Importance of a Well Drafted Contract

Differences between Anglo-Saxon and Roman legal systems

Unlike Roman law, English law is not codified (there are no set rules written in a book regulating the contractual provisions between the parties) thus it is crucial that English contracts must cover every aspect of the agreement, with consideration to parties’ obligations and assessment of risks in the form of well drafted clauses.

For optimum protection, although oral contracts are legally binding in English law, it is recommended that it is followed by a written contract, containing carefully drafted clauses.

Although there is no requirement that contracts should be in writing, a written contract is like an insurance policy, as it is a form of protection for when and if something goes wrong. Written clauses provide certainty and will protect a party by making their position stronger as each parties’ obligations are clearly expressed and defined, as well as embedding consequences in events of breach, this ensures that each party acts with good faith as well as avoiding complicated disputes, or there is a mechanism to enforce each party’s obligations.

Not having a written contract has proven to be an expensive mistake for businesses, when proceedings are issued in Court it is often difficult to prove the terms of the agreement therefore difficult to prove a breach, as you need evidence from notes (if any) and witnesses to demonstrate a binding agreement had been reached in the first place.

Boilerplates in contracts

Boilerplate clauses deal with the mechanics of how the contract works. Although boiler plate clauses may be considered secondary to other clauses often being buried at the end of the contract, they should not be disregarded. It is not unusual for these clauses to be a cause of litigation since they often deal with issues concerning the interpretation, validity and enforcement of the contract as well as having impact on other clauses and the contract as a whole. Therefore, it is important these types of clauses are well drafted, so any such impact is intentional and not as a result of the inclusion of a clause with little thought.

It is key when reviewing a contract to carefully consider each boilerplate clause that has been included to ensure its inclusion is appropriate in the scope and context of the agreement, and to understand what the position of the parties would be if it were not included.

A key example of the importance of boiler plate clauses is the use of Force Majeure clauses during the covid-19 pandemic and financial sanctions as legal frameworks evolve.

Force Majeure

The overarching principle of a Force Majeure clause is that an unprecedented event or circumstances has occurred outside of the parties’ control, which consequently is the sole cause of a party’s inability to perform their contractual obligations. Unless there is an express Force Majeure clause in a contract, the parties cannot rely on this doctrine in English law.

A skilfully drafted Force Majeure clause is also necessary to determine the consequences on the parties. Depending on the wording, the clause can often suspend the parties’ obligations under the contract while the event continues, with their obligations to resume once able to do so, whereas others are drafted to allow one or both parties to terminate the contract. But encapsulating the necessity of the clause to be well drafted is to protect a party from paying damages for breach of contract.

Rapidly changing legal framework

Legal frameworks globally are constantly changing, for example, prevalent in today’s climate   are financial sanctions. Financial sanctions are legal restrictions imposed on dealings with specified individuals or entities, or on activities in certain sectors or geographical regions. They are often imposed rapidly in response to countries and governments actions. You must legally comply with sanctions as they may lead to criminal liability, but they also have significant consequences for ongoing contracts, which, if not drafted carefully, could render their future performance illegal. It is often difficult due to the nature of sanctions to predict when entering into a contract whether and how it may be affected. But some issues to keep in mind are that depending on the terms a party may lose its entitlement to payments or even commit a breach of contract even if failing to fulfil the contract was in compliance with a sanction. Therefore, it signifies how these issues can be managed to an extent by addressing them appropriately in force majeure clauses.

In light of today’s world, in a rapidly changing legal framework whether it concerns economic instability, sanctions or a global pandemic, it is evident that a well drafted contract has the ability to provide strong protection for parties in an ever-changing world.