When negotiating your contracts, stay away from subjective phrases that could be interpreted differently by the parties, or you may be leaving yourself open to a Court’s interpretation.
The goal of every business is to make money, and lots of it. Negotiating contracts with subjective phrases are a sure way to lose money because those contracts lead to delay, breaches and more time spent in Court than doing business.
Subjective phrases are those that are shaded by feelings, experiences and depend upon one’s individual point of view. More often than not, they are loosely-defined words and phrases that may mean one thing to you, but something else to the other party. These phrases are like landmines in your contract, and must be avoided, if possible:
- Avoid phrases like “reasonable” or “best effort.” While attorneys may make a distinction between the two, courts have inconsistently applied the two, sometime even merging the standards. While that would be alright if business goes smoothly, it could create protracted litigation if things turn bad.
- Avoid phrases like “material” and “substantial” unless you specifically define its meaning in your contract. Failure to define a term is an invitation for allowing a Court to define it for you in its own way, and invites creative litigators to shape the facts and circumstances to their advantage.
The easiest way to avoid phrasing that leaves your contract open to interpretation is to consult with an attorney with both transactional and litigation experience. They have the best perspective to offer you in your negotiations. The goal is to make sure that when everyone leaves the negotiation table, everyone is pleased with the deal, but has the same understanding of the rights and responsibilities that everyone just agreed upon.
Subjective phrases will turn your understanding of an agreement upside down, and opens you up to litigation. Avoid these subjective phrases if you can.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.
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