By Elizabeth J. Goldstein
Special to the Legal
Atul Guwande in “The Checklist Mainfesto: How to Get Things Right” shares the story of how a checklist he created for surgeons and nurses to use together in the operating room saved lives and reduced errors. His inspiration was the pilot’s takeoff checklist started by Boeing Corp. Boeing had built a state-of-the-art long-range bomber, Model 299. In 1935, it was competing with Martin and Douglas for new military contracts. On Oct. 30 of that year, the Army held a flying contest to compare the two companies’ new bomber models. Boeing’s plane was the sure favorite. It could fly faster than all previous bombers, carry five times more bombs than the Army specifications required, and travel twice as fast as the current models. To everyone’s surprise, the plane crashed in a fiery ball quickly after takeoff. The pilot and one crew member died in the crash. It was believed that pilot error was the cause of the crash. Boeing’s best test pilots concluded from the crash that a plane as complex as the Model 299 was too complex to be operated by memory alone. As a result, Boeing test pilots developed a flight takeoff checklist. The original takeoff checklist was short, about the size of an index card.
What Makes a Good Checklist
Guwande interviewed Daniel Boorman from Boeing on the subject of what makes a good checklist. Boorman said that checklists should be precise and should not cover every step. A checklist cannot be used to fly a plane. They are to be used by professionals to remind themselves of critical steps they may miss. They aid professionals with remembering how to handle complex tasks. It should feature items that are important but that are sometimes overlooked.
Types of Checklists
Checklists can be designed as a DO-CONFIRM checklist or a READ-DO checklist. For a DO-CONFIRM checklist, one does one’s job and then stops, reviews the checklist and determines that one has completed the tasks on the checklist. In contrast, one reviews each task of a READ-DO checklist and then completes it in turn. It works similar to a recipe. I will create checklists for this blog that are DO-CONFIRM checklists. I believe lawyers will likely refer to the checklists after they have completed their first draft of the agreement or after they review the first draft proposed by the other party.
Contract Checklists
The aim of this series will be to provide checklists on a weekly basis for the basic structure of contract and general provisions as well as specific provisions of frequent commercial agreements. As discussed above, the checklists are not intended to give a layperson or lawyer enough to draft an entire agreement or provision. They are meant to assist people in understanding key considerations that may get overlooked in the complex process of negotiating and drafting a commercial contract. I will start with the ubiquitous boilerplate, because this is a feature of every agreement. Plus, many of us were not taught how to draft these provisions. It is presumed that we know what boilerplate to include and what should be in the boilerplate. However, as you will see, boilerplate cannot be done by rote to the degree one might assume. There are nuances and complexities that one must consider. Today, to get started, we will consider a more basic question – how to handle multi-agreement transactions.
Choice of Law
The checklists will generally address U.S. law except Louisiana with an emphasis in Pennsylvania and New Jersey law. However, as every practitioner knows, the law in each state varies. These checklists may not address the differences presented among different states’ laws, which can present important considerations that are not contained in the checklists presented.
The More the Messier: Multi-Agreement Transactions
Multiple-deal documents can invite mischief, both intended and unintended. In one deal, I was hired to attempt to unwind after it was executed related to the refinancing of a company’s real estate. At the closing, the company’s president sent an extra signature page around the table. Unbeknownst to my client, by signing this signature page, she purportedly agreed to an accelerated buy-out of the president’s stock. The president quit the very next day. Even when there are no bad actors, clients often sign blank signature pages at closings with no realization of what they have signed. Thus, they do not stop to ask their lawyers any questions. They just choose to rely solely on the lawyer’s assurances that the documents are acceptable. Only if a problem arises later will the client appreciate what he or she signed. In fact, the client may be quite surprised to learn what the client’s lawyer found to be an acceptable level of risk.
Ken Adams in “A Manual of Style for Contract Drafting” recommends two strategies to address the problem of unidentified signature pages traveling around the closing table: (1) refer to the type of the agreement in the concluding clause or (2) on the footer of the signature page state the title of the agreement and date of agreement. I prefer the latter solution. The footer clearly identifies the document.
One problem with multiple-deal documents is inconsistent boilerplate. The most problematic inconsistencies will lie if the agreements do not consistently choose (1) between litigation and arbitration and (2) the same venue to resolve the matter. Also, if the agreements do not choose one forum’s law for resolving disputes, one party may engage in forum shopping or litigation may take place in two jurisdictions.
Thus, the contract checklist will have the following multi-agreement transactions checklist:
Boilerplate
q Consistent arbitration/litigation choice.
q Consistent choice of law.
q Consistent forum selection.
Signature Page
q Signature pages identify agreement (via conducting clause or footer).
Elizabeth J. Goldstein is a member of the business group at Dilworth Paxson. Contact her via email and follow her on Twitter.
This posting is for informational purposes and should not be construed or interpreted as either legal advice on any matter or as in any way creating an attorney-client relationship.
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