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Contract Pitfalls

Contract Pitfalls

The importance of having your contracts reviewed prior to board approval.

This past week I attended a continuing legal education course on common mistakes encountered in drafting contracts. It was quite interesting! The speaker focused on the contract for Amazon’s recent acquisition of Whole Foods. Despite the fact that this was a very high-level transaction involving scores of attorneys from multiple firms on each side, our speaker was able to spend an entire workday illustrating hundreds of drafting mistakes in that contract.

One of the bigger mistakes discussed at length was improper use of the word “shall.” In the contractual sense,“shall” is a command word. The speaker took us through many clauses from the Amazon contract containing “shall” and asked us to substitute it with “has a duty to." If the sentences made sense with the substitution, then “shall” was used properly. If not, then there should’ve been a different word used in its place. According to our speaker, the Amazon contract used “shall” 375 times, and approximately 260 of those uses were improper!

Another common mistake drafters make is use of the words “and/or.” Courts don’t like it in contracts because it’s not clear whether “and/or” means all items in a list are required (“and”), or whether any one of them is sufficient (“or”). The speaker suggested that clearing up confusion simply depends how many items are in the list. If the list contains two items, replace “and/or” with “a or b or both.” For lists containing more than two items, preface the list with “any combination of one or more of the following.”

Although the program was designed to educate lawyers on ways they can avoid ambiguity or unintended consequences in drafting or negotiating contracts for their clients, I immediately thought about schools. Districts are presented with contracts from many vendors and service providers each year. How carefully are those documents scrutinized before being taken to the board for approval and signature?

Help is at your disposal. Contract review is an included service with your OPSRC membership. Just email me your document, and I’ll be happy to take a look at it. If the best lawyers for the top firms representing the largest companies in the world can overlook things in their contracts, there is no doubt in my mind that having an extra set of eyes looking over important documents would be a good thing for schools as well.

Terri Thomas

Director of Legal Services

Terri Thomas serves as Director of Legal Services for OPSRC. Ms. Thomas is an attorney practicing exclusively in the area of Oklahoma school law, with a primary focus on rural and smaller school districts. Prior to OPSRC, she served as legal counsel for the Organization of Rural Oklahoma Schools (OROS).

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