Test Your Templates

Yesterday’s post (here) concerned template process; today, let’s consider content. (Template content is a function of what you say and how you say it. Instead of constituting separate topics, they have a way of blending into each other—how you say something has a disconcerting way of changing what it means.)

There are two kinds of template. There are templates for strategic transactions—for ease of reference, I’ll call them “deal templates.” And there are templates for whatever a company does in the ordinary course of business—I’ll call them “commercial templates.”

Deal templates feature the usual glitches of traditional contract drafting. See, for example, this 2011 post about the merger agreement for Google’s acquisition of Motorola Mobility. But with deal templates, you have more leeway for suboptimal drafting. That’s because deals are one-off, and people are less likely to sweat the small stuff.

By contrast, with commercial templates usually less is at stake, so people are more inclined to sweat the small stuff. Furthermore, commercial templates are likely to be used much more often, and the cumulative effect of confusion and delay due to drafting glitches can act as sand in the contract-process mechanism.

So it’s more important that commercial templates be as clear and concise as possible and be tailored to the company’s needs. With that in mind, I offer you the following quick way to check the health of a given commercial template:

• Does it contain the useless “successors and assigns” provision? (For more on that, see this article.) That’s a sign of undue deference to misbegotten conventional wisdom.

• Does it contain the phrase “best efforts”? That’s asking for trouble. Does it contain different “efforts” standards? That’s even worse.

• Does it use the pointless and confusing phrase “represents and warrants” instead of simply having the parties state facts and, as appropriate, specifying remedies?

• Does it use the pernicious phrase “indemnify and hold harmless” instead of stating exactly what indemnification covers?

• Does it use one or more of “WITNESSETH,” “WHEREAS,” “NOW THEREFORE,” and “IN WITNESS WHEREOF”? If so, you can assume that it contains other stale nonsense.

• Does it include a provision excluding “any consequential, special, or incidental losses or damages,” or some such? If so, you can be confident that few, if any, of those who work with the template understand the implications of that language. (For more on that, see this post and this post.)

• Does it use the phrase “may at its sole discretion,” or some variant? Then at best, it’s groping at an issue instead of addressing it head-on. (For more on that, see this article.)

• Does it use the defined term “Parties”? If so, you can expect other defined-term bloat.

• Does it use either or both of “willful” and “willfully”? (For more on that, see this post.) If so, don’t be surprised if it contains additional instances of ambiguity.

• Does it contain blocks of text more than 15 lines long? That’s a sign of not only deficient document design but also, more broadly, contract logorrhea.

That will do for now. The more you answer the above questions in the affirmative, the greater the odds of your company wasting time and money and the greater the odds of a contract dispute. If you decide that you want to fix your templates, your best bet would be to entrust the task to someone who’s an informed consumer of contract language, rather than someone who has learned contract language primarily by osmosis and who traffics in conventional wisdom.