Old English and French.

Doubles and triples you probably don’t mean. An exception: when you mean two different things: e.g., “represent and warrant.” Another exception: when state law requires all words: e.g., “remise, release and forever quitclaim.” Not really exceptions any longer: Give, devise and bequeath instead of Give? Null and void instead of void?

More redundant doubles and triples. null, void and of no effect over and above part and parcel rest, residue and remainder sole and exclusive suffer or permit to have and to hold then and in that event true and correct understood and agreed amend, modify or change by and between convey, transfer and set over covenant and agree due and owing each and every final and conclusive full force and effect known and described as made and entered into

Hideous phrases ending with prepositions and their plain English alternatives. a number of > many/some/(the exact number) is desirous of > wants concerning the matter of > about the totality of > all is binding on > binds due to > because prior to > before is able/unable to > can/cannot

Hideous prepositional phrases and their plain English alternatives. A post-break, pre-lunch group exercise: Hideous prepositional phrases and their plain English alternatives. at present >

at the place > at the present time >

at the time that > at that point in time > at this point in time > by means of > by reason of > for the duration of >

for the purpose of > for the reason that > from the point of view > in a case in which > in accordance with > in all likelihood >

in an X manner > in close proximity > in connection with > in favor of > in light of the fact that > as a result of >

in order to > in point of fact > in reference to > in regard to > in relation to > in terms of >

in the course of > in the event that > in the nature of > inasmuch as > on a number of occasions > on the basis of >

on the part of > to the effect that > until such time as > with a view to > with reference to > with regard to >

Section III: A contract’s building blocks. What it means to the drafter: are we setting up for the right remedy? What it means to the client: are we getting the right remedy? What it means to the litigator: can we sue for the right remedy?

1. The first building block: a Representation. Defined: A statement of fact as of a moment in time intended to induce reliance; to establish standards of liability; to allocate risk. Note: justifiable reliance is generally required for a cause of action based on a representation.

2. The second building block: a Warranty. Technical definition: A promise that a statement is true. Purposes: to provide an indemnity if a statement isn’t true; to allocate risk. Translation: A promise that the maker of a statement will pay damages to the recipient of the statement if the statement isn’t true and the recipient suffers damages. There is no reliance component. Example: The car is purple.

Risk Allocation in Reps and Warranties, and the two types: Flat representation Unequivocal Without wiggle room Qualified representation Hedged

Why Receive Both Representations and Warranties? Avoidance. Restitution. Maybe punitive damages. Warranties No reliance component --additional cause of action. “Benefit of the bargain”: damages. No need to prove defendant’s state of mind. Does it matter? CBS Inc. v. Ziff-Davis Publg. Co, 554 NYS2d 449 (1990)

3. The third building block: a Covenant A covenant is a promise to perform. It can be a promise to do something or It can be a promise not to do something. It creates a duty/obligation to perform. Example: “The Landlord shall heat the Tenant’s premises.” Purpose: to require or to prohibit an action; to establish standards of liability; also to allocate risk.

4. The fourth building block: a Right. A right is the flipside of a covenant. A right shares the same purpose of a covenant: to require or to prohibit an action; to establish standards of liability; also to allocate risk. Example: “If George is obligated to do something for John, then John has a right to George’s performance.”

Covenant or Right: what’s the difference? The Landlord shall heat the Tenant’s premises. The Tenant has a right to have its premises heated.

5. The fifth building block: Condition to an Obligation A condition to an obligation is a state of facts that must exist before a party has an obligation to perform. The occurrence of the condition must be uncertain. The purpose: to establish when a party is obligated to perform a covenant. It also allocates risk.

Condition to an Obligation Type A: Ongoing Conditions “If the Retailer notifies the Manufacturer that it requires Additional Merchandise, then the Manufacturer shall ship the Additional Merchandise to the Retailer no later than three business days after it receives notice from the Retailer.”

Condition to an Obligation Type B - Walk-Away Condition. “The following are conditions to the Buyer’s obligation to perform: The Buyer must have received an opinion from the Seller’s counsel, substantially in the form of Exhibit A. The Seller must have obtained all the consents listed in Schedule 3.14.”

Building Blocks and their Interplay: Rep and Warranty: The car is red. Covenant: Seller shall not paint the car. Condition: Seller must have complied with all covenants.

The sixth building block: Discretionary Authority Definition: the right to choose what action to take; or Permission to act. Purpose: to provide a choice or permission; to allocate risk.

Examples of Discretionary Authority: 1. Have a choice: “Either party may terminate this Agreement at any time by sending written notice to the other party.” 2. You have permission to act, previously denied: “The Borrower shall not invest in any Entity, except the Borrower may invest in any wholly-owned subsidiary of the Borrower.”

7. The seventh building block: Condition to Discretionary Authority Defined: a state of facts that must exist before a party may exercise discretionary authority. “If the Author submits an unsolicited manuscript to the Publisher, the Publisher may accept or reject it, in its sole judgment.”

8. The eighth building block: a Declaration. A statement of fact as to which both parties agree, but with respect to which neither party has any right or remedy. Purpose: to create definitions and to establish policies. Damages: ain’t none.

A declaration that’s a definition: The term “Purchase Price” means $200,000. Declarations which are policy statements: The laws of Georgia govern all matters relating to this Agreement, including torts. An assignee of a limited partnership interest cannot become a Limited Partner unless the General Partner gives its consent.

9. The ninth building block: a Condition to a Declaration. A condition to a declaration is a state of facts that must exist before a policy has substantive consequences. Purpose: to establish when a policy applies. “If a purported assignment is made in violation of this Section 9.3, it is void.”

Building blocks which allocate risk: Representations. Warranties. A recurring phrase: to allocate risk. Building blocks which allocate risk: Representations. Warranties. Covenants. Rights. Walk-away conditions. The remedy of this building block: Restitution, maybe damages. Damages. Damages, maybe specific performance. Rescission. And which things don’t contain a remedy? Discretionary Authority, and Condition to Discretionary Authority; Declarations, and the Conditions to Discretionary Authority.

When building blocks blur, the contract is a mess. Example: The “did-it-himself”contract at Exhibits pp. 2-3.

The first parts of a contract: The Easy Stuff Up Front. Preamble: title, parties, and date. Recitals. “. . . The Parties agree as follows:” Definitions

The second part of a contract: The Core of the Contract. Action Sections - the essence: Subject matter provisions. Money and other payment terms. Closing Detail (if appropriate). Closing Deliveries (if appropriate). Term (if appropriate).

The third part of a contract: More core and the wrap-up. Other business provisions (representations and warranties, covenants, rights, conditions, discretionary authority, and declarations) Endgame provisions Boilerplate Signatures

Boilerplate Provisions Confidentiality? Anti-assignment? Waiver of jury trial? Choice of law and forum? Notices? Severability? Force Majeure? See Exhibit 4.

Avoiding Irrelevancies and Obfuscations: A line in the sand from an in-house counsel to potential vendors. Don’t tell me that “No one ever changes this Agreement.” Your contract is written in a font less than 11 point, in two columns. Your contract is not paginated. Your contract contains typographical or grammatical errors. Your contract contains Goofy provisions. Your contract contains an unrealistic sunset date. You won’t accept a faxed or imaged signature as an “original.” From www.contractualmusings.blogspot.com, and used by permission of its author Chadwick C. Busk, Esq.

Literary Advice for Lawyers who Write:   Mark Twain: "The difference between the almost right word and the right word is really a large matter--'tis the difference between the lightning bug and the lightning."