The Art of Creating the Modern Statutory Business Trust

Sec. 3.2. The Skill of Contract Drafting

A written contract is essentially “legislation” that governs the legal relationship between the parties to the contract. The parties are in effect “legislators” of that legal relationship. The objective of legislative drafting is to state in writing a law that embodies the intent and policy objective of the legislators. Similarly, the objective of contract drafting and contract reading is to state in writing the rights and obligations (i.e. the legal relationship) that the parties have voluntarily agreed to accept and impose on themselves and each other. Some commentators have determined that there is a conceptual difference between a contract and an agreement.

A contract is an exchange of items of value, like a contract for the sale of goods, between two or more persons, each of whom is willing and able to make the exchange. An agreement is an exchange of promises to act or not act, like an employment agreement, between two or more persons, each of whom are willing and able to make the exchange. As practical matter, contracts and agreements often overlap so that this distinction is not always meaningful in terms of how or which common law contract principles apply. These terms will be used interchangeably in this publication.

Like other types of legal writing, contract drafting is a learned skill. This skill has principles and techniques by which the skill is applied to real world situations. These principles and techniques evolve as commerce and technology evolve. However, the fundamentals underlying these principles and techniques remain constant. Whether the written contract is on paper, displayed in digital images or are impulses in the human brain, the principles and techniques of drafting contracts apply to each conceivable form of the written contract.

The most fundamental skill in contract drafting is knowing the desires of the constituents and knowing the substance of business of the LLC. Even before drafting a word, the attorney must be satisfied that he or she understands the desires of the constituents and the business of the entity. Often, the constituents have not formulated legally meaningful and practical concepts of their desires and business objectives. Acting as counselor, the attorney must assist them in articulating these concepts so that they can be transposed into an unambiguous and legally enforceable instrument. The drafter aspires to articulate:

  1. The rights and obligations of the constituents,
  2. Provisions for events or contingencies that are not expected to but may occur,
  3. Provisions that avoid any undesired default provisions of any applicable statutory or common law, and
  4. Remedies and means of enforcing or discharging the rights and obligations.