Have you ever wondered whether the nuances of transactional language matter? Consider Judge Dennis Montali’s seven-page analysis of a liquidation plan and disclosure statement in the Heller Ehrman bankruptcy.
Many of his criticisms are substantive, but he also flags some common attention-to-detail problems in transactional documents. Here are five:
1. Capitalizing common nouns that are never defined
The judge speaks: “Settlement Agreement” is not a defined term. “Self Insured Retention Amount” is not a defined term. “Dissolution Plan” is not a defined term.
Action plan: Review your agreements for capitalized words that are not proper names yet are not defined.
2. Inconsistencies between defined terms
The judge speaks: The definition in (ii) conflicts with the Disallowed Claim definition in 1.50.
Action plan: Cross-reference all definitions embedded in other definitions (or better yet, don’t use a definition to define a separate term).
3. Inconsistent treatment of operative provisions
The judge speaks: Is the use of different but similar terms (“five per cent (5%) per annum” and “five percent simple interest”) intentional or inadvertent?
Action plan: Create a simple style sheet for key parties, currencies, and formulas.
4. Faulty cross-referenced paragraph numbers
The judge speaks: “5.15” should be “5.23”; “5.27” should be “5.28.”
Action plan: Few mistakes are more common than this one. Toward the end of your review, make sure all cross-referenced paragraph numbers are still accurate.
5. Inconsistent formatting
The judge speaks: “6” should be “VI.”
Action plan: If you haven’t installed software to catch such glitches, check your section and subsection headings, and also review for consistent treatment of margins.
One last tip: Use my ten-point checklist for reviewing transactional documents: