There is no requirement in law that states that lawyers must draft every contract. In fact, you may very well be fine editing a form contract to suit your needs. However, many dangers may arise when writing your own contracts without the input of a contract lawyer.
The Importance Of Wording In A Contract
Given the ambiguous nature of the English language and sometimes cultural differences, it is well-acknowledged that the wording in a contract must always be precise. Ambiguity arise when words or phrases in the same contracts are understood in more than one possible sense. For instance, it is clear and simple to interpret when someone specifies that he or she wants a bottle of fresh-squeezed orange juice. However, if the person were to state that he or she merely wants ‘some juice’, then there could potentially be numerous interpretations and understandings of the request. Sometimes, ambiguity can exist even in a well-constructed agreement without any parties’ intention to create vagueness, however, no matter the intention, the consequences can still be disastrous, in some cases it’s serious enough to end a business relationship, and in other cases it wastes time and energy on endless lawsuits, or can even shut down a business. Thus, it is important to keep the contract precise when drafting.
Tramways Advertising v Luna Park
Tramways Advertising v Luna Park is a great example of the importance of contract precision. The plaintiff (Tramways Advertising) and the Defendant (Luna Park) had a fixed-term contract of three seasons for advertising boards on trams. Plaintiff guaranteed that the advertisements were ‘at least 8 hours per day’ every season, by which they meant the advisements were, on average, not exactly 8 hours per day. The defendant was unsatisfied with the ‘8 hours on average’. Luna Park sued for the charge of the ‘third season’ at the beginning of the third season as they purported to terminate the contract early. Defendant filed a counterclaim for breach of contract. The issue of the case focused on the construction of the terms in the contract in order to determine whether or not the Plaintiff has performed the contract in accordance with its terms.
The court held that the term ‘eight hours per day’ should be interpreted as meaning ‘substantially 8 hours per day’, thus found for Luna Park (the respondent). Luna Park was entitled to terminate the contract as Tramway Advertising Pty Ltd led the plaintiff to believe that the contract would not be performed according to its terms. However, the plaintiff was only getting nominal damages as they were not able to prove their loss. In a sense, the lawsuit was an ill wind that blew nobody any good. And could have been avoided if the terms were specified as ‘substantially 8 hours’ when the contract was drafted.
Despite the dire consequences that can result from the ambiguity of any contract, it is sometimes inevitable that things like this happen. Despite business and legal practitioners’ effort in attempting to make every contracts clear, ambiguity nonetheless often manages to creep in, and even pervade agreements. Another recent example is Namrood v Ebadeh-Ahvazi, where the appellant purchaser appealed that the primary judge’s decision that the respondent vendor was entitled to retain the deposit paid by the purchaser under a sale of property contract. In this case, the vendor was allegedly not able to comply with one of its obligations under the contract, and subsequently, the purchaser refused to complete the contract as the vendor failed in performing its obligations, given the absence of sufficient evidence of compliance.
Issues With Interpretation
One of the key issues that arises is in the interpretation of the phrases ‘the completion date’ and ‘by completion’ in the special condition of the contract. The term ‘completion’ in the contract and cl 11.1 required the obligations to be fulfilled by the completion date stated on the front page of the contract or before the transfer of title to the purchaser. The court held that ‘completion date’ refers to ‘the date for completion provided by the contract’, and ‘completion’ means ‘the date that title is conveyed’. The purchaser argued that special conditions were to be fulfilled before the completion date, but Leeming JA held that there is no risk for the purchaser as to whether the works took place on or later than the completion date on the contract, as long as ‘it took place before settlement’. Therefore, the appellate court upheld the decision by the primary court and found the vendor entitled to retain the deposit.
Same as in the case of Tramways Advertising v Luna Park, the misinterpretation by the purchaser in Namrood v Ebadeh-Ahvazi was a costly mistake that could have been avoided if the contract were more precise without uncertainty regarding the words employed in the contract. Thus, it is evident that a clear and certain construction of terms when drafting contracts is essential.
If something is important enough to create a contract over, you should invest in making sure the contract protects your interests. Longton Legal has a team of experienced contract lawyers that understand the importance of it all. We use our extensive contract law experience to draft contracts that serve the purposes of your business. We seek to avoid disputes, and in the event of potential litigation, we are more than capable of assisting. Contact us now to get a quote for drafting your contract.
*Disclaimer：This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*
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