Some years ago, the television series “Ed”, began with the titular character losing his job at a Wall Street law firm. The firm fired Ed after it suffered a multi-million dollar malpractice liability, supposedly caused by his misplacing a comma in a large contract he had drafted.
But such things only happen on television, right? A real court wouldn’t really punish someone for a simple mistake in punctuation, would it?
Well, a real court would, and a real court did. In a case of life imitating art, a judge ruled that a company could avoid a $2 million loss by terminating a contract early – and all because of a misplaced comma.
The contract set a fixed price for utility poles being sold by the pole manufacturer to a communications company. The parties had included in their contract the following paragraph:
This agreement shall be effective from the date it is made and shall continue in force for a period of five years from the date it is made, and thereafter for successive five year terms, unless and until terminated by one year prior notice by either party.
When the market price of poles shot up, the pole vendor sent a notice of termination to the communications company purchaser. After a year, the vendor proposed to continue selling the poles – but at triple the price originally bargained for. The communications company sought to hold the vendor to the original price, which would have saved it over $2 million.
The communications company argued that the intention of the parties was to set a minimum five year contract duration, with additional five-year terms to follow, unless one side or the other terminated before the end of the fourth year of each five-year term. But the court held that by separating the termination notice from the renewal provision by a comma, the parties had actually agreed that the agreement could be ended on a year’s notice at any time.
The result calls to mind a scene that we all experienced in our elementary school English classes. After our teacher pointed out our careless drafting, we would protest, “Well, you knew what I meant!” And reliably, our teacher would reply, “How can I know what you mean if you don’t say what you mean?”
When there is a disagreement between parties over the proper reading of a contract clause, the intentions of the parties are supposed to govern. But in cases of bad drafting, the parties often both sign the agreement with different notions of what it means. In such cases, courts will often look to the rules of standard English to determine which side’s interpretation is more justified. In this case, the communications company lost because the rules of grammar and punctuation supported the pole vendor’s interpretation of the disputed paragraph.
This case stands as an expensive reminder that use of proper English in drafting still matters. And in this age of agreements struck by exchange of e-mails – e-mails often rife with misspellings, fragments, bad grammar and worse punctuation – the trend towards sloppy writing is leading to a greater frequency of disputes over exactly what was agreed.
Though some consider it passé to insist upon proper writing in modern correspondence, the fact remains that sloppy writing can have serious consequences. Employers would do well to impress upon their employees the importance of following standard rules of English in all correspondence – even e-mails. And when the stakes grow large, it still pays to consult your lawyers before you sign on the dotted line.
Attorneys:
Scott Simmons
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