SGS 7 - Drafting Flashcards
Define “Premises”a34
‘Premises’ means the [Buyer’s/Seller’s] premises located at [insert address]
What are the operative provisions?
- Terms defining the scope of the agreement (such as the duration of the agreement)
- Conditions precedent (setting out any conditions to be satisfied before the agreement comes into force
- Obligations of the parties
- Options or rights in favour of one of the parties
- Warranties and indemnities (if numerous, in a Schedule)
What are boilerplate clauses?
The general routine clauses found in most
types of commercial contracts.
Boilerplate clauses deal with the way in which the contract operates, it controls and modify the rights and obligations of the parties.
Usually found towards end of the agreement.
What does it mean when a court has exclusive jurisdiction? What about non-exclusive?
Draft an example of jurisdiction clause.
**Drafting book says this is important
Exclusive means that it is the only court competent to hear disputes on that matter.
Non-exclusive would occur in a situation where there were a number of possible courts that had jurisdiction over the dispute. It would give the English courts jurisdiction as well as other courts.
- Governing Law and Jurisdiction
- 1 This Agreement and any non-contractual obligation arising out of or in connection with it are governed by the laws of England and Wales.
- 2 The parties irrevocably submit to the exclusive [or non exclusive] jurisdiction of the courts of England and Wales in respect of any claim, dispute or difference arising out of or in connection with this Agreement and/or any non-contractual obligation arising in connection with this agreement.
What is a Force Majeure Clause? Example.
A force majeure clause is intended to suspend or terminate contractual obligations if an event occurs that is outside the parties’ control and that prevents one of the parties from performing its obligations.
If one or more of the events occurs, then the contractual performance will be suspended for a specified period. If the event is still continuing at the end of that period, then the contract will be considered to be terminated.
Neither party shall be in breach of this agreement nor liable for delay in performing, or failure to perform, any of its obligations under this agreement if such delay or failure result from events, circumstances or causes beyond its reasonable control. In such circumstances [the time for performance shall be extended by a period equivalent to the period during which performance of the obligation has been delayed or failed to be performed OR the affected party shall be entitled to a reasonable extension of the time for performing such obligations]. If the period of delay or non-performance continues for [NUMBER] [weeks OR months], the party not affected may terminate this agreement by giving [NUMBER] [days’] written notice to the affected party.
Define “Losses”
“Losses” means all losses, damages, penalties, liabilities, costs (including legal costs and experts’ and consultants’ fees), charges, expenses, actions, proceedings, claims and demands.
What is the purpose of an Entire Agreement Clause.
- Draft an example of an Entire Agreement Clause
The purpose of an entire agreement clause is to provide commercial certainty. This is done by preventing the party relying on it from being liable for any statements or representations that are not expressly set out in the agreement.
It also allows the parties to accurately assess the risk they are taking on on the basis of the warranties given by the seller by excluding any other oral or non-contractual promises.
18 Entire Agreement
- 1 This Agreement constitute the entire agreement and understanding between the Parties, and replace all previous agreements and understandings between them, relating to their subject matter.
- 2 Neither Party shall have any remedy in respect of any statement not set out in the Transaction ll
- 3 Each party acknowledges and agrees that the only remedy available to it for breach of this Agreement shall be for breach of contract under the terms of this Agreement.
- Nothing in this clause shall limit or exclude liability for fraud
What is the purpose of a severance clause?
Draft an example of a Severance Clause
It aims to ensure that if any clause is declared unenforceable or invalid , it will br capable of being ‘severed’ from the contract at the discretion of the court. The intention is that the remaining contract will remain valid and enforceable.
22 Severence
If any provision of this Agreement is held to be invalid or unenforceable, then such invalidity or unenforceability shall not affect any of the remaining provisions of this Agreement. The remaining provisions shall remain in full effect.
The Parties may then agree that should a provision be severed, it shall be substituted by an enforceable provision that achieves to the greatest possible extent the same effect as would have been achieved by the severed provision.
Draft an example of an Exclusion of Third Party Rights clause?
25 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
Save as expressly provided otherwise in this Agreement, no term of this Agreement is enforceable under the Contracts (Rights of Third Parties) Act 1999 by a person who is not a party to this Agreement.
OR (the example provided by the drafting workbook)
RIGHTS OF THIRD PARTIES (EXCLUSION)
For the purposes of the Contracts (Rights of Third Parties) Act 1999, this Agreement does not and is not intended to give any rights, or any right to enforce any of its provisions, to any person who is not a party to it .
Execution clause at the end of operative provisions in bold
This Agreement has been executed on the date stated at the beginning of this Agreement.
Check PAGE49 FOR. MORE SPECIFICS
“Company” Defintition
“Company means [NAME OF COMPANY[, a company incorporated and registered in England with company number [COMPANY NUMBER] whose registered office is at [COMPANY’S REGISTERED OFFICE ADDRESS]
What is a Notices Clause? *Drafting book says this is another important boilerplate clause
Draft an example
Notice clauses should provide for:
- where notice is to be served
- the method of service and
- the time at which the notice is deemed to be served
Most will not allow oral notice, but will require notices to be given in writing.
15 NOTICES
15.1 Any notice required to be given under this Agreement shall be in writing and in English and signed by the person giving it and may be delivered personally or sent by facsimile transmission or other electronic means or by first class post to the address set out above in respect of each of the parties.
- 2 A notice or other communication shall be deemed to be received
- 2.1 if delivered personally, at the time of delivery; or
- 2.2 if sent by facsimile transmission or other electronic means, on the date it is delivered, provided that it is sent during Business Hours on a Business Day
- 2.3. if sent by post, 48 hours after the date of posting
[Business Day and Business Hours would be defined terms].
What order should the clauses be in?
- In logical order depending on the nature of the document. This could be in chronological order or in order of importance, or a combination of the two.
What is the purpose of warranties and indemnities?
They define the parties’ legal duties and supplement or clarify any implied terms.
What is a warranty?
A binding statement of fact made by one party to another.
They may be used where one party is entering into the agreement on the basis of certain assumptions about the other. Warranties ensure that those assumptions are given contractual force.
They can also be used to define the nature of a party’s obligations. I.e. if a party is obliged to deliver certain goods, it will often give a warranty as to the quality of those goods.
What is an indemnity?
A contractual obligation where one party agrees to keep another protected from a specific loss.
The liability under an indemnity arises not because of any breach but because the parties have stipulated that one shall save another from loss in certain circumstances.
Thus, the principles of liability for breach of contract do not apply with indemnities.
Buyers may require indemnities from the seller against, for instance, damages that may arise as a result of pending litigation, fines that may be imposed by HMRC etc.
**ENSURE THAT INDEMNITIES ARE GIVEN IN FAVOUR OF THE BUYER (NOT THE TARGET
I.E. The seller shall indemnify the Buyer from and against all liabilities, cash expenses, damages and losses (including any direct, indirect or consequential losses, loss of profits and loss of reputation) suffered or incurred by the Buyer arising out of or in connection to [inset issue of scenario here].
What is an Assigment or non-assignment clause? *Says this is another important clause.
Draft an example.
These prevent one or both parties from assigning the benefit of the agreement or sub-contracting the work to a third party without the consent of the other party.
Note that subject to any provision/clause that says contrary, the benefit of a contract can otherwise be freely assigned, but the burden can never be assigned. To transfer the burden of a contract, a novation agreement (between the original parties and the new party) would be required.
- Neither party shall be entitled to assign or sub-contract this Agreement or any part of this agreement to any person.
What is a termination clause? What are some of the circumstances under which a party can terminate an agreement? Draft some examples.
Example: This Agreement may be terminated immediately by the X upon notice to the X, in the event of the X breaching their obligations under this Agreement.
INSOLVENCY/ADMINISTRATION
Either party may terminate this Agreement immediately by notice in writing if any corporate action, legal proceedings or other procedure or step is taken in relation to the appointment of a liquidator, receiver, administratot, administrative receiver or other similar officer in respect of either party or any of its assets.
BREACH OF CONTRACT
Either party may terminate this Agreement immediately by notice in writing if the other party commits a breach of this Agreement (and this breach, if capable of remedy, has not been remedied within [x] days of the non-breaching party giving the breaching party notice in writing to remedy the breach)
BREAK CLAUSE (termination on notice/agreement)
Each party may terminate this Agreement by giving to the other party not less than 90 days’ prior notice in writing.
Conditions Precedent Clause
i. e. This agreement is subject to the Buyer acquiring all the necessary licens and the parties receiving clearence from the relevant competiton authorites.
5. Conditions
5. 1 Completion is conditional on the following, these being the “Conditions”:
(a) x
(b) x
(c) x
5.2 The Seller undertakes to use all reasonable endeavours to ensure that the Conditions are fulfilled as soon as reasonably practicable and prior to the Longstop Date. The Seller shall notify the Buyer in writing within two Business Days after any Condition has been fulfilled.
Termination clauses - what to bear in mind
Some things to bear in mind when drafting termination clauses
- does the breach have to be ‘material’ to justify termination? If so, what is meant by material?
_ is the party who is terminating the agreement required to give advance notice to the other party when terminating the agreement? How is this notice period to be calculated?
- does the party wanting to terminate have to allow the other party an opportunity to remedy the breach first and if so how long a period?
- what are the consequences of termination?
- do any rights and obligations under the agreement continue (or survive) after the date of termination. If so, how long?
What is a survival clause? Draft an example
The provisions of clause x (clause heading) and x (heading) shall survive the expiry or prior termination of this agreement.
Contained in boilerplate towards end of agreement. It allows certain clauses to be binding upon the parties even after termination or expiry of the agreement.
Typic clauses in a agreement tht at the client may want to survive termination are:
5
- confidentiality - this must remain operational.
- post termination restrictive covenants (I.e. Non-compete clauses)
- indemnities; and
- governing law and jurisdiction /arbitration
What are the 6ws to consider when drafting?
- Who is to perform the obligation?
- What is the obligation to be performed?
- When is the obligation to be performed?
- Where is the obligation to be performed?
- To whom is the obligation to be performed?
- What if - what are the consequences of a failure to perform an obligation?
What are the two types of contracts?
- A contract/agreement under hand - I.e. An agreement which is not intended to take effect as a deed) and
- A deed - I. e. An agreement requiring an additional execution
COMPLETION
At Completion, the Seller shall deliver or procure to be delivered to the Buyer:
(a) a duly completed and executed transfer of the Sale Shares, executed by the Seller, in favour of the Buyer;
(b) the original certificate(s) for the Sale Shares (or a deed of indemnity
