3 Ways to Avoid Ambiguity in a Contract

Contracts should be clear and straightforward to avoid disputes. Here are three ways to minimize any potential obscurity.

In the Legal world, vague terms hold much more weight than nearly anywhere else. However, ambiguity in a contract can cost time, money, and reputation.

It’s critical the terms of a contract are specific and unable to be misinterpreted. Involving everyone from the legal counsel to contracts manager will help increase communication to mitigate the risk of having a contract be misunderstood. Here are three ways the Legal team can work together to do that.

Consistent Legal Language

Keeping language consistent across the department ensures terminology remains the same, no matter where the contract is created. In an enterprise company, a variety of departments are drafting and sending contracts. Consistency in language will help a company remain uniform regardless of who creates the contract.

Templates are a huge help when many different people are creating contracts. Templates can be stored in a contract management platform and updated whenever necessary. These updates are immediately pushed to anyone who creates their next contract from the template, meaning there are no more issues with teams having to download a new template every time a change is made. Legal can draft and approve all templates so there is less room for interpretation and the language used is consistent.

Team Collaboration

What’s clear to one person may be meaningless jargon to another. Collaborating as a team ensures that new sets of eyes are able to clarify any confusion in templates, drafts, and final documents. Working together to add suggestions and improvements means less work for each team member.

A great way to encourage collaboration in a contract management platform is through approval workflows. Legal can be included on every document so there’s no confusion and final sign-off is simple. Other elements such as discussion panels and in-line editing aid this process. Having a set process in place will ensure collaboration is consistent and helps teams work faster.

Glossary of Terms

Having a glossary of terms for both internal and external parties eliminates the risk of ambiguity. Third parties in particular are much less likely to misinterpret contract terms as everything is defined in a glossary. For technology in particular, defining names of software or specific products can help the entire legal process flow more smoothly, especially for people included who may not be as familiar with these kinds of terms. Collaboration is key here, as many sets of eyes can determine what’s missing or unclear.

Keeping these three key components in mind will help increase efficiency as processes are streamlined, as well as eliminate any vague wording. Mitigating risk in a company is crucial for every team. These steps will set all departments, especially Legal, on the path towards clarity and compliance.