Understanding the World of Ambiguous Contract Clauses

Contracts are fun and easy to understand, said no one ever. There is simply no way around the fact that contracts are complicated. Every aspect of the contracting process, whether negotiating, drafting, executing, managing, or enforcing, presents a unique set of issues and challenges. Fortunately, companies engaged in regular contract management can drastically simplify the complexity of the process by choosing the right cloud-based solution.

Of course, contract managers must take an active role in the implementation and use of an online contract database, but using a platform that is purposefully designed with practical features will make certain contract management matters a bit easier to handle. One common concern when it comes to managing contracts has to do with contractual language. We can unambiguously state that, more often than not, contract clauses are definitively ambiguous. In light of this truth, here are some ways that the use of a contract management software may help alleviate some of the issues that contract clause ambiguity creates:

Clarify Vague Standards

There is a good chance that if you are reading this that you have read a contract at some point. And, there is a good chance that when you read said contract (or two, or three, or more) that there were some really “helpful” phrases embedded within it regarding performance standards. You know, clauses that included the standards of “best efforts” or “as reasonable."

Now, contract management services don’t have some magical feature that will define or explain these standards, but they can help with establishing a timeline for performance. More specifically, these vague standards are usually tied to the performance of some action, such as the provision of a good or service or the delivery of a tangible item. Therefore, contract managers can make a determination as to when something within the contract must occur on the basis of what would constitute best efforts or reasonableness, as initially stipulated in the contract.

Basically, contract managers can use the contract language as a guide for assessing an appropriate timeframe, and then use contract management software to create alerts with respect to important dates and milestones, irrespective of whether they are clearly delineated in the contract. Obviously, these clauses may be subject to differing interpretations, but a proactive manager can seek to establish a concrete timeline via contract lifecycle management software and simply adjust as necessary.

Manage Employees and Expectations

All contracts require diligent oversight, but those with ambiguous clauses need additional monitoring. Companies can improve contract supervision by establishing a contract repository for executed contracts. Within this database, contracts can be organized into folders, and ambiguous clauses can be highlighted or tagged to ensure they remain visible and do not get forgotten in the fray.

In addition, a contract management service that allows companies to generate reports on the basis of specific criteria, such as contracts that include the clauses to which we have been referring, enables companies to understand the contents of its contracts and to communicate the contractual mandates with employees. Ultimately, the right CLM software will help companies stay on top of contract clauses that may cause problems because of their ambiguity. In turn, this helps guide employees responsible for contract management and/or execution, and assists with managing expectations with respect to a contract, both internally and externally.

Search and Locate Quickly

Many times we read contracts and there is a part, or a lot of parts, that need to be explained further. Sometimes we forget to highlight, underline, or tag those pages and then when the moment comes for an explanation, we’re left rifling through a stack of paper trying to remember where we saw those words or phrases that needed elaborating. This exasperating and perhaps slightly embarrassing scenario can be avoided by saving all contracts in one secure location.

Also, companies should select a service that offers a quick search function, so that when a contract manager connects with the person who can provide guidance as to the meaning of a contract clause, precious time is not wasted trying to find the particular contract and relevant clauses.