Anticipating Contract Disputes Before You Sign

Enforcing The Contract

A contract formalizes a deal and ensures all parties keep their commitments throughout its term. By signing the contract, each party places a significant amount of trust in the other as well as the certainty and enforceability of the document. Ultimately, a contract that amounts to a few pieces of paper is relied upon for critical business decisions that generally have significant real-world implications in terms of investments, expenses, or personnel.

So what happens if the unexpected happens, which it always does? How do we ensure enforceability?

Utilize Pre-Emptive Measures To Avoid Contract Disputes

Emily Campbell of The Campbell Firm PLLC points out, “Counsel’s goal is to work with its client to paper what the parties have actually agreed to. A good contract will anticipate issues and will have built-in remedies for things that might go wrong.”

In order to craft such a document, a lawyer must understand the industry in which the client operates and the business goals involved. Importantly, the lawyer should ask a lot of questions to help guide the drafting process: What if the baseline assumptions framing the deal prove wrong? What if one party doesn’t perform its obligations? What if one party terminates the agreement?

Utilize Precision To Avoid Contract Disputes

Precision and clarity are essential when composing a contract. Avoiding ambiguity and errors in the drafting process are two ways to ensure precision and clarity and reduce the likelihood of a contract dispute.

Protect Yourself from Ambiguity

Though none of the following strategies will enhance enforceability from a legal standpoint per se, they will help avoid ambiguity and protect against misunderstandings or misdeeds amongst the signatories.

• Use tiered numbers as indices for hierarchical headings. Tiered numbers are an easily understandable and navigable indexing system. This approach makes it far easier to notice if sections of a document are accidentally deleted or excluded. It also avoids differences in pagination between devices.
• Initial all pages with essential terms. This can become very time-consuming, but it’s one of the simplest strategies to implement.
• Keep a digital copy where the timestamp cannot be altered. The simplest way to do this is to save the document as a PDF and then email that copy to all parties and relevant counsel. Any alterations can be compared to this copy in a legal dispute.
• Insert a modification clause into all contracts. Example: “This Agreement may not be changed or terminated orally, but only by an agreement in writing signed by the party against whom enforcement of such charge or termination is sought.”
• Insert critical information into the footer. Every page footer should include the file name, version number, and the date and time printed. Append all documents with the format “yyyy/mm/dd” as in 2026/02/20 for February 20, 2026. This will make it easy to sort document versions alphabetically by version, so you know you’re always looking at the most current version.
• Consider a document management service. There are a variety of companies trying to address the pain point of managing the drafting process as documents iterate between parties, e.g., IroncladApp and Juro. Services like DocuSign that permit e-signatures greatly reduce the risk of disagreement about document versions.

Avoid Drafting Errors

Drafting errors in a fully executed contract can make the affected pages potentially unenforceable, so it is critical to spot and correct these during the drafting process. According to Samuel Shafner of Shafner Law Office, the three most common drafting errors he’s had to deal with are:

Orphan Provisions

One example of an orphan provision would be a document with elaborate representations and warranties by the party seeking the investment, loan, or purchase, but nothing linking those reps and warranties to a consequence. In the event of a dispute, a court is left guessing. You can avoid an orphan provision like this by including a clear ‘indemnity’ clause, which states exactly what happens if a rep or warranty is invalid.

Another example of an orphan provision would be a tech license that states Party A indemnifies Party B for a patent invalidity or infringement claim but outlines no mechanism for the indemnity. For example, does Party A pay Party B’s legal fees as they go or only at the end? If the indemnification depends upon a satisfactory verdict, what happens if the dispute is settled instead?

In general, for every promise a party cares about, there should be a clear consequence articulated in the event that the promise is violated.

Inadequate Notice Provisions

Out-of-date notice provisions, which one still sees in form documents, do not address the realities of modern electronic communications. More modern ones may permit e-mails without addressing hyperactive spam folders and other cyberspace ‘black holes.’ A useful and more up-to-date notice provision could read, “Notices may be sent by e-mail, facsimile, text, and other forms of electronic mail, provided that receipt thereof is acknowledged in the same medium or another medium permitted hereby.”

Simplified Boilerplate

We are all familiar with the dozen or so provisions typically found at the end of a contract that addresses topics like governing law, amendments, and notices. Without these ‘boilerplate’ provisions, contracts can often be avoided or unintended consequences can be imposed, so they are important, but are they always necessary in their usual form?

When drafting a relatively simple contract, like a free-standing letter agreement or a term sheet with a few binding provisions, you can employ a simplified boilerplate of one to two short paragraphs in length.

Samuel suggests the following:

“This agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof and supersedes all oral or written agreements and understandings with regard to such subject matter. 

In case any provision of this agreement shall be invalid, illegal, or unenforceable, such provision shall be reformed to the extent necessary to permit enforcement thereof, and the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

We both acknowledge that damages at law may be an inadequate remedy for the breach or threatened breach of this agreement and that, in the event of a breach or threatened breach by a party of any provision hereof, the other party’s rights and obligations hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, in addition to and not in lieu of any rights to damages at law or other rights provided by statute or otherwise for a breach or threatened breach of any provision hereof. 

This agreement shall be binding on and inure to the benefit of the parties’ respective successors and assigns. This agreement shall be construed in accordance with the laws of the Commonwealth of Massachusetts, without reference to its conflicts of laws provisions, and shall be enforceable exclusively in the courts of Suffolk County therein. Changes, amendments, or modifications in or additions to any provision under or of this agreement may be made only by a written instrument executed by the parties thereto.

No waivers shall be valid unless in writing and signed by the waiving party. All notices must be in writing and are deemed given when received, regardless of the means of transmission, except that notices sent via electronic mail (e-mailed) or faxed notices shall be valid only if their receipt is thereafter confirmed by the receiving party by return transmission or otherwise.”

Enforceability

At the end of the day, you want to ensure your document is legally enforceable.

John Watkins of Reitler Kailas & Rosenblatt LLC observed that enforceability will depend on a number of issues, including but not limited to:

• Was the agreement duly authorized whether by board, stockholders, or an authorized officer or agent?
• Was the agreement properly executed?  Were the signatories acting within their authority? Did all requisite parties sign? Was the proper mechanism for signatures followed, i.e., were original signatures required or were e-signatures allowed? Was a witness or other form of validation required (e.g., notarization, apostille, medallion signature guarantee)?
• If a contract, was there adequate consideration?
• Are the terms enforceable under applicable law or otherwise in accordance with public policy?
• Are the terms in conflict with subsequent or past agreements regarding the same matter?

Before drafting or signing any contract, compare the document against the checklist above to ensure all parties are in agreement.

Using AI for Drafting Airtight Contracts?

Many people think that contract drafting can be turned over entirely to AI, but this is a really bad idea. That said, AI can analyze the documents for internal consistency with the right prompts, and spot drafting mistakes that could lead to confusion.

“AI in drafting contracts is only as good as the universe of samples that are fed into the program expected to produce the contract,” said Ms. Campbell.  “AI results have to be reviewed by counsel to see if it works for the way that the parties actually want to operate. My biggest concern is attorney-client privilege being wiped out by the use of tools [e.g., ChatGPT and the other leading public LLMs] that are learning on the input that would otherwise be confidential.”

Closed-universe AI models built by a company to deal with its own contract forms might be good; these are programs built to handle specific situations that might arise regularly so that standard clauses concerning services and products produced, for example, could be prepared with auto-fill and mix-and-match options in response to appropriate prompts. This way tried and true clauses that a company has seen work without argument from their customers could be implemented, reducing the inclusion of unworkable, vague, ambiguous or confusing terms.

Good luck and good contracting!

[Editors’ Note: To learn more about this subject watch Help, My Business is In Trouble and Understanding Risk Management Basics for Business Owners, each a free on-demand webinar. 

This is an updated version of an article originally published on November 4, 2021 and previously updated on July 17, 2024.]

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