Dubious Contract Drafting: An Extract from a Model Confidentiality Agreement

You’d have thought that by now I’d be inured to how problematic contract drafting is at all levels of the legal profession, but I find myself continually amazed.

So how should I respond? Constant kvetching can make me look like a crank. But saying nothing seems defeatist. So I’ve decided that what I’ll do is periodically dissect deficient drafting offered by someone or some organization with an aura of expertise. I won’t identify them by name, as my aim isn’t to try to cut them down to size.

Instead, I want to encourage the legal profession generally—lawyers and their clients—to realize that the emperor has no clothes and that clearer contracts and a more efficient contract process are eminently achievable.

As my first sample, I offer you the 183-word “no obligation to proceed” language contained in a model confidentiality agreement compiled by a partner at a major law firm and published by an imprint of a major legal publisher:

Each party agrees that unless and until a definitive agreement between the parties with respect to any Transaction has been executed and delivered, neither of the parties will be under any legal obligation of any kind whatsoever with respect to such a Transaction by virtue of this or any written or oral expression with respect to such a Transaction by any of its directors, officers, employees, agents or any other Representatives or its advisors except for the matters specifically agreed to in this Agreement. Each party further acknowledges and agrees that (i) the other party shall have no obligation to authorize or pursue with it or any other party any transaction, (ii) it understands that the other party has not, as of the date hereof, authorized or made any decision to pursue any such transaction and (iii) the other party reserves the right, in its sole and absolute discretion and without giving any reason therefor, to reject all proposals, to pursue a Transaction with another party without prior notice and to terminate discussions and negotiations with it, in each case at any time.

What are the shortcomings in this extract? Let me count the ways:

  1. Redundancy (e.g., “Each party agrees that”; “unless and until”; “Each party further acknowledges and agrees that”)
  2. Sloppiness (e.g., “any Transaction,” although the defined term is “the Transaction”; “any other Representatives or its advisors,” although advisors are included in the definition of “Representatives”)
  3. Needless elaboration (e.g., “its directors, officers, employees, agents or any other Representatives” rather than “any Representatives”)
  4. Rhetorical emphasis (“any kind whatsoever”; “specifically agreed”)
  5. Undisciplined verb use (“the other party shall have no obligation”; “the other party reserves the right”)
  6. Potentially problematic waiver of the implied duty of good faith (“reserves the right, in its sole and absolute discretion and without giving any reason therefor”)
  7. Jargon (“executed and delivered”)

But my biggest problem with this language is the considerable overlap between the first sentence and the second sentence. I can’t see any purpose to it.

As to why is the author offering such problematic language to the world as a model, I suspect he’s unaware of its shortcomings. (I use the masculine pronoun as a convenience.) After all, he presumably learned to draft by regurgitating precedent contracts. The only question is whether he, like some other successful BigLaw partners I’ve encountered, regards as a threat, as a personal slight, any suggestion that one might do things differently.

And note that the whole point of this example is that in its shortcomings, it’s representative of BigLaw drafting.

By the way, here’s my “no obligation to proceed” language (28 words):

Until such time as the parties enter into a definitive agreement with respect to the Proposed Transaction, neither party will be obligated to proceed with the Proposed Transaction.

I’m open to suggestions for how it might be improved.

[Updated 6:55 p.m. EDT, May 5: Here’s my proposed language, revised to reflect Jim’s comment and Chris’s comment and my responses:

Unless the parties agree otherwise in writing, neither party is obligated to proceed with the Proposed Transaction or any other transaction.

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Think this sort of analysis is useful/useless/reprehensible? Let me know. Want me to critique a bit of contract drafting (from an actual deal or from a publication)? Then get in touch.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.