Companies pay millions of dollars a year due to typo errors in contracts. If you want to avoid the same fate, it’s essential to correct these mistakes using CMS.
Tips to Prevent a Costly Agreement Error From Damaging Your Business
How to Correct an Agreement Error Using Contract Management Software
A contract is the culmination of hours and hours of negotiations, and one error may mess everything up. A contract management tool helps to avoid those dangerous errors in your agreements.
You put hours into negotiating and drafting an agreement, hoping that the finished product will be perfect. However, it’s too easy for a tiny agreement error to slip through the cracks. A contract management platform will help you avoid these costly mistakes so that your business won’t take a hit from a misspelled word or misplaced comma.
What are agreement errors and typos in contracts?
Agreement errors are simple mistakes that are often overlooked in the document. These can range from spelling errors to misplaced punctuation marks. However, even though they may seem harmless, they can significantly damage your company if left unchecked. Since you spend hours drafting and negotiating your business agreements, you do not want one error to void the entire contract or cost you financially.
The most common typo errors in contracts
Everyone makes mistakes, even the most seasoned business leaders and legal professionals. However, the difference is that a mistake made in a business agreement can cost thousands of dollars in legal fees.
These simple contractual mistakes highlight the importance of proofreading your documents:
1. Number related typos
Numerical errors are especially damaging since they often involve money. You should pay especially close attention when forming a business or employment agreement as you don’t want to end up paying out more than you intended to. Furthermore, with errors that change financial terms, the court often sides with the non-drafting party.
2. Punctuation errors
Numerical mistakes aren’t the only expensive contract error. Even something as small as a forgotten period or misplaced comma can lead to serious financial consequences for your business. However, you should not only look closely at your documents but at the laws and regulations that govern your company. For example, in 2017, Maine’s Oakhurst Dairy lost a $10 million lawsuit due to an errant comma in the state law.
3. Misspelled or misused words
Typos that lead to misused or misspelled words may leave the terms of an agreement unclear. When this occurs, the other party may be able to void the agreement in a court of law if they cite that they were misled about what they agreed to. Because of this, a spelling or grammatical mistake can damage your credibility and your bottom line.
4. Content mistakes
Some of the most harmful business mistakes come from the failure to realize the content of the agreement you’re creating, so it’s essential to look at the big picture when drafting contracts. For example, if you’re amending the terms of an agreement to reflect a price increase, it wouldn’t make sense to cite the increase from $10,000 to $9,000 rather than the other way around.
Does a typo void a contract?
Mistakes can void a contract if they impair the other party’s consent or cause ambiguity. For example, if the other party initially agreed not to pay for damages, but the contract document reads that they “shall pay for damages,” they may be able to void the arrangement altogether. However, contracts are typically enforceable as is, including the error or typo. So, by default, the court will usually uphold that the parties are still bound to the agreement.
What should you do if you find an error in your contract?
You should correct errors in agreements as soon as possible. You will also need to bring the mistake to the other party’s attention, especially if they have already signed the document.
Follow these standard steps for correcting an error in a contract:
- Redline the incorrect information (make sure that it’s still legible)
- Edit the document to fix the error
- Date and initial the change
- Have the other party date and initial the change as well
Consequences of ignoring an agreement error
Errors in an agreement can be the difference between a beneficial business deal and a costly mistake. At the minimum, a couple of typos may damage your business’s credibility. However, far worse consequences can occur from ignoring an error in a contract.
1. Damage to your reputation
Any little mistake can damage a business relationship. This can range from a tiny typo to an obvious error in the contract that you send them. When there are errors in your agreement document, they may delay signing it to have their attorney review it. Or worse, they may back out of the deal altogether.
2. Unintentional changes of a contract’s terms
When you sign a contract, you are typically bound to its terms regardless of its mistakes. For example, if the agreement was supposed to state “Business A shall not be held financially responsible for damages,” but there’s an error and it states “Business A shall be held financially responsible for damages,” legally, Business A would be forced to pay for the damages.
3. Unexpected expenses
As mentioned previously, a typo may mean that you have to pay out more than you intended. Additionally, if the typo leads to damages, your business may have to pay thousands of dollars in court fees, and if the other party wins, you may have to front the cost of their damages.
Using a smart CLM platform to create error-free documents
When you utilize the capabilities of contract management platforms when drafting your documents rather than relying on spell-check or the human eye, you will be ensured that your finalized agreement will be free from costly mistakes. Advanced features such as redlining, real-time collaboration, and smart templates make it easy to make contract errors a thing of the past.