What are some tips for writing easy-to-understand contract clauses?

It’s almost common sense that we would use plain language when drafting a contract as we would any other document, but there is a historic language hang-over. It’s a bit like timeless literature in old English, and it’s found its way into our most critical business documents - our contracts. It must be remembered that many business stakeholders who read contracts do not have legal training, nor should they need legal training to navigate a contract. A contract is a business document. The heart of every business is sales. They should be able to read and understand the business documents that govern the relationships and deals they create and manage. The use of plain language that the whole business can navigate, is a show of teamwork.

I'd suggest its key that the intent of the clause should be based upon a fair and reasonable approach. Don't set traps by using convoluted language. If you want to shift risk, make that fact known, and keep the general conditions straight forward.

I agree that good business contracts are the ones that use plain, simple and direct language. When I draft a business contract, I always apply these simple steps: 1) prepare skeleton for the contract (table of contents) with sub-points identifying key matters to be put into the contracts. This step helps me see the overall structure and flow of the document. 2) limit the use of legal jargons and specific industry terms. 3) Break the sentences in each clause into short sentences. This helps readers to understand the meaning of the clauses.

Contracts are a story of a business relationship, its start, and its end. I use an outline document, a "term sheet" with each key item for that relationship outlined and agreed to by the parties. Each clause I write is drawn from that starter document in its simplest form. There is an art form to covey legal limitation without being overly verbose. Many attorneys take the approach that they "paint the house" multiple times with similar language in multiple clauses. Whether this is intentional or an artifact in drafting, its confusing. In closing, don't make the assumption that simple drafting is "dumbed" down or rejects the notion of using "magic lawyer words". Here, the art form is to keep it to a minimum and still tell the story.

I disagree with this. A contract is a tool of a business/person. Just like every other tool, there are tools meant for general use, and tools meant for specialists. But ultimately, the contract will be used in a court, which is comprised of specialists. It is important to remember that some phrases have been established as carrying a certain meaning.“Indemnify and hold harmless” is clearer to specialists than “Protect”, in the same way that “ribovirus” is clearer to doctors than “germ”. In giving this example, the article falls afoul of the “different meaning” it claims to avoid. Contracts must be drafted with this distinction in mind, and drafters should think carefully before sacrificing technical clarity for “plain language”.

Use plain English. Resist showing off with the use of Latin terms like uberrimae fidei or ceteris paribus. OK, OK, you caught me.

Put yourself in the other party's shoes. Think about what what they would want in the contract to protect their interest. Do they conflict with your needs? If not, they are a great starting point to build trust. It shows the other party that you understand their position and concerns.

Defining terms that can have multiple meanings helps provide clarity to the contract. For example, when a contract references a calculation of here net losses is deducted from net profit, then you will want to define what net losses and net profits includes. This helps to avoid disagreements between the parties post execution as to what was originally intended.

Den definierten Begriff schreibt man am Besten im Text mit Großbuchstaben, damit beim Lesen klar ersichtlich ist, dass es sich um einen definierten Begriff handelt. Die Begriffsdefinitionen an den Beginn zu stellen hat sich bewährt. Im Text würde ich vermeiden, da es beim (nach)Lesen sonst kompliziert wird.

Understand the business and scope of what you need to draft about is step 0. That would allow you to play later with the language and choose the best terms and design .

There’s a reason why Term comes first, then termination, then indemnification, then limitation of liability, then dispute resolution and finally then the miscellaneous clauses! If you define termination initially, you are simply putting forth that you want to terminate the Contract irrespective of the relationship between the Parties! Order of clauses govern how the relationship between the Parties will form overtime! Don’t mess around by providing dispute resolution when you don’t even have an indemnification clause!

A structured sequence of the contractual clauses ensures the reader's smooth comprehension of the contract's main terms and conditions. It is merely a way to walk the reader through the contract, by defining the parties, objective, value, term, obligations, liabilities ... etc. la simplicité fait la beauté

Clause Structure Example: Scope of Work: Defines the exact services or products provided by the Service Provider. Payment Terms: Details payment amounts, schedules, and methods. Duration and Termination: Specifies the contract's start and end dates, and conditions for early termination. Confidentiality: Outlines obligations to protect sensitive information. Dispute Resolution: Describes the process for resolving disagreements. Key Points: Each section addresses a specific aspect of the agreement. Sections are ordered logically from the initiation to the conclusion of the contract. Clear headings guide the reader through the contract's flow.

Structuring clauses in a systematic and logical manner can enable easier understanding of contract. Readers may be able to understand the contents easier if clauses are well organised under appropriate heading, sub-heading and/or numbering. Proofreading of terms may also be helpful for :a) reducing risk of any inconsistency, and b) enhancing understanding of contract.

Logical terms and conditions are critical to build a strong contract structures and specific clauses, which led to a successful negotiation.

Certainly, it's important to use precise language in legal contracts. Here's a breakdown of how "shall" and "will" are typically used: "Shall": Use "shall" to express a mandatory obligation or duty. It indicates a requirement that must be fulfilled. "Will": Use "will" to express a future action or event without implying a mandatory obligation. It signifies a future occurrence but does not impose a duty. It's important to be consistent in your usage throughout the contract to avoid ambiguity. If you want to convey a sense of obligation, use "shall." If you're discussing future actions without implying an obligation, use "will." Legal language can be complex, and small nuances in wording can have significant implications.

Meticulous drafting is a skill that takes time to develop. Important to be humble to accept constructive critiques from others so as to improve. Avoid verbosity and complex long winded passages.

I literally was just typing about the difference between Will and shall. I don’t even have to look so I’ll just say thank you counselor.

Less Clear Clause: "The Service Provider may provide unspecified additional services at undetermined rates, for which the Client is responsible for payment." Clear and Precise Version: "Additional Services: If the Client requests services beyond those in Appendix A ('List of Services'), the Service Provider will provide them at $100 per hour. These services require the Client's written approval before commencement." Key Improvements: Specificity: Clearly states the rate ($100 per hour) and refers to a specific document (Appendix A) for included services. Direct Language: Uses straightforward wording for clarity. Written Approval: Specifies the need for the Client's written consent for additional services.

The contract writer should be fully aware of what documents consists of. The specificity of document are most important part.

Actually, I do not completely agree to this point. In India, many contracts are critical as well as lengthy by its nature. We cannot add illustration at all the points but for understanding payment tranches and terms. Illustration is handy when it comes to number game and payment understanding.

With regard to technical parameters, commercial standards (DIN, RAL, etc.) should be listed in the appendix if relevant. Particularly in the case of different cultures, it is also important to understand different concepts and definitions of everyday life and, if necessary, to describe these clearly: What is a working or calendar day? When does the working day begin and end? If not clearly defined, this can lead to serious misunderstandings, especially when subcontracting trades - preferably to a different circle of culture than that of the main contract. And these misunderstandings and uncertainties can end up costing a significant amount of money and time.

The contact is vodable as byer service delay & seller reserve right to demand his lose under dispute resolution conditions.

I'm doubtful somehow with this point. Mentioning an example in one clause might unintentionally create confusion or misunderstanding. Contract is one whole unit and clauses should integrate each other. The contract clauses should be written in an understandable language that does not require mentioning examples to clarify more, especially if such examples are related to monetary values that may contradict actual values of the contract. If it's needed, such clarifications can be listed in a separate document or an annex to avoid confusion with the main contractual clause.

I agree with Arpita Bhat in this context. One can't visualise the the appropriate examples and scenarios if the writer won't understand exact contract.

Attention to detail is one of the most important attributes for a corporate lawyer and this is particularly key when drafting or reviewing a contract. It is also important to review or revise clauses in the context of the overall contract. As parties make changes to certain clauses of a contract, it is likely that the relevance or context of some of the other clauses in the contract will also change and hence appropriate amendments will be required.

While a contract being easy to understand is important the capacity for it to be misunderstood should not be overlooked. Working for a Japanese main contractor the Chinese subcontractor had a clause it was to be supplied with two cookers. The subcontractor argued someone who drives is a driver. Someone who cooks is a cooker. A simple example but the misunderstanding could have been avoided.

Reviewing and revising clauses of draft contract can help to enhance clarity and mutual understanding, besides meeting goals and objectives of relevant parties. Proofreading of contract before finalising and signing contract may be helpful for :a) aligning intentions, b) accuracy and c) achieving intended results.

One simple rule - if you as a layman understand your drafted contract, well done , you have achieved a milestone. Also if you want it to be easy understand the underlying intent of each clause - like limitation of liability, indemnity, reps and warranties, if you know what it stands for - you can create the most simple and effective clause Keep it simple, silly :D Raise questions when in doubt & sort it in a manner which both sides understand.

Sometimes, when drafting documents, we tend to overlook minor details like organizing and structuring the content in a coherent and clear manner. Additionally, we often fail to adopt a reader-focused approach. It's crucial to remember that the intended audience may lack legal or subject matter expertise, yet they should be able to understand the language and concepts presented. Contracts, in their essence, are a form of storytelling. By crafting contracts that are reader-friendly, we can effectively communicate with a broader audience.

This article is drafted like if the Legal/Contract/Commercial community was dealing with one and only contract. Would you see yourself reading an IT or Finance article in very broad terms? In the area of Contracts, yes, we aim for standardisation for the sake of compliance and speed of execution, but each contract is specific in answer to various business and legal needs. Therefore, we do adapt our drafting and wording accordingly. From the most Legal considerations (MSA) to Commercial savvy (SoW) to Operational description (SoP), the Contract community doesn’t operate within a single frame only, and is flexible on demand.

Avoid bulky agreements as much as possible. It creates confusion sometimes and leads to reading fatigue. See if schedules and annexures will be more appropriate for certain portions of the agreement

A few important but most overlooked practices that make it difficult to understand a contract; 1. Avoid abbreviations and use expanded forms of words. Alternatively you can consider defining it properly and then use it across a document. 2. Proper numbering of clauses and subclauses is important and it is all the more essential that while cross referencing use the correct clause numbers. Last thing we want is to refer to clauses that are not even in the contract. 3. Ensure that the language is not inconsistent or contradictory within the same document. For instance, we cannot hold a party liable and not-liable at the same time because the document says so. There should be consistency.