At its core, a contract is a written expression of a business relationship.
Like all good relationships, clear communication and understanding between the parties is essential for the relationship to succeed. Unlike our personal relationships, if a business relationship fails, we can’t just de-friend them on Facebook or stop following their Instagram account. A failed business relationship usually means someone is paying another person money, and all parties are paying lawyers to resolve the dispute.
(Not that personal relationships don’t end up in court…but that’s a horse of an entirely different color.)
Understanding the terms of a contract means understanding the duties, rights, and procedures for all parties. Understanding leads to compliance and the benefit of the contract. So, if one of the fundamental elements of contracts is making sure the parties to the contract understand the contract, why do so many contracts fail at this basic requirement?
Outside of contract drafting errors, the two main culprits are industry-specific jargon and non-industry-specific jargon used by the contract drafters—what everyone calls “legalese.”
If a dispute about a contract arises and it must be decided by a court or by an arbitrator, and the parties are not clear about the meaning of key terms, there are three possible scenarios based on what the parties knew and when they knew it:
- Each party attached a different meaning to the term and each party was unaware of what the other party thought the term meant.
- Each party attached a different meaning to the term and one party (but not the other) was aware of what the other party though the term to mean.
- Each party attached a different meaning to the term and both parties were aware of the other party’s meaning attached to the term.
In the second scenario, the contract would be interpreted according to the party who was unaware of the other party’s definition. But, in the first and third scenarios, it’s entirely possible that a court or arbitrator could find that no contract was made because there was no actual agreement as to the terms of the agreement. Such a finding could be disastrous.
The best course of action is to ensure that all parties are operating on the same set of key terms definitions of industry-specific jargon and legalese.
Jargon is the language of an industry, usually a series of shortcuts to words and concepts common used in the business. Legalese is not actually jargon, but rather a style of writing where too many concepts are buried in a given sentence or explained in an unnecessarily complex way. Of course lawyers have their own jargon, and it almost certainly has no place in contracts written for non-law businesses.
Most advertising and marketing professionals are not working for other advertising or marketing firms. The usual client is someone from another line of business. This fact alone means that marketing firms and their clients must make sure they’re speaking the same language in order to come to an understanding about the contract for services.
This is where jargon comes into play.
For example, a “comp” to a marketing or design firm means something very different to someone in the restaurant or hospitality industry. If a contract between a designer and a restaurateur says that the client will be provided with three comps, a restaurateur may think they’re getting three things for free, rather than three different design ideas.
So how do design firms avoid these kinds of jargon based ambiguities?
The firm could include as part of the contract (or during the negotiation and assessment phase) a simple glossary of industry terms. The glossary should contain terms the design firms finds itself regularly defining for all clients. If the terms are important in the contract, you can either include the glossary as an exhibit to the contract, or include the glossary as a part of the contract text.
Legalese is even easier to avoid—simply don’t accept a contract drafting from your lawyer that you don’t understand. More importantly, don’t accept work from your lawyer that your clients can’t understand.
If a client comes back to you and says, “We don’t understand this term in your contract,” then you have a red flag to have that term re-written. Often legalese is the product of how lawyer(s) were trained to write.
A little known secret of law school is that legal drafting classes focus on persuasive writing intended to be read by judges and other lawyers. They’re written with a certain style and little attention to readability. Very little law school training goes into writing for the vast majority of a lawyer’s work, so writing to and for non-lawyers with readability is a significant concern.
Legalese is a style of complex writing that does not lend itself to easy comprehension. Contracts don’t have to be written that way. Some lawyers will tell you that the legal concepts required in some contracts cannot be written in non-legalese. Balderdash! (And other not so polite curse words.) I debunked some of those myths here, and included a discussion of how you can measure readability.
If you have a lawyer draft a contract for you, and you don’t understand the terms, you should demand the lawyer re-write the contract so you do understand (or contact an attorney who will take the time to write the contract so you understand in the first place).
Many lawyers don’t like to write contracts in “plain English” because it’s hard to do, as it runs counter to our training. Writing in “plain English” seems to imply they’re not needed as counselors any more.
Good contracts do two things well for all businesses:
- 1. Clearly describe the business relationship so everyone understands, and
- 2. Speed the sales process by avoiding unnecessary back and forth about contract language.
Because a contract is all about the relationship between the parties, make sure all parties understand the contract. Start the relationship from a solid understanding, not a “guessing about the other party’s understanding” and not from assumptions on your part.
About Matt Johnston
Matt Johnston operates his own law firm in Frederick with a focus on small business counseling, copyright and trademark law, and dispute resolution. Many of Matt’s clients are in the creative industries whose concerns overlap Matt’s practice areas. Matt focuses on providing practical legal advice to prevent legal questions from becoming legal problems. Matt has been described as an approachable lawyer and is always willing to listen and address client concerns tailored to the client’s way of doing business.
DISCLAIMER - The preceding article is intended for educational and informational purposes only. The article should not be construed as legal advice applicable in all situations. No attorney-client relationship is created through this article. If you need confidential legal advice, Matt is available for confidential and privileged consultations by calling 240-351-9944 or emailing firstname.lastname@example.org.