This document serves as an introduction to commercial contract drafting, outlining important principles and practices for both in-house and external counsel. Key topics include the purpose of contracts, the role of legal communication, contract preparation, different contract forms, and common drafting pitfalls. It emphasizes the importance of understanding client goals, legal frameworks, and the dynamics between business professionals and lawyers to create effective agreements.

1. INTRODUCTION TO COMMERCIAL
CONTRACT DRAFTING
By: Dendi Adisuryo (ADCO Attorneys At Law)

2.  My Background
 Audience: In house - external counsel
 Methodology

3. Agenda
 Introduction
 Legal communications
 Contract forms and purposes
 Preliminary agreement forms
 Structure and format of agreements
 General drafting pitfalls
 Simulations

4. Introduction
 A contract is an agreement between two or more parties that
creates an obligation on all parties to perform (or not perform) a
particular action or set of related actions.
 Contract law determines what makes a particular contract
enforceable, and provides remedies when a contract is breached.
 If you are not careful, a contract may not be enforceable when you
want it to be, and may be enforceable when you don’t want it to be.
 Working with a qualified attorney on all significant issues is the only
certain way to make sure your contract works how you intend.

5. Legal Communications
 Whether a contract exists depends on whether parties have reached
a mutual agreement – which can be oral.
 Generally a written contract is entered into to protect the parties
against misunderstandings and to clarify the obligations and
particular agreement between parties.
 Contracts can cover a wide range of circumstances, both in
business settings and personal relationships. Business contracts
are varied and can cover all aspects of a business, including those
with customers, employees, investors and business partners.

6. Whats a good contract?
 A contract where each party gets what it bargained for – without any
disruption or disputes – during or post performance
 Because business people need to run their business, not spend
more time with lawyers

7. Business person vs Lawyer
 Business people: risk takers who look for practical and quick
solutions with the ultimate desire to obtain profit / grow the business
 Lawyers: risk adverse / avoiders, prone to legalese to justify their
existence, often not knowledgeable in the industry and live by
bilable hours
 The gap needs to be closed in the contract process.

8. Preparation for Contract Drafting
 Understand client’s business intention and goals
 Measure positioning of your client and the opposite party: the
purpose is to develop a bargaining position during negotiation and
implementing stage
 Understand the regulatory and legal framework of the proposed
transaction
 Understand all constraints that may be coming from the prevailing
laws, regulations and government policies, and how to minimize or
solve it effectively

9. Preparation for Contract Drafting
 Assessing constraints in negotiation process and project
implementation
 Understand the deal structure and alternatives of option
 Setting up of a strong and effective negotiation team
 Composing strategy and techniques of negotiation and drafting
 Utilization of database, R & D materials & studies
 Applying best practices and authoritative precedence

10. Preparation for Contract Drafting
 Conflict check in the industry
 BKPM Negative List of Investments
 Investment incentives, guarantees, and supports available
(regulatory or special treatment for industry or location)
 Tariff barriers; export and import constraints
 Regulatory issues (investment, industry, trade, anti monopoly,
environmental, labor, local regulations)
 Competitors in the industry
 Location of the projects: access to infrastructure
 Non-regulatory issues (local community, politics, and social issues,
governance, etc)

11. Contract forms and purposes
Below is a list of other types of contracts that are commonly used in
commercial businesses:
 Arbitration Agreement
 Asset Purchase Agreement
 Assignment Agreement
 Bonus Agreement
 Collaboration Agreement
 Consulting Agreement
 Credit Agreement
 Deferred Compensation
Plan
 Development Agreement
 Distribution Agreement
 Employee Stock Plan
 Employment Agreement
 Equipment Lease
 Franchise Agreement
 Guaranty Agreement
 Indemnification Agreement
 Joint Venture Agreement
 Lease
 License Agreement
 Loan Agreement
 Manufacturing Contract
 Merger Agreement
 Non-Disclosure Agreement
 Operating Agreement
 Promissory Note
 Repurchase Agreements
 Sales Contract
 Services Agreement
 Shareholder Agreement
 Stock Option Agreement
 Stock Purchase Agreement
 Supply Agreement
 Trademark License Agreement
 Underwriting Agreement
 Voting Agreements
 Waiver Agreement

12. Contract forms and purposes
 Shares CSPA
 One of option in acquisition
 Transfer of shares after completion of conditions
 Terms and conditions => pre closing, at closing, post closing
 Offtake
 Commitment to supply and purchase for certain period of time
 “take or pay”
 Price adjustment
 JVA
 Arrangement between partners in business
 Rights, roles, responsibilities
 Tag – drag along rights

13. Contract forms and purposes
 Farm in – farm out
 in consortium – to sell “interest”
 Common in oil and gas, or exploration business
 Investment agreement
 Similiar with JV, but easier exit
 Option to buy / convert the investment into equity

14. Preliminary agreement forms
 Memorandum of understanding
 Initial understanding on commercial terms
 A set of mechanism to proceed with the transaction
 Time schedule
 Costs of transaction
 Head of Agreement
 Spirit of transaction
 Key feature of the transaction
 Details terms will be regulated in further documents

15. Preliminary agreement forms
 Term sheet
 Tools to ease the high level management to discuss / negotiate
 Bullet points
 Summary of commercial points
 NDA/Confidentiality agreement
 Promise not to disclose information / documents obtained during the process of a
transaction
 Survival periods
 exclusion

16. Simmulation I: Terms Sheet (Acquisition)

17. Structure and format of agreements
 Parties
 Recitals
 Interpretation
 General terms
 Commercial terms
 Price Adjustment

18. Simulation II – Stage of Transaction
Simulation II.a – Payment of purchase price

19. Structure and format of agreements
 Warranties, representations and undertakings
 Liquidated damages
 Boilerplate
 Language
 Choice of law / forum
 Confidentiality
 Tax and costs
 Period
 Termination
 Notices
 Entire Agreement
 Force Majeure
 Severability
 Counterparts

20. Simmulation III – Representation, warranties
and undertaking
Simulation IIIa - Liquidated Damages

21. Structure and format of agreements
 Schedules
 Execution
 Side Letters

22. Simmulation IV – Side Letter

23. General drafting pitfalls
 Hasty, Inadequate or Non- Existent Due Diligence
 Drafting a clause or section from scratch.
 Inconsistently defining terms and phrases.
 Leaving out key details
 Lack of details in mechanism
 Not spending enough time on choice of law, forum, dispute resolution, damages, and
limitation of liabilityeaving out key details
 Relying on Word’s Track Changes feature
 Running out of time to review
 Assuming that outside counsel provided perfect work product.
 Not having a system for managing standard forms
 Forgetting what version you sent and to whom.
 What is the exact amount to be paid? When? How? Conditions of non payment?
 Delay..what the cpnsequence?
 Shipping / delivery? Demurage, dispatch
 Dont understand what we drafted [??]

24. Simmulation V – Details of Mechanism
(claim of past liabilities of tax and
outstanding payment to vendors)

25. Thanks!