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The importance of clarity in contracts

On Behalf of | Oct 20, 2023 | Business Transactions

Well-written contracts are crucial in business. Yet sometimes, one party intentionally tries to make the wording hard to understand. That could come back to haunt them if there is a later dispute over an alleged breach of the contract.

It can also make a dispute more likely in the first place because the party accused of the breach may have thought they were complying. It’s just that they interpreted the words in the contract differently from the accusing party.

Why do businesses use ambiguous language?

Sometimes, the person writing a contract feels they can gain an advantage by failing to be specific. For example, a ski business might say it reserves the right to close in “unsuitable weather conditions” rather than in “ winds above Force 6 or an avalanche risk above category 3” to leave itself more opportunity to cancel bookings without reimbursing customers.

If a customer takes the company to court over a cancellation, a judge might rule the ski company was in the wrong. They might decide the booking conditions did not make it clear enough when a trip could be at risk of cancellation and therefore award the customer compensation the ski business hoped using ambiguous language would avoid. 

It’s best to use plain language

Some businesses use complex legal terms and long-winded sentences because that’s how they’ve always seen contracts written. Others may do so because they hope the customer will get bored of reading it and just sign without finishing it, thereby omitting to notice a vital detail.

While it is certainly not illegal to use legalese, it’s best to make your contracts simple for a reader to understand. A judge asked to rule on an alleged contract breach wants to be sure both parties understood what they were signing. While the onus is on the reader to ensure they understand before they sign, if a judge thinks there was a deliberate attempt to mislead, they may rule all or part of the contract invalid.

If you are faced with a contract dispute, it’s important to examine whether it was clear or ambiguous, as this could affect your next moves.