By William Marshall
Transactional attorneys refer simply to “reviewing” a contract. However, I have identified different modes of review and found that thinking about them can be helpful in improving my review practices. The following are nine modes of review that I, to varying degrees, am adopting as I review an agreement. Some of them overlap and, of course, I very often perform multiple or even all of these modes in a single reading of an agreement. However if time permits, separate readings focused on one or two of these modes at a time can result in a better, more comprehensive assessment and markup of a document.
- Business terms review. This is both a high level assessment of the appropriateness of the document and a check of the actual business terms. Is this the right type of agreement? Is the agreement too long or short? Are the specific business terms accurately stated?
- Balancing review. It is well understood that attorneys generally prefer to “control the document.” This control includes preparation of the first draft. When I am presented with a draft by opposing counsel that is very one-sided, I am forced to either reject the draft completely or attempt to balance out the document. By a balancing review, I refer to this assessment and to making sure I am not falling into the trap of pushing back relative to where opposing counsel has drawn a line in the sand, but rather based on what’s appropriate for the transaction and the parties’ relative bargaining power.
- Reviewing what is missing. This is one of the most challenging modes of review. It is easy to unconsciously react only to what is on the page, whether it is in a draft provided by the counter party or in a form used as a starting point and thereby miss critical provisions. Identifying what is missing requires reliance on prior experience with the type of transaction at issue and checklists or solid exemplary forms as well as an understanding of any special circumstances in the transaction at hand.
- Risk allocation and remedy review. By risk allocation, I mean assessing my client’s exposure under the agreement. Indemnity, representations and warranties, limitations on liability, insurance and similar risk allocation provisions are key, although, potential risk appears throughout an agreement. I try to ask, “What happens if party A or party B doesn’t perform this or that obligation? What happens if this future event does not happen? What are the potential remedies? Should the remedies be express or simply left as breach of contract claims?”
- Offense/defense review. This mode of review involves reading the agreement from the perspective of both parties and, for each, asking, “What if I breach?” and “What if the other party breaches?” as to each of the various obligations. It is closely tied to the risk allocation and remedy review, but with the focus on making sure the perspectives of both parties are considered. This can reveal important issues that might be overlooked if only reading with your client’s perspective.
- Obtuse review. This is more of a mindset one can adopt when reviewing more than a mode of review per se. It involves a manner of mentally disconnecting from one’s experience and reading the agreement in a hyper-literal manner. The purpose is to try to avoid any unconscious “I know what this is getting at” and to question everything in the document (like an obtuse person might).
- Ambiguity and pure drafting review. This review focuses on pure language and drafting, driving toward clarity, concision, completeness, and accuracy and relentlessly searching for and resolving ambiguity. Ken Adams’ A Manual of Style of Contract Drafting is an excellent resource for developing skill at this type of review.
- Fresh eyes review. Getting away from a document when it seems final or close to final (at least for that draft) and coming back to it with fresh eyes is invaluable. One often sees issues that were hidden in plain sight. The dynamic here is akin to the obtuse review mentioned above. It is in the nature of coming to the document as an outsider of sorts. It is amazing how my eyes can miss a minor error in an initial review and then become inured to that error until I step away from the document.
- Polishing review. This one is fairly obvious. I am checking for cross-references, consistency, punctuation, formatting, etc.
Separate reviews of a document in each of the modes above is, of course, often not an option. A variety of practical and budgetary considerations often make it impracticable. However, I find the act of identifying and exploring them – a type of meta-analysis of what I am doing – can help me to achieve a better result for my clients. If you have a mode of review I haven’t mentioned, please feel free to share it by emailing me at wmarshall@ubmlaw.com so I can add it to my list.
Will Marshall is a co-founder of UBM Law Group.
**This article is for information purposes only and does not contain or convey legal advice. The information herein should not be relied upon in regard to any particular facts or circumstances without first consulting an attorney. Any views expressed are those of the author only and not of the SDCBA or its Business & Corporate Law Section.**
This article was originally published in the SDCBA’s “Business and Corporate” column series.