Nomenclature: How Words Affect Contractual Relationships

The nomenclature of a contract can subtly alter the relationship between the parties. The choice of particular words can create tension when exercising the provisions containing them simply because of how they sound, and what impression those words make in the mind of the reader. The legal effect can be identical, but a subtle psychological bias can be introduced by selecting loaded words as definitions or terms. This bias can be reinforced by using the notice provisions of the agreement to influence whether a notice is communicated, and how it is communicated.

Consider a scenario where a first party is required to perform, and a second party is to notify the first when its performance is not to the standards in the contract. In this scenario, the contract calls for a “deficiency notice” to be sent, and permits such notices to be sent by email. The connotations of the word “deficiency” are relatively innocuous. The word suggests that only a minor breach has occurred. It could be easily inferred that deficiencies will occur regularly, and the parties are encouraged to discuss them. The term does not, in and of itself, say anything about the parties themselves, only that one party’s performance is below standard in some respect. The word “deficiency” as a noun is not generally used to describe a person, so does not tend to invoke an emotional response in those that hear it. (In my mind, it is comical to describe someone as a “deficiency”, since it is so incongruous.)

Consider a second scenario, nearly identical to the first, except that instead of sending a “deficiency notice”, the contract describes a “failure notice” for exactly the same circumstances. This “failure notice” has a prescribed form having particularly legalistic language. The “failure notice” must be sent according to a specific procedure for providing notice that is onerous. Perhaps the “failure notice” is addressed to a senior executive instead of a manager or project manager, and must be hand delivered. The connotations of a “failure notice” are harsh. The word “failure” can be used to describe both an event and a person, and therefore tends to invoke an emotional response in those that hear it. By providing a “failure notice”, the second party is by implication branding the first a “failure”, describing not only the first’s performance, but implying something about the first party itself.

If the likelihood of a party not performing to contract is the same in both scenarios, the choice of language will have a meaningful impact on the relationship between the parties. In the first scenario, by choosing words that are benign and selected carefully to facilitate communication, the parties will enjoy a better relationship. Relationship managers and project managers living the contract day to day will feel comfortable sending deficiency notices by email, since doing so will be less likely to be perceived as an insult to the other party. In contrast to the first scenario, in second scenario, the contract creates an atmosphere of hostility and sets up the parties as adversaries. Those that are implementing the contract are required to send notices framed in aggressive language that sets the stage for dispute.

One approach is not necessarily better than the other. Since the choice of language will have a subtle but serious impact on the relationship, it should be chosen with the relationship of the parties in mind. There are some business arrangements that will lend themselves to a more intimate partnership, and some where a more distant relationship is appropriate.

Lawyers should carefully consider nomenclature when drafting a contract intended to govern a long term relationship. Long after the lawyers have left the scene, relationship managers and project managers from both parties have to live with the fallout of those word choices.