Knowing the Default Rules

Revisiting this 2014 post on reading a contract reminded me of an aspect of reviewing contracts that perhaps doesn’t get the attention it deserves: factoring in the default rules.

If your understanding of a transaction is limited to what’s in the contract, you might be putting yourself at a disadvantage—you might be unaware of default rules that would apply in the absence of anything in the contract to the contrary.

For example, I recall an M&A lawyer with his own small firm marvelling at how BigLaw lawyers representing the other side are more often than not oblivious to important default rules that apply through operation of the Uniform Commercial Code, and that as a result he has the upper hand.

My deal days are a distant memory, so I’m the last place to look for specifics on this sort of thing. What important but perhaps nonobvious default rules do you think people should be aware of?

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.

5 thoughts on “Knowing the Default Rules”

  1. Personal jurisdiction and venue rules. Example: (1) A small software vendor’s contract form (which I hadn’t drafted) had a forum-selection clause specifying the vendor’s home city as the exclusive venue. (2) A big customer wanted to change it to the customer’s home city. (3) I proposed to the customer’s in-house lawyer that we simply drop the forum-selection provision entirely; he agreed — apparently not having realized that his client, the customer, was already amenable to suit in the vendor’s home city, but not vice versa.

  2. In at least one jurisdiction, a notice to quit must precede an eviction action, which slows landlords down a bit, but by virtue of statute, purported waivers of the tenant’s right to a notice to quit in a lease are not only ineffective, but ‘in terrorem’ provisions constituting unfair acts in the course of commerce, ie, statutory torts.

    What you here call ‘default rules’ I generally think of as (extracontractual) ‘background law’.

    I imagine that the European civil law tradition and the approach of the People’s Republic of China are sources of much background law and many default rules. You may have examples of each in back numbers of the blog. Didn’t you have some entries about doing business with Chinese companies?


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