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How differences in interpretation can lead to contract disputes

On Behalf of | Mar 14, 2023 | Commercial Litigation |

Some people find contracts to be understandably confusing because they don’t understand legal jargon. Even when a contract includes terms that are articulated in plain English, there could eventually still be a dispute about what the terms of a contract actually mean. In a nutshell? Contract language tends to be complex and interpreting them can be a beast of a task.

Differences in interpretation can lead to major conflicts concerning any specific contract. Businesses that are about to sign a contract with a client or customer and organizations that are hoping to cooperate with a vendor will need to consider the possibility of a difference of interpretation during the contract negotiation process in order to mitigate the likelihood of tensions arising down the road.

How can those who are entering into a new business arrangement reduce the risk of difference of interpretation challenges causing issues as time goes by?

Talking plainly about the meaning of the contract helps

People often rush to get ink on paper when negotiating a contract and care more about having the signed document in hand than about setting the best terms possible. It is common for businesses to use boilerplate documents that only have a few details included. Eventually, those generic contracts can lead to disputes and allegations of a breach of contract.

Any vague language, including terms like a reasonable amount of time, could lead to disagreements in the future. What one party thinks of as reasonable may seem inappropriate to the other. Instead of using phrases that are open to interpretation, it is typically better to impose very specific rules, including explicit time frames and exact terms regarding compensation amounts.

Meeting in the middle can help settle a dispute

When each party to a contract had their own idea of what the agreement would mean, it could be very difficult for them to compromise later. If those who are struggling with a contract dispute recognize that it is a matter of interpretation rather than intentional non-compliance that has caused the issue, they may be able to negotiate a solution that works for everyone in full.

Such challenges are also important learning opportunities. A legal professional can assess what has happened in a situation involving different interpretations of a contract. Then, they can advise those involved in ways that may prevent future disagreements about the true meaning of a contract. Understanding that a small oversight can lead to major business disputes may significantly help those who are negotiating a contract or who are hoping to enforce one.