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What’s in a word? The importance of clear drafting when writing contracts
Adrian Fryer
Most employers use standard contractual documentation which is issued to new recruits without much thought. A recent Court of Appeal decision, relating to a commercial contract, serves as a reminder that a lax approach to contractual wording can have big implications, and not just in a commercial context. It is just as important for contracts of employment and settlement agreements. Employers need to make sure they have covered exactly what they want to cover.
In Cantor Fitzgerald v Yes Bank, the Claimant had a contractual agreement with the Defendant under which it was entitled to commission if it found financing for the Defendant in certain, specified circumstances. The relevant phrase was “private placement, offering or other sale of equity instruments”. There was a public sale of equity. The Claimant claimed commission. The Defendant alleged that no commission was due, arguing that the adjective ‘private’ at the start of the list qualified the whole list and not just ‘placement’. The Court of Appeal agreed with the Defendant. The Claimant was not entitled to commission.
The Court of Appeal concluded that, unless something in the drafting of the list suggests otherwise, the reader will naturally tend to assume that an adjective or determiner at the start of a list qualifies the entirety of it. In this case, the word ‘private’ applied not just to ‘placement’ but separately to ‘offering’ and ‘other sale of equity instruments’.
Employers should take the time to check the use of qualifying terms in lists in any key employment documents. Adjectives should not be used at the start of a list unless they are intended to be applied to the full list. Here are some other top tips to avoid wording mishaps in employment and settlement documentation:
- Be very careful before making any list definitive. Consider using the phrase ‘including, but not limited to’ when drafting lists.
- If you want to mention something specific, but do not want it to impinge on a wider position taken on the same subject elsewhere in the document, then consider including the phrase: ‘without prejudice to the generality of the aforegoing’.
- Make sure that, if a provision requires all aspects of a sub-clause to be satisfied, you include the word ‘and’ between each sub-clause. Do not use the word ‘or’.
- Make it clear whether clause headings are to be considered as being part of the contract.
- If your contract includes schedules or appendices, then make it clear in the main body of the agreement whether or not these are to be considered as part of the contractual agreement.