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Patent & Legal | Commercial and Corporate Law

Drafting and reviewing contracts

In contrast to “normal” legal work, where a lawyer has to advise or represent a client in the context of an ongoing or already concluded matter, contract drafting requires a completely different approach from the lawyer.

This type of approach is rather foreign to many lawyers, as they have to assess a retrospective view of a particular situation in their day-to-day work. Every year, our lawyers in the Commercial and Corporate Law team draft a large number of contracts for both partnerships and corporations. Thanks to their many years of experience and ongoing training, our legal experts are able to anticipate future events. This enables them to draw up preventive regulations accordingly.

Contract creation

We involve our clients in the drafting of contracts by our lawyers and explain the advantages and disadvantages of the individual options in detail if required.

True to the saying “knowledge is power”, our lawyers in commercial and corporate law assume that fully informed shareholders are a fundamental element of long-term corporate success and can best be prevented in this way.

The drafting of contracts regularly follows a certain pattern that is always the same:

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Determining the contract objective and contract type

The first step in drafting any contract is to determine the objective of the contract and the type of contract.

This requires consideration of the purpose and the desired future cooperation between the contracting parties.

One example from practice is a planned business start-up. The first question is the legal form.
If it is important for the founder to start the business as quickly as possible, there are many arguments in favor of founding a partnership such as a general partnership (OHG) or a civil law partnership (GbR).

If, on the other hand, there are high liability risks, it is advisable to establish a corporation such as a GmbH due to the possibility of limited liability.
However, a combination of both is also theoretically possible. In this case, a partnership is founded first and after a certain growth phase of 1-2 years, the company is converted into a corporation.

Once the legal form has been clarified, however, other issues must be clarified before the contract is drawn up and the company founded:

  • Who should lead the company and how should it be led?
  • Should joining and leaving the company be easy or difficult?
  • Is the company continued if a shareholder leaves and what happens to the company if only one shareholder remains?

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Determination of the legal framework

Once the specific objectives and wishes of the contract design with regard to the company profile have been determined, it is examined whether these objectives can be legally realized at all.

The wishes expressed by the client often have to be adapted to the legal framework conditions if the founder(s) do not refrain from the specific wish after receiving appropriate legal advice. For example, a post-contractual non-competition clause is often requested by the lawyer when drafting the contract, but very few people are aware that such a clause is only effective against payment of compensation. It is therefore not uncommon for a post-contractual non-compete clause not to be agreed after all, following appropriate clarification of the legal admissibility of such a provision.

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Preparation of a draft contract

After legally inadmissible objectives have been eliminated in the previous step, an initial draft contract must now be drawn up. In the context of each provision, it is important to consider what the "worst case" scenario is and which provisions can best prevent this.

In addition, many objectives can be achieved by the lawyer through a wide variety of provisions when drafting the contract. For example, it is possible to exclude a shareholder and withdraw his share in return for payment of a settlement in a standardized manner, so that the settlement is to be paid in the same amount regardless of the reason for leaving, or in the form of a good and bad leaver provision.

Under such an arrangement, the compensation to be paid increases or decreases depending on whether the departing shareholder is at fault for leaving the company or is leaving without fault. Both regulations have their advantages and disadvantages. These must be fully explained and agreed in each case, as this is the only way to ensure that a decision is made that is as informed as possible.

The client's involvement and understanding of the contract to be concluded is of essential importance, because if a client cannot understand the content of his own articles of association, his company is regularly doomed to failure, which in such a case is probably also to a not inconsiderable extent the fault of the advising lawyer.

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Preparation of a draft contract

In the final step, the individual provisions are adjusted in accordance with the definition of the various options under the different clauses and the entire contract is carefully reviewed again.

Contract review

German and international case law and the actual application of the law are subject to constant change. Regulations that were absolutely typical a few years ago can already be regarded as null and void today – with sometimes devastating consequences. For example, until a decision by the Federal Court of Justice, a GbR was largely regarded as not having legal capacity. Nowadays, however, the GbR is generally considered to have legal capacity and there is probably no one who would argue otherwise. This may be an extreme example, but it shows that it is of considerable importance to regularly review contracts for their effectiveness and adapt them to current circumstances.

We recommend a contract review at regular intervals of two years. This is the only way to ensure that the company does not suffer significant disadvantages due to current changes in the law or legal situation. You can have your contract reviewed by our lawyers.

Have your contract checked now
Commercial and Corporate Law

Speak to our experts

Rechtsanwalt Albrecht Lauf
Managing Partner white ip | Patent & Legal
Albrecht Lauf

As a specialist lawyer for commercial and corporate law, Albrecht Lauf is a recognised expert and advises our clients from the corporate sector on corporate law structural measures such as start-ups, partnerships, shareholder disputes, capital increases and spin-offs.

Rechtsanwalt Dieter Merz
Attorney at Law | Of Counsel
Dieter Merz
Due to his many years of experience in the ongoing support of medium-sized companies in various sectors, Mr Merz primarily takes on the difficult and extensive challenges in the area of M&A processes, company succession and company acquisitions.

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