Reseller News

Avoid contract legalese confusion

  • Rae Nield (Unknown Publication)
  • 05 September, 2010 22:00

I am a fan of plain language contract drafting. I have some drafting rules: no “suches” (as in “Such products will comply with the standard…”), no hereins, hereinafters or hereinbefores, no heavy, crippling clauses that cannot be enforced (these are pretty common today, but are misleading and probably represent a Fair Trading Act breach).

I like contracts that clearly tell parties what to do, with plenty of protection and no cryptic drafting.

This is particularly important when the law changes. For instance, we used to protect the seller’s interest by retaining title to the goods until they were paid for. Then, along came the Personal Property Securities Act, and the rules all changed.

In most situations title means nothing now (although a retention of title clause does create a security interest). What counts is whether your security interest is registered on the Personal Property Securities Register.

If it is not, you will be back in line behind anyone who does have a registered security interest – like a bank. So I like a contract to give my client and the other party a few clues as to what is happening, what they have to do, and most importantly, what happens if something goes wrong.

I had a major barney with a colleague once about my plain language drafting of clauses which create security interests in goods. He seemed to be from the school of thought that said “baffle them with legalese and that will preserve all of their rights” – even though both parties would have to go a lawyer to figure out what the contract meant (hmmmm – was there a bit of marketing rationale there?).

It is quite common – have a look at some of the supplier contracts you sign up to and see how many refer to, for example, contracting out of all of your rights under section 107(2) of the Personal Property Securities Act. Do you know what that means? It means quite a lot of things, including that if goods are repossessed from you by your supplier, they do not have to automatically tell you how much they sold them for, and if they damaged something else when they ripped their goods off your equipment – too bad. So in my view, plain language is the order of the day.

Even with that, I have seen all sorts of funny clauses. There is the “Oh Yeah?” school of black humour – like one I saw recently where consumers signed away all their rights to use their own image for ever… No, it wouldn’t have been enforceable but would a consumer be prepared to pay a lawyer to find that out?

There’s the “Yeah, Right!” school, where they primly say that if something goes wrong with the goods, please contact the overseas supplier. But best of all is the realist school – and the realistic contracts I see are often from resellers like you, people who have seen it all before, and very carefully explain that yes, you do have to look after your own business, that you do have to take care, and you can’t blame everything on the other party.

Which leads me to the contract I saw the other day. It carefully set out what this value added reseller expected of its customers and who had to do what, then finished with this classic line: Client understands that unless Client has an unlimited IT budget it’s impossible for us to guarantee zero downtime. As one of my clients said: Ain’t it true!

Rae Nield is a solicitor specialising in marketing law. This article is intended for general information and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at