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Contract simplification – five techniques


I’ve developed a real thing about contracts with incredibly convoluted language. You’ve seen plenty of them — “if X and Y happens, then Z will occur, provided that A is true, and subject to the occurence of B, except that if C is also the case, then D will take place.” I confess to having been guilty of such crimes against language myself.

There is, however, a better way — several of them, actually.

Short Sentences, Plain English

Contracts don’t have to be written in legalese. Short, plain statements of the parties’ intent will do nicely. If a sentence starts running long, break it up.

Charts and Tables

Instead of long, complex narrative language, use charts and tables. Here’s an example of the former:

If it rains less than 6 inches on Sunday, then Party A will pay $3.00 per share, provided that, if it it rains at least 6 inches on Sunday, then Party A will pay $4.00 per share, subject to said rainfall not exceeding 12 inches, [etc., etc.]

Here’s the same provision, in table form (apologies for the extra blank space just below; I can’t figure out how to make it go away):

AMT OF RAIN ON SUNDAY PAYMENT DUE
FROM PARTY A
Less than 6 inches $3.00 per share
At least 6 inches
but less than 12 inches
$4.00 per share

Which one would you rather read?

Situation Tables

There’s no reason that a contract can’t provide for Plan A, Plan B, Plan C, etc., when particular things happen. This can often be spelled out in situation tables. Here’s a trivial example:

EVENT PLAN A PLAN B PLAN C
Supplier experiences quality problems Supplier will give immediate written notice to Buyer and correct the problem within 24 hours. Buyer may obtain goods from alternative sources and bill Supplier for its expenses, less what Buyer would have paid Supplier under this Agreement. [Be creative!]

Illustrative Examples and Sample Calculations

Your contract may contain a complex formula or some other particularly tricky provision. If so, consider including a hypothetical example or sample calculation to “talk through” how the formula or provision is intended to work.

(UPDATED 2009-08-11: The drafters of $49 million of promissory notes would have been well served to include a sample calculation to illustrate one of their financial-term definitions — it would have saved them a lot of money in attorneys’ fees. See this posting.)

Explanatory Footnotes

Suppose that, after intense negotiations, a particular contract clause ends up being written in a very specific way. Consider including a footnote at that point in the contract, explaining the same. Future readers — your successor, your lawyer, a judge — might thank you for it.

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