If you have ever read a contract or another legal document, you know they can be hard for the average Texan, who is not an attorney, to understand. Liberally strewn with professional lingo (legalese) and confusing words like heretofore, aforementioned and herewith, you may wonder what it is you just read and what it means. Your attorney is, of course, there to explain it to you, but if you think all of those fancy words are included just to confuse or impress you, that is probably not the case.
According to insurance giant Smith, Bell & Thompson, which offers professional liability insurance for attorneys and other industries, sometimes it is the small things that trip you up. In one scenario the company describes, an attorney drafts a loan contract meant to protect clients from liability in case of a default. After many years, the loan does go into default. Another lender buys the note, then files suit against the clients who originally issued the loan.
The new lender has a different interpretation of the contract, and the court agrees that the language favors the new lender. What all of this boils down to the omission of a parenthetical when the contract was drawn up—a clerk’s error. The attorney even submitted affidavits from each of the contract’s original parties stating that they understood the document was not intended to provide full recourse. However, that did not sway the judges.
The original lender settled the dispute with the new lender for $1.6 million, then sued the attorney for the same amount, plus $465,000 in legal fees. The case was resolved at mediation for $800,000 in expenses and indemnity.
This may seem like a small matter, and in many circumstances, it might be. But this scenario shows how even little errors can have a big impact on an attorney’s clients.