How to Understand Contract Language

Go through the contract line by line, word by word.

For the layman, the wording of a contract can be intimidating. Even when a legal expert assures you that the bottom line is reasonable, you may justifiably hesitate to sign on the dotted line until you understand every sentence firsthand. After all, honest disputes over interpretation often end up in court. But you don't need a law degree to understand contract language. Understand it by looking up terms, analyzing all levels of the agreement and asking questions until the answers satisfy you.

Things You'll Need

• Dictionary of legal terms

Instructions

1. Read a few primers or overviews about the area of law dealt with by your contract, whether it be labor agreements, mergers, construction or leases. Unless you are already familiar with the field, the research will prepare you to consider the recurring issues, conflicts and means of resolution entailed by the contract language. Findlaw.com is a good resource on various areas of the law.

2. Go through the contract line by line and circle any word, phrase or clause that is unclear to you. These include terms that in ordinary language may have a slightly different or unclear meaning in the context of the contract language ("assumption," "float," "odd lot," "devise," "time is of the essence," "material," "several").

3. Write a list of the contract's unfamiliar or semi-familiar legal terms. One by one, look them up in a reliable legal glossary or dictionary. A good dictionary with clear, comprehensive and well-documented yet concise definitions is Barron's Legal Dictionary.

4. Peruse the contract language again. Look for obscurities, omission, wholes that appear less than the sum of their parts, inexplicable deviations from the wording of similar contracts. Focus on the goals of the contract, how you expect to benefit from it and what you expect to deliver to gain that benefit.

5. Write a new list, this time of questions about every detail large or small that still bothers you. Do further research if that will answer your questions. Otherwise, take the questions to others, including your attorney or another legal consultant and other parties to the contract. Take notes. Pursue any differences in understanding until they are clarified to your satisfaction.

Tips & Warnings

• When in doubt, strike it out. If no amount of conscientious inquiry can bridge the gap between what the text seems to mean and what you're told it means, ask that the wording be changed. Ask that the contracting parties' verbal understanding be more clearly expressed in alternative contract language, so that you know for sure what you are committing yourself to.

References

• Barron's Law Dictionary, Fifth Edition; Stephen H. Gifis; 2003
• Public Employees Federation: Understanding Contract Language

Resources

• Expert Law: Common Contract Clauses
• Law Depot: Boilerplate for Common Legal Forms
• Find Law: Learn About the Law