Business Law New Lawyers

4 Reasons to Keep Contract Drafts

Generally, counsel prepares several drafts of a contract or agreement before the parties sign the final version. There are several reasons to retain those drafts. 

Drafts of an agreement can be very important if disputes arise later for these reasons:

  1. Drafts may show intention. Drafts of an agreement can help in the later interpretation of that agreement, especially if ambiguities in language and gaps in coverage become evident. Understanding how the agreement evolved may explain the parties’ intentions.
  2. Drafts may be evidence. Drafts often provide useful evidence in discussions of disputes and admissible parol evidence in litigation.
  3. You should know what the other party knows. If the other party to the agreement, or that party’s counsel, has retained drafts, then it’s best to retain drafts and maintain the same knowledge as the potential adversary. If the other side generated the first draft, which is typically the articulation of its opening negotiating position for the core issues, subsequent drafts are probably progressively more favorable to the nondrafting side. For example, an unfavorable provision that appeared in a draft but was later deleted indicates that the parties considered that provision and rejected it.
  4. Cover yourself with your client. Retained drafts also help when your client later questions provisions in the final document. If your client required you to make a change against your advice, the draft may show who requested the change. Conference notes written in margins and requested changes written in different colors, indicating who requested the change, also provide a later explanation for the approach taken. For this reason, you may want to retain drafts until the time for bringing a professional liability action has run.

When it comes to retaining drafts, don’t pick and choose—keep them all. Partial retention may raise an inference that the discarded drafts were harmful to the client. Departures from normal document retention practices for a particular transaction may raise the same inference. Ethical questions can also arise based on the motivation for the selective retention.

There may be reasons not to retain drafts if they won’t be protected (i.e., by attorney-client privilege or work product privilege). And it’s impossible to predict whether retained drafts will help or harm the client. But at least consider these reasons for retaining drafts before you hit the delete button or insert it in the shredder.

This advice is from CEB’s Drafting Business Contracts: Principles, Techniques and Forms. For discussion of retaining final transaction documents, see §1.29 of that same book.

Other CEBblog™ posts you may find useful:

© The Regents of the University of California, 2018. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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