Line by Line
Why attention to detail is key to contracting success
The content of this article is not intended to, and does not, constitute legal advice, and should not be used, referred to or relied upon as such.
In the daily course of running your business, and especially amidst a wide-range of competing priorities, taking the time to check, read or review a contract in detail can feel like an unaffordable luxury or even seem counter-productive. On these occasions, the temptation to assume that a contract’s content must be adequate, and to sign without engaging with a contract’s content in detail, is understandable. In this article we explore a range of reasons why it is never advisable to give into this temptation, however understandable, and, by contrast, why paying attention to detail is key to securing successful contracting outcomes for your business.
The Missing Cog
Whilst it may sound obvious, a failure or reluctance to check a contract carefully prior to sign-off can lead to a scenario whereby your business binds itself into a set of obligations which are incomplete or missing key components.
For example, if the contract relates to the implementation of a new solution, which will in turn result in the transfer of personal data processed by your business to a new country or territory, data protection rules may require the incorporation of additional standard contractual clauses, in order to ensure that such transfers are conducted lawfully.
Similarly, if the contract makes provision for the sale of your business’ products, services or solutions to a new customer, but does not contain all of the corresponding commercial and pricing details, your business may subsequently encounter difficulties realising all of the revenues to which it is entitled.
In both examples, your business is potentially exposed where it may not otherwise have been, had the relevant agreement been checked carefully prior to sign-off.
Who Goes There?
If your business is handling a number of draft contracts simultaneously, for example through the use of sales contract templates at a time of high-volume growth and expansion, it can become very easy to fall victim to human error, in particular by marking draft contracts up with incorrect customer counter-party names.
If introductory clauses, recitals and signature blocks are not checked for accuracy, contracts can mistakenly be signed-off in the names of incorrect and unrelated entities. In turn, this can result in the validity of the wider contract being called into question, (whilst also, likely, damaging your business’ credibility with its customers upon discovery of the error).
A Lack of Definition
Defined terms are a common tool used within contracts for the purposes of clarity, brevity and ease of reference. By defining key terms correctly at the outset, a contract can be kept both concise and accessible in the interest of both parties.
Defined terms must be checked and used carefully however; if a definition of ‘Force Majeure Event’ is not sufficiently detailed, for example because it fails to include pandemic within its scope, your business may not be able to suspend fulfilment of its obligations, or to legitimately escape liability for a failure to perform, in the event of a pandemic-related emergency or interruption.
Directions Unclear
Contractual provisions rarely operate on a separate and standalone basis, or in isolation from one another; it’s common for individual clauses to sign-post to others appearing within the same agreement. For example, a termination clause may contain wording which states that:
“The Customer may terminate the Agreement immediately on written notice to the Supplier in the event that the Supplier is subject to any of the circumstances set out within clause X.”
(Where, in this example, clause X lists a range of insolvency or bankruptcy related circumstances which may have befallen the Supplier).
If an undetected typo or drafting error resulted in the above wording incorrectly sign-posting instead to clause Y or clause Z, both of which might refer to entirely different or unrelated matters, the Customer’s ability to terminate on the Supplier’s insolvency could be drawn into question or even prevented.
To Conclude
Whilst checking a contract carefully prior to sign-off can be time-consuming, there are a range of ways in which doing-so can add real value for your business in the short, medium and long-term of the resulting contract lifecycle. Moreover, experience suggests that a carefully checked and well-presented contract is more likely to be well-received by your counter-party, which can in turn help to smooth the way during negotiations.