Business Disputes Because Of Poorly Written Contracts

Ask a business owner about all the problems for which there was no plan or contingency, and many of the answers will describe business disputes. When you build a business, your mind is focused on infrastructure, investment, hiring personnel, legal problems, etc. But people are involved in every single one of these aspects of business! And that means disagreement is inevitable. Disagreement on how to handle one side of the business, disagreement on fees and expenditures, disagreement on the right hire — the list goes on and one.

Some of the most cataclysmic business disputes arise from poorly written contracts.

Contract writers might use one of two styles. The first involves lots of legal jargon that a layman usually won’t understand. The second is called a “plain-language” contract because it’s written with the opposite approach: to be much less confusing. Turns out, using plain-language contracts can significantly diminish the chance of a dispute arising because one or more parties are confused by a contract’s wording.

Think about every contract you’ve ever been forced to read yourself. You’ll see any number of words you won’t understand unless you’ve been to law school. Latin phrases, ancient language like “heretofore” and legal terms like “force majeure” are the golden standard of legal contracts. But they shouldn’t be. They result in wasted time spent helping all parties understand the terms of the agreement. Time is money. Try writing contracts in plain language.

Shawn Burton wrote for the Harvard Business Review: “We should live in a world where contracts are written in accessible language— where potential business partners can sit down over a short lunch without their lawyers and read, truly understand, and feel comfortable signing a contract. A world where disputes caused by ambiguity disappear.”

We recently began a series on confusing terminology used in contracts. Many of these are common English words that could be used in a plain-language contract too. Avoiding the use of these words makes sense. But sometimes the person who drafts the contract makes a typo and uses the wrong word in the wrong situation. This can create even more confusion. That’s why documents like these need to be drafted more than once — and then proofread by a third party.

Poorly written contracts aren’t always a direct result of “how” they’re written, though. Sometimes, poorly written contracts simply leave certain things out.

Take breach of contract, for example. What happens when someone breaks their end of the deal? What are the consequences, legal and otherwise? Is there a fine? A lawsuit? Criminal wrongdoing? The penalties should be clearly outlined in the contract itself — and you might be surprised how few contracts actually have a breach of contract clause.

Poorly written contracts can also be unfair or illegal. When one side asks for too much and the other receives too little, disputes are bound to happen. When writing a contract, your lawyer should warn you when unfairness could lead to problems down the road. Part of running a successful business, law firm, or other service is learning the value — and art — of compromise.