Updated: Jul 12
Words Matter in a Contract.
First, let’s start with defining a contract. By definition, a contract is an agreement between 2 or more people and/or entities with the intent for such agreement to be enforceable by law. This means that if a person and/or entity does not hold up their end of the bargain in the agreement that there is legal recourse for the non-breaching party to sue the breaching party in court to mandate such party to carry out his/her/their/its contractual obligations and/or pay the non-breaching party damages.
Second, writing a contract is no easy feat no matter what one may think from simply conducting an internet search on Google or some other search engine for that “right” contract. A contract is multi-layered. A contract is legally binding. Accordingly, it is vital that you ensure that the wording you select in a contract is precise and effective in articulating the intent of the parties using ink and paper. For instance, the words, “may,” “shall,” and “must” are often used interchangeably yet incorrectly. When writing a contract, if I say that, “Person A may pay Person B upon receipt of the goods” this has a much different impact than using the verbiage, “Person A must pay Person B upon receipt of the goods.” The word, “may” is permissive and presents a choice for Person A to render payment to Person B; whereas, “must” signifies an obligation with no room for non-compliance once Person A receives the goods. And if you are really looking to be confused today, throw in the word, “shall,” because historically this word has been loosely used to communicate “will” with the intended effect of a mandated action at some point of time in the future. However, depending upon the jurisdiction, courts may interpret the word, “shall” to be permissive and communicate an aspiration and not an obligation. In a ruling by the United States Supreme Court in Gutierrez de Martinez V. Lamagno, 515 U.S. 417 (1995), the court agreed that the use of the word, “shall” is “reasonably susceptible to divergent interpretations,” and found that with the facts presented in that particular case that the word, “shall” should be interpreted to mean “may.” Thus, the United States Supreme Court looked to the 4 corners of the document to ascertain the intent of the drafter of the contract, and based upon the court’s interpretation of the document, found that the word, “shall” communicated a permissive and not an obligatory action.
This leads me to the final point. There is a rule of thumb in contracts providing that any ambiguity in a contract will be charged or construed against the drafter of the contract. The drafter of the contract is the person who writes the provisions and clauses of the contract. And if your attorney drafted it for you, then you are still deemed the drafter of the contract. Thus, it is incumbent upon the drafter of the contract to select his/her/their/its words carefully to ensure that the actual intent is captured in writing.
In short, be clear, be precise, and be intentional with your words. Use the verbiage, “must” and “may” as appropriate, and avoid “shall” to avoid ambiguity and confusion. There are other words that we can discuss but we will save that for a future post.
Should you require any assistance with drafting or interpreting your next business contract, please contact one of our trusted attorneys at Peace & Squires Law. We are here to help, and look forward to sharing our experience and knowledge with you as we work diligently to produce smart and sensible legal solutions for your needs.