How can you streamline your contract drafting time and create a better document? Prepare. For all types of transactions, the time spent organizing and guiding the drafting and closing process will save actual drafting time and will help produce more accurate, understandable, effective, and comprehensive documents. Follow these ten steps for success in any business transaction.
- Investigate the factual and legal setting. Rarely will the parties have worked out all aspects of a deal before they first meet with counsel to draft the agreement. Anticipate assisting the client in structuring and negotiating the transaction.
- Prepare a time and responsibility chart. The chart should identify the persons and entities involved—and their attorneys—with contact information, as well as every document, letter, approval, certification, opinion, and other writing that’s necessary for closing the transaction or is otherwise included in the final transaction documentation.
- Consider using a term sheet or a letter of intent. A letter of intent is any writing that describes some or all provisions of a proposed transaction in which a party shows interest in or commitment to the subject matter or the process of negotiating a definitive agreement. Letters of intent can be binding or nonbinding. A term sheet is an abbreviated form of letter of intent that simply outlines the economic terms of the transaction.
- Review the client’s related documents. The client may have its own standard contracts for particular types of transactions or may have internal guidelines or checklists to assist corporate officers in negotiating and documenting transactions. These documents can provide a good starting point for any new deal.
- Review documents used in similar transactions. Review previously drafted or negotiated documents from similar transactions before starting to draft a new document. But never assume that a document from one transaction can be used in another simply by changing the names and dates.
- Prepare the document outline or checklist. Before drafting, prepare a checklist, outline, or term sheet of key issues or provisions based on discussions with the client, legal research, and review of sample documents. The process of identifying the document’s major components may raise factual or legal issues that need further consideration.
- Draft the agreement. Most attorneys refer to form documents from their files and make changes to create a new document that reflects the current agreement. After drafting and editing the agreement, review the draft document in conjunction with the previously prepared outline, list of issues, or term sheet to ensure that it covers all points. Before a draft document is circulated electronically to other parties, make sure changes will be tracked and readily visible.
- Review and negotiate the agreement. After the document is written, proofread, edited, and reedited, review it again with the client before distributing it to other parties. Then circulate it to opposing counsel and other parties for review and comment, together with an email or cover letter reminding recipients of the date by which they should provide comments. Finally, organize document review sessions to provide maximum efficiency and minimum inconvenience to everyone involved.
- Prepare for and conduct the closing. The attorneys may hold a preclosing meeting or teleconference a day or more before the actual closing to ensure that all documents are in final form and ready to be signed. Prepare and distribute a closing checklist to all parties before or at the preclosing conference. At the closing—either in person or through exchange of electronic documents—guide the client through the signing and exchange of documents. The closing itself is usually only a brief formality.
- Follow through on any remaining matters. Retain one set of originals or copies of all transaction documents for future reference. When the document is signed, the client should be told to calendar the key dates and set up an advance warning system to permit adequate planning. Counsel may also set up a calendar as a courtesy to the client, but counsel often advises the client of key dates and then disclaims any responsibility to advise the client in the future of those dates.
Contract drafting is not always a linear process—counsel may need to switch up the order of these steps, work on several steps at the same time, or revise work done at an earlier step in the process.
Learn more about each taking of these steps and all of the mechanics of document drafting in CEB’s Drafting Business Contracts: Principles, Techniques and Forms, chap 1.
Other CEBblog™ posts you may find useful:
- Contract Drafting 101
- Review This Before Drafting a Contract
- How to Keep Contracts Out of Court (Part 1)
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