Every so often, brokerages and associations bring in an attorney from Oregon REALTORS’ risk management department to talk about avoiding risk and legal quagmires. Oftentimes at those trainings, we get a variation of this question: “How can a broker reduce their legal risk best?
The answer is always the same for contracts where pre-existing forms are created to address the specific scenario: use those pre-existing forms. For contracts where no pre-existing forms are created, and you have to custom draft something to meet the scenario, the advice is: be extremely clear in how you write everything.
Ambiguity is the enemy when you draft a custom contract or custom addendum. What you write should be something that an unrelated, unsophisticated party can pick up and read and understand. While shortcuts can help, phrases like “x is contingent upon y” can get you into trouble if they rely on assumptions. Georgetown Law School’s writing center produced a set of tips for achieving contract clarity:
- Begin with a term sheet. Before you write anything down, outline all the positions the agreement will take, understand exactly what the client wants and where they are not willing to take risks.
- Don’t reinvent the wheel. Other contracts that are used in similar situations will oftentimes have useful language or useful concepts. It’s not a crime to draw inspiration for your language from successful contracts in the past.
- Use plain wording. At the end of the day, you want to make it so that there is only one possible interpretation of the terms. Shorter sentences are advisable because long lines of text tend to combine and conflate ideas and terms together.
- Use words consistently. This is not writing the next great American novel. Creative writing trains the user to vary their terminology and avoid repeating the same simple words. Legal writing is the opposite. “Seller shall do X, Seller shall do Y” is much better than “Seller should attempt to achieve X and must strive to accomplish Y” in a contract.
- Modifiers matter. Words like “only,” “any,” “may,” and “must” have very specific meaning. Pay attention to those terms because simple slips can cause substantial change. E.g., “Seller may order a home warranty for Buyer” vs. “Seller must order a home warranty for Buyer.”
In summary: Clarity above all else. If possible, make your addenda and contracts clear enough that anyone can pick them up and understand them.