Many readers of this column are business owners, and many of them have a need from time to time to hire a lawyer to draft a contract for them. These contracts might include, for example, a contract between your company and its employees or independent contractors; an asset or stock purchase agreement, a nondisclosure agreement or an LLC operating agreement.
The problem that business owners find with many of these contracts is that they are written not in plain English but rather in legalese or, worse yet, in taxese.
Even though I practice law, including tax law, I, too, like many business owners, dislike legalese and taxese. Thus, to business owners who read this column and who have to hire lawyers to draft contracts for them, I suggest they impose the following 10 requirements on lawyers whom they’re considering hiring. By the way, if, when you hire them, these lawyers start the process by sending you an “engagement letter,” this, by itself, may be a bad sign: Engagement letters are really personal service contracts. Why not call them that?
Here are the 10 rules:
1. Write every sentence in any contract for me so that I’ll understand every provision in it on a careful first reading.
2. Use legal and tax technical terms in a contract for me only if you absolutely must. And when you do use them, define them in plain English in the contract, or, if this can’t be done succinctly, explain them to me on the phone.
3. Don’t have a separate contract section for definitions, whether at the beginning of the contract or at the end. Instead, if a term in the contract needs a definition, put the definition right before or after that term.
4. To provide an appropriate formality, start each contract for me with a title page; and in the title, identify the parties and give a brief but comprehensive idea of the contract purpose.
5. Right after the title page, provide a one-level table of contents to give readers the big picture of the contract and a two-level table of contents to enable them to find provisions on specific issues that concern them. (But in a relatively short contract — say, four or five pages — just a single-level table of contents might suffice.)
6. Always list the names and addresses of all of the parties to the contract at the top of the first page; don’t bury this information at the end.
7. Start the contract with one or a few explanatory statements to provide readers with the context of the contract and thus to make it easier for them to understand. And if possible, draft these statements in a way that will favor my company if there’s ever a contract dispute.
8. Don’t start any of the above explanatory statements with the word “whereas.” Just write each statement in plain English and number it. (And while you’re at it, don’t use anywhere in the court the words “aforementioned,” “hereinafter, ” “whereof,” or any other words that only lawyers use. Only use words you’d find in a good newspaper.)
9. In the provisions of any contract you draft for me, don’t use run-on sentences. Make each sentence no more than four lines long.
10. Don’t cover multiple contract issues in the same provision. Cover each issue in a separate section or subsection.
John Cunningham is a Concord, NH lawyer of counsel to McLane Middleton, P.A. His practice is focused on LLC formations, general business and tax law, advising clients under IRC section 199A, and estate planning. His telephone number is (603) 856-7172, his e-mail address is [email protected], and the link to his website is www.llc199A.com.