On Reviewing a Contract

Recently I received the following email:

I have been following your blog for a long time and your insights are really helpful for young lawyers. I am a young lawyer from India who has recently started working with a law firm. Though there are senior lawyers to guide me, I would like to have your views on contract review. Here are some of the questions that I have:

  1. What are the best practices for reviewing contract?
  2. Do I need to point out issues which may be one-sided but pretty standard in that particular kind of contracts?
  3. Do you suggest in-line comments or use the comments feature in MS Word?
  4. Should I make all the changes or just point out the major issues while reviewing leaving it to the opposite party’s lawyer to make the changes?

I don’t do deals, so my perspective might not be that relevant; I hope readers will chime in. But here are some thoughts, addressed to the sender:

The first part of reviewing is reading the other guy’s draft; see this 2014 post about that. The key point is that you should have a basic understanding of the substantive issues covered in the draft, so you have a frame of reference to compare it to. So study! Unfortunately, the resources available are of, ahem, mixed quality.

If you have comparable contracts prepared by your law firm, compare them to the other side’s draft.

Regarding what issues to point out, I guess the question is, To whom? Someone at your law firm? The client? Your client might need to have everything explained.

You can mark comments by hand, make changes using Word’s “track changes” feature, or use Word comments. I don’t know the extent to which people still mark comments by hand.

As between using track changes and comments, I guess that relates to your fourth point. I would have thought it’s always best to propose your own language, because that gives you the momentum. But if that would be time-consuming and you have to limit your billable time, you might find it preferable to let the other side do the work.

Generally, you should limit your comments to matters that could cause confusion, could add risk, or don’t reflect your understanding of the deal. Don’t make changes to make the language conform to what you think contract language should look like. Traditionalists are prone to doing that when reviewing drafts prepared by people who consult A Manual of Style for Contract Drafting. It’s annoying.

But I would be willing to ask the other side to get rid of what is usually simple clutter if I can show that it has the potential to cause problems. See for example this post on an instance of what I call “throat clearing” that confused a court.

Anything else, readers?

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.