Sympathy for the typo

Pouncing on a typo may seem petty. For one thing, everyone makes them, and they sometimes survive endless diligent re-readings. But they can cost big time, and not only when the typo consists of a misplaced decimal point in a dollar amount. In one famous dispute a telecommunications company risked losing millions because a single misplaced comma made the renewal term ambiguous. The issue was resolved, but not until a decision, an appeal, and lots of expert testimony about what the placement of a comma signifies.

When typos or just bad drafting cause ambiguity, courts may try to figure out what the parties intended. Their first step is usually to apply “rules of construction,” which include such common sense ideas as:

• agreements are generally interpreted against the person that drafted it;
• the words of an agreement should be given their plain and literal meanings;
• interpreting the words of an agreement should produce reasonable rather than absurd results;
• specific provisions are more likely to identify intent than more general provisions; and
• an agreement should be interpreted in a way that makes it enforceable rather than void.

Additional rules apply in particular situations. As examples, the rules to guide interpretation of an ambiguous copyright license include :

• the clearest language is necessary to divest the author of the fruits of his labor;
• copyright licenses are assumed to prohibit any use not authorized;and
• the burden of demonstrating the existence of a license lies with the person asserting it.

Some mistakes are less understandable

There are typos and ambiguities and misunderstandings, and then there are plain errors — pure nonsense that gets copied from form to form and year to year without thought or justification. Here’s a very common error that many people have seen so many times it looks correct just because it looks familiar:

Independent contractors. The relationship between the
Licensor and Licensee is that of independent contractors. Nothing
in this Agreement may be construed to make a Party the agent or
partner of the other. Neither Party may legally bind the
other Party in any manner. [taken from a software license]

That section is intended to avoid the possibility that by doing business together, the parties could be perceived as “partners.” Partnership these days is a much overused and misused idea — practically every business lists on its website as partners companies that are really just customers or suppliers. But a real legal partnership can be created without using the word “partner” and even without anything in writing. Partnership can be inferred when two or more people hold themselves out as doing business together (for example by using a name such as “Smith & Jones”).

The problem is that in a real partnership, partners ordinarily share profits, losses, and decision-making. If Smith orders a truckload of CD blanks, Jones may have to pay for them — Smith and Jones being equally liable. Accordingly, avoiding the appearance of partnership when there isn’t one is a good idea, and the sentence about neither party being “the agent or partner of the other” make the appropriate point at least between the people who agree to it.

So what’s the big deal?

To be extra-convincing, the section doesn’t just say that the parties are not partners. It also says their relationship is “that of independent contractors” which is pure nonsense.

Part of the problem is a missing word. When an employer hires someone, we know what to call them: employer and employee. But when a someone hires a contractor, we call them the contractor and… what? The person that hired the contractor. In contracting there is no equivalent of the word “employer.”

But the bigger problem of saying “the relationship between the parties is that of independent contractors” is contractors don’t have a relationship with each other. Even when two parties really work as contractors for the same company, there is no default set of rules that defines their power or liability relationship to each other.

The reality is when one party provides software under a license and the other agrees to license it (as in the example above) neither is a contractor: they’re licensor and licensee, and the section could just say so (or say they are employer and employee, or bank and borrower, or whatever the situation happens to be). But that can problematic too, because often more is going on. For example in a licensing situation, licensors often also provide support services (making the licensor also a service provider). Licensees sometimes have a right to change the software as long as they give back to the licensor the right to also use the changes (making the licensee also a licensor). In situations like those, identifying parties only as “Licensor” and “Licensee” would overly simplistic, and partly inaccurate.

The simplest improvement would be to cut out the first line entirely, leaving this:

Nothing in this Agreement may be construed to make a Party
the agent or partner of the other. Neither Party may legally
bind the other Party in any manner.

Except that the last line doesn’t entirely make sense either. The parties certainly do intend to bind each other — at least to the agreement they’re signing. So in the end, the best thing is to chuck the section entirely, and replace it with something like this:

Relationship of the parties. Neither Party, by reason of this
agreement or its performance (1) is an agent, representative,
partner or joint-venturer of the other Party, or (2) is granted
any right, power or authority to enter into any agreement, incur
any obligation or liability, or to otherwise bind or speak
on behalf of the other Party. [taken from a software license]

But the hunt for law turned nonsense doesn’t end there.

Next stop, Wonderland…

The first (and last) time I negotiated a real estate deal, I received the “Contract of Sale” by fax. It was old school — a paper form with blanks that had been re-used and re-filled in for years, and after generations of photocopying parts had faded into illegibility. Experienced recipients didn’t mind — they’d seen that form before. The company which makes the form, which favors the seller, also sells a form for the buyer to respond with that contains buyer-favoring clauses. So the seller’s lawyer faxes the seller-favoring form, and the buyer’s lawyer sends back the buyer-favoring form, and over time the back and forth of negotiation has become increasingly ritualistic, a robotic ping-pong fax exchange of increasingly unreadable and unread forms.

You think I exaggerate? Maybe. Today, many forms are available electronically, for example like this, which eliminates the illegibility problem. Someone must be reading and customizing them.

But consider the following section from a nondisclosure agreement:

By disclosing such information to you, the
undersigned does not grant any express, implied, or other license
or right you to use the Company’s Confidential Information other
than as permitted in writing by the confidential information to you in
order to determine whether there is sufficient basis for a
subsequent agreement between you and the undersigned for the
further development and exploitation of the Products, without any
obligation on the part of whether you or the undersigned to enter
into any such agreement, while maintaining the confidential nature
of such information regardless of whether any such agreement is
entered into.

Wow.

It apparently concerns two parties who are discussing a potential deal. It appears to say that the information one of them discloses should only be used by the other in connection with the discussions until a deal is reached. Only it doesn’t actually say that. Take a look at the first part again:

By disclosing such information to you, the
undersigned does not grant any express, implied,
or other license or right you to use the Company’s
Confidential Information other than as permitted
in writing by the confidential information.

It says something about how the information disclosed can be used (as permitted in writing), but it is confusingly circular (“Confidential Information can only be used as the confidential information says it can be used”). It also deviates from ordinary practice, which also protects secrets disclosed verbally when reduced to writing shortly after, and usually protects disclosure by all the parties discussing the deal (not just the information of the “undersigned”). Then the next part (starting with the words “to you” shown here in bold) gets really odd:

By disclosing such information to you, the
undersigned does not grant any express, implied, or other license
or right you to use the Company’s Confidential Information other
than as permitted in writing by the confidential information to you in
order to determine whether there is sufficient basis for a
subsequent agreement between you and the undersigned for the
further development and exploitation of the Products, without any
obligation on the part of [something missing?] whether
you or the undersigned to enter into any such agreement,
while maintaining the confidential nature of such information
regardless of whether any such agreement is entered into.

Either the highlighted words “to you” don’t belong, or something is missing there. Something is definitely missing further down, after the phrase “without any obligation on the part of” (on the part of who?).

The section must be the victim of word processor malfunction, or OCR failure, or a badly fragmented hard drive which like a radiation-induced mutation re-arranged or erased some of the original words. The mystery is why so few notice. That form has been signed many times, probably because instead of reading it the parties assumed it said what such terms usually say, or because the party signing felt he had no choice, or because the agreement was so meaningless he decided he was better off leaving it unchanged.

Recall that one of those rules of construction mentioned earlier was “agreements are generally interpreted against the person that drafted it.” That means when an agreement has multiple possible meanings, the interpretation of the person who drafted it is disfavored (because he had his chance to make it clear); or, put another way, the interpretation of the person who signed without asking for changes is favored. That sometimes gives an incentive to sign without asking for any changes.

Re-read until you see the dinosaurs…

One playful lawyer I know deliberately spikes his agreements with nonsense, particularly in the boilerplate “force majeure” section. That section says, in effect, that a party will be excused from his obligations under the agreement if the reason is something he can’t control and couldn’t anticipate. To the usual force majeure litany (war, earthquakes, floods) he adds funny excuses for non-performance: the return of predatory dinosaurs, attacks by synchronized hat-exchanging disco dancers, the appearance of men with hands of blue walking two by two…

Even the largest law firms, although proudful about their precision and their hundreds of attorneys available to read and re-read, glide over those force majeure dinosaurs again and again, draft after draft, without murmur or complaint.

The danger of this trick (apart from the possibility someone could assert the words must mean something) is the possibility someone might eventually notice, and be irked.

But it’s a dandy way to tell if anyone is actually reading everything, because a lot of the time, they ain’t.

– Charles

PS: Next up, probably, will be something about trademarks and trademark searches. But what would you like to read about here? Suggestions welcome!

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Charles B. Kramer, Esq.
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For discussion purposes, not legal advice.
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