Drafting contracts – – little words with big meanings.

Fundamental principles of contract drafting

Contract Drafting

This post examines a few contract phrases that lawyers may give little attention but that can have significant impact.

Other good and valuable consideration.

Every attorney has seen this phrase in either a contract, a release, or a deed.

It has become commonplace for a legal instrument to recite that Party A is executing the instrument for a specific sum of money “and other good and valuable consideration.”

But, can the inclusion of such language create exposure for Party B? Can Party B be made to give Party A something in addition to the specified sum of money?

That issue was addressed in Haden v. Sims, 150 So. 210, 168 Miss. 64 (Miss. 1933). In that case, the deed recited payment of “one dollar and other considerations.”

The Supreme Court held that parol evidence was admissible to prove what the “other considerations” in the deed were. The Court held that parol evidence supporting a finding that $1000 was owed.

Remember, a cardinal rule of contract construction is that the Court will endeavor to give effect to all provisions of the contract.

So, if you draft the instrument to recite the full amount of the consideration, stop drafting. Leave out the phrase “other good and valuable consideration.” Do not inject uncertainly.

On the other hand, if the instrument does not recite all of the consideration (something commonplace in deeds), be certain there is another document that reflects that additional consideration and reference that other document as well.

Drafting attorney’s fees provisions.

Contracts often contain a provision for a party to recover its attorney’s fees and expenses if it has to sue to enforce the contract. There are several words to focus upon in drafting such a provision.

In Americrete, Inc. v. West Ala. Lime Co., Inc., 758 So.2d 415 (Miss. 2000), the instrument stated that “the prevailing party may recover attorney fees.”

The first item to focus upon is the word “prevailing”. Often, it is easy to determine who prevailed.

But, in commercial litigation in particular, sometimes each party wins a little and loses a little. In addition, a plaintiff might assert seven causes of action and only win on one of them. In those situations, who “prevailed”?

In drafting an attorney’s fees provision, depending upon the nature of the contract, consider defining the word “prevailing” in way that best benefits your client.

Similar, it is useful to address the question of whether actual attorney’s fees or reasonable attorney’s fees may be recovered. The two are not necessarily the same.

Forum selection clauses.

Contracts often contain a provision requiring any lawsuit between the parties be filed in a particular. Obviously, you want the venue to be one favorable to your client.

A common mistake, however, is to use a phrase such as “both parties consent to litigating any claims arising out of this contract in the Circuit Court of Madison County, Mississippi.”

The problem with this language is that it is merely permissive. The parties consent to litigating in that court, but they did not agree it was the only possible venue. The other side could file suit first in another venue.

If you want to tie the other side to your venue, make it the “sole and exclusive venue.”

Such a phrase can also prevent a defendant from removing a case to federal court. See, e.g., Costas v. Deposit Guaranty National Bank, 138 Fed.Appx. 605 (5th Cir. 2005).

Panter Law Firm, PLLC, 7736 Old Canton Road, Suite B, Madison, MS 39110.

601-607-3156.

www.craigpanterlaw.com

Craig Painter