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Business Law Today

The new classroom
Learning how to draft contracts in the real world
By Susan J. Irion
I went to the 'school of hard knocks,'" my grandfather used to say. A bit of a character, he faked his age at 16 to enlist in the U.S. Navy for World War I, then went on to a successful career in business. His work took him to the oil fields of Saudi Arabia in the 1940s, among other exotic places. While I have not traveled exactly the same road my grandfather did, I had to learn part of my trade thanks to hard knocks, too. As a business lawyer, I learned not in law school but on the job how to draft and negotiate a contract—but it shouldn't be that way.

How many new lawyers would have to admit they've written a "usual" contract term without fully understanding the implications of including it? And many more of us have crafted unreadable documents that baffle even sophisticated businesspeople. Fortunately, this sorry fact of legal life is changing. Thanks to some savvy business lawyers-turned-teachers, law students as well as young associates are now formally learning how to draft transactional agreements. The trend is catching on quickly at both law firms and law schools. This article highlights how law firms are using this training to sharpen the skills of their business lawyers, and how law schools are introducing contract-drafting concepts.

The new pedagogy starts from the premise that contracts have to make real sense in the business world. Fundamentally, the teaching addresses how to memorialize a deal so it reflects the business intent of the parties and balances their risks. Teachers such as Tina L. Stark at Fordham Law School call this "translating the business concepts into contract terms."

In my opinion, the best teachers of this new curriculum focus their students on the deal from a client's viewpoint. Many new lawyers lack the business experience to begin their law career with that perspective. In entry-level classes, students are taught first how to identify the client's business needs. The next step is articulating those aims according to the appropriate contract principle and level of risk allocation.

Teachers can convey these points initially by using easy examples for role-play based on contracts everyone knows. I have used this technique successfully with law students and new lawyers alike. I recommend simple yet realistic scenarios such as the purchase and sale of a used vehicle (originated by Stark), or a contract for a service for the home, such as landscape care and maintenance.

Under either situation, the same points emerge. The teacher should designate volunteers to act as buyer and seller, asking them to articulate the wants and needs of each party. Then the teacher must provide short, clear definitions of the essential contract terms (representations, warranties, covenants, conditions), plus examples of standard phrasing, such as, "Seller represents and warrants . . . ."

It is an easy next step for a teacher to elicit an example of a party's need and to guide the student to translate that business need into a contract term. For instance, under the used-vehicle-sale example, the buyer wants the vehicle to be in good condition on the date the contract is signed. The solution: "Seller represents and warrants the vehicle is in good operating condition." The buyer also wants the vehicle in the same condition on the date title is provided.

The seller, though, will not want responsibility for minor, normal deterioration that may occur prior to closing. This covenant provides the solution: "Seller shall maintain the vehicle in good operating condition, reasonable wear and tear excepted."

Last, it is imperative for the teacher to discuss the remedies that result from the exercise of different provisions. The student must reflect whether the client needs rescission, damages or repair, and must be sure that a term is drafted to yield that remedy.

By the end of this example, all participants can see how a contract takes shape. The students learn the definitions of representations, warranties, covenants and conditions and can express the parties' objectives using each of those terms. In doing so, they create a whole package of interrelated rights, obligations and relief provisions that strike the right balance for the parties.

Another critical teaching point concerns how to craft what a party would warrant or promise without risking too much downside. An example based on an asset purchase agreement works well with junior lawyers. The teacher advises them that the buyer will want assurance that the corporation has no hidden liabilities. The seller, of course, does not want the deal to fall apart in the event the seller had not known about the existence of a potential claim.

The students become aware of these objectives and learn to balance each party's degree of risk through the use of qualifying language, such as, "Except as set forth in Schedule XYZ, there is no litigation pending or, to the knowledge of the seller's officers and executives, threatened against the seller."

Subsequent classes build on the same methodology. With good grounding in how to articulate business needs into the appropriate contract terms, students can progress by applying those concepts in increasingly complex situations.

Students may start by drafting a simple one-page contract based on the oral scenario enacted in the classroom. The next exercise might require students to identify the standard contract terms (such as a covenant) in a lengthier but pre-prepared contract. Next, the students should focus on drafting specific provisions and, finally, on preparing an entire contract based on a more robust fact pattern.

At DLA Piper US, LLP, we train our new transactional associates in this way, with great results. We hold "boot camp" for associates who had just passed the bar and joined the firm's transactional practice groups. The session includes a three-hour workshop on "Basics of Contract Drafting."

The benefits of the last workshop, in fall 2005, were evident immediately. "I feel like I better understand the process by which you translate a client's needs into the language of contracts," reported one associate. "The workshop helped me to understand how to read and write each provision within the context of the entire agreement. I can begin to understand how to use the various provisions of a contract to protect the particular needs of the client." Explained another new lawyer in evaluating the course: "Not only do I feel better equipped with the language needed to write a contract, but I also feel more comfortable in reading contracts because I understand the significance of the terms."

To be sure, the associates received training on the nuances of drafting as well. The class offered basic tips about how to avoid ambiguity and vagueness. The teaching literature offers many good exercises to demonstrate drafting precision and test the students' understanding. I highly recommend the books by Thomas Haggard in this regard.

In my teaching, I also always emphasize two drafting techniques that maximize contract clarity: enumeration and tabulation. Too few older contracts exhibited those features, to the detriment of confused readers sorting through pages of unbroken type. In conjunction with the reduction in the use of legalese, such as, "hereinafter," no other new drafting conventions have done more to bring contracts into a more reader-friendly 21st century.

After junior lawyers have received the foundational training described above, firms can bring their associates to the next level. In this training, the firm should focus on advanced application of the basic skills.

During the summer of 2006, DLA Piper offered a six-hour advanced contract drafting workshop to mid-level transactional associates. The trainer, Charles M. Fox, a former corporate partner at the New York office of Skadden, Arps, Slate, Meagher & Flom, LLP, based his session in part on his excellent book, Working With Contracts: What Law School Doesn't Teach You (PLI 2002). Topics included the business implication of materiality clauses in complex commercial transactions, and drafting formulas to describe complex calculations.

Of course, law firms would prefer that incoming associates already have some grasp of the ins and outs of contract drafting. Law school training in real-world drafting would clearly fill a vacuum in preparing new associates for business practice. Among the new associates participating in DLA Piper's contract drafting class last fall, virtually none had received education in law school about contract drafting.

Said one participant: "This was the first time I had a lecture on contracts that went beyond the theory, that is, offer and acceptance, and discussed the mechanics of writing contracts and incorporating these aspects of the bargain into the contract." Earlier training during law school would help more lawyers circumvent some of the "hard knocks" on-the-job education.

Law schools may have been a bit slow to add transactional drafting to their curricula. But fortunately, in the years since Fox published his guide, law professors have begun to prove that the title What Law School Doesn't Teach You may become obsolete. Deans now realize that the legal community needs future business lawyers to enter the field with some level of preparedness. Many law schools have developed classes to bridge the gap between academic and practical training in the business world. Without doubt, more business lawyers launch their careers with more than theoretical know-how.

The new trend in law schools toward teaching drafting was abundantly clear last summer, when the Northwestern University School of Law hosted the first national conference on the subject. Well, it wasn't exactly the first: In 1951, another school had sponsored a similar program. But needless to say, some networking on this new trend was long overdue. "Teaching Contract Drafting" took place on July 20-21, 2005, and drew more than 100 professors from law schools coast to coast. Two participants even journeyed from a law school and firm in England.

In my former position as clinical assistant professor at Northwestern Law, I organized the conference along with Tina Stark and Richard Neumann, professor of law at Hofstra University. The conference represented a significant link between academia and the practicing legal community. People from nearly a dozen major law firms took part as attendees, sponsors and speakers. Keynote speakers addressed the point that law firms need law schools to educate future business lawyers about transactional drafting, and law school presenters shared their curricula and teaching experiences.

Northwestern Law's curriculum is one example of a typical model. At Northwestern, in 2005 I developed and taught the entry-level class, Basics of Contract Drafting, which became the prerequisite for a series of advanced classes. The school offers a selection of classes each year on "Structuring Transactions" in various areas of law, such as, mergers and acquisitions, intellectual property, real estate, finance transactions, and more. Those classes teach substantive law and apply it through sophisticated drafting assignments.

The pedagogy of contract drafting is taking root. The availability of texts, trainers, and classes has expanded greatly compared to a mere five years ago. Perhaps within another five years, law schools will supplant law firms in getting new business lawyers up to speed on drafting skills. A legal career involves plenty of hard knocks; hopefully the process of learning to draft contracts will not be in that category too much longer.

A bibliography on contract drafting

How-to books on contract drafting

  • Kenneth A. Adams, A Manual of Style for Contract Drafting (ABA 2004).
  • Scott J. Burnham, Drafting and Analyzing Contracts (3d ed., Matthew Bender & Co. 2003).
  • Howard Darmstadter, Hereof, Thereof, and Everywhereof: A Contrarian Guide to Legal Drafting (ABA 2002).
  • Reed Dickerson, Materials on Contract Drafting (West 1981).
  • Charles M. Fox, Working with Contracts: What Law School Doesn't Teach You (PLI 2002)
  • Thomas R. Haggard, Contract Law from a Drafting Perspective — An Introduction to Contract Drafting for Law Students (West Group 2003)
  • Thomas R. Haggard, Legal Drafting: In a Nutshell (2d ed., West Group 2003)
  • Thomas R. Haggard, Legal Drafting: Process, Techniques, and Exercises (West Group 2003)
  • George W. Kuney, The Elements of Contract Drafting: With Questions and Clauses for Consideration (West Group 2003)
  • Tina L. Stark, ed., Negotiating and Drafting Contract Boilerplate (ALM Pub. 2003)
Books on writing style

  • Bryan A. Garner, The Redbook: A Manual on Legal Style (West Group 2002)
  • Bryan A. Garner, Legal Writing in Plain English (University of Chicago Press 2001)
  • Richard C. Wydick, Plain English for Lawyers (4th ed., Carolina Academic Press 1998)

— Susan J. Irion (Not intended to be comprehensive.)
Irion is director of professional development at DLA Piper, in Chicago. Her e-mail is susan.irion@dlapiper.com.

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