Different factors contribute to contract disputes. Ambiguity is one of them. If any term in the agreements you have with the parties you work with is not clear, misunderstandings may arise in the future.
Here is what to know about ambiguity in contracts:
What is ambiguity in agreements?
Any language open to multiple interpretations in a contract can be considered ambiguous. When you use words with multiple meanings, you should provide the definitions of the intended meanings at the beginning of the contract. Examples include party, service, work, deliverable, term, fee, governing law, confidential information and effective day. It’s also crucial to provide definitions of industry-specific terms.
Not being specific in your contract can also result in ambiguity. For example, stating in your employment contract that an employee should complete work in a reasonable time, make reasonable efforts to acquire new clients, or use their best efforts to complete projects is ambiguous.
The level of effort your employee might view as reasonable may seem insufficient to you. You may have expected them to use all available resources to acquire new clients, but they might have only used one or two, believing it was enough effort. This may have resulted in them not acquiring a client.
Other ambiguous terms to avoid in your agreements include as soon as possible, material breach, undue delay and substantial progress.
Another way in which a contract can be ambiguous is when clauses contradict. One clause stating an employee will be paid every 30 days and another stating payment will be due every 45 days creates ambiguity. Further, if you have multiple related contracts with a party, ensure that they do not have contradicting clauses.
Ambiguity can lead to costly misunderstandings. You may need to go to court to protect your business. Learn more about how to draft clear contracts.