One Little Word Can Really Mess Up Your Legal Contract

Saying the legal industry is slow to change is not up for much debate. Fortunately, we are starting to see changes in the legal landscape that are really exciting because of the opportunities and potential that they bring. One of the changes that we are starting to see is the use of plain language in legal contracts. Quite simply, some contracts (and lawyers) use plain language and others do not.

I was presenting at a conference recently on the topic of legal contracts. When discussing the movement away from legalese towards more simplified language, one attendee asked about the use of the word “shall” and whether it meant the same thing as “may”. Well, let me tell you, the nerd in me got really excited by this question. Whether using legalese or plain language, the words that are used in contracts can have such an impact on their interpretation. Something as simple as substituting the word “may” for the word “shall” makes a big difference. Although the word “shall” may not embody everyday simplified language, it still has a place in legal contracts.

What’s the big deal? In Canadian contracts, when a provision states that the Company “shall” do X, Y and Z, that Company better make sure that it can and will do X, Y and Z.

The use of “shall” means that the Company must do it. It becomes a mandatory obligation that the Company must fulfil.

By contrast, substituting the word “may” in the same sentence has a different impact: “The Company may do X, Y and Z.” The effect of this substitution is that the Company may do these things…but it does not have to do them.

Let’s see how this plays out using typical language found in a contract.

Option 1: Company shall pay all invoices of the Consultant within 30 days of the invoice date.

Option 2: Company may pay all invoices of the Consultant within 30 days of the invoice date.

Do you see the difference? In option 1, the Company must pay within 30 days. In option 2, the Company has the option of paying within 30 days. Obviously if you are the Consultant, you want to ensure that you are using the language in Option 1 and specifically the word “shall”. Otherwise, you might have outstanding invoices for months before you actually get paid for work rendered.

The words chosen in a contract can have a significant impact on their interpretation. Make sure that you (or your legal provider) are carefully reviewing your contracts. If not, you may (but not “shall”) be leaving your business at risk.

Do you notice a shift towards easier to read contracts? Please let me know in the comments!

About Amy Grubb

Amy Grubb is a business lawyer with over a decade of experience helping her clients save money with their legal contracts. To learn more about her services, visit her website or email her at amy@grubblaw.ca.