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GAPS IN CONTRACTS—ROOM FOR MISUNDERSTANDINGS AND UNINTENDED LIABILITIES?

As noted earlier, gaps in contracts (silence, lack of express terms) may be risky. What is left out of a contract— knowingly or unknowingly—can be at least as important as what is included. Gaps or omissions in contracts—what the contract does not say—leave room for invisible terms, which in turn can lead to unexpected results. Some contract gaps and omissions may be intentional, but many are not. While sometimes the parties deliberately choose to leave an issue unaddressed, often this is not the case. instead, one or both of the parties may be unaware of the gap and its potential impact. When silence is used creatively[1] and both parties understand the impact, there might not be a problem. But unintended risk might result when the parties do not understand the implications of the silence created by those gaps and omissions.

Some people care about text and clarity more than others. Lawyers typically care a lot. As illustrated by Figure 5.1, lawyers tend to see gaps even where most people see text that covers everything necessary.

Contract provisions are sometimes confusing, ambiguous, or vague. Because some terms, such as "bi-monthly” and "delivery,” are easily misunderstood, they should be substituted with a better choice of words. In many cases, it does not take a lot of effort or require legal knowledge to prevent misunderstanding and express the intention of the parties more clearly.[2]

Mind the gaps in contracts!

Figure 5.1 Mind the gaps in contracts!

Some gaps are riskier than others. Unnecessary gaps and misunderstanding should be detected and prevented. In the following section, we show how the law can provide requirements where the parties have not been sufficiently clear as to what is required. While there is no substitute for contract clarity about performance and active clauses stipulating what needs to be done, by whom, and when, clarity about passive clauses is equally important. We cover unintended unlimited liability through gaps filled by invisible terms in a later section under the heading "Clauses that May be Risky—or offer Protection against Risks.”

  • [1] Haapio, H. (2009) invisible terms & creative silence: what you don't see can help or hurt you. Contract Management, September, 24-35, available at http://www.ncmahq.org/files/Articles/CM0909%20-%2024-35.pdf; and Haapio, H. (2004) Invisible terms ininternational contracts and what to do about them. Contract Management, July, 32-5,available at http://www.ncmahq.org/files/Articles/81EEB_cm_July04_32.pdf.
  • [2] For examples, see Haapio 2009 and 2004.
 
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