The operator test for deal terms

Deal documents get written for the closing day. Operators live with them for years.

That gap is the cleanest test I know of for whether a clause is actually a good one. Strip away the negotiation theater, ignore the markup history, and ask a single question. When the contract is sitting in a binder six months from now and the operator, the integration lead, the CFO, the GM, has to make a decision against it, will it help them or will it slow them down?

Most clauses I read fail that test for one of two reasons. They are either too vague or they are too cute.

Vague clauses

Vague clauses get celebrated at signing because they cleared a stuck negotiation. Then they show up in a quarterly close and nobody can tell whether the working capital adjustment is supposed to include the customer prepayment that came in three days before the effective time. A vague clause survives the deal and dies in the calendar.

The operator test catches these early. Read the clause out loud as if you were the controller running the close. If you cannot do the math from the words on the page, the clause is not done.

Cute clauses

Cute clauses are the opposite problem. They are carefully drafted to lawyer-trap a future dispute. Eighty percent threshold, materiality scrape, anti-sandbagging carve-out, defined term that pulls in three more defined terms. A cute clause survives signing and then gets quietly ignored because no operator wants to be the person who unwinds an integration over a footnoted scrape.

The operator test catches these too. If reading a clause requires a flowchart, it is not load bearing. It is decoration. Decoration in a contract is risk in the field.

Cute clauses survive signing and then get quietly ignored because no operator wants to be the person who unwinds an integration over a footnoted scrape.

What survives

The clauses that survive both tests share three properties. They name a specific person or role that owns them. They name a specific trigger that fires them. They name a specific outcome that follows. A good representations and warranties indemnification clause does all three. The buyer notices, the seller responds inside a defined window, the escrow releases on a defined schedule.

That is not novel drafting. It is drafting that respects the people downstream of the signature page.

The shortest editorial pass I make on a draft is a single question. Who owns this paragraph after close? If I cannot name them, the paragraph needs another revision.