Contract Weasel Words

What would legal documents be without weasel words?  Written contracts are full of them, and they often serve a salutary purpose.  Here are a few samples:

         “Substantial”:  This word often appears in the performance section of a contract.  From a legal standpoint, contracts usually do not require “perfect performance”, only requiring “material” compliance with the contract terms.  For example, in a contract to purchase 10,000 widgets, if the supplier erroneously delivers only 9,994 widgets and a later audit shows a shortage of 6 widgets, it would not be considered a real default because the shortage is not significant.  The buyer would simply get credit for the 6 missing widgets.  In some cases, however, precise performance can be required if specified in the contract.  In a contract for the sale of close tolerance machine parts, if the parts are not delivered to exact specifications the contract would be considered breached if, by its terms, the contract required production to exact tolerances. 

“Material”:  Material is a word that often appears in the default section of contracts.  When a default occurs under a contract it typically triggers remedies in favor of the non-defaulting party.  That party can usually suspend performance and sue for damages.  Loan documents are good examples of contracts with powerful remedies in the case of default.  If you fail to make your car payment on time you are in default and the lender might be able to repossess your car.  But what if your payment check is $.18 short because you transposed the numbers on your check?  Technically you have not made your full loan payment on time, however, this would not be viewed as a “material” default and I would not want to represent a lender trying to repossess a car on that basis.

“Reasonable”:  This is perhaps the most famous weasel word of all and we see it everywhere in legal documents.  This is because application of the law often depends on what a “reasonable person” would do under the circumstances.  It is in the interest of society to act “reasonably”.  If a contract is not clear on when performance is due the law requires that performance occur within a “reasonable” time considering all of the circumstances.  In real estate contracts, even where the date for performance is specified the law might excuse late performance if it is not unreasonably late.  For example, if closing is set for June 22nd and the buyer cannot close, but can close on the morning of June 23rd, the law would typically consider this to be performance within a reasonable time.  There is an exception, however, and that is where the contract specifies that the time for performance is “of the essence”.  When you see these words in a contract it means that performance must occur by the date indicated without exception.  (Sounds reasonable…!)

      — Kevin Palmer

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