One of the costly contract mistakes that some business owners make is a lack of clarity. A contract with vague language can result in disputes, financial risk and damaged relationships. Thus, it’s important to ensure all agreements you draft are clear.
Here is how you can avoid ambiguity in your contracts:
1. Define key terms
Identify terms that are crucial to a contract and might be misunderstood, and provide their definitions at the beginning. For example, parties entering the agreement, effective date, services/deliverables, products/goods, confidential information, industry jargon and legal terms. This helps prevent different interpretations, as a reader will know what a term refers to every time they read it.
2. Use simple language
It helps to use simple, direct language. Using a lot of industry/legal jargon and complex sentences can lead to confusion. Someone outside your industry should understand a contract you draft.
3. Keep sentences short
Long, complex sentences can easily introduce ambiguity. For example, combining two separate conditions into one sentence can be confusing. Stating, “The supplier shall deliver the goods by Nov 2 and provide the safety certificate,” can be considered ambiguous. Must the safety certificate accompany the goods, or can it be provided later? You need to keep distinct requirements in separate sections to avoid confusion. Short sentences allow you to state terms clearly, which makes it easier for readers to understand.
4. Use active voice
Active voice makes contracts clearer. For instance, instead of saying, “Weekly progress reports should be submitted to the supervisor,” say, “The employee shall submit weekly reports to their supervisor.” Instead of “The goods will be delivered to the warehouse,” say, “The supplier will deliver the goods to the (warehouse address) at (time/date). Avoid using the passive voice whenever possible, as it often obscures the responsible party.
Disputes stemming from ambiguity in business documents are not uncommon. Learn more about how to draft documents efficiently to protect your business.