What is a watertight contract? In my view it is like the pot of gold at the end of a rainbow – we’d all like it to exist, but it doesn’t. Recent examples like Pimlico plumbers, Uber and Oakhurst diary have shown how so-called watertight contracts have been leaking at the edges…
Although articles will tell you how to Write a Watertight Contract, in reality it’s neither possible nor desirable. Such articles provide tips that can help you create the basics for a decent contract, and I agree wholeheartedly with suggestions to use plain language, avoid jargon and not to copy copy and paste. But they are peddling a myth when suggesting these tips lead to watertight contracts.
Is it Possible?
A watertight contract is one where there is no scope for dispute. It is ‘leak proof’. That means writing a contract so it cannot possibly be misunderstood by anyone.
A watertight contract should use every possible means to minimise the risk of it being misunderstood, because as the article above ends “it is hoped this will avoid costly litigation.” However, that’s all it is. A hope, not a promise. Surely a watertight contract means there is no room for dispute. Not that you will hopefully avoid disputes?!
In the UK construction industry, some of our standard forms have been around for over a hundred years and contain nearly a hundred thousands words (once edited by lawyers). if those contracts aren’t dispute-proof and watertight, is any?
Rudolf Flesch, in the Art of Readable Writing, says:
You cannot prevent a reader from reading meanings unto your words that you didn’t think of; but you can guide [her] interpretation of the more abstract words – which are the most dangerous – by using as many concrete cases, illustrations and examples as possible.
Perhaps that is partly our problem when writing contracts – we tend not to use any case, illustrations or examples. We focus our drafting on literal interpretation by the courts – ie using three words when one will do – rather than practical interpretation by the users. We shy away from images, flowcharts and explanations in case they hinder not help our cause.
Tips: check your contract makes sense to the parties, check it makes sense to outsiders, and use images to seal some of the holes in your contracts.
Is it Desirable?
A more realistic approach is taken by 10 Ways Project Managers Can Create Watertight Contracts:
Even a wonderful contract is no insurance against bad behaviour. Someone who is intent on breaching an agreement will go ahead and do so, no matter how artful the legal drafting.
It also recommends ‘writing it in plain language that everyone understands’. This is a essential pre-requisite if the users are going to be able to understand the behaviour you expect of them – and avoid the bad behaviour referred to above. It is definitely desirable to set out the standards of behaviour that you expect from both parties, and not take it as read. However, you cannot use a contract to so carefully control one company that it cannot breach that standard.
We are humans, not robots, and failure is a fact of life.
Tips: recognise that contracts are written, read and understood by humans who are not perfect; plan for when things go wrong, rather than assume everything will go right.
Watertight contracts would provide a straitjacket for working with another company, one which would hamper and hinder, not help the parties. Working together based on trust is surely more desirable than suffocatingly close control?