By Binziad Kadafi
Contract Drafting and Negotiation Method
The rapid development of international joint venture as a form of business organization is facilitated by the increasing globalization of the markets between the 1970s and 1980s and the fall of relevant barriers in the 1990s to the transnational business activities. One of the reasons behind the massive use of international joint venture at the international arena is the fact that it can serve as an effective mean to achieve certain set of goals. Some international joint ventures are formed by international business actors to open an access to a country that applies or used to apply strong restriction towards direct foreign investment. International joint ventures are used as well in order to expedite company’s ability to enter into foreign markets by benefiting from not only the available labor, established operations, and captive market of the partnering company, but also their knowledge and familiarity with the local environment and the labyrinth of local regulations and politics.
Other goals that can be met by choosing international joint venture as a form of business organization include: (1) promoting transfer of proprietary technologies and processes across border; (2) encouraging synergies between the differentiated but complementary strengths of parent companies; (3) reducing risk, particularly in certain unstable industries; and (4) increasing one company’s opportunity to export its products and expand its business overseas.
Despite of those various advantages, the establishment of cooperation in joint venture that cuts across national boundaries may expose the parties to a more complex difficulties compared to the establishment of other conventional business cooperation. The difficulties that parties might deal with in the formation process, or even in the operation of the venture once it is being formed, are magnified not only by legal issues, but also by linguistic and cultural differences. It is therefore, finding a suitable local partner is usually the single most important decision, because the wrong partner can lead to conflict, turmoil, and, in some cases, the premature termination of the joint venture. One good advise for a company when looking at several potential partners to form an international joint venture is to carefully examine not only the business experience, assets, services, and expertise that the potential partner may bringing to the venture, but also the cultural, linguistic, political, and social advantages and disadvantages of the partner.
Since differences in language, behavior, and attitude are instantly apparent, the ability to resolve difficulties derived from legal, linguistic, and cultural differences would become a key element in order to guarantee the effectiveness and longevity of the venture. The role of lawyers as the representatives and negotiators on behalf of the parties in addressing those difficulties is very essential. In many cases in this kind of situation, lawyers are required to look even beyond the legal tasks to the underlying reasons for the transaction and are encouraged to ask questions and obtain information that ordinarily may not be considered critical to the purely legal aspects of the transaction. Lawyers play a crucial role in bridging and accommodate those differences by employing the right method of negotiation. Skilled negotiations on both sides may save the transaction, while ineptness may result in both parties not only walking away from the deal but also walking away with such distaste that they never again seek to do business with each other.
Among differences that complicate the formation process of international joint venture, disparities in language are an important consideration because they increase the potential gaps and errors in communication, which in turn will hinder the engagement of principled negotiation, that is negotiation which begins when both parties fully understand and try to appreciate the fact that each brings both conflicting and also compatible interests to the transactions. Disparities in language begin with the drafting process itself and lead to two primary questions. Will the contract be drafted in a primary language, and then translated into a secondary language? Or will the process be arranged equitably collaborative with initial drafts made in each language, resulting in a final version which comes with negotiation from these two starting points?
1. Unilateral Drafting and Negotiation
If the contract is initially drafted and negotiated in one language, or the language of primary party, to be translated into the other, referred to as the language of secondary party, the primary party will probably give more input into the content of the contract. Since drafting contractual terms in a foreign language makes meaningful participation in the drafting process difficult, the secondary party will tend to limit its participation to negotiation, by only trusting the primary party to incorporate results into the contract. Ownership of language is transformed into ownership of the drafting and negotiation process, and as the primary party dominates contract creation, the process becomes essentially unilateral. As a consequence, the notion that negotiation is a function of leverage, that is the allocation of power or control between the two sides, cannot be upheld in this situation.
In this method of drafting and negotiation, the primary party is likely to realize power benefits by virtue of the advantage associated with contracting in the primary language that extend beyond the establishment of favorable contract terms. While the secondary party relies on the primary party to include every single negotiated provisions as accurately as possible and in good faith to the contract, the dependency inherent in the status of the secondary party increases the power of the primary party. In turn, the ambiguities in the resulting contract may also be interpreted in favor of the drafting party.
2. Collaborative Drafting and Negotiation
As opposed to unilateral method, dual-language contract development is likely to decrease power disparities in the negotiation. When the contract is developed through the proposals of each party and formulated in the language to which every party is accustomed to, neither party has the advantage of dominating the process. Since there is no dominant party in this regard, the parties have greater potential to negotiate on a more equal manner.
When the contract is drafted and negotiated in the language of each party, the substantive participation of both is encouraged. The balance of power represented by joint participation in drafting and negotiation process reduces the potential for opportunistic behavior of one party, and consequently, the final document would become a more accurate reflection of the real substance of the negotiated deals.
Dual-language drafting and participation of dual-party in the negotiation allows the parties to manage cultural and linguistic misunderstandings far before the parties are formally bound to pursue the venture implementation. The resulting product of this method tends to be a contract that has been thoroughly examined, encouraging resolution of areas of potential conflict in advance. Of course disputes are less likely to arise when the contract could accurately reflect the expectations that each party developed during the dealing process.
From a strategic view, international joint venture contracting which encourages mutual participation also encourages acceptable terms under culturally distinctive norms, expectations and values. The overall result of collaborative drafting will be an enhancement of the quality of the contract as a tool for the growing, developing relationship between two distinctive parties.
However, there are also some downsides of the application of collaborative method. When both parties are to participate in the contract drafting process through parallel discussions in separate languages, they must make sure that these separate efforts are integrated. Language barriers that encourage parties to develop separate versions of agreements in isolation may result in two distinctive strategies. It could in turn encourage inconsistencies between the parties’ stated goals, objectives, and expectations.
In most of international contracting scenes, the tendencies to apply unilateral method have been very strong. In such method, the draft of agreement are mostly prepared and proposed in either English, due to its attribute as the most used international language, other international language, or the language of one party. This approach placed the party and their lawyers whom more accustomed to the designated language as a primary party in the negotiation as opposed to the other, whom due to language selection disadvantages turned out to be secondary party.
Although there may perhaps no clear evidences that could show that the more accustomed to designated language side totally dominated the process and took benefits from their superior position as primary party, and although the other party may somehow significantly participate in the negotiation and made substantial contribution to the development of the draft of agreement –which is contradictory to the general tendency/characteristic of secondary party– however, consideration to employ collaborative method in the contracting in international settings would still be relevant. This advice does not necessarily mean that collaborative method is more preferable compared to unilateral method, as neither is perfect and the options involve inevitable trade-offs. However, in the drafting and negotiation of international contract, like joint venture agreement that involves more complexities caused by not only differences of legal systems, but also cultures, attitudes, and languages, the use of collaborative method would likely be able to address such complexities by the virtue of its inherent quality to bridge those differences effectively.
Language of the Contract
There are many types of legal writing. From judicial opinions, legislations, private agreements, including correspondence with clients or third parties. Each type of legal writing has its own substance and style. However, the fundamental goal of each writing is the same, to communicate effectively. Empirical studies, however, indicate that a significant percentage of legal writing is difficult to understand, because they use customary language of lawyers which include distinctive words, meanings, phrases and modes of expression. This result get labeled “bad legal writing”, a label used to denote ineffective legal writing, that is, writing that does not communicate effectively.
Bad legal writing is attributed to many factors, including the lack of knowledge of lawyers on basic grammar and syntax. Many accused that lawyers can’t say anything simply. Lawyers have no judgment and don’t know what to include and what to leave out from their writing. Bad legal writing has also been attributed to fear, inertia, and self interest, as well as various external factors.
A fundamental reason for bad legal writing is that lawyers ignore the writing process. They are so focused on the substance they want to express which makes them forget to focus on the writing process. It is true that no matter what the subject matter of the writing, a lawyer must have a comprehensive substantive understanding of that subject matter. Because, only if the lawyer understands the relevant facts and laws, can the lawyer begin to draft an appropriate writing. However, lawyer must also understand and apply the writing process. Failure to apply the steps of the writing process will often result in bad legal writing which include failure to identify the intended audience, organize and write carefully, also failure to edit and rewrite.
There are several reasons that lawyers resist changing the way they write, which fall into four general categories. First, some lawyers do not perceive a problem with their legal writing. Because many of their legal writings generally accomplish their goal, they feel that there is no need to fix them.
Second, some lawyers take comfort in the traditions of legal writing, namely the formalistic language as a commonly followed tradition in legal writing. One reason why do lawyers like formalistic language is because it has been judicially interpreted so they could take comfort in its certain meaning. The traditional language and style is “tried and true”. Therefore, it is familiar and has proved successful in the past. Another reason is that lawyers take pride in the elegance of the formalistic language, as the majesty of the language was designed to generate respect to legal profession. The two reasons are then complicated with the fact that many clients still seek a degree of formality in their legal documents. Because, although many clients have been complaining that formalistic legal writing is incomprehensible to them, however they are accustomed to its form.
Third, some lawyers are not willing to bear the costs, both actual and potential costs, caused by the change of their legal writing style. As an actual cost, rather than drafting documents from scratch, lawyers can save time to generate documents more efficiently by using and adapting standard forms or precedents. Unfortunately, the use of forms and precedents encourages lawyers to skip essential steps (one frequently skipped step is the organization step) in the writing process and perpetuates bad legal writing. The potential cost is that the new language requires judicial interpretation. Lawyers are concerned about their reputations and the threat of malpractice claims if the new language they are using is not in fact better than the traditional one, which has been judicially interpreted through the previous long litigation processes.
Fourth, lawyers often lack of adequate competence and skill to change their legal writing effectively, even if they realize a problem in it. Many lawyers lack of sufficient training in legal writing which has its root from their legal education. Throughout law school, by depending heavily on existing legal writings for their learning, law students are bombarded with bad legal writings, which in turn make them tend to emulate the writing style they read.
In fact, writing the contract in plain language will of course bring some benefits to the drafting and negotiation process. The first benefit of the use of plain language in the contract is that it can increase efficiency of reading and ease of understanding. Plain language gives also potential for reducing mistakes and resulting fewer errors. The other benefit that plain language can give is its effect on the legal profession’s public image. Lawyers have never had a good press, and a chief source of ridicule is the way in which lawyers draft documents and the way that lawyers communicate –or rather, fail to communicate– with their clients. According to one critique, lawyers’ writing style has at least four outstanding characteristics: (1) wordy; (2) unclear; (3) pompous; and (4) dull. The other benefits of the use of plain language in the contract is that it allows lawyers to comply with statutory requirements, which, in many countries, including the U.S. requires lawyers to produce certain documents in plain language, in order to be more accessible to the clients and public in general.
The following areas are few preliminary suggestions to improve the effectiveness of legal writing as an essential component of competent representation:
- Use the active voice when attributing action or obligation. The passive voice is appropriate in some circumstances. However, in contracts and legislation, for the sake of clarity, obligations should be expressed in the active voice and specifically attributed to the obligated party. One of the benefits of the use of active voice is that it takes fewer words than the passive voice. A provision that serves as good example of this rule is: “Any intellectual property created or improved by the Company (“New Intellectual Property”) pursuant to this Agreement shall be owned by the Company.”
- Avoid redundancy. Although lawyers may think say thing twice makes it clearer, redundancy often creates ambiguity. Additionally, many redundancies that had historic relevance are no longer necessary. For example, why do lawyers use the term null and void? According to the dictionary, either null or void by itself would do the job. The use of term null and void can be found in a clause of joint venture agreement as follow: “Any purported gift, sale, … in contravention of the terms of this Agreement shall be null and void.” Not only the term “null and void”, the use of term “force and effect” can also be considered as redundant. Again, an example on this term can be found in a joint venture agreement: “[B]ut every other provision of this Agreement shall remain in full force and effect…”
- Unless stressing negative, draft in positive. Lawyers should avoid double negatives, which can often create confusion. For example, “purchaser cannot opt not to purchase unless the following events occur” is difficult to analyze. “Purchaser must purchase unless the following events occur” is much easier to understand.
- Poor use of definitions. Definitions have a proper role to play in legal documents. The main one is to give a precise meaning to words and phrases used in the document. The improper use of definition can be found in an example of agreement as follow, where it explains only the use of capitalized terms: “Capitalized terms used in this Agreement shall have the meaning ascribed to them herein whenever they are used in this Agreement, unless otherwise clearly indicated by the context.”
- Avoid the use of frequently litigated words and phrases. Traditional legal drafters tend to assume that well-litigated words and phrases should be retained. However, it would be more logical to be suspicious of constantly litigated words and phrases, because any word or phrase that has produced frequent litigation should surely be shunned. The word “forthwith” has led to a great deal of litigation, because it is too open-ended to admit of certainty. Many judicial decisions discuss the problem of the use of this kind of word. An example of the use of this word in an agreement is as follow: “In the event of dissolution of the Company, the entire outstanding Loans and accrued interest shall forthwith become repayable without demand.”
- Avoid long sense bites. Another characteristic of traditional legal drafting is long slabs of unbroken text. This produces impenetrable text, confounding comprehension. One example could be best representing this problem: “Neither the performance of this Agreement nor the consummation of the transactions contemplated hereby or thereby, will result in a breach of or default by it under the terms or provisions of, or result in a breach of or default under, or the acceleration of any obligation under, any material agreement, instrument, document, decree, order, judgment or other restriction to which it is a party or by which it or its assets may be bound or affected.”
- Avoid the use of legalese and jargon sentence. Legalese is more than merely the ‘language of lawyers’. Rather, it is the language that lawyers would not use in ordinary communication but for the fact that they are lawyers. All these words, such as “herein, aforesaid, etc.”, give the clause a legal feel without serving any legal purpose. An example can be found here: “Neither the performance of this Agreement nor the consummation of the transactions contemplated hereby or thereby.”
- Not to follow peculiar linguistic conventions. Lawyers often adopt linguistic conventions that have no basis in law, logic, or modern usage. For instance, the use of language “date hereof” in agreement: “US Party hereby agrees upon the Effective Date hereof,” instead of “today”. Or the use of language: “[F]or the purpose of amicably resolving such Deadlock,” instead of “for resolving deadlock”.
- Use verbs instead of nouns. This practice of nominalization might be thought to achieve a certain formality of tone, but it is at the expense of effective communication. Examples of this problem can usually be found in the Recitals part of an agreement: “WHEREAS the Parties have entered into Letter of Intent dated September 24, 2007 for the creation of this Joint Venture Agreement.”
A shift from a unilateral method of contract drafting and negotiation into a collaborative one in representing clients in international contracting, primarily the formation of international joint venture, is highly recommended. This method, which allows parties to draft and negotiate the contract in the language they are accustomed to, will in turn ensure the participation of both parties who bring differences to the dealing process and increase the likelihood of resulting a good agreement, in a sense that it accurately reflects the essence of negotiated deals. However, in order to avoid the development of different contract versions in isolation, parties engaged in this method should meet frequently during the drafting process or should attempt to reconcile their drafts in one final, intensive round of negotiations.
As to the use of contract language, when writing, lawyers often forget to consider who will be reading the document. Lawyers seldom write for a single audience. In an international setting like the international joint venture contracting, where the audience comprised with parties who bring not only different interests, but also different nationalities, legal systems, cultures, attitudes, and languages, the need to use plain legal language shows much greater significance.
One of the main sources of bad legal writing is the technique of revising forms and precedents, rather than drafting from scratch, to save time in drafting contract. When lawyers rely on forms and precedents, they are much less likely to invest time examining “boilerplate” provisions that they do not perceive as transaction specific. Therefore, one alternative to address this issue is by drafting all legal writing from scratch based on legal principles that is likely to be applied to the surrounding facts in client’s situation. However, this is a time consuming and expensive process. Another alternative that will likely accommodate the production of effective legal writing without investing too much time and efforts by drafting contract from the scratch is to rewrite all forms in plain language.
Many rules of modern legal writing that have been introduced by various legal scholars should be used as a checklist in order to ascertain that any types of legal writings have met the minimum requirement of effective writing. To promote modern legal writing, lawyers should have allocated enough time, not only but primarily after the conclusion of any negotiations, to check the conformity of legal documents they have resulted to such rules.
 This article was published in Jurnal Hukum & Pasar Modal. Vol. VII. Ed. 10/ 2015 (p. 153-166), and was originally developed as an assignment paper in one of author’s courses during the study at the University of Washington School of Law.
 Steven R. Salbu, Parental Coordination and Conflict in International Joint Ventures: The Use of Contract to Address Legal, Linguistic, and Cultural Concerns, 43 Case W. Res. 1221 (1993), at 1223.
 Id., at 1224.
 Daniel K. Chow & Thomas J. Scoenbaum, International Business Transactions, Problems, Cases and Materials, (2005), at 526.
 Salbu, supra note, at 1225.
 Id., at 1226.
 Chow, supra note, at 526.
 Salli A. Swartz, International Joint Ventures: Practical Issues and Helpful Hints, in International Practitioner’s Deskbook Series, Joint Ventures in the International Arena (Darell Prescott & Salli A. Swartz ed., Section of International Law & Practice, American Bar Association, 2005), at 121.
 Salbu, supra note, at 1226.
 William F. Fox, Jr., §§ 5.1-5.5, Negotiating International Commercial Agreements in International Commercial Agreements: A Primer on Drafting, Negotiating and Resolving Disputes, 3rd ed. (Kluwer Law International 1998), at 201.
 Robert J. Walters, Now That I Ate the Sushi, Do We Have a Deal?” The Lawyer as Negotiator in Japanese-US Business Transactions, 12 NW.J.Int’l L. & Bus. 335. 1991, at 336.
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 Salbu, supra note, at 1241.
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 Salbu, supra note, at 1245.
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 Salbu, supra note, at 1246.
 Id., at 1247-1248.
 Id., at 1250.
 Id., at 1251.
 Id., at 1251-1252.
 Id., at 1251.
 Id., at 1253.
 Id., at 1255.
 Id., at 1258.
 Debra R. Cohen, Competent Legal Writing-A Lawyer’s Professional Responsibility, 67 U. Cin. L. Rev. 491 (1999), at 495.
 Id., at 496.
 Id., at 497.
 Id., at 505.
 Id., at 509.
 Id., at 505.
 Id., at 510-511.
 Id., at 511.
 Id., at 505.
 Id., at 513.
 Id., at 514.
 Id., at 505.
 Id., at 515.
 Id., at 517.
 Peter Butt & Richard Castle, Modern Legal Drafting, A Guide to using Clearer Language (2006), at 114.
 Id., at 118.
 Id., at 119.
 Richard C. Wydick, Plain English for Lawyers 5th ed. (2005), at 3.
 Butt, supra note, at 121.
 Cohen, supra note, at 519.
 Id., at 521.
 Wydick, supra note, at 28.
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 Wydick, supra note, at 17.
 Id., at 18.
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 Butt, supra note, at 187.
 Id., at 140.
 Id., at 141.
 See Id.
 Id., at 142.
 Id., at 144.
 Id., at 151.
 Nominalization is a base verb that has been turned into a noun. See Wydick, supra note, at 23.
 Butt, supra note, at 153.
 Id., at 1253.
 Cohen, supra note, at 497-498.
 Id., at 498.