Introduction to

Tech Contract Drafting

&
the Elements of a
Commercial Agreement
 The Boilerplate
Guesses?
Boilerplate refers to those standard clauses (and agreements) that are often re-
used and re-cycled by lawyers.
Also known as… “standard form” agreements.
Useless trivia – on the origin of the word
Term originates from the newspaper industry when newspapers were
printed using metal plates.
Lead was boiled and poured into mats forming a metal plate used for
printing the newspapers.
Since changes could not be made to the “boilerplate” the term was
adopted to refer to clauses in commercial agreements that remain
unchanged.
Alternatively, some suggest that the word originates from identification
plates attaches to boilers during manufacturing.
The plates contained blank boxes on which standard information about
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the boiler would be stamped.
 The Boilerplate
Advantages?
Boilerplates provide a framework for negotiations.
Otherwise solicitors would be arguing about meaningless
concepts.
Speed…
Client wants a confidentiality agreement “now”.
As a learning tool for “green” solicitors?
Disadvantages
Tired, wordy, useless terms are kept alive…
“hereof”, “wheretofor”, “wherefrom”, “witnesseth”
Has anyone EVER used these words before?
Irrelevant clauses are thrown in…
Is time really “of the essence” in EVERY agreement?
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4
Disadvantages (cont’d)
Sloppy drafting leads to professional negligence, and can affect
your reputation
Casano v. C & K Express Inc., [1991] B.C.J. No. 2227 (CA)
The parties entered into a "document" dated Nov. 15, 1985
which purported to transfer all of Casano's shares in Delbrook to
the Defendant.
Although it may be a misnomer to so describe it, I shall
refer to this document as the "agreement"....
This agreement, although perhaps prepared professionally,
leaves much to be desired. Its woefully vague and imprecise
language is the cause of the difficulties these parties encountered
in trying to complete their bargain.
Some written documents are described as an agreement to
make an agreement: this document would more accurately
be described as an agreement to have a law suit.
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Basic Layout of a Commercial Agreement
A commercial agreement generally contains the following:
Title;
Date;
Parties;
Recitals;
Consideration;
Definitions and Interpretation;
Body of the agreement (which includes certain boilerplate
clauses like force majeure, etc.)
Testimonials and Attestations
Signatures, witnesses, seals
Schedules and appendices. 6
 Title
Usually capitalized (don’t really know why –
“they” claim that really important things in a
contract are capitalized for emphasis, but I’m
not convinced)
AGREEMENT OF PURCHASE AND SALE
SOFTWARE LICENSING AGREEMENT
CONFIDENTIALITY AGREEMENT

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 Date
This Agreement is made February 3, 2005.
This Agreement entered into this 3rd day of
February, 2005.
This Agreement dated this 3rd day of February,
2005 with effect as of the 15th day of January,
2005.
This Agreement dated this 3rd day of February,
2005 (the “Signing Date”) with effect as of the
15th day of January, 2005 (the “Effective Date”).
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 Parties
This Agreement is made February 3, 2005 between…
This Agreement is made February 3, 2005 among…

Now this is where Law School gets in the way of real

life…
You would think that “between” is used when there
are two parties to the transaction… i.e. between
IBM Jamaica and Xerox Jamaica.
Whereas “among” is used when there are more than
two parties… i.e. among IBM Jamaica, Xerox
Jamaica and HP Jamaica.
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 Parties
However, it has been “declared” that even in agreements with more
than two parties that “between” is correct, and “among” is wrong!
(see, Aird & Berlis, Business Acquisition Agreements – An Annotated
Guide)
See also, the commentary in the Merriam-Webster dictionary under
the definition of “between”:
“There is a persistent but unfounded notion that between can be
used only of two items and that among must be used for more than
two.
Between has been used of more than two since Old English; it is
especially appropriate to denote a one-to-one relationship,
regardless of the number of items….
Among is more appropriate where the emphasis is on distribution
rather than individual relationships <discontent among the
peasants>…” 10
 Parties
For our purposes, we will assume that the parties to a
commercial transaction are corporations…
“ABC Technologies Ltd., a corporation incorporated
under the laws of the Province of Ontario”.
Be careful about saying that the company is “duly
incorporated”
Why?
It has been suggested that this is akin to giving a
legal opinion as to incorporation and valid existence
of the corporation! (see, Wilfrid Estey, Legal
Opinions in Commercial Transactions, 2nd ed.) 11
 Parties
SOFTWARE LICENSE AGREEMENT
This Agreement dated this 3rd day of February, 2017, is made,

BETWEEN:
IBM Jamaica Ltd..,
[Insert Full Postal Address]
(the “Licensor”)
OF THE FIRST PART
AND
HP Jamaica Ltd.,
[Insert Full Postal Address]
(the “Licensee”)
OF THE SECOND PART
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Some commentary on the previous slide…
It is best to define the parties by what they “are”…
It is best to call IBM the “Licensor” – because they will be
licensing something
It is best to HP the “Licensee” – because they will receive the
benefit of a license from the licensor
ALSO, it is useful to set up the agreement in terms of Licensor &
Licensee because it serves as a useful template or precedent for
other licensing negotiations.
“OF THE FIRST PART” and “OF THE SECOND PART” are
meaningless phrases in today’s society…
There is some suggestion that these phrases arose when scribes
would record agreements (“scriveners”)…
But for modern purposes I would suggest that they are useless…
Sometimes you will also “Party of the First Part” and “Party of
the Second Part” – again, useless gibberish. 13
 Recitals
This is the part of the contract after the parties are named that
starts with “WHEREAS”
I personally don’t like the use of “WHEREAS” but it seems to
have been accepted by the courts as a legitimate way of
introducing the recitals of an agreement…

WHEREAS, the Licensor licenses computer software, leases

and sells computer hardware and provides maintenance and
support services for both software and hardware;
AND WHEREAS, the Licensee is desirous of obtaining a
license for Licensor’s Access to Justice Software Program
(version 1.0) and certain maintenance and support services for
that Software Program.
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There is usually some debate as to whether Recitals actually form
“part” of the agreement…
In other words, are recitals just “fluff” or do they add some
meaning to the agreement?
In Ex parte Dawes, In re Moon, (1886) 17 Q.B.D. 275( C.A.) Lord
Esher held that:
“… there are three rules applicable to the construction of such
an instrument.
If the recitals are clear and the operative part is ambiguous, the
recitals govern the construction.
If the recitals are ambiguous, and the operative part is clear, the
operative part must prevail.
If both the recitals and the operative part are clear, but they are
inconsistent with each other, the operative part is to be
preferred.”
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 Canada Trust Co. v. Ontario Human Rights
Commission, 74 O.R. (2d) 481 (C.A.)
WHEREAS the Settlor believes that the White Race is, as a whole, best
qualified by nature to be entrusted with the development of civilization and
the general progress of the World along the best lines:
AND WHEREAS the Settlor believes that the progress of the World
depends in the future, as in the past, on the maintenance of the Christian
religion:
AND WHEREAS the Settlor believes that the peace of the World and the
advancement of civilization depends very greatly upon the independence, the
stability and the prosperity of the British Empire as a whole, and that this
independence, stability and prosperity can be best attained and assured by the
education in patriotic Institutions of selected children, whose birth and
training are such as to warrant a reasonable expectation of their developing
into leading citizens of the Empire:
AND WHEREAS the Settlor believes that, so far as possible, the conduct of
the affairs of the British Empire should be in the guidance of christian (sic)
persons of British Nationality … 16
“In holding that the provisions of the trust did not violate either the Human
Rights Code, 1981 or public policy, McKeown J. took into account only the
operative clauses of the trust document and the second sentence of the fourth
recital.
In his view, the balance of the recitals were merely expressions of the settlor's
motive and, hence, irrelevant to a determination of the issues before him.
While he found the motives offensive to today's general community, he
concluded that these recitals could play no part in interpreting the trust
document or in resolving the question of whether the trust contravened
public policy.
In my opinion, the recitals cannot be isolated from the balance of the trust
document and disregarded by the court in giving the advice and direction
sought by the trustee in this case. The document must be read as a whole.
While the operative provisions of an instrument of this nature will ordinarily
prevail over its recitals, where the recitals are not clearly severable from the
rest of the instrument and themselves contain operative words or words
intended to give meaning and definition to the operative provisions, the
instrument should be viewed in its entirety. That, in my opinion, is the
situation in the case of this trust document.” 17
“... the recitals were intended to give guidance and
direction to the General Committee in awarding
scholarships.
They go beyond the restriction in the second sentence of
the fourth recital excluding "all who are not Christians of
the White Race, all who are not of British Nationality or of
British Parentage, and all who owe allegiance to any
Foreign Government, Prince, Pope or Potentate, or who
recognize any such authority, temporal or spiritual" from
benefits in the Foundation.

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 Canada Trust Co. v. Ontario Human Rights
Commission, 74 O.R. (2d) 481 (C.A.)
An in case you were wondering…
The Court held that:
The trust violated public policy.
It was premised on notions of racism and religious superiority that
contravened contemporary public policy.
However, the trust should not fail.
The cy-pres doctrine should be applied and the trust should be brought into
accord with public policy so as to permit the general charitable intent to
advance education to be implemented.
The recitals should be struck out and all restrictions with respect to race,
colour, creed or religion, ethnic origin and sex should be struck out.
From a practical, drafting perspective, it is useful to include a phrase that the
“foregoing recitals are true and correct” or that “the parties [hereby]
acknowledge and declare that the foregoing recitals are true and correct in
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substance and in fact”
 Consideration
NOW THEREFORE THIS AGREEMENT WITNESSES that in
consideration of the mutual covenants and agreements herein and
the sum of one dollar ($1.00) and other good and valuable
consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties agree as follows:
NOW THEREFORE in consideration of the premises and the
mutual covenants and agreements herein, the parties hereto hereby
covenant and agree as follows:

I think that most of this language is rubbish.

In a commercial agreement there will ALWAYS be consideration
flowing between the parties… why can’t people simply say:

The Parties agree as follows: 20

 Definitions and Interpretation Provisions
Perhaps unsurprisingly, the definitions section is where certain words or
phrases are defined.
Restricting definitions… e.g. Vehicles means cars only
These are the least ambiguous types of definitions.
Enlarging definitions… e.g. Vehicles includes bicycles
These are intended to provide flexibility for future events or
developments, but they are very ambiguous
In the example above, would a tricycle be a vehicle too?
Confining definitions… e.g. Vehicles do not include modes of
transportation without engines.
These add clarity to the definitions but still leave room for
ambiguity.
Definitions are usually capitalized and in quotation marks…
“Program” means the software to be licensed by Licensor to the
Licensee as more particularly described in Appendix A. 21
Some tips on the Definition Section
Do not define the obvious!
“Signature” means a unique identifier that identifies a natural or
legal person by name, title or both.
Do not define terms that will only be used once.
For instance, if “remote access” is only mentioned once, there is
no need to define it in the definitions section.
Simply define it in the section or appendix that deals with remote
access.
Do not create “forced” definitions.
E.g. For the purposes of this Agreement, wheelchairs, tricycles,
strollers and roller blades are considered forms of mechanical
conveyances…
E.g. For the purposes of this Agreement, alcohol also includes
mouthwash and aromatic bitters. 22
 Some tips on the Definition Section
Do not “over define” a term… (e.g. the definition of “confidential
information”)
Keep the definitions consistent! – “day” shouldn’t mean “business
day” in one part of the agreement, and then mean “calendar day” in
another part.
Do not draft “ping-pong” definitions…
Any guesses?
These are definitions that include other defined terms, other
provisions of the agreement, or even other provisions of other
agreements (like an earlier confidentiality agreement).
E.g. “Confidential Information” means Programs, Software (as
described in Appendix A), trade secrets, know-how, Manuals, and
other such information set out in the Confidentiality Agreement
between the Parties dated March 1st, 2008 and hereby
incorporated into this Agreement by reference. 23
 Entire Agreement

You should include a phrase that specifies that the

agreement represents the “entire agreement” of the
parties...
This Agreement supersedes and invalidates all other
commitments, representations and warranties
relating to the subject matter hereof which may
have been made by the parties either orally or in
writing prior to the date hereof, and all of which
become null and void from the date this Agreement
is signed...
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 Entire Agreement
Why?
Certainty
Parol evidence rule
“When the terms of a contract have been embodied in a
writing to which both parties have assented as the definite
and complete statements thereof, parol evidence of
antecedent agreements, negotiations and understandings is
not admissible for the purpose of varying or contradicting
the contract so embodied.” Corbin on Contracts (1952) p.
534
Beware of an “entire agreement” clause that inadvertently
excludes things you WANT included...
For instance, would the clause inadvertently exclude previous
confidentiality agreements? Or schedules to be added later? 25
 Software License
Agreements

Agenda
Types of intellectual property
Basic elements of a license agreement
Discuss and review a sample license
agreement
 Types of intellectual property
Before we discuss software licensing agreements or IP
licensing agreements, it is useful to give an overview of the
different types of IP rights.
Patents
Trade-marks
Copyright (and Moral Rights)
Industrial Designs
Integrated Circuit Topographies
Confidential Information
Plant Breeders’ Rights, and Personality Rights (maybe)
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 Software License Agreements
Software is licensed not sold…
Understanding the basics of licensing agreements is essential to
technology contracting.
Software licensing agreements will also help you understand
other types of licensing agreements – like franchising, celebrity
endorsements, etc.
Basic elements of a license agreement

Subject Matter Termination

Exclusivity Representations and Warranties
Territory or Scope Insurance and Indemnities
Term Assignment & Sublicensing
Consideration Other Standard Terms – Notice,
Quality Control Choice of Law, Force Majeure

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Take 15 minutes and review the
sample license agreement, and then
we’ll discuss.

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Seminar Work
At the end of tonight’s class, read the “Subcontractor Agreement”
It is an actual agreement I drafted for a client (pro bono);
It was accepted verbatim by the Prime Contractor WITHOUT
modification
Then, in your groups, discuss which parts of the Subcontractor
Agreement are favourable to the Licensor.
Assume that you and your team are counsel for the Prime Contractor,
and edit the agreement as to make it as mutual/fair/reasonable as
possible.
Use the “tracked changed” feature in Word
Send the hard-copy to Odesha and the soft-copy to me
(info@crownes.ca) on/by 4.30 pm on Monday, March 27th.
For clarity, you do not NEED to add new clauses, just edit the
existing clauses to make them more mutual or less biased.
But, if you feel that additional clauses you may add them. 30