The Risks of Casual Contract Writing in Business: Why Plain Language is Essential

Contracts are the backbone of any business transaction, and yet in the 1960s, a movement began to use plain language in contracts. This evolved from the realization that most people don't read contracts word for word; instead, they rely on the legal team to interpret what the document means. This is a perilous approach because words have precise meanings, and contracts must be meticulously crafted to ensure clarity. Poorly written contracts can lead to misunderstandings, discrepancies, and even legal disputes, which ultimately can harm a company's interests.

Artful Writing vs. Casual Drafting

Even with a team of experienced lawyers, companies often still produce subpar contracts. The goal of contract writing is not to be casual but rather to communicate effectively and unambiguously. Contracts are legal documents that become binding agreements between parties. When a contract is written casually, the likelihood of misinterpretation increases exponentially.

A Case in Point: Eric Burns and the Cement Mixer Incident

Eric Burns' Case:

Eric Burns had a heartening experience that unfortunately ended in tragedy. He was working on a construction site when a cement mixer's pressure tank exploded, causing severe injuries. When Burns sought compensation, his employer denied the claim, citing a business pursuits exclusion in their insurance policy. However, the issue wasn't resolved as expected. Let's delve into the complexities that arose.

The policy definition of the "business pursuits exclusion" was ambiguous and required careful interpretation. When the insurance company refused to pay out, Burns garnished the insurer, leading to a legal battle. The insurer's stance was that the employer's actions violated the exclusion, preventing the payment. However, several key points in the policy required deeper analysis:

Contract Clarity: The wording of the exclusion was crucial. If it was poorly worded, it could be easily misunderstood, leading to disputes. Legal Interpretation: Lawyers play a vital role in ensuring that all terms in a contract are clear. Ambiguities can be resolved through legal interpretation, which can significantly impact the outcome of a case. Practical Application: The actual events leading to the explosion needed to be evaluated in light of the exclusion's wording. Was the employer's action within the scope of the business pursuits exclusion, or was it a separate, unforeseen event?

The Importance of Plain Language in Contracts

Contracts should be written in clear, straightforward language. This ensures that all parties understand the terms and conditions. Ambiguities can be eliminated by using simple, direct language. For example:

Instead of: "The insured will not be covered for any loss or damage resulting from the material's inherent vice or the insured's own fault,"

It should be: "The insurer will not be liable for any claims arising from the material's inherent defects or any fault on the part of the insured."

Clarity is paramount in legal documents. Vague terms can lead to misunderstandings and disputes. By using precise language, companies can reduce the risk of such issues.

Best Practices for Business Contract Writing

1. Engage Experienced Legal Counsel

Although a company may have a dedicated legal team, it's wise to consult outside counsel for a fresh perspective. A second set of eyes can catch overlooked details and suggest clearer language.

2. Use Plain Language

Terms should be as simple as possible. Avoid jargon and convoluted phrases. The document should be accessible to all parties involved, regardless of their legal knowledge.

3. Conduct Thorough Reviews

Contracts should undergo rigorous review and revision before finalization. This includes input from all relevant stakeholders, including those without a legal background.

4. Seek Clarification

If terms are unclear, do not hesitate to seek clarifications from the other party. Ambiguities can lead to misunderstandings and legal disputes.

Conclusion

Contracts are essential tools in business, and they should be treated with the same level of rigor as other critical business documents. Writing contracts casually can lead to significant risks, including financial losses, legal disputes, and reputational damage. By adopting a careful, methodical approach, businesses can ensure that their contracts are unambiguous and legally sound.

The legacy of the 1960s movement to use plain language in contracts is a valuable lesson. Effective contract writing is not about being casual but about ensuring that all terms are clear, unambiguous, and enforceable. Legal clarity is a business imperative, and businesses that fail to adhere to this principle put themselves at unnecessary risk.