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To have a binding contract, English contract law requires that the business contracts must be specific and clear in their wording. For example, terms, each contract clause, and any particular action should be written in plain language. Simply having a written contract with the other parties is not the best practice. This article will explain why clarity of contract is essential when entering commercial agreements with other businesses. This will ensure your business does not agree to unclearly written agreements.
Why Have Clarity of Contract?
UK law treats a legal agreement very seriously. Therefore, the consequences of a party breaching a written contract can sometimes be severe. Accordingly, English courts tend to hold that only a contract clause with sufficient clarity should be enforceable.
This makes a lot of sense as you do not want to enter into business contracts that have unclear wording, which can cause a particular problem. However, you also want your business to have confidence in the power to enforce contractual obligations in a court should the other party breach them.
How to Ensure Clarity of Contract?
To ensure clarity of contract, your contracts should precisely describe:
- what the parties agree on;
- how they agree on it; and
- when it is to be delivered.
Some lawyers nickname this ‘who, what, when, where and how?’
Indeed, your business would not be happy to receive a draft contract that detailed severe consequences for your failure to deliver goods without clearly specifying when they are due and where to deliver them. Therefore, check that your written contracts are well-drafted with clear and specific terms. You should do the same for those you are signing from another party.
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An Example
Your business agrees to supply food to a local Premier League football club’s canteen, which requires daily deliveries (including weekends) early in the morning.
A contract term simply stating that the Premier League club requires ‘the daily supply of food in exchange for a fixed daily rate’ might not provide your business with much clarity.
Instead, the written agreement should aim to confirm:
- Who: who is the food going to? If the club has many departments, which staff member should receive the food?
- What: further detail as to the food would be helpful. Does the club want fresh produce and ingredients which it will use to cook meals, or is it looking for ready-made food to sell? A well-drafted contract should specify these details.
- When: by what time does the club need the food and ingredients to enable their staff to prepare them for breakfast for staff and players?
- Where: the contract should identify an exact location for the food delivery, for example, the back entrance of the canteen. Likewise, if no one is supervising the drop-off, is it sufficient to leave the delivery outside the canteen, or must it go directly to someone in reception?
- How: the contract must include further details regarding how goods are to be stored, packaged and delivered. For example, the club might specify that you should provide the food in boxes or crates to enable easy transfer into the kitchens. Some clubs might have environmental policies, so they may prefer businesses with environmentally friendly practices such as avoiding unnecessary plastics.
Providing information will enable your business to know the club’s expectations and avoid unintentional contract breaches. Therefore, clarity of contract is vital to creating a thorough business relationship and ensuring all parties on the same page.
Striking Out an Unclear Contract
If a judge cannot understand a contract’s purpose or clause easily, they may strike it out as ‘unclear’. A struck-out clause cannot be relied upon.
If a contract has a confusingly phrased termination clause and your business uses it to end a written agreement early, you may risk a court stating that the clause had no legal force due to lack of clarity. This would mean that your business had breached the contract by relying upon an invalid clause.
If in doubt, a judge will try to give the relevant words their natural meaning and favour clear words over legal jargon. English courts aim to apply business common sense in line with the subject. This means they value clauses written in plain language. Where a judge is interpreting the wording of construction contracts, they will consider what the contracting parties aimed to agree.
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Key Takeaways
When drafting your business contracts, remember to focus on the contract’s clarity. This means you should use wording that provides greater clarity and understanding of the contract’s purpose and intention. Therefore, a judge can interpret the contract obligations. This avoids them striking out clauses, or the entire contract, due to lack of clarity. Clarity of contract ensures that your business, the other party to the contract, and a court fully understand how the contract works in practice.
If you need help drafting contracts, our experienced commercial contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
When interpreting an uncertain clause, a judge may try to find the natural meaning of the clause and look at the subject matter of the contract.
Clarity of contract is ensuring that a contract is clear and concise in what it sets out.
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