Your Base Document: A Key Starting Point
It is important to adopt a “base document” or “boilerplate agreement” that has sample language for the various clauses that commonly occur in your agreements (frequently referred to as boilerplate clauses). There are several significant benefits to doing so, including
- adopting standard language for clauses that you use regularly
- demonstrating your Style Guide “in action”
- setting the baseline standards against which all your other precedents will be measured
Here are a number of key issues for you to consider when creating your Base Agreement.
Proper Organization
Insure that your agreement is organized in a consistent, logical structure. This is one of the most important thing you can do in any of your documents. Establishing such an organization for your Base Agreement sets the standards for all further agreements you draft.
Conform to Your Style Guide
It is extremely important that you also adopt a house style guide, which will address various issues relating to your contract drafting. This will insure that you address similar issues in the same way in all your agreements. You may wish to review the ContractStandards Style Guide for a good example that you can either adopt for your purposes or use as a framework to develop your own version.
Table of Contents
By including a Table of Contents in your Base Agreement, you will remind those who use it to draft their own agreements to include such a Table in theirs. You will want one in all your medium-length and long documents.
The Table of Contents serves one key purpose, in addition to its usual function of enabling readers to find specific content. That is to serve as a checklist when you are asked to review other similar documents drafted by third parties them. While the organizing structure of the third party document will usually be different from yours, such that document comparison software will be ineffective, you can use your Table of Contents to do that comparison on an item by item basis.
Key Business Terms
Many standard-form agreements, such as car rental agreements, place the key business terms at or near the head of the agreement, usually in larger print so that the terms are easily identifiable. In any negotiated agreement, there are certain business terms that are most important to the business people. We therefore recommend adopting the same practice and putting those terms upfront, formatted to distinguish them from the rest of your agreement. (See our ContractStandards Base Agreement to see how we do this for our agreements.)
Definitions Section
It is important to have a single section listing all definitions used in your agreement. The definitions themselves may all appear in that section or may appear embedded in the relevant text, or you may adopt a mix of the two approaches. Placing all definitions together allows you to verify that all defined terms are in fact used in your agreement and that no embedded definitions are not noted in this section.
In any event, since definition formatting varies, it is important to adopt a particular style (such as “[Defined Term]” means [definition] or “[Defined Term]” is defined in section [reference]).
In addition, you must decide where to place the Definitions section, namely at the beginning or near the end of your agreement. If your goal is to enable your client to read and understand your agreement more easily, you should place them near the end. (See our ContractStandards Base Agreement to see how we do this for our agreements.)
Captions
One of the most important things to do in your drafting is to insure that every clause
- addresses one and only one substantive issue, and
- has a clear, substantive, and unique title.
Contract clauses are confusing when they address two or more substantive issues. Confine your clauses to a single substantive issue, since this will enable you and your reader to understand it better. Similarly, a clear descriptive title that communicates the “meat” of the clause will be very helpful for readability.
Acknowledgements Section
While it is common to have all representations and warranties in one section (although see the comment immediately following) and all covenants in another, the various acknowledgements made by one or both parties are usually scattered throughout the document without rhyme or reason. Adopt the same approach as with other clause types, and place them all together in a single “Acknowledgements” section.
Representations and Warranties
In reviewing signed agreements, we frequently see a single section entitled “Representations and Warranties,” without any further detail as to the specific contents of the section. Given that these sections can often represent a quarter to a third of the total number of pages in the agreement and half or more of the actual transaction-related content, this leaves the reader guessing as to what this section actually contains.
You should, therefore, first create a separate “Representations and Warranties” section for each of the principal parties (such as “Seller’s Representations and Warranties” and “Buyer’s Representations and Warranties”). Next, insure that each representation and warranty is properly captioned, so that the reader will be able to review the Table of Contents and quickly understand the substantive issues addressed in the section.
It is in connection with the representations and warranties that our comments on the need for organizational structure are particularly germane. We have repeatedly seen such sections where the clauses are thrown together in a seemingly haphazard way.
This lack of structure and of proper captions also creates the risk of duplication of clauses, which we have frequently seen. A closer reading of the duplicate clauses often reveals differing substantive content, thereby creating uncertainty for the parties. Accordingly, you should pay careful attention to not just what you draft in these section but how you draft.
Next Steps
Once you have finished your Base Agreement, your job is far from over. You must also do three key things, namely
- make it easily available to everyone who may wish to use it
- use it as the template for all agreements you draft in the future
- update it regularly and, just as importantly, note the “Last Updated” date at the top of the first page so others know you’re keeping it up to date
Our Base Agreement
If you review our ContractStandards Base Agreement, you will see a good example of an agreement that you could either adopt for your own purposes or use as a framework to develop your own version.