“Clarity precedes success” says lawyer-turned-leadership-coach, Robin Sharma. Lawyers, business leaders and executives will all tell you that knowing what you want is a fundamental success principle for any business. Why then, when putting together agreements, whether for internal or external use, is there often confusion and sometimes bitter conflict around what was agreed?
Minimising your commercial risk
Any lawyer will tell you that it is impossible to guarantee that your agreements will never be disputed or tested. However, there are ways to minimise your commercial risk. The most obvious way is to make sure that everyone is really on the same page and that the agreements which follow are precisely and clearly drafted. Sounds simple enough but assumptions, competing agendas, time pressures and other factors can get in the way of producing effective negotiations. This may give rise to unintentional gaps which may have dire consequences if a party tries to rely on a right, it thought it had but doesn’t.
For SMEs, the concern is often cost. There is a temptation to use AI or to - uhm – “borrow” other business’s terms and conditions found on their website. Whilst AI can generate good ideas of what should be in an agreement, it is unlikely to generate something that deals with the specific risks facing a particular business. It also won’t tell a user whether they are missing something if the user doesn’t know what to ask for. Likewise, by using someone else's terms and conditions, your starting point becomes what their business needs, not what will give your business the edge it requires to succeed.
When it comes to large businesses negotiating complex, high value transactions, there is a tendency to fall back on what has always been done both by the lawyers and the company’s decision-makers. There are concerns that by simplifying language something crucial will be left out or a nuance lost. There are, without a doubt, certain words and phrases which courts have considered and interpreted to have a particular meaning, and these terms have a place in agreements. However, mindlessly relying on the structure and wording of previous agreements tends to lead to “lazy thinking” and assumptions that everyone understands the agreement because they have signed a similar one before.
Reducing the risk of disputes
The concept of “plain language drafting” is on the rise and it challenges lawyers to prepare agreements that are easier to use and by so doing reduce the risk of disputes. In fact, plain language drafting is seen as being so important that recently International Organisation for Standardization (ISO) published a global standard for plain language (ISO 24495-1:2023) highlighting the changing requirements of both businesses and consumers.
It is more cost effective to put clear agreements in place before doing business then to fight about what was meant at a later date. As a barrister once told me “In each court case, 100% of the parties think they may win but at least 50% of them lose”. Even if you avoid court, the financial impact of dealing with a dispute can be debilitating or even fatal to a company.
Conclusion
The highly experienced professionals in our Commercial department understand how key clear and accurate agreements are to every business. Members of the team have experience in commercial litigation, insolvency law and dispute resolution. This allows them to confidently advise clients on their potential risks, and draft agreements that clearly set out what it is the parties are trying to achieve. So, reach out to us - we look forward to helping you build the best possible legal basis for your business transactions.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
