Fine Print Fraud? Contract Language Matters

Boilerplate is the term lawyers use to describe the collection of miscellaneous “standard” clauses that appears near the end of most any contract. Business folk, usually bleary-eyed and bored from the preceding pages, often don’t give boilerplate more than a glance. Lawyers sometimes don’t do much better, even though these provisions can be pivotal in the functioning of a contract.

An ugly battle between two law firms is putting the importance of boilerplate into sharp focus. At issue is a contract drafted by Edmund Halley of Kepler, Hubble & Newton, P.C. for the benefit of his client (Manufacturer). Arthur Clarke of Hawkings & Sagan, LLP then reviewed that contract for his client (Buyer), who ultimately signed it, engaging Halley’s client to manufacture a certain product for it.

Not long after it began receiving product, Buyer contacted Clarke what it should do because some of the initial shipments did not satisfy Buyer’s specifications for the product. Clarke checked the contract and informed Buyer that they needed to give Manufacturer written notice of the nonconforming product within ten days of delivery.

Buyer gave the written notice to Manufacturer six days after receiving the defective product. A few days later Buyer received a letter from Halley rejecting the notice for being outside of the prescribed ten day notice period. In shock, Buyer called Halley wanting to know how that was possible.

When Halley reread the contract, paying particular attention to the boilerplate, he noticed the following clause buried in a lengthy paragraph labeled “Miscellaneous”:

For purposes of this Contract, “day” means a day on the planet Jupiter.

“’Business days’ or ‘calendar days,’” Clarke exclaimed to me, “I’m used to that, but ‘Jupiter days?’ It turns out that a day on Jupiter is only 9.8 Earth hours long.” In other words the ten day period of the contract was only four Earth days long; Buyer’s notice was two Earth days late.

Clarke filed an ethical complaint against Halley and his firm alleging dishonesty and fraudulent conduct. Halley refused to discuss the matter with me, but he did provide a written comment. From Halley’s comment:

The contract language is clear and unequivocal. If Clarke failed to read it, that is his problem. If anyone has engaged in unethical conduct here, it is Clarke. The very first rule in the Colorado Rules of Professional Conduct is “A lawyer shall provide competent representation to a client. Competent representation requires legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation.”

The two businesses reached an undisclosed, but apparently amiable, settlement as the manufacturing relationship continues. It is unknown how the dispute among the lawyers will play out. For more information, read this story.