Skip to main content

The BUSKLAW January Newsletter: Recent Court Decisions Prove It: Every Word in a Contract Has Meaning!

In contracts, words are weapons. A lawyer who effectively drafts contracts will make careful word choices because the client's fate often depends on it. And every word in a contract has meaning: two recent cases support that truth. 

First, we have Heimer v. Companion Life Insurance Co., a 6th Circuit Court of Appeals decision issued just a few days ago. One Beau Heimer got drunk with his friends, but they all decided to take their motorbikes off-road for even more fun. Unfortunately, Beau collided with one of his pals and suffered major injuries; the medical expenses to put Beau back into some semblance of order exceeded $200,000.00. Beau filed a claim with Companion Insurance, but they declined to pay. Why? Because the vehicle insurance policy that they issued to Beau contained an exclusion for the illegal use of alcohol

Beau's attorney was crafty. He argued that Beau didn't illegally use alcohol. Beau was not a minor and didn't drink in defiance of a court order. Beau was intoxicated for sure (twice the legal limit!), but this exclusion shouldn't apply to illegal post-consumption conduct, such as the illegal use of a motor vehicle. And the Court agreed, scolding Companion for not using specific policy language excluding coverage for claims where the insured is found to be legally intoxicated. 

The distinction between an insurance coverage exclusion for the illegal use of alcohol as opposed to being legally intoxicated may be splitting hairs, but it was enough to cost the insurance company big bucks for the failure to word the exclusion to match their intent. I bet that Companion's lawyer who drafted their policy will be more careful with his word choices in the future. 

The second case involving the impact of a few words was a 7th Circuit Appeals Court case: ADM Alliance Nutrition Inc. v. SGA Pharm Lab Inc. The parties were sophisticated businesses. SGA supplied ADM with a product used to make medicated animal feed. The parties ended their relationship by signing a termination agreement under which ADM agreed to release SGA and its officers from any and all claims, whether known or unknown. Here's the rub: after the termination agreement containing this release language was signed, ADM came to believe that SGA had misrepresented the potency of the product that SGA had supplied to ADM, so ADM sued SGA for breach of contract and fraud. SGA asked the court to dismiss the suit on the basis that the release was for claims both known or unknown.The Court agreed, finding that as between two businesses, this release language was effective to cover the unknown claims for fraud and breach of contract. 

Just because the phrase, known or unknown claims, is commonly used in a release agreement doesn't mean that ADM had to agree to it. They could have insisted on a specific description of the claims being released or simply refused to agree to the release of unknown claims. But they didn't, and they lost!

These two cases prove that every word in a contract means something. That's why contract-drafters must ponder every word and how it might relate to every eventuality. This is easier said than done, but who said that drafting effective contracts - especially using plain language instead of legal jargon - is a cinch?

If you find this post worthwhile, please consider sharing it with your colleagues. The link to this blog is and my website is And my email address is Thanks!


As a follow-up, consider this post by Professor Toedt. (If you think you know what "groceries" mean, think again!)

Popular posts from this blog

The BUSKLAW May Newsletter: Is There a Moral Imperative to Plain English? Part 1 - Examples

"The man in black fled across the desert, and the gunslinger followed." 

Thus begins Stephen King's epic story of the gunslinger, Roland Deschain, and the popular Dark Tower series of novels describing his adventures. But King didn't have to write this sentence that way; he could have consulted with the typical lawyer, politician, or company PR department first. Had he done so, the sentence may have appeared so:

"The bad hombre who was dressed mostly in dark clothing and running fast across an arid land was pursued by a multi-armed, extremely dangerous, and notorious vigilante."
The difference in these two sentences is clear. King's concise short sentence creates an image that grabs the reader's attention and raises provocative questions. Who is the man in black? Who is the gunslinger? Why is he after the man in black? But the Bizarro World Stephen King sentence - with its ethnic slur, passive voice, ambiguity, suppositions, and superfluous adjectives …

The BUSKLAW November Newsletter: Dead Turkeys and Deader Tort Damages

November is the month of Thanksgiving. And Thanksgiving for most folks means time with family and friends (better yet, family who are friends), an appropriate but modestly-priced wine, and a turkey. Turkeys should live their brief sojourn on this earth in relative peace before winding up on our table. But that was not to be for the poor fowls in the recent Kent County (MI) Circuit Court case of White Acres, LLC et al v. Shur Green Farms, LLC et al

The case involves a plethora of parties (hence the "et al"), all of whom were in the distribution chain of a biofuel called Lascadoil. Unlike its parent product, Lasalocid, Lascadoil is not an appropriate turkey-feed additive. (Does anything with "oil" in its name sound fit for human or animal consumption?) So when a bunch of turkeys died after eating feed tainted with Lascadoil, the lawsuits started flying; each party was sued by its downstream buyer who in turn sued its upstream seller. And numerous insurance companies…

The BUSKLAW September Newsletter: Lawyers and Their Goofy Words - and What to Do About It

Growing up, I was told that lawyers were smart cookies. After all, getting a law degree isn't an easy task. You first go to college and find a subject that is best suited to how your brain works so that you can maintain a high GPA. In my case, I quickly discovered that I wasn't a good fit for the "hard sciences." So I took a lot of Political Science and English courses, learned how to write fairly well, suffered through the tedious law school aptitude test on October 20, 1973, graduated with a B.A. degree in 1974 and then went on to law school. There, I endured a legal education infused with the Socratic method (here's an example), suffered occasional migraines (because some of my law professors were truly smart but couldn't teach) and graduated with my law degree on Mother's Day, 1977. Passed the Michigan bar exam and by God, became an honest-to-goodness lawyer in November of 1977!

So having gone through undergraduate studies, law school, and the bar exam…