5 Common Contractual Terms and What They Actually Mean

Dinah SackeyContract Management

Sometimes, when legalese meets sector specific jargon it’s easy to get confused as to what your contract is actually committing you to. Some public sector contracts can be weighty, convoluted, and packed with terms and conditions that seem burdensome for small and medium sized businesses but, more often than not, most contracts include standard obligations that are not specific to any particular industry. In the UK, the plain English campaign has helped address some of the opaque language across the public sector in general, but contracts (with their feet firmly in law) are constructs that persist on being a little hard to digest, even when the terminology can be considered ‘standard’.

We looked through 10 public sector contract templates from 3 jurisdictions and identified 5 of our favourite contract terms. We then searched 20 solicitor’s blogs and newsletters to compare what they thought these terms actually mean. 

Endeavours – are they your best or are they just reasonable?

When a contract states that you will use your [Best] or [Reasonable] endeavours to ensure a particular outcome or meet a particular obligation, there is a distinction being made about how much effort you are expected to put in to achieve that outcome or obligation. There is case law, dating back to 1911, that puts to test the actual meaning of this obligation and several of the legal sites we visited advised against it all together. If your contract calls on your best endeavours you are being asked to exhaust all avenues that you reasonably can, to meet your obligation or deliver that outcome, even at cost to your business. Check out the case of Jet2.com v Blackpool Airports [2012] and take note because, wow…

The expectation of reasonable endeavours is not as stringent and mostly permits a balance of effort versus commercial impact of that effort. 

Is that deadline really that important? Really?!

If your contract includes a ‘time is of the essence’ clause it means that any deadlines linked to that clause are critical. If those deadlines are missed the other party has grounds to terminate the contract and claim damages. Again, there is case law dating back to the 1800s, so this is a well-established concept. Even if the contract does not explicitly state that time is of the essence but has clear deadlines that you are expected to meet to fulfil your obligations, the implication remains the same.

As it happens, not all documents are created equal.

The order of precedence within a contract will point out, in descending order, which document has authority should there be any inconsistencies in clauses, conflicts in the obligations stated, or contractual disputes. If you’ve ever been party to a public sector contract you’ll be very familiar with how many documents a contract can include and its sometimes difficult to distinguish the ‘ask’ between the specification, order form, contract document, or framework agreement. The order of precedence should indicate which document, or set of clauses, take priority and this should provide you with more clarity.

Just in case you were a little confused about that last clause…

‘For the avoidance of doubt’ is one phrase that seemed to appear in numerous online agreements, so it seems very popular beyond the public sector. In the main, a well written contract should be clear and concise, however this is not always the case, or the parties want to make extra clear what they mean by a clause. The avoidance of doubt clause often aims to clarify a preceding clause with additional information that better describes what is expected. Arguably, if clause 2b explains clause 2a better than clause 2a, why not use clause 2b? The jury is out.

We are not proud about this one, but we’re also not prejudiced.

The ‘Without Prejudice’ clause was a little more difficult to find explanation for as most referenced communications during disputes or negotiations where the parties wanted the space to discuss the matters at hand without impacting on a previous position they held, and with the expectation that the discussions could not be disclosed in court. For contractual terms that rely on the WP clause; there is often reference to another clause / obligation and the intent is to make clear that the rights granted by, for example, clause / obligation A are not diminished, affected by, or in any way nullified by clause/obligation B.

Our ultimate takeaway? A good contact should have clear terms and conditions that are achievable, reciprocal, and fair. If your contract is packed full of terms that seem complicated, hard to fulfil, or weighted in favour of one party you may want to seek legal advice or consider the benefit of contracting with that party to begin with.

In any instance, monitoring your contract and working collaboratively to agree favourable terms and conditions can e made easier by software like Complete. We’re passionate about taking the pain out of contract management. Get in touch and take a look at some of our solutions;