Writing properly florid legal text takes years of practice. No-one enjoys reading it: not even the curmudgeon who has taken the trouble to write it. Construing a contract should not be a bodily pleasure but an act of ascetic sufferance, the reward for which comes in the hereafter*. Lawyers do this so you don’t have to.
Here’s how to do it. First, take a simple proposition. The simpler the better. For example:
Unless we hear from you before the end of the week, we’ll assume you are happy with the term sheet.
Imagine you are a lawyer. Your client asks you to ‘have a quick look at this to make sure it is ok’. This is your chance.
Your first job is to depersonalise it. Law is formal, not colloquial. Do not countenance a familiar ‘we’ or ‘you’: this is a commercial contract, not a family reunion. Parties should address each other as if they were unacquainted:
Unless the vendor hears from the purchaser before the end of the week, the purchaser will assume the vendor is happy with the termsheet.
But why have easy-to-follow active tenses, when you can elongate with denser constructions? The passive tense is your friend (if you are a lawyer, you have to take your friends wherever you can find them):
Unless the vendor is advised by the purchaser before the end of the week, the vendor will be assumed by the purchaser to be happy with the termsheet.
This all still seems a little loosey-goosey. Lawyers have no truck with loose geese. It is time to start layering on detail. Do this painstakingly, in stages.
First, be infinitely clear about times, dates and deadlines:
Unless the vendor is advised by the purchaser on or before the close of business in London on Friday 22 March 2016, the vendor will be assumed by the purchaser to be happy with the termsheet.
I said infinitely clear. Don’t forget contingencies: what, for example, if Friday 22 March 2016 is not a working day**?
Unless the vendor is advised by the purchaser on or before the close of business in London on Friday 22 March 2016 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London), the vendor will be assumed by the purchaser to be happy with the termsheet.
Infinitely clear, I said: What if the following business day falls in the following calendar month? There might be some adverse tax consequences. You might have to book revenue in a different quarter. Who knows? Better be safe than sorry. You can’t rule out a week and a half of public holidays being spontaneously declared, or a war suddenly breaking out. And you can be sure, if war should break out between now and the end of the week, the very first thing your client will do is sue you for mucking up the tax-efficiency of its forward cashflows by forgetting to provide for it. So be careful:
Unless the vendor is advised by the purchaser on or before the close of business in London on Friday 22 March 2013 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London, provided that if such immediately following Business Day would not fall in the calendar month of March, such date will be deemed to be the business day in London immediately prior to Friday 22 March), the vendor will be assumed by the purchaser to be happy with the termsheet.
As we inspect the detail, note that some of this original language is a bit sloppy. What do we mean by ‘happy’? (This is a whole, other, existential question). And what if our napkin contradicts the legal contracts we’re going to draw up?
Unless the vendor is advised by the purchaser on or before the close of business in London on Friday 22 March 2016 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London, provided that if such immediately following Business Day would not fall in the calendar month of March, such date will be deemed to be the business day in London immediately prior to Friday 22 March), the vendor will be assumed by the purchaser to have consented to the material economic terms of the transaction, as set out in the term sheet which is attached to this letter as an annex, such consent always to be subject to the legally binding terms of the transaction as shall be agreed between the parties on or before the closing date.
It still isn’t clear who we’re talking about. Just in case anyone is in any doubt, can we say? With infinite certainty?
Unless Joe Bloggs (such person, together with its successors and assigns, the “Vendor”, which expression will, unless the context requires otherwise, include reference to such person’s directors and employees (“Personnel”) but will exclude reference to consolidated and non-consolidated affiliates of such person, howsoever described (“Affiliates”)) is advised by John Doe (such person, together with its successors and assigns, the “Purchaser”, which expression will, unless the context requires otherwise, include reference to such person’s Personnel but will exclude reference to such person’s Affiliates) on or before the close of business in London on Friday 22 March 2016 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London, provided that if such immediately following Business Day would not fall in the calendar month of March, such date will be deemed to be the business day in London immediately prior to Friday 22 March), the Vendor will be assumed by the Purchaser to have consented to the material economic terms of the transaction, as set out in the term sheet which is attached to this letter as an annex, such consent always to be subject to the legally binding terms of the final transaction documents as shall be agreed between the parties on or before the closing date.
But hold on: what if my client agrees to change the deal in the mean time? Or events overtake us?
Subject to any subsequent mutually agreed amendment to the terms hereof between the parties, such amendments if made orally to be subsequently confirmed by the parties in writing within a reasonable period of time (provided that any failure to confirm such oral amendment shall not operate to vitiate such amendment) or any other written agreement between the parties, whether or not expressed as an amendment hereto, which is intended to modify the terms of this agreement, unless Joe Bloggs (such person, together with its successors and assigns, the “Vendor”, which expression will, unless the context requires otherwise, include reference to such person’s directors and employees (“Personnel”) but will exclude reference to consolidated and non-consolidated affiliates of such person, howsoever described (“Affiliates”)) is advised by John Doe (such person, together with its successors and assigns, the “Purchaser”, which expression will, unless the context requires otherwise, include reference to such person’s Personnel but will exclude reference to such person’s Affiliates) on or before the close of business in London on Friday 22 March 2016 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London, provided that if such immediately following Business Day would not fall in the calendar month of March, such date will be deemed to be the business day in London immediately prior to Friday 22 March), the Vendor will be assumed by the Purchaser to have consented to the material economic terms of the transaction, as set out in the term sheet which is attached to this letter as an annex, such consent always to be subject to the legally binding terms of the final transaction documents as shall be agreed between the parties on or before the closing date.
The problem is, now, that this is starting to look like a pretty onerous sort of obligation, so we need to be extra careful to protect your client’s interest. How do you know that you won’t be held to a technical provision with malicious intent?
Subject to any subsequent mutually agreed amendment to the terms hereof between the parties, such amendments if made orally to be subsequently confirmed by the parties in writing within a reasonable period of time (the reasonableness of such period as determined by the parties acting in good faith and in a commercially reasonable manner and provided that any reasonable failure to confirm such oral amendment shall not operate to vitiate such amendment) or any other written agreement between the parties, whether or not expressed as an amendment hereto, which is intended to modify the terms of this agreement, unless Joe Bloggs (such person, together with its successors and assigns, the “Vendor”, which expression will, unless the context requires otherwise, include reference to such person’s directors and employees (“Personnel”) but will exclude reference to consolidated and non-consolidated affiliates of such person, howsoever described (“Affiliates”)) is advised by John Doe (such person, together with its successors and assigns, the “Purchaser”, which expression will, unless the context requires otherwise, include reference to such person’s Personnel but will exclude reference to such person’s Affiliates) on or before the close of business in London on Friday 22 March 2016 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London, provided that if such immediately following Business Day would not fall in the calendar month of March, such date will be deemed to be the business day in London immediately prior to Friday 22 March), such Purchaser acting in good faith and in a commercially reasonable manner, the Vendor will be assumed by the Purchaser to have consented to the material economic terms of the transaction, as set out in the term sheet which is attached to this letter as an annex, such consent always to be subject to the legally binding terms of the final transaction documents as shall be agreed between the parties on or before the closing date.
Good faith. I like that. But wait a minute: if in acting in good faith that doesn’t mean my client is somehow responsible to its counterpart as some sort of fiduciary does it? Best be sure by using the great smart bomb in the lawyer’s armoury. For The Avoidance Of Doubt. No five words in the legal lexicon are more apt to create doubt where none before existed:
Subject to any subsequent mutually agreed amendment to the terms hereof between the parties, such amendments if made orally to be subsequently confirmed by the parties in writing within a reasonable period of time (the reasonableness of such period as determined by the parties acting in good faith and in a commercially reasonable manner provided that any reasonable failure to confirm such oral amendment shall not operate to vitiate such amendment) or any other written agreement between the parties, whether or not expressed as an amendment hereto, which is intended to modify the terms of this agreement, Unless Joe Bloggs (such person, together with its successors and assigns, the “Vendor”, which expression will, unless the context requires otherwise, include reference to such person’s directors and employees (“Personnel”) but will exclude reference to consolidated and non-consolidated affiliates of such person, howsoever described (“Affiliates”)) is advised by John Doe (such person, together with its successors and assigns, the “Purchaser”, which expression will, unless the context requires otherwise, include reference to such person’s Personnel but will exclude reference to such person’s Affiliates) on or before the close of business in London on Friday 22 March 2016 (or, if such date is not a business day in London, the close of business on the immediately following day that is a business day in London, provided that if such immediately following Business Day would not fall in the calendar month of March, such date will be deemed to be the business day in London immediately prior to Friday 22 March), such Purchaser acting in good faith and in a commercially reasonable manner, the Vendor will be assumed by the Purchaser to have consented to the material economic terms of the transaction, as set out in the term sheet which is attached to this letter as an annex, such consent always to be subject to the legally binding terms of the final transaction documents as shall be agreed between the parties on or before the closing date. For the avoidance of doubt, the parties enter this Agreement as arms’ length contractual counterparties, at what they consider to be market prices, for valuable consideration and without notice of any interests to the contrary and nothing in this Agreement will constitute or be construed as, or be deemed to constitute or be construed as, a joint venture or partnership between the Vendor and the Purchaser. Neither the Purchaser nor the Vendor shall assume or be deemed to assume any fiduciary responsibilities or other analogous obligations of a trust or agency nature, and each parties hereby acknowledges that it has obtained such legal advice as it as considered necessary or appropriate to assess the suitability and/or appropriateness of entering into this transaction and expressly disclaims any reliance on the other, or any responsibility for advising the other, as to any risks, economic, legal, regulatory, reputational or otherwise, which may arise (whether or not such risks to arise) as a result of the contemplation of the transaction contemplated herein.
And so our 19 word napkin scribble has evolved into a 500 word behemoth. And we haven’t yet started inserting indemnities, let alone a governing law clause. It requires no particular acumen, but just sheer bloody-mindedness, to carry on, as we lawyers like to say, ad infinitum.
Ad nauseam, even.
*i.e., when the bill becomes due.
** Or, indeed, not a Friday.
Olly Buxton (pictured) is an in-house lawyer based at a City investment bank. His blog posts can be found on LinkedIn here. Follow Olly on Twitter here.
