You need to be careful when drafting your business contracts. They should be clear to avoid misunderstandings. Ambiguity can result in legal disputes, and, in some cases, if a contract is not clear and specific enough, its terms may be declared unenforceable by the court.
So, how can you ensure your business contracts are not ambiguous?
Avoid statements that can be reasonably interpreted in more than one way
The words or statements used in your contracts should not be able to be interpreted in more than one way. Two people reading your agreement should understand a statement similarly. Words like reasonable, negligent, standard, sufficient, approximately, appropriate, prompt, material, without undue delay and substantial should be avoided, as they are vague.
For example, your employment contract should state the quality of work employees should provide. Stating an employee should perform their duties with reasonable effort can be ambiguous. An agreement can also be considered vague if you state employees should wear “appropriate attire” – what you consider appropriate may not be what an employee considers so.
Further, the contract with your supplier should clearly state when they need to deliver goods and the quality of goods to be delivered. Terms like “within a reasonable time frame” or “satisfactory quality” can lead to disagreements, which can potentially lead to a lawsuit.
Define key terms
Another way to avoid ambiguity is to define key terms at the beginning of your contracts. Define terms that could be interpreted differently and industry-specific or technical words used throughout a contract.
With a definition clause, a signatory can understand what a word means when they read it.
Avoiding vague words and defining key terms can protect your business from expensive legal issues. Consider legal guidance to draft enforceable agreements.