It might be easy enough to spot a particular issue when structuring a transaction. But addressing that issue appropriately in a contract requires careful aim, as anything other than a direct hit might create awkward problems.
For example, I saw on Twitter, via the indefatigable Rob Hyndman, a link to this blog post by Michael Fitzgibbon of the Ontario employment and labor law firm Watershed LLP. The post discusses a recent Ontario court opinion addressing a dispute regarding termination of an employee.
The contract between the company and the employee included the following:
In the case that the Company would decide to terminate the contract with the employee in the first 4 years after the signature, the Company will pay to the employee an indemnity compensation of two (2) years salary including the bonuses.
In 2011 company management discussed terminating the employee. They decided to do so, but elected to wait until the four-year period had run, so they could avoid having to pay two years’ salary. The court held, unsurprisingly, that the company still had to make the payment, because it was triggered not by termination but by the decision to terminate.
Whoever drafted the contract had perhaps been thinking in conversational terms. In the software-code world of contract drafting, being casual in addressing an issue can have unexpected implications.
So when coming up with contract language to address an issue, be focused. Run through in your mind how it might play out in different scenarios, then adjust the language as necessary.
From the wording (non-idiomatic use of “the,” for example, along with the “would decide”) I would guess that the drafter wasn’t thinking in English. Was it a Quebec-based company?
Or perhaps it was intentionally good drafting by the employee’s lawyer. Sometimes to be explicit about an issue is to lose it; maybe it’s better to leave an ambiguity in and fight about it later than to lose it at the outset.
I don’t agree. This would be bad drafting by a lawyer, in view of the contra proferentem rule (at least as it is understood under English law). Maybe the commercial parties want to leave wriggle room for future discussions but this is not any part of best practice for a lawyer.
I assume your both right, but by “good drafting” I might have better said “good lawyering.” Suppose you were the employee’s lawyer. Under the circumstances, to point out the ambiguity to the employer would (probably) be to automatically lose the issue. You might not “rely” on it, but if it shows up you might still take advantage of it. And that’s what happened here. But I am under no illusion that the employee didn’t benefit from some happenstantial drafting.
Andy, I agree that the employee’s lawyer was right not to object to this wording. I would probably have done the same. On reflection I don’t think it is ambiguous. It makes the trigger for payment a decision within 2 years rather than a termination within 2 years. That may not be what the employer meant, but it is what he wrote. Woolly thinking more than woolly drafting.
Andy: I assume that the company did the drafting. And furthermore, if you read the entire provision, you’ll see that nothing about it suggests good drafting.
But more generally, without even considering Mark’s point, deliberately incorporating confusion with the idea of taking advantage of it later is a risky proposition that isn’t conducive to harmonious contract relations.
Ken
I assume that the company drafted the language and that the contract contained a “joint efforts” clause (court not to construe against either party as drafter), so the court didn’t rely on who the drafter was and just read the language to mean what it said.
However, I agree with Andy that if I had been the employee’s lawyer and had foreseen the possibility of what happened, I would have zipped my lip and left the employee-favorable language unremarked. I wouldn’t consider it “deliberately incorporating confusion with the idea of taking advantage of it later.” Who says it’s confusion? Not the court, apparently. I would say that the company offered my client favorable language on the point, and I accepted it without question.
Pragmatically, how can the employee’s lawyer reasonably foresee (a) that the employer would want to fire the employee, and (b) that the employer would take the decision to fire him, wait a year or two to implement the decision, and not read the contract?
The employer’s wounds were self-inflicted and involved no sharp dealing by the employee.
As for harmonious relations, the provision in question only came into play after the relationship had already broken down.
Finally, would it not have been unethical for the employee’s lawyer to seek a modification of the provision when there is no modification that would have been in the employee’s interest?
But I like Ken’s concise summation that “nothing about it suggests good drafting.”