Writing a contract may appear so simple to some business people that little risk is evident in so doing. An urge to move things ahead, accomplish a task, or close a deal propels a person to get on his computer, retrieve some sort of template, and start making tweaks to it based on the perceivingly relevant circumstances. Productivity is and should be universally praised. What might go undetected, however, is the legal meaning behind serving as the drafter of a contract. This blog article explores the legal significance of drafting a contract.
Nearly all of us have written something with a concept in mind, let a little time pass, and then revisited our writing with critiques about what we wrote. We thought what we wrote at the time was clear, understandable, and to the point, but we might change our opinions several days or weeks later when we have a chance to refresh our perspectives. Writing is an iterative process. Whether preparing an email to a colleague, a how-to guide for new employees, or a contract for the purchase of real estate, a person will probably find that this concept applies. The trouble is that once a contract is signed by all parties, one probably will not be permitted to go back and edit his work, at least not without a lot of effort and/or cooperation.
Nobody is a perfect writer. There is no such thing as a person who writes flawlessly. It’s a worthy aspiration to become an excellent writer–and the progress made along such a journey will be rewarded–but the ultimate outcome will not be a redefining of the English language. The saying “practice makes perfect” is not literally true in the context of writing, but it is true that practice will lead to something closer to perfection than the product of one’s first repetition.
A person closer to her first repetition in legal writing than her pinnacle might be wise to defer or delegate the constructive use of a keyboard until more experience is acquired. Even sophisticated business organizations are not immune from drafting risks. In Mid-West Conveyor Co. v. Jervis B. Webb Co., 877 F. Supp. 552, 560 (D. Kan. 1995), a declaratory judgment action, the court took into account when ordering judgment in favor of the plaintiff that defendant Jervis B. Webb Company drafted the relevant agreement at issue (a license agreement): to the extent a portion of the agreement was unclear, the court said, that portion should be construed against defendant Jervis B. Webb Company as the drafter of the document. The court made the point that had defendant Jervis B. Webb Company, as the drafter of the agreement, intended to limit the geographic scope of the license, it could and should have included appropriate words of restriction. Id. The Restatement (Second) of Contracts § 206 (1979) was cited by the court for the rationale for the rule that ambiguous agreements are construed against the drafter:
[W]here one party chooses the terms of a contract, he is likely to provide more carefully for the protection of his own interests, and more likely than the other party to have reason to know of uncertainties of meaning; he may leave meaning deliberately obscure, intending to decide at a later date what meaning to assert[.]
Id. The Mid-West Conveyor Co. case shows how drafting mistakes can be costly for the drafting party. The onus is on the drafting party to include appropriate verbiage and phraseology. Courts assume that drafters provide more carefully for their own interests and have greater understanding of meaning. For this reason, when there is an instance of ambiguity, it will be construed against the drafter and favorably to the non-drafting party.
As with many concepts in law, there is an applicable Latin phrase. The concept of ambiguous contract terms being interpreted against the draftsman is known as “contra proferentem”. Derichs v. AT&T Services, Inc., No. 16-2346-JWL (D. Kan. May 9, 2018). One Kansas case defines the Latin term as “requiring ambiguities to be resolved against the contract’s drafter”. Reiling v. Sun Life Assurance Co. of Canada, 66 F. Supp. 3d 1361, 1367 (D. Kan. 2014). It seems reasonable to deduce that a term used in a dead language, now incorporated into the English language, has stood for a principle for a very long time; moreover, given the length of its reign, the term does not appear to be departing us anytime soon. Legislation changes the regulatory environment of business from year to year. Unlike it, the principle of contra proferentem appears to be unwavering. For that reason, among others, it should be understood before putting pen to paper instead of being an unwelcome surprise to authors after the fact.
There is a required phase between writing a contract and it being construed against the drafter. That phase is called ambiguity. In order for contract terms to be interpreted against the draftsman, they must be ambiguous to start with. “If, after applying the ordinary rules of interpretation the contract is still ambiguous, the court can resort to the rule that ambiguities are construed against the drafter.” Coshocton Grain Co. v. Caldwell-Baker Co., No. 14-cv-02589-DDC (D. Kan. Aug. 22, 2017) (citing First Nat’l Bank of Olathe v. Clark, 602 P.2d 1299, 1303 (Kan. 1979)). Kansas courts focus on ambiguities being construed against the drafter. For that to take place, there must be–naturally–ambiguities within the contract. It follows as a logical corollary that an unambiguous contract is not construed against its drafter.
Whether a contract is ambiguous is a question of law for the court. RMD, LLC v. Nitto Ams., Inc., No. 09-2056-JAR (D. Kan. March 27, 2012). This, of course, means it is the role of the judge to determine contractual ambiguity. But what is a judge to do in the situation of an ambiguous contract being prepared equally by both parties? She will not liberally or strictly construe it against either party. Id. (citing Colburn v. Parker & Parsley Dev. Co., 842 P.2d 321, 328 (Kan. Ct. App. 1992)).
These rules regarding contract drafting can be synthesized into a resultant series of steps. This is not an exhaustive analysis but an abbreviated one for didactic purposes. Step one is to make sure that a contract or agreement was entered into. This blog article is not discussing, for example, the potential benefits of filing a federal trademark application or evaluating who should be the resident agent of a Kansas LLC. Step two is to ask whether the contract or a term thereof was ambiguous. Different rules apply to unambiguous contracts than do ambiguous contracts. A judge makes the decision regarding this legal question. If a contract is in fact ambiguous, one must continue to the latter two steps. Step three is to ask who prepared the contract. If it was just one party, then different rules will likely apply than if both parties prepared the contract. Step four is to construe the ambiguous contract against its drafter (and in favor of the non-drafter), if the drafter was merely one of the two parties to the contract; otherwise, in a mutual drafting scenario, the contract will likely not be strictly construed against either party.
Business persons and non-business persons alike, the human beings they are, may not write contracts with precision. One who takes the initiative to write a contract may instead find himself subject to punishment rather than reward, the opposite of what some might expect for taking what would be ordinarily considered productive action. (Even when a person starts with a template, instead of writing something from scratch, it is difficult to know whether the choice of template was appropriate among other competing forms and whether a qualified drafter assembled it in the first place.) Lawyers who write, review, and litigate contracts may be engaged to come to the aid of contract drafters and reduce the risk of ambiguities, in addition to incorporating language non-lawyers may not have previously considered.
Different lawyers and law firms have different areas of expertise. Specialization in the field of law appears to be a growing trend. While some may work in criminal matters, divorces, or accidents that result in personal injuries, others, like this law firm, work in business, real estate, and trademark matters, a common theme of which is contracts. Kincaid Business & Entrepreneurial Law, LLC ® regularly works on contracts, whether their drafting, interpretation, or revision. If you, your business, or your family has a legal need in the realm of contract law, please contact us at 913-735-7707 or schedule with us here if we could potentially be of service. You may also wish to read about fundamental contract principles (in Kansas) and ambiguity in Kansas real estate contracts on our blog.
Matthew T. Kincaid