Contract drafting and the limits of textual analysis

Good contract drafting can be compared to good writing, as a play or TV drama can be compared to real life. One is a focussed, concentrated form of the other. Discuss.

Modern contract drafting uses the general principles of good writing and adapts them to the peculiar requirements of a commercial agreement. Some of the general principles work well for contracts. To communicate clearly, it is best to use modern language, write in short sentences, be direct and avoid ambiguity. This works for contracts as it does for an instruction manual for consumer goods, or an article in the The Times.

Contracts are less interesting, from a literary viewpoint, than many forms of writing. A contract sets out legally-binding obligations that the contracting parties have agreed. It is, in effect, a “shopping list” of promises. Some of the writing techniques that are used in other forms of communication have no place in contract drafting. For instance, contracts rarely use techniques that show off the author’s literary creativity, or try to persuade the reader of a political opinion, or demonstrate empathy. Equally, some of the techniques for good contract drafting are unlikely to be found in general writing. In contracts, the drafter should be painstaking to avoid internal ambiguity: he should use the same word or phrase in different parts of the contract to express the same meaning. This can sometimes result in a stolid “feel” to contract prose, which a writer in a different genre might avoid by varying the words used.  In some respects, contracts read like computer programs: it is important to be mathematically precise and accurate; very little credit is given for style.

If best practice is followed, a contract should only have one meaning. If the meaning is clear, there should be no scope for disputes arising over interpretation. But this logical conclusion fails to take account of human nature. Disputes over the meaning of contracts can arise for many reasons, including:

1. The drafter didn’t make the meaning clear.
2. The parties didn’t understand the meaning, even though it was clear. Perhaps there was wishful thinking on the part of the parties, or they didn’t have the same powers of linguistic analysis as the drafter.
3. The parties chose not to understand the meaning, because it was not in their commercial interests.

When disputes over the meaning of contracts arise, they sometimes end up in court. The judge has the final say on what the contract means. If the contract is clearly written, the judge should follow that clear meaning and decide the case accordingly. But referring a question of contractual interpretation to a court creates further uncertainties, including:

1. The drafter didn’t make the meaning clear (see above).
2. The drafter did make the meaning clear, but the judge didn’t understand the meaning – he didn’t have the same powers of linguistic analysis as the drafter, and didn’t have as much experience of drafting contracts as the drafter.
3. The judge was influenced by how other courts interpreted the meaning of the same or similar words in earlier contracts.
4. The judge adjusted the meaning to do justice in the case. This is a larger subject than strict textual analysis, and may be affected by considerations such as which party acted badly, or whether the parties’ conduct modified the terms of the contract. IP Draughts recently discussed this point with a senior commercial judge. The judge’s reaction was that judges are expected to do justice in the case, so this factor will always be present. This led IP Draughts to wonder whether disputes over contractual interpretation would be better decided by an arbitrator, particularly one who had extensive contract drafting experience.

Some experienced contract drafters, and IP Draughts includes himself in this category, would like contracts to be interpreted according to their linguistic meaning, particularly when they are well-drafted and the meaning is clear. This can be viewed as the engineering or computer programming approach. However, not all people think in this way or follow this approach when faced with a contractual dispute.

IP Draughts is not sure what is the best way of dealing with these issues. Ken Adams would like the courts to hear expert testimony when interpreting contracts. IP Draughts is unsure whether this would significantly increase the quality of contractual interpretation. It would probably work well if Ken is chosen as the expert, but if not him, who? In many cases, it might just add another layer of expense to the dispute, with rival experts arguing – as in the case referred to in the last link- over the significance of an Oxford comma.