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Blog >> ERRORS IN CONTRACT DRAFTING: The “Million Dollar Comma” and “How Vail Bought Park City”

 

Every quality business attorney will advise any type of business owner to always have professional legal assistance when dealing with any type of contract. Most businesses deal with numerous contracts and some even use contracts as part of their daily operations. Some of the most common business contracts include:

 

·         Real estate agreements

·         Lease agreements

·         Bills of sale

·         Purchase orders

·         Employment contracts

·         Partnership agreements

·         Buy-sell agreements

 

Of course, there are many additional types of contracts and the kinds that you use will depend heavily on the type of business you run.

 

No matter what contract you are considering, however, you should not sign anything until you have had an experienced attorney closely review each provision of the agreement for any possibly unfavorable terms and negotiate the terms, if necessary. If you are offering the contract to another party, be sure to have a lawyer draft the agreement to make sure your rights are fully protected.

 

Careless drafting can cost money – the "Million Dollar Comma"

The “Million Dollar Comma,” referring to a single punctuation mark in an agreement between two Canadian telecommunications companies regarding the use of telephone poles, is a mistake contract drafters never want to repeat. A provision of the contract read 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 company that owned the poles, Rogers Communications, believed that the contract term was for at least five years with the option to be renewed thereafter. The other company, Bell Aliant, read the second comma to mean that they could cancel the contract after only one year. The court found that the carelessly placed comma did allow Bell Aliant to cut the contract short, which ultimately cost Rogers 1 million in Canadian dollars. This case goes to show how important extremely careful drafting can be for your bottom line.

 

Review and revisit your contracts – "How Vail Bought Park City"

If a business signs a long-term contract, they may simply take the terms for granted and forget to periodically review the contract for any pertinent provisions. For example, Park City Mountain Resort in Park City, Utah signed a lease agreement in the 1970's to lease a large amount of the resort's land from landlord Talisker Corp. In 2011, Park City was required under the agreement to send notice of a lease renewal for the next 20 years, however, the company forgot about the provision and did not send notice. Instead, while Park City assumed the long-term lease had automatically renewed, Talisker began talks to lease the land to Vail Resorts. Park City took the case to court and lost, as the judge found that they were required to renew the lease as agreed. The dispute resulted in the complete sale of Park City Resorts to Vail Resorts.

 

As you can see, having an experienced business attorney draft, negotiate, and review your contracts is imperative to protect your interests and ensure you are not opened up to unnecessary liability. If you have any type of contract questions, please do not hesitate to call the Law Offices of Nate Kelly at (415) 336-3001 in San Francisco or (310) 228-6215 in Beverly Hills.

 

 

One thought on “ERRORS IN CONTRACT DRAFTING: The “Million Dollar Comma” and “How Vail Bought Park City”

  1. Pingback: Choosing Form(s) over Substance: The Dangers of Using Online Business Forms | :: NATE KELLY ::

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