I recently reviewed an agreement which had been professionaly drafted for my clients – but which they did not understand.
It contained long and complex clauses upon matters which have routinely been the subject of academic debate in the courts. In some cases these clauses can be critical, and a well drafted clause can mean the difference between survival and financial ruin for a business when an agreement turns sour. In this agreement, for example, as in many, the right to terminate if the other party suffered any one of a number of financial problems – including, I suspect, losing his change down the back of the sofa, – was the subject of several paragraphs of prose.
However, given that my client’s only real obligation was to pay for work completed to its satisfaction, I personally did not feel that such a detailed clause was appropriate. What was more worrying, however, was that there were several practical issues of much more signifcance to the client which had not received such detailed attention.
For example, my client required regular progress reports and had the right to terminate the agreement if adequate progress against an agreed schedule was not being maintained. This obligation was critical to my client, – who needed to be able to dump and replace the contractor if appropriate. Critical in a practical sense, but clearly not the type of clause which regularly excercises the learned minds of the judiciary!
The agreement defined ‘Report Dates’ as the first day of each calendar quarter – so far so good – but then merely required the other party to produce reports ‘in accordance with the Report Dates’. What did this mean? Neither my client (nor, it turned out, the other party,) fully understood how to interpret this clause, which meant it was already doomed as a useful weapon in the contractual armoury.
A report, scribbled on the back of an envelope, prepared on 10th April for the period from 1st January up to 31st March, but not delivered to the client until 31st May would fulfil the obligation – but was certainly not what my client needed. Accordingly, the clause was ‘legal’ but practically ineffective. (Lawyers will know that there would be an implied clause to the effect that the report had to be delivered within a reasonable time – but the clients didn’t know that, and anyway, why place them in a situation of having to argue about what was reasonable?)
The clause was changed to make it clear that the reports would cover the activities of the quarter ending on the relevant Report Date, would be in such format as my client reasonably required, and would be delivered within 7 days of the end of the quarter in question.
Tags: Definitions, effectiveness, report