Monday, July 18, 2011

Clause Elements

Each time I review a set of clauses for the Clause of the Day, I am stuck by their common features, even though the source material is drawn from a wide range of different agreement types, drafted by different firms, for different clients.

The clauses all share common characteristics. They frequently use the same terms of art or common phrases.

Deeper analysis shows that they are composed of common sub-elements. For example, the Non-Disclosure Obligation in confidentiality agreements contains four components: (a) confidentiality, (b) non-use; (c) non-disclosure; and (d) protection of information. The Conduct of the Business clause in acquisition agreements typically contains four elements requiring the seller to: (a) conduct business in the ordinary course consistent with past practice; (b) preserve its business organization (or assets); (c) keep its directors and employees; and (d) keep its customer and supplier relationships and preserve the goodwill of the business.

Clauses, just like the agreement as a whole, are a checklist of elements, detailing required and optional clause terms.

Of course, the existence of common features is really not surprising. The clauses are all seeking similar objectives. The language has evolved over time, much like common law, into a well used reference. But while, commonality exists, it has not been codified.

By contrast, in the field of architecture, design and build standards are codified. MasterSpec, by ARCOM, provides comprehensive documentation that “automates specification production tasks and simplifies creating custom office masters for specific regions, clients, and products.” (MasterSpec). My architecture friends tell me that standards are required because the lawyers would otherwise sue them.

Analysis of clause elements highlights the value of precedent and the related contentious issue of garbage-in; quality-out. Words are important. Precedent is important. What is included (or omitted) in the clause is just as important as how the language is expressed.

1 comment: