Ben Fleshman | 08-23-2016
In most contexts, ambiguity might lead to slight disagreements or misunderstandings, but they are not likely to lead into litigation. In the world of contracts, however, ambiguity can cost a company a lot of money. It’s important, therefore, that the terms of a contract be so specific that they cannot be misinterpreted.
To accomplish this, it is important to involve the contract manager, legal counsel, and drafting team to collaborate on the type of language they will use in the contract. The following three methods can be used to reduce ambiguity in a contract.
Create a Legal Language Library
Also known as a clause library. When a variety of departments are all creating contracts to suit their own needs, those contracts tend to take on different forms. Distinct terminology arises for each different sector of a company, and more often than not, that leads to ambiguity and a lack of uniformity throughout the company.
With proper contract management software, however, your legal counsel can create a standardized legal language library, or database for contractual terms that can be used throughout the company. This ensures that the terms used in a contract from the sales team will be the same ones used in a contract created in the legal or any other department. These standard terms come from someone well versed in legal jargon and proceedings, which means that terms will be up–to–date and clear. There will be less room for loose interpretations when the language used in your contract matches the language commonly used throughout the industry.
Collaborate as a Team
Collaboration is key when drafting a contract. What might seem perfectly clear to you may actually be nebulous and obscure to someone else. It is always best to get a fresh set of eyes, especially from the legal department, to review a contract draft. Different team members bring new perspectives, and they can help you see which terms are unclear and what implications that ambiguity may convey. The can offer suggestions for improvement, and contribute clarifying statements to the contract.
One of the benefits of CLM software is that it makes collaboration simple and easy. The entire team can access a contract draft in the cloud from wherever they are, make comments on specific portions of the document, and edit or add to the document where needed. Every member of the team will receive alerts when comments or changes are made, so everyone can stay informed. When you wish to integrate these changes into the document, it can be done easily online.
Attach a Glossary of Terms
One way to increase precision of language in your contract from the outset is to include a glossary for certain terms which may otherwise be ambiguous. This makes it more difficult for a third party to misinterpret the terms of the contract, as everything is clearly defined in the attached glossary. You may also wish to clearly define terms with which a judge may not be familiar (such as the name of a piece of technology or software unique to your company). The contributions of the entire team can help you locate terms which may be ambiguous and need alterations or definitions. It may be difficult to determine which terms need clarification, but doing so will help to clear away any ambiguity which may exist around a certain word or phrase.
Concord offers state of the art contract management software which can help you on your quest to clearer contracts. We provide collaborative tools, central storage for contracts, eNegotiation, and contract drafting technology, to make your contract management easier.
Though contract management is critical to all business operations, 96% of the world’s companies still manage their contracts manually, wasting $153B a year.
To correct this, Concord unifies all the steps of the contract lifecycle into a single platform, being one of the few platforms to natively support the entire contract lifecycle from drafting, negotiating and signing, to managing executed contracts. No additional third-party software solutions are needed for e-Signature or storage when you use Concord. There are no other extra costs.
Concord is committed to making sure that no one will have to manage a contract manually ever again and provides many of these key high-performance features for free—to everyone.