We live in a digital-first era where communication is abbreviated to its simplest forms. But the legal profession is one where simplification has notably not become part of the culture, especially contract language. And it’s not for lack of trying.
Why Contracts are Traditionally Complicated
Late in the 20th century, U.S. presidents tried with limited success to persuade civil servants to simplify legal regulations. Presidents Nixon and Carter issued executive orders requiring that federal laws and regulations be written in “layman’s terms” (Nixon) and “be as simple and clear and possible” (Carter). More recently, President Clinton issued a memorandum that eventually became the 2010 Plain Writing Act, requiring that all federal agencies use plain writing when drafting public documents and that they teach their employees to write plainly. But old habits die hard.
Lawyers want to be sure the contracts they draft will be interpreted and enforced the same way other contracts have been. Employing long-used terms helps ensure such predictability. The stability of business transactions depends on this type of continuity, and a lawyer needs to be able to tell their client confidently that the contract will do what it’s supposed to. If a contract dispute winds up in court, lawyers don’t want to risk judges challenging the use of terms that aren’t considered standard language.
As a result, all too often, lawyers continue to use contract templates filled with such old-fashioned terms as “thereof,” “whereby,” and “said”–as in, “The decedent left said property his heirs.” But words and phrases like these don’t make a contract more legally enforceable, just harder to understand. And that can prolong negotiations.
Tips for Keeping Contracts Simple and Clear
Fortunately, in recent years, lawyers have begun replacing ancient, hard-to-understand contract terms with modern, concise terms. It has also become standard to format contracts in such a way as to make them easier to read. Here are a few guidelines that can add clarity when drafting a contract.
Be concise. Short sentences are better than long sentences. A sentence filled with too many commas or semicolons should probably be chopped up into two or more sentences.
Incorrect placement of a comma can change the meaning of a sentence. If you don’t have anyone else available to look at your work, reading the contract out loud can help determine if your meaning is clear. Ask yourself, if the contract ends up in front of a judge or arbitrator, will that person understand the parties’ intent when signing the contract?
Format sections and sub-sections. Just as short sentences are easier to read than long ones, short sections are easier for readers to get through than sections that fill one-third of a page or more. Adding subject titles and sub-titles to each section also helps comprehension.
Use active voice. The use of active voice–e.g., “Seller grants to buyer” instead of “Buyer will be granted by seller”–makes sentences easier to grasp.
Don’t separate keywords in a sentence from each other with lengthy clauses. Keep a sentence’s noun, verb, and subject close to one another. If necessary, move a descriptive clause into another sentence, or shorten it.
Example 1:
“Company hereby engages Executive to render exclusive and full-time services to Company and to the subsidiaries and affiliates of Company, as Vice President, and in connection therewith to perform such duties as Executive shall reasonably be directed to perform by Company, upon and subject to the terms and conditions hereinafter set forth.
Here’s a simpler, equally effective way to convey the same information:
“Company engages Executive to serve as full-time Vice President and to perform the duties associated with that position, as described below.”
Example 2:
Original sentence:
“Company A may not, without the prior written consent of Company B, transfer the Class A shares to any Person.”
Revised sentence:
“Company A may not transfer the Class A shares without Company B’s prior written consent.”
Consistency with terms. Use words consistently. Literary writers like to use various synonymous words and terms to maintain reader interest. Consistency is more important in contract drafting. It helps avoid ambiguities or misinterpretations.
Shall, will, may. Be careful to use “shall,” “will,” and “may” appropriately.
- “Shall” is mandatory and implies a duty;
- “Will” describes future consequences of events that do not obligate either party;
- Anything that follows “may” is discretionary.
Can Businesses Still Be Protected?
Making contracts simpler does not mean weakening a company’s contract protections. In fact, many of today’s contracts actually simplify dispute resolution, making it more tolerable for all concerned.
Negotiation-mediation-arbitration clauses. Dispute-resolution clauses traditionally listed the jurisdiction and venue for a lawsuit to be filed. But the expense and duration of modern litigation have prompted many businesses to opt for Alternative Dispute Resolution (ADR). ADR clauses in a contract outline an escalating set of steps for settling disputes using negotiation, mediation, and arbitration if necessary.
The negotiation clause directs the parties to use “good-faith efforts” to resolve problems informally between themselves. If that doesn’t work out, the parties will turn to a neutral third party to act as a mediator. The mediator separates the parties, asks each side to present their best case in private, then goes back and forth between the two sides, trying to arrive at a mutually acceptable compromise.
If mediation proves unsuccessful, the parties will hire a private judge (often a retired court judge) and submit to binding arbitration. Arbitration is a private trial that allows for limited discovery, making the process less expensive than a courthouse trial. Because the judgment is binding, an unhappy loser cannot turn around and file a lawsuit. This gives both parties an incentive to settle the case sooner rather than later.
Most ADR clauses also allow parties to take relatively low-dollar claims to small-claims court.
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The Future of Contract Language
Not all contract terms can be transformed into plain language. Some transactions require esoteric terms that must be explained to the client. And the use of plain language occasionally makes a client uncomfortable. Sometimes less sophisticated individuals will request that their lawyer substitute more “professional” language for informal, easy-to-understand terms. So it may take some time for plain-language contracts to become universally accepted.
But as the older generation of lawyers taught to use terms such as “trover” and “replevin” retires and is replaced by those trained in using plain language, the legal profession has finally begun catching up with the rest of society.
Eugene Friedman, Esq. is a partner at Gertsburg Licata. He can be reached at [email protected] or by phone at (216) 573-6000.
Gertsburg Licata is a national, full-service business law and strategic advisory firm offering a full range of legal services. Call 216-573-6000 or contact us here.
This article is for informational purposes only. It is merely intended to provide a very general overview of a certain area of the law. Nothing in this article is intended to create an attorney-client relationship or provide legal advice. You should not rely on anything in this article without first consulting with an attorney licensed to practice in your jurisdiction.
