A BUSKLAW Newsletter Addendum: The Dangers of Contractual Ambiguity and Acrimonious Contract Negotiations

This is a follow-up to my recent post about contractual "gotchas." Some lawyers think that they're being crafty (and doing their clients a favor) by deliberately introducing ambiguous provisions in a contract. Plain-language expert Ken Adams points to an example from a 2007 post here. And negotiation expert and author Victoria Pynchon points to another example (involving the meaning of "sudden and accidental" from environmental liability insurance policies) from her Negotiation Law Blog.

This gamesmanship strategy is not only ethically questionable but also likely to backfire on the supposedly crafty lawyer because ambiguity often cuts both ways - and courts often interpret ambiguous provisions in a contract against the parties who drafted them. 

A lawyer negotiating a contract under a tight deadline may use that pressure as an excuse to leave a disputed provision open to interpretation to meet the deadline. This is risky business - it may lead to controversy down the road. And that dispute may hurt an otherwise positive business relationship between the parties. In my experience, most deadlines to sign contracts are artificial; the most reasonable deadline is the end of a party's fiscal year. Other than that, pricing that is offered on the last day of the month can usually be had on the first day of the new month. And there is usually no rational basis for not continuing the contract's non-price-related provisions after the declared "sunset" date. 

Now for true confessions. First, I can't say that, in the interest of meeting a signing deadline, I've never negotiated a contract that contained a deliberately ambiguous provision, but I've always disclosed the situation to my client and received their written consent to accept the risk. Second, on numerous occasions I've pointed out unintentional ambiguities in contracts drafted by the other party. One example is where the contract referenced an exhibit that was not apparently applicable to the deal; I suggested that the incorrect reference be removed (to the relief of the other party's lawyer). I discovered that this courtesy builds trust - and makes negotiating other parts of the contract easier. 

And finally an aside about "problem" contractual negotiations - those that are drawn out and acrimonious but finally result in a signed agreement. In my experience (8 times out of 10), even if there are no contractual disputes down the road, the business relationship will be troubled, and one party will usually want to terminate the contract when it expires (or earlier, if there's a basis for that). The parties would have been better off had they never done the deal!