What Does That Mean? The Importance of Precise Language In Sourcing Contracts

“What does that mean?” may be one of the most common questions a lawyer asks when working on the early stages of a sourcing deal. Sometimes it’s because the client is using company-specific or industry-specific jargon the lawyer hasn’t heard before. But more often it’s because the lawyer is trying to convert a concept or common parlance (which may seem intuitive to the client) into clear, unambiguous and precise contractual language.

Sometimes these conversations end up sounding like this recent deposition (or result in these types of conversations after the contract is signed):
Plaintiffs’ Lawyer: During your tenure in the computer department at the Recorder’s office, has the Recorder’s office had photocopying machines?
…
Deponent: When you say “photocopying machine,” what do you mean?
PL: Let me be — let me make sure I understand your question. You don’t have an understanding of what a photocopying machine is?
D: No. I want to make sure that I answer your question correctly….When you say “photocopying machine,” what do you mean?
PL: Let me be clear. The term “photocopying machine” is so ambiguous that you can’t picture in your mind what a photocopying machine is in an office setting?
D: I just want to make sure I answer your question correctly.
PL: Well, we’ll find out. If you can say yes or no, I can do follow-ups, but it seems — if you really don’t know in an office setting what a photocopying machine is, I’d like the Ohio Supreme Court to hear you say so.
D: I just want to make sure I answer your question correctly.
Deponent’s Lawyer: There’s different types of photocopiers, Dave.

The truth is, if a contract is drafted precisely, conversations like that shouldn’t happen because the term “photocopier” would be defined precisely in a way that both sides had agreed on (indeed there would be a defined term in the contract). This is especially important in a sourcing contract where the type and number of “photocopiers” (and the number and type of copies or images produced by those “photocopiers”) could form the basis for the pricing of the deal.

Later in that same deposition, the Deponent revealed that he referred to those devices as “Xerox” machines and the process of making a copy “Xeroxing,” regardless of whether the machine involved was actually manufactured by Xerox. If the contract were prepared using this terminology without the benefit of a precise definition of “photocopiers” (including, for example, whether one or more manufacturers’ models were intended), it’s possible that someone attempting to interpret the contract might consider only “Xerox” machines as being in scope. Later on, if Fuji or Canon machines were discovered in the customer’s environment, a change order might be required for the service provider to support them (which might include an associated change in pricing and service levels).

Among other things, the job of the lawyer is to make sure that the intentions of the parties are captured (and clearly stated) in the contract. So, for example, someone who was not involved in the deal should understand the contract to mean the same thing as the people who entered into it in the first place. Although it may, at times, seem like a deliberate focus on terms such as these slows down the process, the upfront investment to clearly define the terms associated with scope, pricing and service levels can decrease the likelihood of disputes (or unintended changes) down the road – making the relationship more likely to be successful.