Who is Tina Stark in the World of Contract Law?
Tina Stark is the Director of ContractDrafting.org, a nonprofit organization for contract educators. She is also an adjunct professor at Harvard Law School teaching on Entrepreneurship, Finance and Contract Drafting. In 2011, she was a Visiting Professor at NYU Law School. Prior to this, Ms. Stark was a tenured Associate Professor of Law at Boston University School of Law where she taught Contract Drafting, Drafting Wills, and Joint Ventures. She has practiced law for over 20 years in both a law firm and corporate environment and taught numerous executive education programs around the world including Harvard, Columbia, and Fundação Getulio Vargas.
Her first book, Drafting Contracts: How and Why Lawyers Do What They Do, was published by Aspen Publishers in 2007 and has been adopted at many law schools throughout the country and in Canada. She has written a number of articles on contract interpretation, contract drafting, joint ventures and choice of law. She has a number of upcoming articles including "Contract Interpretation: The Trouble with Interpreters." This article will appear in the Commercial Law Journal (2009) , as well as her second book, Negotiating, Drafting and Interpreting Contracts (with Robert Scott; Cambridge Press 2009, forthcoming). "Designing An Empirical Study of Contract Interpretation: The Case of Confidentiality Agreements," which looks at how to empirically study different courts, judges, fact patterns and the effect of making contracts mandatory versus permissive, appears in the Journal of Legal Studies (2009).
Ms. Stark has trained lawyers in Australia, Brazil, Canada, Germany, Italy, Portugal, Saudi Arabia, Singapore, UAE, UK and Vietnam. In 2001, she created the first full-fledged online education course in contract drafting offered by Boston University School of Law. She is a frequent lecturer at law school faculty development workshops on contract drafting and interpretation. Ms. Stark has trained practitioners in many multinational law firms and companies in Asia including Bingham McCutchen and Vinson & Elkins.
Fundamentals of Effective Contract Drafting
One of the most frequent comments I get on my contract drafting posts is that clear is better than clever. While I completely understand the impulse to be clever and the appeal of clever contracts, Tina Stark preaches that clarity and precision make for the most effective contracts. In her books, Practical Academic Guides to Drafting Legal Documents, Tina on occasion calls out specific choices in contract language, marketing examples as imprecise or ambiguous:
In addition to being imprecise and ambiguous, the marketing language above is inaccurate because the ad implies, but does not state, that a proposal is a legally binding offer and its acceptance creates a contract. Even if an offeree does not accept the offer unambiguously like the FedEx proposal for instant delivery depicted above, it can still create a legally binding contract if, after receiving the offer, the offeree begins performance in accordance with the proposal.
Stark explains that the ambiguity in the marketing example derives from the use of the word "offer," which can have a variety of meanings, depending on the definition. Stark believes that the word "offer" should be replaced with "unilateral offer", "bilateral offer" or "true bilateral contract" if either or both parties are providing something. Stark states that the text should say:
A unilateral offer by one party to which the other party is invited to reply and thereby create a unilateral covenantee by commencing performance on the specified terms.
These are essential lessons to know when drafting contracts – the drafter has to consider what the words mean and what the different meanings might expect in the future. Mastering Contract Drafting has been a welcome guide in my effort to learn effective contract drafting.
Applying Tina Stark’s Insights to Contract Design
The lesson taught by legendary contract lawyer and educator, Tina Stark, is that when contracts are structured logically, the result will truly be a meeting of the minds. For example, in drafting a software licensing agreement, the principal subjects of the contract may include: license grant, payment terms, warranties, liabilities, term and termination, dissolution, dispute resolution, nondisclosure, and severability. Within each of these primary subjects, narrower topics must be discussed in a hierarchical relationship. For instance, in the license grant provision, the licensor will want to define the scope of the licensee’s usage rights, dividing these rights into bundled software packages, which can be further subdivided into different types of use (e.g. personal use, internal use, external use, project-based use, etc.).
Organized contract structure is particularly important for long-term contracts. When entering into a long-term contract, the parties will likely be modifying the evaluation criteria, goals, review dates, project milestones, deliverables, and consultation times of the contract to suit their respective purposes throughout the contract’s life. If these objectives and requirements are organized clearly (e.g., by the quarter or by stage of project), the parties can continually refer to these documents that are created or updated through a well-organized process. If, on the other hand, the document is not structured well, the parties will be forced to create all of their own documents (which they will have to do anyway, and which they will typically reference and incorporate by reference into the original contract), and chances are good that provisions within the original contract will be forgotten, have to be reconstructed based on the context of the new document, or have to be cross-referenced and compared with other concurrent documents making it necessary for the parties to search through multiple documents that are very likely to not be organized in the same manner.
When a contract involves many different entities, parties have to be even more careful to structure the contract logically because of the many ways in which it can be read. For example, in a contract where vendor A is selling goods to vendor B, who in turn, is reselling them to customer C, and customer C is paying vendor A directly, the contract must clarify whether vendor C, or vendor B, now owns the goods from a legal perspective. It is also necessary to define the relationship of the parties among themselves. Do all three parties have a joint venture relationship? Is C merely vendor B’s customer and vendor A’s partner in providing technology and support? Or is A a direct contractor of C providing essential goods and services, with B acting as a distribution broker for A and a general contractor for C? All of these terms must be well-defined and structured in a way that is clear from multiple angles and interpretations. Such an effectively structured contract will ensure that there will be no discord in the future, as all of the parties will have read the same document in a similar manner and relied upon its provisions to perform their respective obligations.
Pitfalls to Watch Out for When Contract Drafting
Proper agreement drafting is a skill that requires an understanding of certain fundamental practices. When those practices are absent, the end product bears the consequences.
Tina Stark identifies four common mistakes that are often found in commercial contracts, including documents drafted by lawyers:
- Overstatement or understatement of obligations or benefits: In the case of sales contracts, dollar value is often the main concern of both parties. The seller does not want to make warranties that will expose him to liability for damages, and the buyer does not want to give up quality or make payment without security. A common practice is, therefore, the insertion of a series of specific warranties to be given by the seller, together with limitations on these warranties. In the case of a license agreement, there may be an overstatement of intellectual property rights granted to the buyer or licensee. Important, however, is the compliance of the contract with the Federal Trade Commission guidelines, the failure of which could create illusory contracts. It may also create adverse tax consequences.
- Obscure obligations and benefits: The contract should anticipate the future events or occurrences which could jeopardize the parties’ mutual intent. The contract should therefore specify the manner in which day-to-day issues will be handled (under what conditions a party may suspend performance , what is the exact delivery date, when payment should be made, whether there will be any back charges, etc.).
- Unintended assumptions about the contract: This occurs when one of the parties presumes that the contract provides for something that it intentionally does not. An example is a broker’s sale agreement which covers several lots owned by the seller without specifying (in a separate exhibit) that some of the lots in fact belong to someone else or do not have access to utilities. If the parties’ expectations are not stated clearly in the contract, they will not be enforceable against the other party.
- Warranties and representations: Both parties should make their assertions clearly. In many cases both parties make every assertion and warranty, even if limited to the party’s knowledge. For example, the license agreement should stipulate precisely what kind of software is being licensed and whether the seller is willing to grant any warranties at all. One of the parties should attempt to limit his liability (e.g. to direct damages only, proven by written evidence, and no consequential damages). The other party will want to indemnify itself from the seller’s noncompliance with any patent, trademark or other intellectual property law.
Tips and Techniques for Contract Drafting from Tina Stark
Here are some practical tips and techniques for drafting contracts that Tina Stark recommends for legal practitioners, to help improve the clarity and effectiveness of legal documents.
Based on her experience in teaching attorneys and law students to draft contracts, she suggests the following:
· Start the contract with a recitation of the purpose of the transaction to be achieved by negotiating and drafting the contract. This will help keep you and your readers focused and on track.
· Use principles of general grammar, syntax, and punctuation – basic principles of grammar should apply to contract drafting. Good grammar and punctuation (including the use of paragraphing and white space) helps facilitate clarity and uniformity. Compared to academic writing, contract drafting is different in that there are specific rules that govern the meaning of certain words in the context of contracts, such as "and," "or," etc. It is also acceptable to use informal "legalese" such as "the parties," "hereinafter," etc. But beware of other informal usages, such as "it shall be agreed that." Indiscriminate use of informal expressions can create ambiguity.
Consider the reader of the contract – when drafting, you should be mindful of the audience with whom you are working. If you’re drafting for clients in a specific industry, like automobile manufacturers, you should consider yourself an employee or an officer of the client’s company, and review the contract from the perspective of the various employees who would review it. Consider the people and/or institutions that will be signing the contract, and ask them what clarifications they might be interested in getting. Once the contract is signed, you should also consider yourself an agent of the persons or companies who signed the contract.
The Evolution of Contract Drafting and the Contribution of Tina Stark
Both formal and informal surveys of sophisticated legal practitioners can reveal where the best ideas on a certain topic have been written over the last decade. For tools for contract drafting, Tina Stark’s "Drafting Contracts" has appeared in almost every survey. Why? Why is her book still the most cited and well-known contract drafting book?
I think one of the reasons is that Tina Stark was willing to throw out tradition and the status quo and take a chance by presenting her methodologies from the newer lens of real transaction lawyering rather than the older, black letter law of the classroom and case law.
When, as an example, Tina realized that the case law did not reflect a sufficiently modern approach for classifying the conditions under which a contract will terminate (or will not), she threw out the traditional dividing line between conditions precedent , concurrent conditions, and conditions subsequent and developed her own framework of fulfilling conditions, future conditions, and failure of a condition. This is not a common way to cut up the elephant of contract law, and perhaps this is part of the reason it has become so popular. It is simple and works so well at allowing the drafter to clearly state what they really want.
85% of the comments from institutional legal advisors who were asked to comment on my blog posts concerning contract drafting, have said that they have at least heard of Tina’s book and half say they are familiar with it. 65% have said they have a copy and have read it (or at least certain chapters from the book).
The book has clearly made its mark on practitioners and, perhaps the only surprise is that it has taken this long to become a cornerstone of contract drafting jurisprudence.