How to write better contracts: An annotated NDA

Below is an example of an extensively edited contract. Annotations explaining some of the edits follow. If you have any questions about this agreement, or would like a professional review of your contracts, please contact us

Original - click to expand. 

Markup - click to expand.

Final edited NDA - click to expand.

Contract design and user experience:

User experience: UX is greatly enhanced by using an easily readable font, in size 12 pt. Do not justify margins, or be tempted to crowd the line spacing to make a contract fit onto a single page.

Title: Always include a straightforward title at the top of your contracts. You don’t need to specify the parties, as they will be included in the introductory clause.

Bold defined terms: When introducing defined terms, I recommend setting the term in bold in its initial usage. This makes it easier for a reader to locate where a term is defined.

Section numbering and headings: Each section should be numbered and have a short heading. This allows the reader to easily find her way around the document, and makes it easier to discuss the contract with someone else. For numbering, I recommend using Word's automatic numbering function, as it will automatically renumber paragraphs if they are moved, avoiding errors in enumeration.

Typically I make heading recommendations, but leave it up to the drafting attorney to make the final call on headings for each section. Many attorneys also wish to add a provision stating that "the titles of sections are inserted only as a matter of convenience and in no way define, limit, extend, describe, or otherwise affect the scope or meaning of this agreement."

This Nondisclosure Agreement: Although it is common to make “this Agreement” a defined term, in most cases it is unnecessary: The this in “this agreement” makes it clear what agreement you mean. (See Adams, 2.110).

The Parties: As with this agreement, there is little risk of ambiguity in referring to the parties to this agreement without creating a defined term. Always identify what kind of entity each of the parties is. In this instance, the Company is a California limited liability corporation and the Recipient is an individual.

Shall: Many attorneys (and their clients) are obsessed with shall, believing that it conveys gravitas, compulsion, or formality. However, shall should not be used to mean anything other than has a duty to. Overuse of shall can result in confusion about whether something in a contract is an obligation or not. We can simply state “Confidential Information means…”

Including but not limited to: This phrase is routinely used in contract language, and many lawyers fiercely cling to it. From a purely grammatical standpoint it is redundant, as including means “containing as part of the whole” and therefore not limited to. Additionally, but not limited to does not always have the intended effect in the courts. In another article I address but not limited to in more detail, and recommend that you draft your contracts thoughtfully, without, as Adams says, relying on “the flimsy crutch that is but not limited to.”

Semicolons: Because the series in section 1 of this contract is composed of complex elements, using semicolons helps clarify where one ends and another begins. For more, see my post on when to use semicolons in legal writing.

In all respects: This phrase is almost always unnecessary. It is overly wordy, and doesn’t add any meaning that “governed by” wouldn’t already include.

In witness whereof: This phrase is archaic and out of step with the tone of the rest of the contract. (In fact, you should delete it from all your contracts.) The concluding clause serves to indicate that the parties are signing the agreement on the date stated in the introduction, so why not just say that? There are no other dates stated in the contract to cause confusion, so specifying the date first stated above is unnecessary.