Commercial contracts stand as the skeletal framework upon which business relationships are built, meticulously outlining obligations, expectations, and the pathways to resolution when disagreements arise. Yet, despite their pivotal role in ensuring smooth transactions and mitigating future conflicts, a significant number of contracts are marred by imprecise language and ingrained bad drafting habits. These shortcomings can transform seemingly robust agreements into breeding grounds for disputes and ultimately undermine the very essence of the intended arrangement.
One of the most insidious manifestations of contractual sloppiness lies in the adoption of seemingly professional and reassuring phrases that, upon rigorous examination, lack any substantive meaning or practical enforceability. The notorious “best efforts” clause serves as a prime illustration of this phenomenon. Its veneer of diligence and commitment belies a profound ambiguity: “whose best?”, “best compared to what?”, and “best for whom?”. This inherent subjectivity renders the clause a fertile ground for post-agreement wrangling. As vividly depicted, “best efforts” can be stretched to encompass anything from a solitary, perfunctory email to a complete absence of follow-up, leaving aggrieved parties mired in protracted debates about the intended level of exertion rather than focusing on rectifying the underlying problem. The time and resources expended in deciphering the nebulous meaning of “best efforts” invariably dwarf the effort that should have been directed towards achieving the desired outcome in the first place.
The allure of “best efforts” often stems from a misguided pursuit of flexibility. However, this perceived adaptability comes at a steep price: a significant erosion of accountability. A party’s insistence on such a clause should raise a cautionary flag, potentially indicating a reluctance to commit to concrete performance benchmarks or even a tacit acknowledgment of potential shortcomings, with the clause strategically positioned as a pre-emptive justification for non-performance. In high-stakes commercial endeavors, relying on such subjective standards is akin to laying a welcome mat for future litigation. The emphasis must instead shift towards clearly defined, output-based obligations, where performance is directly linked to measurable and verifiable results, thereby bolstering the contract’s enforceability and reducing the scope for interpretive disputes.
Similarly, the seemingly amicable promise to “negotiate in good faith” often lulls parties into a false sense of security. On the surface, it projects an image of professionalism and mutual respect, fostering a superficial atmosphere of collaborative intent. However, the benign facade of “good faith” can crumble when circumstances evolve, and the parties’ interests diverge. This clause can be readily exploited as a dilatory tactic, allowing a recalcitrant party to engage in endless, unproductive “good faith discussions” as a means of obstructing the other party from exercising their legitimate contractual remedies. The fundamental weakness of the “good faith” clause lies in its lack of a defined endpoint or concrete triggers. It is not anchored to any specific timeline or objective milestones, rendering it an ineffective tool for ensuring timely resolution, particularly in complex cross-border transactions where enforcing contractual obligations is already fraught with challenges. Genuine leverage in negotiations arises not from vague expressions of goodwill but from the establishment of clear timelines and well-defined escalation protocols that automatically come into play when the initial spirit of “good faith” appears to have dissipated. Tangible deadlines provide a basis for enforcement, whereas subjective intentions remain open to endless debate.
Adding to this catalogue of deceptively comforting yet ultimately toothless clauses is the common inclusion of language stating that something will be done on a “commercially reasonable basis.” This phrase, often intended to inject a degree of flexibility and practicality into contractual obligations, suffers from the same fundamental flaw as “best efforts” – its inherent subjectivity. What constitutes “commercially reasonable” can vary wildly depending on industry standards, market conditions, and the individual perspectives of the contracting parties. For instance, in a service agreement, a clause might state that the service provider will respond to support requests on a “commercially reasonable basis.” This leaves open to interpretation the acceptable response time, the level of resources to be dedicated, and the priority to be assigned to different types of issues. When a critical problem arises and the response is perceived as inadequate, the aggrieved party will find themselves in a protracted and likely unproductive argument about what a “commercially reasonable” response should have entailed. Like “best efforts,” this clause provides a convenient shield for underperformance and a fertile ground for costly disputes, offering a false sense of security that evaporates when put to the test.
Beyond these specific examples of problematic phrasing, a significant contributor to contractual sloppiness is the fundamental failure of the contracting parties to achieve a genuine alignment on the core elements of their agreement. Contracts rarely unravel due to minor disagreements over specific wording; the underlying cause is often a profound divergence in the parties’ understanding of what is being exchanged, the obligations undertaken, and the intended outcomes. The anecdote involving the protracted indemnity clause negotiation, which ultimately exposed a fundamental disagreement about whether the contract was for software development or product licensing, serves as a powerful illustration of this point. No amount of meticulous drafting of individual clauses can rectify a contract built upon such disparate underlying assumptions.
Therefore, the paramount initial step in crafting effective contracts is to ensure a crystal-clear and unambiguous alignment between the parties regarding the fundamental terms of their transaction. Before even considering the intricacies of individual clauses, it is essential to establish a shared understanding of the subject matter of the contract, the precise obligations of each party, and the specific outcomes that the agreement is intended to achieve. This foundational clarity allows the subsequent drafting process to flow more naturally and logically, with individual provisions directly supporting the agreed-upon framework. Recognizing during the drafting process that the fundamental deal itself is not yet fully conceptualized is a critical juncture that necessitates a step back to address the underlying misalignment before proceeding further.
Several detrimental habits perpetuate the prevalence of sloppy contract drafting. A common pitfall is the uncritical reliance on generic, off-the-shelf templates without adequate tailoring to the specific circumstances of the transaction. While templates can offer a convenient starting point, they often fail to address the unique nuances of a particular business, industry, or contractual relationship. The indiscriminate adoption of boilerplate language can lead to the inclusion of irrelevant clauses or, more critically, the omission of essential provisions that are specific to the agreement at hand.
Another significant contributor to sloppiness is the persistent use of vague and ambiguous language. Imprecise terms create a breeding ground for disputes, as contracting parties can legitimately hold differing interpretations of their respective obligations and rights. The consistent application of clear, concise, and unambiguous language is therefore crucial. Avoiding industry-specific jargon where possible, clearly defining key terms and concepts, and employing specific and measurable language are essential steps towards minimizing ambiguity and fostering mutual understanding.
Furthermore, a frequent oversight in contract drafting is the failure to adequately anticipate potential future scenarios and contingencies. Contracts should not be viewed as static documents confined to the immediate terms of the agreement. A well-drafted contract should proactively address potential changes in circumstances, including clearly defined termination clauses, robust dispute resolution mechanisms, and flexible provisions for modifications or amendments. By anticipating potential future challenges, the contract can provide a framework for navigating unforeseen events and ensuring the long-term viability of the business relationship.
Finally, the reluctance of many businesses, particularly SMEs, to seek professional legal counsel or involve legal expertise in the drafting and review process is a costly habit that often leads to significant downstream consequences. While the perceived upfront cost of legal fees may act as a deterrent, the potential financial and reputational risks associated with poorly drafted and legally unsound contracts far outweigh this initial expense. Experienced legal professionals possess the specialized knowledge and expertise to identify potential pitfalls, ensure compliance with relevant laws and regulations, and draft clear, comprehensive, and legally enforceable agreements that effectively protect the interests of their clients.
In conclusion, the seemingly innocuous nature of phrases like “best efforts,” “negotiate in good faith,” and “commercially reasonable basis” masks their potential to introduce significant ambiguity and undermine the enforceability of commercial contracts. These examples underscore a broader issue of sloppiness in contract drafting, stemming from a lack of precision, a failure to establish a clear alignment on the fundamental terms of the deal, and the persistence of detrimental drafting habits. To effectively mitigate these risks, contracting parties must prioritize clarity, specificity, and a focus on tangible, measurable outcomes. Investing the necessary time and resources in ensuring a shared understanding of the core agreement, employing precise and unambiguous language, proactively anticipating future contingencies, and engaging legal expertise are indispensable steps towards crafting robust and enforceable contracts that serve as a solid and reliable foundation for successful and enduring business relationships. By consciously moving away from vague assurances and embracing clear, outcome-oriented language, businesses can navigate the complexities of commercial agreements with greater confidence, security, and a significantly reduced risk of costly and time-consuming disputes.
Important disclaimer: The information provided on this page is for informational purposes only and does not constitute legal advice. It should not be relied upon as a substitute for consultation with a qualified attorney. You are encouraged to seek the advice of a licensed professional for your specific situation
