This contract tip is about how our experiences affect our views about contracts.
We've all heard the parable of the blind men who came across an elephant. Each man touched a different part and pronounced what it was. They all had very different ideas because each of them touched a different part.
Working with contracts can be like that too.
We each work with contracts in different ways. It makes sense that we end up with different views about them.
In a past webinar, I shared what I called a "commercial contracts risk map." I showed on this map that disputes involving indemnification and limit of liability are less likely than those involving payment and operational issues.
I was surprised by how many people disagreed. It wasn't until I took a step back and talked to some people about it that I understood why.
I'm a transactional lawyer. I was using “dispute” as I think of it, which is any disagreement with a vendor. These happen daily for large companies. With that metric, yes, money and operational provisions are usually at issue.
But others interpreted “disputes” as meaning someone had filed for arbitration or litigation. And yes, if that disagreement made it to that stage, you bet that most will have indemnification and limit of liability issues.
It was a great reminder of the need to stay attentive to how our experiences shape how we understand terminology and concepts.
Staying aware of those differences is critical for people who work with contracts. We may be discussing the same word or provision, but understand it to mean different things.
I experience this concept sometimes with words, but also with contract concepts. I may think a word or provision is obvious and clear, but when I ask the counterparty for their understanding, I learn my interpretation of it wasn't obvious or clear to them.
I've found the best way to deal with these situations is to pay close attention to the conversation.
If the conversation leaves you wondering if you are discussing the same thing, it may be worthwhile to talk about each of your assumptions. You may find you are looking at the same language but understand it differently.
What techniques do you use to avoid these misunderstandings?
