About USC Gould
USC Gould is a top-ranked law school with a 120-year history and reputation for academic excellence. We are located on the beautiful 228-acre USC University Park Campus, just south of downtown Los Angeles.
Learn about our interdisciplinary curriculum, experiential learning opportunities and specialized areas.
Participate in an unparalleled learning experience with diversity of people and thought. Get involved in the law school community and participate in activities that enhance your studies.
We work closely with students, graduates and employers to support successful career goals and outcomes. Our overall placement rate is consistently strong, with 94 percent of our JD class employed within 10 months after graduation.
Our faculty is distinguished for its scholarship, as well as for its commitment to teaching. Our 12:1 student-to-faculty ratio creates an intimate and collegial learning environment.
- Alumni and Giving
Alumni and Giving
The global Trojan network of more than 10,000 law alumni and donors include recognized leaders in numerous fields who are deeply committed to supporting student and law school success.
Contract drafting essentials for business professionals
- ABOUT USC GOULD
- A MESSAGE FROM THE DEAN
- + HISTORY OF USC GOULD
- LAW, RACE AND EQUITY
- + NEWS
- + EVENTS
- BOARD OF COUNCILORS
- CONSUMER INFORMATION (ABA REQUIRED DISCLOSURES)
- VISIT US
- SOCIAL MEDIA
- + CONTACT US
Monday, June 24, 2019
Contract Drafting Essentials for Business Professionals
By Juan Ramos
University of Southern California Gould School of Law
|Juan Ramos, Lecturer in Law|
Business professionals come across contracts on a daily basis. Whether they are asked to draft a contract or review and comment on a contract, there are several key foundational contract concepts that business professional should know.
Foundational Contract Concepts. The main foundational contract concepts include representations, covenants, rights, discretionary authority, warranties and conditions.
Representations. Representations are statements made about a past or present fact intended to induce reliance. The recipient of the representation is taking the other party at its word with respect to the past or present fact. If the statement turns out to be false, the recipient of the representation can sue the other party for misrepresentation. If you are the party making a representation, you want to qualify the representation as much as possible by adding words such as “approximately” or “about,” or by making exceptions to the representation.
If you see a representation about the future, it may actually be a covenant.
Covenants and Rights. A covenant is a promise to do something or not to do something. The maker of the promise – the promisor or covenantor – creates an obligation for itself. It binds itself and has a duty to perform in favor of the recipient of the promise. The recipient of the promises has a right to the promisor’s performance. If the promisor does not live up to that promise, the recipient of that promise can sue for breach of a covenant. Operative words or phrases to signal a covenant include “shall,” “promises,” “covenants” and “is obligated to.” If you are making a promise, you want your obligation to be as weak as possible. You can qualify a covenant to weaken the obligation. For example, instead of promising that you will get something done, you may instead qualify that promise by stating that you will use “reasonable efforts” to try and get that thing done.
Discretionary Authority. Statements that grant a party a choice or permission to act or do something provide that party with discretionary authority. The main operative word to signal discretionary authority is “may.” If you will be exercising the discretionary authority, then you want the grant to be as broad as possible. Consider including phrases such as “sole discretion” or “sole and absolute discretion.” If the other party will be exercising the discretionary authority, narrow the grant as much as possible. To constrain discretion, you may want to require the other party to use “reasonable discretion” when they exercise their discretionary authority, or you may want to make the exercise of the other party’s discretionary authority be subject to your prior approval.
Warranties. Warranties are a particular type of promise. A warranty is a promise that a state of facts about the past or present is true or that a state of facts will exist in the future. Unlike a representation, there is no justifiable reliance component. The recipient of a warranty is not relying on the truthfulness of the underlying statement but is instead focusing on the promise that the warrantor will pay damages if the state of facts does not exist in the future.
Conditions. Conditions are “if’s.” With respect to foundational contract concepts, a condition is a state of facts that must exist before an obligation or discretionary authority is triggered. For a state of facts to be a condition, there needs to be uncertainty. That is, the state of facts cannot be certain to occur. For example, the passage of time cannot be a condition because it is certain to occur. Also, a party’s own actions cannot be a condition to its obligations; otherwise, that party would control whether the condition is satisfied. Signal words and phrases for conditions include “if,” “on condition that,” “subject to,” “provided that,” and “conditioned on.”
About the Author:
Juan Ramos teaches Contract Drafting & Strategy for the USC Gould School of Law’s online programs. Ramos is an expert in transactional law, including corporate, contracts, real estate and business law.
THE LATEST NEWS. REDEFINED.
Overcoming Interpersonal Mush
March 25, 2021
10 reasons to get a master’s at USC Gould
March 11, 2021