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Simplified, Balanced Contract Language Helps Minimize Contractual Disputes


All parties entering into a contractual agreement naturally seek to minimize potential disputes. Despite best efforts, this is sometimes unavoidable. It is therefore generally always in a contract manager's best interest to select language that is understandable, balanced and not subject to easy misinterpretation. Doing so can eliminate disagreements between parties and when they do occur they can be resolved more quickly.

A Prime Example

Joe Haigh, the head of FDS corporate finance services, wrote a guest article for Real Business describing the measures he takes to assuage any concerns raised by the opposite party in a contractual dispute. In his piece, he admits that he has made the mistake of overlooking certain language in contracts he has signed because he didn't have the time or patience to read all the complex language. Because of his distaste for contract complexity, he also intentionally made the language in his own contracts simple. This worked well for him for years, until a problem arose.

Haigh found that in certain cases contract simplicity could negate the finer points of an agreement. For example, a contract between an organization and its business partner that only minimally covers the basic principles of an agreement might work just fine most of the time, but could run into problems, especially with new partners, when the language did not cover a particular circumstance. Haigh stated that these finer points often don't materialize, but failure to include them in an agreement could ultimately result in litigation.

Advice of Outside Counsel

In fact, this mistake resulted in Haigh's first contract dispute with one of his clients. This is an issue he hopes to mitigate going forward, taking the time during the negotiation phase to be careful to include any language that could potentially cause a dispute. He concluded that while he still follows a simplistic philosophy, he understands the importance of considering all possibilities that could occur during the life of a contract. One way to mitigate this possibility is to seek the advice of a legal third party. While the advice of outside counsel can also make a contract more complex, if you take the time necessary to find the right legal partner, you should be successful in managing complexity, while maintaining adequate legal protections.

K.I.S.S

"Personally I believe in KISS (keep it simple, stupid) but an expert eye is still necessary," Haigh writes.

While Haigh saw the error in his ways, he maintains that his simplistic approach is still valid. Dispute resolution can be achieved with far greater efficiency if contracts are simple. As this blog previously mentioned, in the event of a dispute, the mission of all relevant parties should be to arrive at a quick resolution. Whenever a lengthily legal dispute can be avoided, it is generally in the best interest of all parties.

Lessons Learned

It's important to be cognizant of the lessons Haigh learned. Contracts frequently include a large number of obligations, with both explicit and implicit expectations. While it may be difficult to simplify agreement content without compromising the integrity of the contract in every circumstance, simplicity should remain the goal.

Additional Horsepower From CLM

Wherever possible, the negotiation process can and should be simplified and where appropriate, augmented by seeking outside legal assistance. Additional simplicity can be accomplished by using a Contract Lifecycle Management (CLM) solution that will provide a central repository for all documentation, making primary and supporting documentation easy to locate and that incorporates features such as the ability to connect related documents with each other and allows a contract manager to easily search for problematic language in all agreements, not just the one in dispute. Doing this can go a long way toward improving your ability to resolve or potentially avoid a contract dispute.

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