Acting for a client in a commercial matter is one of the highest privileges a lawyer can be given. It allows you to fully engage with your client’s vision and make the deal a reality. You can add your commercial acumen to your reservoir of legal and academic knowledge and your experiences generally to create a milestone in your client’s commercial walk.
Moreover lawyers are wordsmiths and experts on language, its meaning, consequences and manipulation to achieve the best commercial outcome for their clients.
Lawyers are the Michelangelo of their craft and the lofty endeavour of drafting is like fashioning your very own slab of Tuscan marble going from your precedent bank (the Carrara quarry at Pisa) to finalisation of the masterpiece/ the deal when all parties sign (the pinnacle of the Duomo in Florence).
How do you go about fashioning your masterpiece when you are asked by a client to document a particular deal he or she is involved with?
One thing is for sure, it will not just ‘appear’ once a few variables are inserted into a document from the precedent bank just as Michelangelo’s ‘David’ did not materialize at the ‘quarry’ in Pisa.
You may find a lump of marble that generally suits the type of deal you and your client are working on but you need more to do your job as a Michelangelo for your client.
You need to see his vision understand his commercial drivers’ goals and constraints ofrisk and capacity. You must enter his or her world, challenge his assumptions ask questions be his counsellor his ‘consigliere’(as Robert Duvall portraying the lawyer Tom Hagen to “his clients” the Godfather.
You bring to the table not just a template Share Purchase Agreement (SPA) a licence or a shareholders’ agreement (SHA) and the technical skill to fill out the variables but you bring something much more valuable, you bring your whole life experience and ability to deliver wisdom to your client in the way she approaches the deal as much as the way in which the document is crafted.
Sir Walter Scott a novelist and lawyer two centuries ago said:
a lawyer without history or literature is a mechanic, a mere working mason; if he possess knowledge of these, he may call himself an architect”
You, your client, your client’s commercial counter-party and their lawyer will more than likely only ever read the contract drafts. They may not even read (or none too carefully) the actual final document they are signing. Everyone in a properly negotiate and draft agreement will know the clauses inside out having weighed each clause against the legal risks and commercial outcomes as they have been advised by their lawyers and will fully trust the lawyers and “sign on the dotted line”.
The ‘tussle of the drafts’ is the chiseling away at the marble
Any client who does not go through that process but signs an off-the-shelf precedent his lawyer has prepared, is ‘penny wise and pound foolish’. Moreover, his lawyer is probably dilatory in his duty to his client, as would the lawyer on the other side be, for not having gone through the process of properly considering the wording of the agreement in the context of a balancing investment and legal risk by going through the exchange of marked up amendments;indispensable for any good and sustainable deal.
Once signed the contract or licence will forever be consigned to the darkness of the filing cabinet until, heaven forbid, a dispute put to in the parties arises and so exposes the fruit of a lawyer’s labour to the light of day.
So the drafting process including the ‘ebb and flow’ of emailed mark ups is an invaluable opportunity for a client and his commercial counter-party to know and understand their rights obligations and the law of contract that applies to their dealings. In the ‘tussle of the drafts’, the parties can test the limits of how far they can push risk to the other side without breaking the deal or mitigating the risks. It is much better to have a heated exchange over the drafts than it is to endure litigation of a poorly considered executed contract.
A contract properly negotiated and drafted and redrafted by lawyers on both sides will not only flush out the hidden agendas, differences and potential problems the deal may have during the course of commercial dealings between the parties but it will also stand the test of time. A few thousand spent here will save tens of thousands later.
One ‘pass’ over the document will never be enough in my opinion for a client to get a sustainable contract.
If you have not gone through at least three version; that is to say an original version one presented by one party then marked up with amendments by the other party then with a revision by a second set of marked- up amendments by the first party, the document will be poorer for the lack of effort by the lawyers and clients concerned.
My strong recommendation is that lawyers properly consider the costs of the ‘tussle of the drafts/amendment process and disclose that to their client up front in the client agreement. **
Over the years firms would have produced top quality ‘slabs of marble’ in the firm’s precedent banks from which to choose when lawyers are next instructed on a commercial matter. I have been a practitioner now for over 25 years and I can tell you the quality of drafting in the precedent banks around Brisbane, Sydney and London that I have seen in the last 10 years far surpasses what the profession used to subject clients to in the decades before the turn of the century. I again draw upon His Honour Justice Wilson’s comments about our poor legal drafting was in the ‘good old days’ when he said: If asked to draft something such as a phrase “help yourself to an orange”. Lawyers would produce some people like this:
“I give you all and singular my estate and interest, right, title claim and advantage of and in this orange with all its rind, skin, juice, pulp and pips and all right and advantage therein, with full power to bite, cut, suck and otherwise eat the same or give the same away as fully and effectually as I am now entitled to bite, suck, cut or otherwise eat the said orange or give the same away with or without its rind, skin, juice, pulp and pips, anything herein before or hereinafter or any other deed or deeds, instrument or instruments of whatsoever nature or kind to the contrary in anyways notwithstanding”
That nonsense simply does not happen anymore thankfully. And it is not the turgid use of language that causes drafts and redrafts to go back and forth rather the chiselling away that each ‘Michelangelo’ is trying to achieve in getting the document just perfect. Very often it can be achieved within six versions.
Most precedents leased as I have had the pleasure of seeing and working with have always been in Plain English these days and set out the terms with headings, paragraphs and very logically laid out sub paragraphs. I personally start working on my ‘slab of marble’ with the definitions after thinking about the deal and how I can encapsulate in the definitions some of the commercial dynamics of the deal so that the rest of the document flows much more smoothly without the need for a repetition and volume.
How many people can predict the future?
“I think there is a world market for maybe five computers.” — Thomas Watson, chairman of IBM, 1943”
Charlie Chaplin predicted that “film was a fad that would soon be replaced by stage once the novelty wore off”.
We don’t like their sound, and guitar music is on the way out.—Decca Recording Co. rejecting the Beatles, 1962
“No one will pay good money to get from Berlin to Potsdam in one hour when he can ride his horse there in one day for free.”—King William I of Prussia, 1864, in reaction to the invention of trains.
Even Albert Einstein, one of the greatest minds of our epoch said in 1932 that“nuclear power was unobtainable as it would require the splitting of the atom”
Obviously from such examples it is clear that predictions about the future are notoriously hard, yet lawyers are expected to future cast all the time. In fact we do it well because we are a profession that listens to our clients and bring to the table our broad education and life experience and not just technical skill.
Lawyers assist the client plan for contingencies in their documents.
Lawyers are constantly involved in‘progressive visioning’ where we anticipate the potholes up ahead and plan for those contingencies in the contract.
Lawyers are kind of like ‘precogs’(designed to stop misdeeds before they happen, from the movie withTom Cruise, Minority Report). We bring to the table our collective experiences (built into our precedents by generations of lawyers learning from each other’s clauses) and our own experience to ‘future cast’ the potential risks for the relationship between the parties and draft accordingly.
However as the lawyer on the other side is doing exactly the same thing, inevitably this leads to variations and marked up amendments. Both lawyers are chiseling away at the marble as the masterpiece is really a joint effort.
Risks are all around and lawyers have seen it all and are expected to see and advise their client.
If some lawyers could, I guess they would be tempted to allocate all the risk to the other counter-party and zero to their client.
Good lawyers however know, that’s not the way the business world works and that their client’s best interests are served by a sustainable and workable contract.They know when to ‘back off’ and think commercially understanding more about the investment risk the parties are trying to maximize by committing their capital and energy to the deal before them.
Good corporate and commercial lawyers temper their predisposition to insert into contracts clauses shifting risk to the other party to keep their client safe from future shock by understanding that the viability of a deal contains a balance between the risks of all the parties. Often the very process of negotiating the terms of a contract will ensure that balance is achieved.
The negotiation and redrafting process does not come cheap, if done properly. One can imagine Michelangelo being told by the pope or other patron that they expected him to produce his masterpiece in a short period of time and for a limited budget. You can imagine that Michelangelo would have resisted such simplification (if not insult) inherent in such a request. Lawyers should do the same.
Your slab of marble will be good if you ‘follow the grain’ when chipping away with your amendments. The natural flow of the negotiations will depend much on your skill as negotiator not only negotiating with law on the other side but also with your own client. Your client will tend to be bullish and resist and take personally every change from the other side. It is the task of the lawyer to moderate the emotional impact of the amendments by explaining to a client the rationale for the amendments and how they are to be dealt with.
Indeed, I will often receive the amendments first look at the mark ups create my own response and next version as a draft and send it to my client and then have a long teleconference with him about the original amendments and my amendments to those amendments so the client is already placated and keeping within ‘the grain’ of the negotiation so that it does not go off the rails.
Many ‘painful’ edits and negotiations bring forth the masterpiece.
The drafting is as much about crafting negotiated outcomes as it is technical prowess.
You have to be a statesman diplomat as well as an artist to get your masterpiece into the final form.
You have to know when to stand your ground and when you need to yield, compromise and seek alternative options.
Michelangelo had to negotiate with the pope and other patrons had his squabbles with them, resolved them moved on to make his masterpieces which endure. Lawyers today also create masterpieces of drafting by negotiating and in like manner their ‘art’ will stand the test of time.
From a paper presented at 3rd Annual Legalwise Contracts Conference
* taken from His Honour Justice Alan Wilson’s speech in the Banco Court, Supreme Court of Queensland, Brisbane on 12 March 2015
** See Legal Profession Act 2007 generally Part 3.4 (Division 3 including section 308 (1) c) estimate in timely disclosure (section 310 at commencement or as soon as practicable thereafter) and continuous disclosure for changes in estimates and circumstances section 315). Failure to comply with Division 3 is capable of constituting unsatisfactory professional conduct or professional misconduct as per section 316 (7) and may also result in client not having to pay a bill unless costs assessed under Division 7 as per section 316 (1)
*** Also taken from His Honour Justice Alan Wilson’s speech in the Banco Court on 12 March 2015
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