I donāt think Iāve ever met a lawyer who drafts contracts from scratch. In modern legal teams, we use precedents as a starting point for our amendments whenever we introduce anyone to the world of contracts. If youāre a newer contracts lawyer or contracts professional, hereās a guide on how to use precedents effectively and avoid common mistakes.
Where you can get precedents
There are three general places we can get precedents from:
- Ā Your law firm or business might have standard contract documents setting out acceptable risk profiles (with blanks for us to fill in).
- Ā We can use documents prepared for previous matters with similar circumstances / parties / risk profiles.
- Ā We could use precedents prepared by other organisations (e.g. Practical Law by Thomson Reuters).
What to do before you start using the precedent
Before diving into the actual document, there are a few things weāll need to understand from our client / supervising lawyer because theyāll impact how we amend the precedent:
- The project / matter ā Our job is to make sure the words on the page reflect whatās happening in real life. For example, itās common for construction contracts to require insurance for the things being built. But if the project is for demolition, then that insurance requirement from the precedent construction contract should be deleted.
- The client ā Who the client is, and where they sit in the overall contracting chain, will have a big impact on which precedent to use and how itās amended. For example, a favorable risk profile for a contractor is unfavorable for a principal.
- What is the purpose of the document ā A draft contract for internal discussion could be primarily based on the precedent risk profile with some questions for the client. Whereas a draft contract to reflect agreed commercial terms between parties would require significantly more amendment.
- How should the document be presented ā Generally, changes you make to a precedent should be saved as a new document with all amendments marked up (in Word, you can find this function in the āReviewā tab). You could also issue a ācleanā copy (with all amendments accepted).
Amending the precedent
Once we have an understanding of those things, we can start working with the precedent. I think thereās two types of amendments:
- the āmechanicalā style amendments to the precedent that junior lawyers are able to make from day 1; and
- Ā the āthinkingā style amendments that junior lawyers should consider, but with the understanding that itāll take experience to really get these right.
Checklist of āmechanicalā amendments
When going through the precedent, here are the things you should look out for (and either amend or, if you donāt have the information yet, replace with ā[insert]ās):
- Party names
- Project / matter name and details
- Dates
- Addresses / emails (e.g., in notice provisions)
- Terminology (e.g., āContractorā -> āSubcontractor / āSupplierā)
- Jurisdiction (e.g., if governed by the laws of a different State)
- Legislation / Policies (some of these may be outdated)
- Execution blocks
- Automatic cross-references (some of these may not work properly when you amend the document)
Getting familiar with the āthinkingā amendments
These are the amendments that clients actually pay us for. Itāll take time to master how to address each of these but itās never too early to start thinking about as a junior lawyer (and can be a really good starting point for feedback from your supervisor):
- Applicability of the precedent to the client / project / matter;
- Appropriateness of the risk profile (e.g., whether it reflects market positions or a more favorable position for your client to start negotiations with);
- History of the document (e.g., if this precedent is from a past project, whether there were negotiated positions that may not be appropriate anymore);
- How has the precedent worked in practice (e.g., are there mechanisms that have resulted in disputes, or issues with the payment / notice provisions?);
- Flow-on effects of amendments (making amendments to one clause could have flow-on effects to other parts of the contract that will need to be considered).
Tips and tricks
Now that weāve gone through how to use precedents to deliver what the client / our supervisors want, here are a few tips and suggestions to help you avoid some of the common mistakes that Iāve personally made:
- Donāt trust āreplace allā ā It can be tempting to use the āreplace allā function in Word to universally change words like āContractā to āDeedā but thereās a chance that something will be replaced incorrectly. I suggest using the āreplaceā function one-by-one to avoid nonsense mistakes like āDeedorā.
- Replicate formatting ā If youāre amending a clause and would like to use the formatting from another part of the document, use the āFormat Painterā function in the āHomeā tab of Word.
- āNot usedā ā If youāre deleting parts of a document with automatic numbering, you can replace the deleted wording with ānot usedā so the numbering / table of contents still works (although this will depend on how the document is meant to be used).
- Ā Unformatted paste ā If youāre copying wording from other documents with different formatting, you can paste that wording without bringing over that different formatting (right click and choose the āpaste optionā that looks like this:
- Checking cross-referencing ā Broken cross-references will show up as āError! Reference not found.ā To check these, I refresh the automatic cross references and do a word search for āError!ā.
- Mirror wording ā If youāre drafting new wording into the precedent, take a look through the existing provisions in the precedent and use the same terminology / style (e.g. for indemnities).
Have you got any other tips youāve picked up working with precedents? Iād love to hear them!
One Response
Thanks so much for talking about how important it is to understand what the project is and what was agreed to on the contract so you can make sure they match. My uncle is building a large shed in his backyard and recently got some grief for it. So we’ve been looking into hiring a construction lawyer to help him and the city understand what was a greed to on the contract.