I have recently been sent a contract for review, and what I discovered was a mish-mash of bits and pieces which had clearly been cobbled together from several different agreements.

The result? A potentially very costly mess!

Many of the terms used were not defined, and the (single) subject matter of the agreement (defined as ‘the Products’) was also referred to in various places as:

“the Work (as defined below)” (It wasn’t!)
“the Research Services”
“the Results”
“the Development”

and a couple of others which I can’t repeat here for fear of identifying the parties.

None of these terms were defined in the document or used in any consistent manner – in fact they seemed to be used interchangeably. In addition, there was reference in one definition to a Schedule which did not exist and was not referred to anywhere else in the contract.

So, does this matter, or is it just nitpicking?

Unfortunately, not only does it matter, but it can have serious implications. Here’s why:

The payment terms did not refer to the Products at all – despite several of the undefined terms being used in it, – and the warranty clauses did not link back to the Products either. Accordingly, the only possible ‘agreement’ between the parties would have been for the provision of Products, without the benefit of a warranty, for an undefined (and therefore, by law, a ‘reasonable’) payment.

However, in this case, the wording created such confusion and uncertainty that the whole agreement would almost certainly have been unenforceable.

This was a high value, technical contract, which ran to several pages. However, whatever the nature or value of your agreement, if you have taken the trouble to negotiate a deal, surely you want it to be enforceable?

If you have an agreement that you know (or suspect) has been created by cutting and pasting, and want to be sure that you are protected, please get it checked out – it may have been cheap to create, but it may also not be worth the paper it is printed on.

I have come across the following example today of a ‘circular’ definition:

Definition: ‘Protocol’ means the protocol which the supplier must provide to the client in accordance with Clause 2

Clause 2: The supplier will provide the client with the Protocol

This definition creates a perpetual loop. As the supplier, you would read to clause 2 and see that you have to provide a Protocol – you would then look to the definition to see what it means, and find that it is the document you have to provide under clause 2!

As a lawyer who focuses on the practicalities of contractual agreements – and on making them as short as is reasonably possible – if I was re-drafting this, I would firstly decide whether a definition was required at all. If it was, I would probably re-word it along the lines of the following:

‘Protocol’ means a protocol in the form set out in Schedule 1, or in such alternative form as the parties shall agree in writing from time to time.

The first part of the wording gives the parties certainty as to what is meant, and the second part gives them the flexibility to make future changes.

Do you have definitions in your agreements which don’t make sense to you or go around in circles? If so, I’d be pleased to hear about them.

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.