Monday, January 28, 2013

Contract Basics from ICLE Seminar by Scott Scarbrough

Contract Basics A to Z

With the wealth of information available on the internet, there are numerous standard contract forms that can be downloaded and filled in with the details of a particular agreement.  There are forms for the sale of property, rental of property, lease of property, or a license for the use of software, and even experienced attorneys often take these forms and simply edit, cut and paste to fit a particular situation at hand   In fact, so many contracts are created from stock contract forms with boilerplate clauses that not only may one or both parties not understand what they are actually agreeing to, but the lawyer who drafted the contract might not realize the ramifications of some components of the contract. 

While stock contract forms are an excellent time saving tool, it is important to understand the implications of each and every term in a contract.  This blog will take on the common steps of contract drafting; discuss the importance of each section, the traditions, assumptions, benefits and risks of boilerplate clauses, and implications of these elements of the written contract.    

This, the first column of this blog series will explore the basics of a contract; the importance of the client interview, ethics, communications, and the engagement letter.  Following weeks will explore the most common components of a written contract, the preamble, recitals, words of agreement, definitions, covenants, conditions, representations, warrantees, boilerplate clauses, end games, remedies, and ADR clauses.

The Initial Client Interview:

A client meets with the attorney to engage the attorney in drafting a contract.  What are the primary issues the attorney should be considering in this first interview?  Are there any conflict of interest issues with helping this client?  What other questions should he/she be asking the client?  Fortunately, the answers come from ethic laws that bind all us attorneys and from common sense in considering what the attorney is being asked to do in drafting the contract.
On the ethics front, the number one complaint filed against attorneys with the bar association is for lack of communications with the client, followed closely by claims of unreasonable fees.  The easiest way to insure your client’s satisfaction is to manage their expectations for communication and to explain in detail the fee structure during the initial client interview.  By following up writing, in an engagement letter to the client, the attorney not only insures the client understands the fees and communication expectations are documented, but the attorney satisfies Wisconsin’s Rules of Professional Conduct for Attorneys.  (WI 20 SCR 1.5 expressly mandates that an attorney prepares an engagement letter confirming, in writing, the nature and scope of the representation, if the fees will exceed $1000.)

[Practice Tip:  The engagement letter should be provided to the client within a reasonable time. The detail and specificity of the letter depends on the nature of the client-lawyer relationship, the work to be performed, and the basis and rate of the fee.  Additionally, a lawyer should detail in writing, before or within a reasonable time after commencing the representation, the basis or rate of the fees and expenses to be charged to the client.]

            On the contract drafting front; what are the specifics of the contract that the client wishes the attorney to draft?  In order to ask the right questions, an attorney needs to understand what is in a contract.  Remember, there are two basic components/requirements of a contract; 1.  A promise or a set of promises (a commitment to do/not do something) that the law will enforce (a court will award a remedy for the failure to perform), and 2.  Contains an Offer, Acceptance, and Consideration, plus all the other equally important elements of: how, when, where, why, and what if.
            In future weeks, this blog will discuss the common components of a contract, in order to understand the how, when, why, and what if.  Next week we will tackle the traditional Preamble, Recitals, and Words of Agreement.  Following weeks will review the Definitions, Covenants and Conditions, Representations and Warrantees (which are frequently misunderstood and mis-used), Endgames and Remedies, and then finally end with a series of blogs concerning the benefits and cautions of Boilerplate clauses.

Input is always appreciated.  If there are any questions, comments, insights, concerns with this blog, please contact, J. Scott Scarbrough, Esq. at
 stacks_image_6654_1.png Published by J. Scott Scarbrough

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