The contract language is like software code: one small typo, and the whole thing falls apart.
Running a successful business comes with its fair share of challenges, from managing finances and employees to ensuring legal compliance. Contract management is often overlooked, but it is crucial for any business. Contracts form the backbone of any business relationship, outlining terms and conditions and protecting all parties involved. Managing contracts can be a complex and time-consuming task where even minor errors can lead to costly consequences.
One of the most common errors in contract management is simple typos, misplaced commas, or missed words. These seemingly small mistakes can have significant effects, as evidenced by the case of Lockheed Martin.
In 1999, the aircraft manufacturer signed a sales contract with an unnamed army for the Hercules transport plane used by air forces worldwide. However, the planes were sold at a rock bottom rate due to a misplaced comma by one decimal point in the equation that adjusted the sales price for changes to the inflation rate. Later, James Blackwell, president of Lockheed's aeronautics division, said,
'That comma cost Lockheed 70 million dollars.'
Punctuation is crucial in conveying clear and concise meaning, especially in a legal language with complex concepts. In fact, the main objective of punctuation is to make complicated principles easier to understand. When punctuation is misplaced or misused, it can have serious consequences that lead to misunderstandings or multiple interpretations, which may differ from the text's original purpose.
How much can a misplaced comma cost you?
Of all the punctuation marks, the comma is the most versatile. Still, its misuse has the greatest potential to alter or influence the meaning of a sentence.
Using commas in contracts connects distinct clauses in a manner that lacks precision, which can result in various interpretations. Unlike a period, which marks the end of one thought or sentence and the beginning of another, commas exist in a linguistic grey area that is frequently unclear.
For instance, a misplaced comma in a contract dispute can have expensive consequences, as demonstrated in 2006 between Bell Aliant and Rogers Communications, two Canadian telecommunications companies.
In their 14-page contract, the termination clause was punctuated in a way that created confusion and disagreement between the two parties. The clause stated:"This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms, unless and until terminated by one year prior notice in writing by either party."
Rogers Communications agreed to connect its phone and cable services across 91,000 utility poles controlled by Aliant, understanding that the contract would continue for a fixed five-year period before Aliant could terminate the arrangement and adjust its access rates and regulations.
However, the Canadian telecommunications commission, citing "the rules of punctuation," concluded that the placement of the second comma "allows for the termination [of the contract] at any time, without cause, upon one year's written notice." As a result of this ambiguous punctuation, Rogers was ordered to pay an additional 2.13 million Canadian dollars for the use of the poles.
After 18 months of appeals, the commission later overturned its decision when a comparison between the French and English language versions of the contract made it clear that the agreement could only be terminated at the expiration of the original five-year term.
Misplaced commas or other punctuation marks can lead to significant confusion, misunderstandings, and even legal disputes. This is where artificial intelligence (AI) can come in handy, as it can be used for contract management and review. While contract management is a difficult task requiring human assistance, AI can significantly help boost the accuracy and effectiveness of the process.
Get ahead of the game.
These examples illustrate just how crucial it is to review everything thoroughly and carefully because even the tiniest error can have enormous consequences. In today's fast-paced business world, staying ahead of the competition is essential, and using AI for contract management is an excellent way to do so.
In conclusion, managing contracts can be a daunting task, but with the help of AI, you can streamline the process and reduce the risk of costly errors. DealMaker can become your new best friend and help you conquer new markets. So why not take advantage of the latest technology and invest in AI? Your business and your customers will thank you for it.