Those traps don't change — they’re the ones lawyers have fallen into since the beginning of time.
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The devil may be in the details, but there are nefarious aspects in the big picture as well — especially when you’re talking about drafting commercial contracts.
“In that portion of the book devoted to the structure of a contract, I provide an analysis of the five sections of any contract with general comments on each section explaining where the traps are,” says Barry Lipson, a practising lawyer for just shy of 60 years. “Those traps don’t change — they are the same traps lawyers keep falling into.”
Lipson is widely published in both corporate and real estate-related subjects, and through his work, seeks to address the high-level issues that arise when lawyers draw commercial contracts. His book The Art of Drafting the Commercial Contract was recently added to the new Corporate Commercial Collection on WestlawNext Canada. Although Lipson joins a stable of experienced authors offering their expertise in this area, his work stands apart because of its big picture approach to contracts rather than the individual aspects of the law.
“In my book, I’ve divided every contract into five sections that comprise the structure of any contract. Each section highlights the problems that are commonly created by the failure to draft properly,” he says, adding that its bare-bones purpose is to give lawyers “a heads up on where you can often go wrong.”
Lipson wrote a book on the matter because in an unofficial way he already had created one. As a barrister at the beginning of his career, Lipson says he became a student of contract cases. Whenever he read a reported case, “invariably there would be a flaw in the drafting of the contract that gave rise to the issue that was being litigated."
Lipson began to record what the failing was in each reported contract case, and before he knew it he had a notebook filled with recommendations on how to avoid ambiguous provisions and vagueness, or how to recognize an error in your own drafting. He evolved from a practitioner to a teacher, he says, because the purpose of his book is to guide the draftsman away from poor drafting habits that later result in litigation.
One of the common issues Lipson has identified is “the failure between a lawyer and his client to understand the contract the client expects the lawyer to draft” — or in other words, miscommunication.
“The extent to which a client does not get the bargain he thought he had made is the extent to which the draftsman of the contract has failed to either clearly express the bargain his client made or has failed to anticipate and address those issues that were foreseeable,” Lipson says.
A corporate commercial transaction is based upon the bargain the client thinks he made — he offers a price predicated upon his understanding of the bargain. If the lawyer drafting that contract on behalf of the acquiring company doesn't understand the bargain as well as their client does, the lawyer will "fail to emphasize those areas in the contract that are highly sensitive to the result and that form the basis for the figure the client agreed to pay..”
This failure of communication has two basis, Lipson notes. The first: the lawyer doesn’t know how the purchase price was arrived at and/or doesn't understand the considerations that were paramount in the client's mind when he made the bargain. The second: the lawyer didn't emphasize the considerations that were the foundation of the deal that was made, an issue that often arises because the lawyer wasn’t privy to all of the negotiation that went on. To overcome that, Lipson recommends lawyers sit in on the negotiation with their client or at least have the client explain the financial aspects of the deal that gave rise to the purchase price the lawyer is instructed to insert into the contract.
“That's something very general — I'm dealing with a generic product called the contract, its terms and the proper use of those terms are important,” Lipson says of his book, which highlights these common traps.
Since retiring, Lipson has retrained himself to create short stories, which he calls “a total departure from writing a legal contract.” Short stories require a subtext that leaves questions in the mind of the reader, so they become curious as to how it will end — whereas the text of a contract should be clear and precise in its language, leaving no doubt about the intentions of the parties and offering “absolute clarity as to what the ending will be.”
Despite the differences between the two, when a lawyer has been instructed by a client to draft a contract “he is undertaking a form of creative writing,” Lipson says.
