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LPLC: Write it right

Every Issue

Cite as: August 2015 89 (8) LIJ, p.65

Avoiding common pitfalls when drafting will help mitigate risk and ensure that documents accurately reflect the client’s intention.

Snapshot
  • Drafting is an essential skill but potentially risky.
  • Drafting culminates in an executed document giving effect to a client’s wishes.
  • Claims show drafting pitfalls include improper use of precedent, and failure to check documents thoroughly.

The Legal Practitioners’ Liability Committee (LPLC) has received several claims in which a practitioner recycled a document used in a previous matter and failed to remove a provision inapplicable to the new matter. In one instance a practitioner failed to substitute a party’s name when copying a provision over and consequently it was unclear who the provision referred to. In other instances practitioners have tried to cut corners by recycling a document fundamentally inappropriate for the new matter.

We are also aware that some lawyers and clerks have a habit of producing a document from a precedent on their firm’s practice management system and using that as their precedent for subsequent documents. Problems can arise when the makeshift precedent lacks the updates and variables such as optional clauses that are contained in the actual system precedent.

It is important that people using precedents are properly trained and supervised. In one claim a practitioner documented a loan with mortgages over three properties and guarantees from the borrower’s directors. When there was a default on the loan and the directors became bankrupt, the property was sold for significantly less than the outstanding loan amount.

The practitioner was sued because the loan agreement inexplicably contained a limited recourse provision. Arguably only the secured properties and not the directors’ guarantees could be used to recover the loan amount. The financier alleged this clause was never requested. It was in fact an optional clause in the precedent that was left in by an employee lawyer who was not supervised properly when the practitioner was on leave.

Checking and attention to detail

Attention to detail is crucial when drafting as simple errors can be costly. One claim arose when a vendor client agreed to sell a unit that previously comprised a garage and four laundries on separate titles. The vendor had changed the use of the property by converting the laundries into residential premises.

The client provided the practitioner with all relevant titles and a diagram of the property at the beginning of the matter. However, when preparing the contract of sale the practitioner failed to include all five titles, allowing the purchaser to rescind the contract. The practitioner had not checked the file when preparing the contract, nor checked the contract carefully enough after drafting it.

The LPLC also sees claims where agreements are negotiated over many weeks and go back and forth between the parties multiple times. These ongoing negotiations and amendments make it difficult for those involved to look at the agreement with fresh eyes. In some claims obvious drafting errors could have been detected if a new pair of eyes had looked at the document.

In other cases the negotiations occur in a compressed time frame and often late at night, which also results in mistakes being missed. It is essential to allow sufficient time to check documents properly before execution.

Where possible, have a colleague or peer look over drafting that contains unusual provisions, or is undertaken in a time-pressed situation or in drawn out circumstances. Some agreements also need to be road-tested to show how critical clauses such as will provisions and contractual formulae will operate in a practical sense.

Practitioners should be mindful that while technology has assisted the drafting process, glitches sometimes occur. Problems have arisen where mark-ups and even text in soft copy documents sent from a practitioner to a client or vice versa have gone missing. Use of tracked changes also has its risks, and it is important to have a common understanding with your client and other parties about how and when changes will be marked up. Always be alert to the possibility that changes inadvertently may not be marked up. When checking a document ensure that all intended changes have been incorporated so that the final document accurately reflects the intentions of your client. n

This column is provided by the Legal Practitioners’ Liability Committee. For further information ph 9672 3800 or visit www.lplc.com.au.

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