Contract Drafting

The $2 Million Dollar Comma

This Canadian case highlights how important a simple comma can be, let alone ensuring that you use the correct words. So what happened? A, a party to the contract wanted out of the contract: more than $CAD2m was at stake.

The Clause in Question

In dispute was the interpretation of a termination clause. The relevant clause was as follows:

This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms”,” unless and until terminated by one year prior notice in writing by either party.

The key comma is highlighted in “quotes” above.

A argued that because of the placing of the comma either party had the option to terminate the contract by giving notice of 1 year, and it didn’t matter if that notice was given during the first 5 year term or in any subsequent 5 year term.

The other party R, argued that neither party could terminate in the first 5 year period, but that in any second (or further) term of 5 years either party could terminate by giving notice of 1 year.

The Result

The resulting court case was a veritable linguistic interpretation feast with the Rule of the Last Antecedent being quoted more times than we have seen sunrises. So how did it end up, well at first instance the Commission found for A, deciding that A’s interpretation was the correct one.

However R appealed and then won, because they were able to rely on a French version of the contract (the parties had signed both English and French versions of the contract) and the French version had clearer language in it and no such comma in it. Lucky for them!

So what’s the lesson here?

Punctuation and wording in any contract is very important – it pays to get it right, because getting it wrong can’t have disastrous effects! As the T shirt says:

“I love cooking my family and my dog. Use commas. They save lives”.

Enough said.