It is Artprize again in downtown Grand Rapids! See one of the exhibits on Monroe Avenue in front of the Venue.
Question:
Did you know: “Shall” has a different meaning then “May”?
One is mandatory.
The other is permissive.
In business, it pays to be clear in the contract language you use.
Check out this recent Michigan Court of Appeals decision on why you need to take care in drafting contracts.
This case was a dispute over a commercial lease contained in a “letter agreement” – and the legal concept of contra proferentem that ambiguities in contracts should be construed against the drafter.
According to the Court of Appeals: “the primary question presented in this case is
whether the following paragraph of the letter agreement precluded plaintiffs from filing this lawsuit:
“10. The failure of either party to perform the preliminary duties outlined in
this agreement will permit the obligee of the duty to declare a default and
terminate this preliminary agreement to lease or other remedy that may be agreed
to by the parties.”
The trial court found that this language precluded the tenant from suing.
The court of appeals disagreed.
The Court of Appeals evidently found this language to be ambiguous.
“It is an elementary rule of construction of contracts that in case of doubt, a contract is to be strictly construed against the party by whose agent it was drafted.” Shay v Aldrich, 487 Mich 648, 673; 790 NW2d 629 (2010).
This rule of construction is known as “contra proferentem”.
The contra proferentem rule is applicable only as a last resort, when other techniques of interpretation and construction have not resolved the question of which of two or more possible reasonable meanings the court should choose. It is a tie breaker when there is no other sound basis for choosing one contract interpretation over another.”
Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459, 460, 663 N.W.2d 447, 449, 2003 Mich. LEXIS 1224, *1 (Mich. 2003).
However, in this case, the Court seemed to make much of the fact that the drafter, who was a party to the contract, was an attorney.
The Court of Appeals reversed the trial court decision and found that the language did not preclude the tenant from filing suit and the case needed to proceed to trial.
Conclusion:
Small business owners often times are wearing many “hats”. They are working with limited cash flow and are forced to make many choices. Many of these choices are in areas outside of their expertise.
Oftentimes startups and small business owners will “cut corners” to be more efficient and cost-effective.
When it comes to signing a legally binding contract – it is simply not worth cutting corners on.
The cost of what you do not know can be significant.
Question? Comments?
e-mail: Jeshua@dwlawpc.com
Twitter: @JeshuaTLauka
Purpose Driven General Counsel 