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Contracts should explain their terms as necessary

I couldn’t disagree more strongly with my friend Ken Adams’s comment that, apart from the opening recitals, “in a contract you don’t reason or explain. You just state rules.” That’s way too categorical a statement for my taste.

Contracts are read and followed by people, not by computers, and people sometimes need to be persuaded to do the things they’re theoretically supposed to do. That’s where it can be extremely helpful to record reasons and explanations into a contract.

Suppose Company A signs a contract requiring it to do X. It won’t necessarily happen that way automatically. One or more people need to make X happen, and those people might balk at doing so.

For example, Company A’s management might have changed their minds. When they signed the contract, they were willing to do X, as required by the contract. Now, though, they don’t want to spend the money, or they’d rather chase a better opportunity, or whatever — now, they simply don’t want to do X, even though the contract says they have to.

It might be even simpler: Perhaps it was Alice at Company A who negotiated the contract, but she moved on to another job. Now, it’s her successor Allen who’s responsible for making X happen — and he thinks doing X is a bad idea, so he wants a way to get out of having to do it.

What will Company A’s lawyer say? He wants to please his client and make a favorable impression. If he can think of even a faintly-plausible rationale to excuse Company A from doing X, the chances are that he’ll say so.

Bottom line: If Company A really doesn’t want to honor its contractual commitment to do X, the odds are that the company will simply fold its arms and say “nope.” (I speak from hard experience on this score.)

That’s where reasons and explanations can come in handy in a contract: If the contract explains the business reasons why Alice committed the company to doing X, there’s a better chance that her successor Allen will understand her reasoning and, however grudgingly, go along with her commitment.

The same is true in contract litigation, too: Judges sometimes need to be persuaded too. This is especially true if there’s more than one way to read the contract — again, this is where reasons and explanations can come in very handy.

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