Business Law Legal Ethics Legal Topics Practice of Law

3 (Selfish) Reasons to Draft Fair Contracts

An attorney drafting an agreement has an obligation to represent the client zealously and to prepare a contract that maximizes the client’s legal and business advantages. But does this mean that an attorney may include provisions that are extremely onerous to the other side?

The inclusion of a patently illegal or unconstitutional contract provision is improper (Cal Rules of Prof Cond 3–210), but most one-sided or “hard ball” provisions fall into a gray area that doesn’t equate to unethical conduct by the attorney. And the implied covenant of good faith and fair dealing isn’t applicable to the parties before a contract is formed.

But even though it may not be against the rules, there are still some good reasons to avoid unfair contract provisions:

  1. Doctrine of unconscionability. Courts may use the doctrine of unconscionability to invalidate particularly unfair or oppressive clauses. And a court’s finding that some aspects of a contract are unconscionable might cause the court to view the remainder of the document as equally unfair or oppressive and to refuse to enforce it in the way you’d envisioned. See CC §§1599, 1670.5. See also Armendariz v Foundation Health Psychcare Servs., Inc. (2000) 24 C4th 83 (arbitration agreement fatally tainted by unconscionable terms too pervasive to sever).
  2. Negative effect on business relationship. Unfair, unreasonable, or overreaching contract provisions can diminish the goodwill that’s often crucial to a business’ success. Unreasonable contract terms can strain relationships and fail to promote mutual trust and cooperation between the parties. Find less oppressive alternatives that nevertheless give your client the legal or business advantage it’s seeking.
  3. Damage to attorney’s reputation. An overreaching contract may damage your reputation. If you go too far in attempting to maximize your client’s advantage, you may ultimately suffer a lack of respect and trust from the bar, making future negotiations with the same or other parties difficult or contentious to the point of preventing effective legal representation.

So what do you do when your client is pushing for a contract provision you believe is unfair and overreaching? Persuade your client not to insist on the provision. Point out that he or she doesn’t want an unenforceable contract or one that will damage his or her reputation or credibility with customers and associates. Most clients will see the long-term benefits of drafting documents from a “win-win” perspective.

If you can’t persuade your client to cut out the provision, send your client a letter detailing your concerns. This way at least you’ll have documentation in the file of your efforts at dissuasion.

Even as you zealously represent your client, you can take into account the legitimate interests of all parties in preparing and negotiating a document. The resulting product will be more fair, balanced, and likely to produce a harmonious and mutually profitable relationship between the parties than would a contract written solely to benefit and protect one party at the other’s expense.

If you draft contracts in your practice, you need to review the strategy, standards, and ethics material in CEB’s Drafting Business Contracts: Principles, Techniques and Forms, chap 2. On unconscionability, turn to CEB’s California Law of Contracts §§5.76–5.80.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

2 replies on “3 (Selfish) Reasons to Draft Fair Contracts”

Too bad the U.S. Supreme Court doesn’t share your views. (See, e.g., AT&T Mobility v. Concepcion, 563 U.S. 333 (2011) )

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