How Litigation Experience Helps Contract Drafting

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How Litigation Experience Helps Contract Drafting

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My father stopped going to court in 1988. Save for moving or attending calls or giving evidence at trial, he avoided the courts. He became a ’corporate lawyer’.

A corporate lawyer is a lawyer that prefers the boardrooms to the courts because they do not enjoy the latter. Their practice is focused entirely on contractual and corporate advisory matters. Corporate lawyers prowl boardrooms, general meetings and hotel conference rooms. Litigators prowl the courts, tribunals and police stations. I know a corporate lawyer so averse to courts he could not even attend his pupil’s call purportedly because he was so traumatized by the experience during his pupillage.

When I was in his firm, my father had a rule: if you wanted to be a corporate lawyer at the firm you would first have to spend three to five years in litigation. He felt those initial litigation years would inculcate good habits and provide for a well-rounded education for a corporate lawyer.

First, as a litigator, we always have to be on top of the law. We need to know the latest decisions as well as how it fits with the other previous court decisions. Knowing the latest cases and law gives us a competitive advantage over those lackadaisical about their reading, and their numbers are legion. A good litigator makes it a point to know and understand the latest legal developments.

A corporate lawyer with litigation grounding is likely or likelier to form a habit of regularly reading decided cases. It was a regular complaint of my father that corporate lawyers he dealt with didn’t know and didn’t bother to know the latest decided cases. If the latest Federal Court decision had an impact on a contract we were drafting for a client and we didn’t know about it, our ignorance leaves us open to a claim for negligence.

Second, and related to reading cases, a corporate lawyer should be aware of how a contract can go wrong and think about suitable clauses or wordings to avoid such a situation. Often, corporate lawyers draft contracts and go on their merry way after. They are usually not around, if not long gone, when there is a dispute or things go wrong. That’s when the litigators come in.

In the early 2000s, I handled claims for a nursing college against nurses and their guarantor parents or relatives for breach of scholarship contracts. Depending on where they went to study nursing the scholarships varied from RM 30,000 – RM 40,000 in value. In exchange, after graduation, they would be bonded to the nursing college for at least five years. They could be posted to any hospital that the nursing college had a tie-up with.

I was busy with such cases because it was the time when there was a huge demand for nurses in Dubai. Nurses could earn anything between ten to fifteen times more than they would in Malaysia. As a result, many breached their scholarships and flew over to Dubai. It made sense. They would have earned more than enough to pay off the scholarship after half a year’s worth of salary.

Now you would think the claims were a sure-fire winner, no-look slam-dunk win, and you would be right. Except that, if you were the other side’s lawyer and diligently read the scholarship agreement, you should have come across an arbitration clause tucked away close to the end of the contract. And if you were sharp enough, you would have filed an application to refer the claim for arbitration pursuant to the then-in-force section 6 of the Arbitration Act 1952 and jam my claim in the courts.

That happened. But thankfully, it wasn’t a regular objection. Even though I could and would defeat the application, it slowed the progress of the claim and added cost to it.

In any event, it was silly to have an arbitration clause for a low-value scholarship claim. We usually refer matters to arbitration when they have a high degree of technical expertise involved, or where the parties want privacy, or the claims are of great value and immense complexity; not a RM 40,000 claim for a breach of a scholarship agreement.

I called up the group legal manager to ask her why there was an arbitration clause in the scholarship agreement. She thought an arbitration clause was part of the ‘usual boilerplate clauses at the back of the contract. That’s why.’ I advised them to immediately revise their contracts to excise the arbitration clause.

If she understood the litigation dimension to the presence of such a clause, she would not have allowed it to be in their standard scholarship terms. Exposing contractual terms to litigation will test a contract’s mettle. It is in litigation that we discover the many ways a contract is deficient and realize the clauses which had more than a significant influence on the course of litigation. Learning from those experiences will inform our clause selection and clause drafting better.

Third, by actually handling contractual dispute claims, we get the experience of what goes into such a dispute. We engage with it at a working level. It is from our first-hand working experience that we gain a deeper insight into how to better craft terms that improve the operational aspects of litigation for effectiveness and success.

An example. Order 10 r 3 of the Rules of Court 2012 (RC2012) recognizes that if there is a term in a contract that specifies how the service of a document is to be carried out, that term will regulate the service of documents between the parties. That means we can include a term in the contract to specify how or where the service is to take place.

So if we were a corporate lawyer drafting a contract and had some litigation experience, we would craft a service of documents clause to serve the Writ of Summons or Originating Summons by way of say, e-mail or Whatsapp, in the event legal proceedings had to be initiated. Such a clause would cut down the time, effort and cost of service and the challenges in personally serving the claim on the other party if a litigation dispute should break out. It’s a small but significant thing when the dispute hits the courts.

This is an example how litigation experience can inform and improve the contract drafting and thinking experience. An experienced litigator will also advise against including an arbitration clause in a scholarship contract. This is how that experience can influence and shapes the contractual terms in a contract.

Finally, a litigator’s drafting is likelier to be more cogent and to the point compared to a corporate lawyer’s drafting. In theory, of course. That generalization applies to the mediocre. I think there is little qualitative difference between a top litigator and a top corporate lawyer.

A litigator drafts and crafts documents principally for the court’s consumption. Yes, it is also for the opposite side, but they are not the priority; the court is. And the court is busy; constantly, perpetually and relentlessly busy.

In writing for the courts, litigators have to balance cogency, thoroughness and conciseness for busy people who need to quickly absorb and manage large amounts of information of a complex and complicated nature in order to come to a decision. That is a litigator’s audience. Therefore the writing has to be simple and the content distilled and precise.

A corporate lawyer should write in the same fashion, and I am not saying they don’t. But they don’t have to because they write for a different audience. Conciseness is less of an issue because the audience is interested more in getting their money’s worth from the lawyers and the deal the lawyers were hired for; the audience is more concerned about completeness than optimality of expression; the audience is more focused on completion or the appearance of it than the actual completion itself.

Now having said all that, it does not mean that a corporate lawyer who does not go through litigation is any lesser than one who did. I know excellent corporate lawyers without any litigation experience. It is about both quantity and quality of experience.

It also means that a corporate lawyer’s experience has room for a wider and greater depth of diversity to it, more opportunities to learn from different domains, and enjoy a richer professional experience. It works vice-versa as well. A litigator that has a meaningful experience of corporate legal work will enjoy the same the same benefits, advantages and awareness from such an opportunity.

In either case, I cannot see how one loses out from such an experience.

1 thought on “How Litigation Experience Helps Contract Drafting”

  1. In a conversation two weeks ago with a friend who had exchanged his black and whites for a more colourful wardrobe, he observed that in some of his corporate transactions, litigation lawyers ported to corporate work tend to be more combative in language and approach in corporate work.

    Where the instruction is for a beautiful suspension bridge to be built, there is the tendency to build the bridge AND to have machine gun emplacement on either ends, antijumping nets on the sides and throw in a couple concrete barriers mid span for the potential suicide bombers.

    Something similar was said in a Linkedin post i read by a corporate lawyer whose name slipped my mind. The said post shared a situation in which two business owners with very good relationship with one another wanting to get a deal formalized by lawyers. A handshake deal over whatever that is they imbibe and leave the details to the lawyers.

    Now the lawyers left to their own devices proceeded to have a mini arms race of their own with the clauses. Both wanted to have no chink in their client’s armour. In doing so, what began as two good friends wanting to do business together devolved into a situation of mutual distrust until the deal was finally called off by both parties or so the story goes.

    The said post might be half true (i hope the legal fees are paid deal or no deal) or even a pure fiction as i suspect some Linkedin contents are but the point is valid.

    Sometimes in safeguarding the client’s interest, lawyers cannot help but to be very protective. After all, lawyers are expected to anticipate the legal pitfalls the client might encounter.

    Reply

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