Contract Drafting – The Path to Best Practice
A Look at Best Practices in Contract Drafting and How Loio’s SaaS is Seeking to Drive Efficiency Across your Teams
Contracts make up the foundation of many industries; I operate in the Oil & Energy Industry as an independent petroleum landman or land manager, and the success of geological and geophysical probing, FEED studies, marketing initiatives, funding measures, exploration and transportation of oil and gas, and many other facets of the industry hinge on the provisions of a contract. But, how is the contract formed? Who decided which provisions would be included? Who drafted it, and how many iterations will it see from the first draft to the final version? This article is the beginning of a series that will give you a glimpse into the drafting process; and with them, I hope to discuss the players, highlight the need for collaboration, unpack the anatomy of the contract, and bring to light some emerging technology that will make the drafting process more efficient.
The Drafting Process
Let’s first talk about the drafting process – and not simply inside the Oil & Energy Industry, but generally across most industries. Creating a contract requires the input of at least two parties, and this process can be as simple as one party drafting the contract and the other party simply saying, “Ok, that works for me.” Or, it can be a complex process that involves multiple iterations and constant negotiations between the parties and their teams over the meaning of key terms and the inclusion or omission of key provisions. The common thread in contract drafting across all industries are:
- Negotiations (however simple), and
- A Written Agreement
A third strand that is equally as common (and arguably the most important) is:
- The Support Team
The support team can be defined as those who are not parties to the contract but assist in its confection. That is, think of a team of chefs and sous chefs creating a meal to present to a panel of judges (yes; Alton Brown and Iron Chef America is rolling through my mind, too). There are, to be sure, roles that each member fits into and hierarchies to recognize, but the notable point is that each member of the team participates in creating the meal.
The support teams
To return to the Oil & Energy Industry, standard business agreements include Oil and Gas Leases, Joint Operating Agreements (JOAs), Farmouts, Assignments, Road, Waste, Noise, and other Permits, to name a few. The parties to an agreement might consist of two or more oil and gas companies, or an oil and gas company and a landowner or mineral owner, or an oil and gas company and a county’s board of commissioners or a parish’s police jury. And the team of professionals that support each of these parties during the drafting process are generally comprised of attorneys, paralegals, and land managers (either an independent landman or an in-house landman). Our focus today is on the support team and the roles each might play in confecting a great contract.
The attorney is the liability barrier for the client; they hold a license to practice law and are often responsible for the creation of the contract. Theirs is the obligation to draft the contract with statute and case law in mind to avoid unenforceable or onerous provisions. They also (often) carry liability or errors and omissions insurance which serves as an additional protective layer for their client in case they make a mistake. But what is not to be lost in the degree on the wall and the insurance coverage is the value of the attorney’s mind.
Contract drafting from the attorney’s perspective is thinking preemptively to capture in the contract those provisions that not only serve the purposes of today, but those for tomorrow and further into the future.
The paralegal serves a vital role inside a law firm by coming alongside of the attorney and assisting them in their practice. Their assistance often emerges in the following two ways:
- They serve as a second brain in legal matters
- They drive efficiencies by developing best practices
The purposeful paralegal knows the law, speaks the law, writes the law, and even dreams of the law (yes, this really happens). Now, I do not intend to label a paralegal the same as an attorney, but I want to point out that paralegals are trained to know the law, to understand rules of procedure, and to speak legalese with their attorneys. They perform their services under the direct supervision of an attorney and add considerable value to practice of law. In the realm of contract drafting, the paralegal has a repository of forms and clauses to draw from when preparing a contract for the attorney to review; and, at times, they attend meetings to understand the client’s needs before they choose the particular contract form or decide which clauses to insert into the contract for the attorney to review and approve.
Contract drafting from the paralegal’s perspective is ensuring excellence and efficiency in the final draft by leveraging their knowledge of law and procedure and forever evolving in the realm of best practices.
Land manager’s perspective
The land manager is somewhat unique to the Oil & Energy Industry. Theirs is the position of a co-planner with the client – and these clients often include oil and gas exploration companies, midstream pipeline companies, land and mineral owners, attorneys, state and federal agencies, among others. The independent landman is often in the field working with geologists, engineers, construction crews, landowners, mineral owners, state permitting agencies, guard dogs, cows, and the occasional rattle snake (yes, even rattle snakes). In many ways, the land manager serves the same role as the paralegal – to come alongside their client and assist them with their day-to-day activities. In the realm of contract drafting, the mindful land manager assumes the role of a thinker and planner – that is, the land manager understands the legal and regulatory scheme of his industry and seeks to bring that knowledge to bear during the drafting stages of a contract. Landmen understand how certain provisions will impact their client’s current and future plans and are poised to act preemptively to avoid future disasters for their client.
Contract drafting from the land manager’s perspective is understanding what his client’s goals are and ensuring that the correct questions are asked, and the appropriate provisions are reviewed before the contract is finalized.
Contract drafting is a key aspect for businesses all over the world. I recall reading in the Bible where it was the practice to reduce a sale of land to writing and have witnesses acknowledge the transaction; and, thereafter, to seal those deeds in earthen jars for preservation and future proof of ownership. Indeed, it may be said that the legal profession is dedicated to nothing else, as they oversee constitutional contracts between a nation and its citizens, marital contracts between a husband and wife, state and municipal contracts, business contracts, equity and natural law contacts (implied duties between humans). In all these contracts, the parties are the prime movers and their support teams are the prime doers; and a good support team must never be taken for granted. Attorneys, paralegals, and land managers are three primary support roles in contract drafting within the Oil & Energy Industry and their individual expertise can lead to a superb contract if there is ample collaboration.