On Typos in Contract Drafting

The ever-vigilant Steven Sholk told me about this post on Footnoted. It describes how in an exhibit to an employment agreement filed on the U.S. Securities and Exchange Commission’s EDGAR system, the company undertook that in addition to paying the executive’s moving expenses, “in consideration of other relocation expenses that Executive and his family will incur, $87,500,000 will be paid upon the Effective Date of the Agreement and $87,500000 will be paid upon final relocation to Atlanta, Georgia.”

Footnoted thinks that in each instance the intended figure was $87,500, and it suggests that as long as the executive doesn’t attempt to collect $175 million from the company, the error “seems more likely to elicit laughter, rather than heart failure, in the board room.”

Footnoted’s account caused me to consider the implications of typographic errors—typos—in contract drafting.

But first, what is a typo? I think the definition offered by The Free Dictionary is OK: “An error while inputting text via keyboard, made despite the fact that the user knows exactly what to type in. This usually results from the operator’s inexperience at keyboarding, rushing, not paying attention, or carelessness.” Excluding glitches that are due to the drafter’s coming up with the wrong words means that, for example, an instance of inadvertent use of less instead of more, as described in this August 2008 blog post, is best considered not a typo but rather a different kind of mistake.

So here’s my taxonomy of contract-drafting typos:

First, some typos are clearly typos, in that the result makes no sense. Of the 787 “material contracts” filed on EDGAR that contain the word pubic, in only a tiny proportion was the word used intentionally. (For example, I spotted one reference to “pubic bone.”) Other instances constitute examples of a typo beloved of adolescents of all ages, pubic for public—hence “initial pubic offering,” “pubic announcement,” “pubic utilities,” and the like. Because the nature of the typo is so apparent, it’s inconceivable that it would ever provoke a fight. Of course, even more clearly the result of a typo are those collections of characters that don’t even constitute a word, as in—to invent an example—blg, blgo, or bloog for blog. Whether you can decipher what the parties intended depends on the nature of the typo.

Second, you have typos that don’t render text nonsensical but would result in a ludicrous outcome if taken at face value. Offering an executive $175 million in relocation expenses would fall into this category.

Third, you have typos that create an alternative meaning that makes sufficient sense that a contract party is willing to argue that in fact there was no typo. For example, in a contract between a union and an employer, the employer agreed to comply with the union’s collective bargaining agreement and any changes “herein.” In subsequent litigation, the trustees of the union’s pension fund argued that “herein” should have been “therein”; the employer argued for “herein.” See Calhoun v. Bernard, 333 F.2d 739 (9th Cir. 1964). If in cases such as this the party claiming typo prevails and the other party convinces the court that it hadn’t been aware of the typo, the court may well hold that there was no valid contract, on the grounds that there hadn’t been a meeting of the minds.

And fourth, you have typos that don’t result in text that is nonsense or ludicrous, but nevertheless the typos are subsequently readily identified as such because it can clearly be established that both parties knew at the time of signing what the text should have said. A good example of this kind of typo is how, in a mortgage prepared in 1986, the principal amount was erroneously stated as $92,885 rather than the correct amount, $92,885,000. (Of course, a secretary was blamed; I suspect that she was the fall guy. And in any event, many lawyers at different organizations missed the typo.) The sad story is recounted in this 1991 New York Times article.

You’d think that the fourth kind of typo would, like the first and second, be essentially benign. But circumstances can result in that being far from the case. In the mortgage example, one of the lenders felt compelled to give the borrower $11.4 million to drop its claim. And the lender estimated that after adding in its other expenses, the typo had cost it $31 million.

Of course, these musings have no bearing on how you avoid typos. For that, your only defense is … proofreading! (For more on that, see this January 2009 blog post.)

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

10 thoughts on “On Typos in Contract Drafting”

  1. Ironically, in the NY Times article (and I was a NYC banking paralegal at the time, and I remember the story very well), GECC is spelled “GEEC” at least twice…

  2. Just on the small point of what 'typo' actually means, a traditionalist might say that no mistake made on a computer is a "typographical error", as we don't set type on a computer. But of course we do use the word, and I like to use it broadly, including instances where someone types 'less' instead of 'more'.

    This is because the word 'typo' seems to say "it's only a typo, everyone makes typos", rather than "you can't work out whether to write 'less' or 'more' – you're an idiot". Even if this usage is stretching the current meaning of the word, it is a useful euphemism when commenting on someone else's document.

  3. As an HGPH alum, that case was infamous internally. The general belief among the associates (I was there from 96-99) was that there was certainly some lawyer involved, but no names were ever discussed.

  4. Pricing typos can be very costly. Always have the client check prices and sign off on them. This is one of the few things clients can do relatively quickly and something most of them will actually do. Another issue to look out for is currency use, especially for international contracts.

    I've seen the misuse of the dollar sign, such as the buyer shall pay $1Euro.

  5. Typing “less” when you mean “more” used to be called a scrivener’s error. The term is archaic but still useful, and would proably cover fourth category errors as well.

    My favorite fourth category error occurred at the firm where I practiced in the 1980s. My partner pulled a copy of an acquisition agreement from a recently closed deal to use as a model. We had represented the buyer, and several high priced New York firms had closely negotiated the agreement. My partner copied one page and scrawled a note in the margin to the partner who had negotiated the earlier deal, “I knew you were good, but I didn’t know you were THAT good.”

    Then he circled a single sentence: “At closing, the Seller shall pay the Purchase Price to the Buyer in Immediately Available Funds.”

  6. Hi, I hope I'm not mistakenly pointing this out, but did you happen to make a typo in the paragraph before last? Could it be "one of the lenders felt compelled to give" rather than "one of the lenders felt compelled to gave"?

    Also I'd like to compliment you on your excellent website that I've just discovered. I will probably be referring to it regularly as I'm interning at a law firm at the moment.

    • Mike: Aaargh! Thanks for pointing that out. I'm reconciled to having the odd typo crop up in my posts—it's the cost of reading from the screen rather than a printout. And the potential impact of a mistake isn't what it is in contract drafting! Ken


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