A contract is intended to serve as the foundation of trust and clarity between the parties who agree. However, it only takes a single poorly drafted clause to shake that foundation and threaten the entire deal. Picture two businesses nearing the close of a significant transaction, only to discover conflicting language hidden deep in the contract during due diligence. The consequences can be severe: delays, costly renegotiations, and damaged business relationships.
Unfortunately, this scenario is far from rare. Small differences in wording can carry outsized consequences, often overlooked until it is too late to remedy them easily. This is why careful contract review is not just a legal step, but a strategic business imperative.
Common Examples of Misworded Clauses
To understand the risk, consider some typical examples of how small language choices can shift meaning drastically:
- When a clause uses “shall” instead of “may,” it changes a permissive or discretionary statement into a mandatory obligation. This can impose unintended duties on a party, potentially leading to disputes over compliance.
- Leaving out important qualifiers such as “material” in breach or default definitions can expose a party to penalties even for trivial or technical breaches that were never meant to trigger remedies.
- Using “including” rather than “including but not limited to” can inadvertently narrow the scope of obligations or rights, limiting flexibility or protections that were intended to be broad.
Each of these subtle distinctions can shift how risks are allocated, affect timelines, or even render the agreement unenforceable in certain respects. Overlooking these details can be costly in terms of time, money, and business goodwill.
How to Prevent Problems with Contract Language
Avoiding issues caused by misworded clauses starts well before a contract is signed. The most effective safeguard is a rigorous review process during the drafting and due diligence stages. While artificial intelligence tools can efficiently flag common drafting errors and identify inconsistencies across documents, they still lack the contextual judgment and nuance that human legal expertise provides. Experienced attorneys bring the contextual understanding and judgment necessary to ensure that contract language accurately reflects the parties’ true intentions and adequately protects their interests.
During due diligence, it’s helpful to use a detailed checklist focused on the key contract elements that are important to you, ensuring every clause is carefully examined for ambiguity, risk, and alignment with the overall business objectives. Clear communication between negotiating parties is also vital; raising questions and clarifications early can prevent misunderstandings that escalate later.
What to Do if a Misworded Clause is Found
Discovering a problematic clause after signing or during due diligence calls for a measured, strategic response:
- First, consult with legal counsel to fully understand the potential impact of the clause and explore available remedies.
- Promptly seek to renegotiate or amend the contract to clarify the language and resolve ambiguities before they cause disputes.
- Document any agreed-upon changes in writing to maintain a clear, enforceable record and avoid future conflicts.
- Develop contingency plans in case the clause leads to delays, financial exposure, or other liabilities, so your business is prepared for any outcome.
The Strategic Importance of Contract Review
Contract review is far more than a routine legal step; it is a strategic necessity that protects business interests and helps keep deals on track. Diligence in drafting, reviewing, and negotiating contract language can prevent costly delays, preserve valuable relationships, and provide peace of mind.
In the contemporary complex commercial environment, the precise formulation of contract language is indispensable for attaining business success. Allocating ample time and expert scrutiny to comprehensive contract review represents a strategic investment, facilitating frictionless transactions and fortifying collaborations.