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Last week, you asked your business attorney to take a quick look at a short contract you received from a new service provider.
You believe it shouldn’t take your attorney more than a few minutes to review and confirm that everything makes sense, and you can sign the contract.
It only took you half an hour to read and understand the terms of the contract completely.
Then why did it take your attorney more than two hours to review the agreement and make a few changes?
Here is a peek inside the mind of an attorney as they review a legal document.
The Document Matters
The purpose of a legal document is to clearly communicate the rights and responsibilities of everyone involved (the parties).
If a dispute arises, the authority in charge of resolving the dispute uses legal documents to form a final solution.
A well-written document provides a clear path for the authority to follow.
A poorly written document creates opportunities for the disputing parties to argue “their interpretation” of missing or ambiguous content.
The Words in the Document Matter
A well-crafted legal document contains precise, indisputable, clearly defined words and phrases. Each reader’s unique background of experiences affects their interpretation of words and phrases.
In some situations, TOU means “terms of use” e.g., a service agreement. Others may define TOU as “time of use” for consumable products or “tactical operations use” for action-dependent activities.
Terms of art and best practices are industry specific words and phrases.
These tools allow document writers to use shorthand language for situations where the parties share commonly accepted vocabulary unique to the applicable document’s purpose. Common legal terms of art include:
- Exploitation: In many contexts, exploitation denotes a negative experience. However, in industries that collect royalties for intellectual property licensing, it means the active commercial use, monetization, or licensing of intellectual property and refers to the revenue generated through these activities.
- Agent: Generally, an agent is a person or a company representing another party in a transaction. More specifically, when an agent is involved in a contract, it may be presumed that the agent has the authority to sign contracts on behalf of the party the agent represents.
- Intellectual Property: People tend to reference any licensable material as intellectual property. Because intellectual property encompasses numerous categories, legal documents should define the specific types of intellectual property relevant to the document – such as copyright, trademark, wordmark, patent, or trade secrets.
Grammatical application affects how legal documents are interpreted.
There is a significant difference between “Company A will pay the vendor on the first day of each month,” and “Company A may pay the vendor on the first day of each month.” Passive voice in legal documents can also lead to disputes.
Active voice clearly identifies which party is required to take an action or receives a benefit in the document. Consider the following examples:
“Vendor will be paid on the first day of the month,” where no specific party is identified as the payor or “Company A will pay the vendor on the first day of the month.” Where Company A clearly is the party obligated to make the payment.
“The agreement will be delivered to the parties…” versus, “Company A will deliver the agreement to the parties…”
Defining terms reduces confusion that might arise if a word is not a standard term of art, or the parties using the document don’t recognize the same terms of art.
Common examples of how defining a term in a document helps include:
- Business Day: Business Days typically do not include weekends and recognized holidays. When the parties recognize different holidays (by city, state, nation, etc.) defining the exact days that constitute Business Days can help avoid disputes arising from missed deadlines, delayed payments, and similar circumstances.
- Year: When parties use a fiscal year that is different from a calendar year, it is important to define whether deadlines in the document are based on fiscal or calendar years.
- Payments: Payment obligations create many dispute opportunities. Clarify the due dates, the currency, which party pays conversion or processing costs, conditions upon which payment is made, whether a disputed amount can remain unpaid while the parties resolve the dispute, if payment amounts depend on gross or net sums and if net sums, and if net sums, what fund categories are subtracted from gross to equal the net amount.
The Look of the Words Matters
Finally, a review attorney will check document terms that are highlighted within the document in different font styles, formatting, punctuation, and category groups.
Legal documents often use ALL CAPITAL TYPE or bold type, or BOTH to bring attention to information that
- (i) must be included due to applicable laws,
- (ii) may contradict common use or application,
- (iii) allocates or waives rights or obligations for the parties, or
- (iv) otherwise includes content that might be unexpected within the context of the document.
While processing these basic review applications, the attorney may also fix typos, correct document formatting, and revise other aspects of the document contents – all in an effort to ensure the parties have a comprehensive and consistent understanding of the true intentions and purposes of the final, executed document.
Legal documents can be daunting, and meticulous verbiage is crucial! Sutter Law helps you read your documents with confidence and expertise.
Reach out today so that you can focus on what you do best: your business! Let us handle your legal documents, offering you transparency, clarity and simplicity.
