Why Are U.S. Contracts So Long?
A question many lawyers from civil law jurisdictions ask when they first see a contract draft from a U.S. lawyer is:
“Why is it so long!?”
Some will conclude that U.S. contracts are long because lawyers are trying to run up fees and create an impenetrable document that clients will always need them to interpret. This is not the case.
U.S. contracts are long because, unlike with contracts in civil law countries, the parties cannot rely heavily on codified law to fill in the gaps. Instead, because party intent plays such a large role in contract interpretation in the event of a dispute, the parties must take great pains to include language to cover all possible scenarios.
The last thing they want is to unintentionally leave a situation ambiguous so that a court will later on be forced to puzzle through the best course of action, if the parties cannot come to a resolution on their own. To prevent this, the parties cover all their bases in great detail, so that, no matter what may come, they have a document to guide them.
Common Sections of a U.S. Contract
Contracts drafted by U.S. lawyers usually contain the following main sections:
(Please note, however, that each contract is highly customizable, and a careful lawyer will draft original provisions, using similar contracts as a guide, to suit the needs of the parties in each case.)
- Introduction. This section typically sets forth the proper legal names and addresses of the parties, and defines their role in the agreement (e.g. “Buyer,” “Seller,” etc.).
- Recitals. This section is a description of the facts that caused the parties to enter into the agreement, and usually looks like this: “WHEREAS, the Buyer wishes to purchase the Assets, and WHEREAS, the Seller wishes to sell the Assets, the parties hereby agree as follows…”
- Operative Provisions. These sections get to the heart of the agreement. These provisions state the main actions and obligations of the parties to the agreement. For an ongoing business relationship, as in the case of a manufacturing agreement, for example, these sections will be quite lengthy, as each action to be performed (and the party responsible for the costs thereof) is laid out clearly.
- Representations and Warranties. This is the part of the contract in which the parties will state various pieces of key information that the other party will rely on (a “representation”), and agree to make the other party whole in the event that things are not as described (a “warranty”).
- Term and Termination. These sections set forth the amount of time for which the agreement will be in effect, how to terminate it and the procedures for renewal.
- Breaches and Remedies. In this section, actions constituting breach of the agreement are described, as are the remedies.
- Boilerplate. There are a number of provisions that are inserted into almost every agreement, known as “boilerplate.” They cover things like the need for confidentiality between parties, how to assign the agreement, which jurisdiction will govern in the case of a dispute, indemnification between parties and various matters of contractual interpretation.
- Signature page. The parties (or their official representatives) sign their names on the contract and become bound to it.
- Attachments. In many business agreements, the largest section of the contract will be the attachments in which technical specifications are set forth in great detail, financial documentation is provided and appropriate lists or other items are included for reference.
There you have it. That’s why U.S. contracts are so long.
If you are interested in learning more, the @WashULaw online LL.M. in U.S. Law program offers a course entitled Fundamentals Of U.S. Law I: Contracts that can help expand your understanding of U.S. contract law.