496 U.S. Laws Require Plain Language Contracts

496 U.S. Laws Require Plain Language Contracts by Michael Blaise
496 U.S. Laws Require Plain Language Contracts by Michael Blaise

Do your contracts comply with plain language laws?

The first national survey of plain language laws took two years and reached a surprising result: contract design is heavily regulated.  

About 500 statutes and regulations require some form of plain language in contracts or contract-related documents like notices and labels. Your documents may be among them.

Plain language is a popular solution favored by lawmakers with more plain language laws proposed each year. Many drafters are subject to these laws and many more will likely be subject to them in the coming years. Contract drafters need to be prepared to comply with them. The first step is awareness. If you draft or review contracts, notices, labels, or advertisements then you need to know if a plain language law covers them and what that law requires.

Which Documents Do Plain Language Laws Cover?

To be precise, 496 statutes and regulations spread across the United States require plain language in private sector contracts and related documents. Most are state laws. Nearly all of them cover quintessential standardized contracts drafted by a company and signed by individuals.

Image 1- Private Sector Contracts Plain Language Laws created by Michael Blaise

The largest group covers insurance industry contracts and related documents: two hundred-nine laws (42%). The next two largest groupings involve uniform commercial code provisions on the sale of collateral (eighty laws; 16%) and contracts from an assortment of industries (sixty laws; 12%). A cluster of forty-three laws (9%) cover utility and telecommunication documents. Then comes documents involving banking, loans, debt, and credit (forty-one laws; 8%). About thirty-four laws (7%) cover housing documents like leases, while twenty-three laws (5%) involve healthcare, seventeen (3%) cover multiple industries at the same time, and thirteen laws (3%) focus on commercial contracts.

The scope of individual laws varies. Some are very narrow, like those focused on collision damage waivers in car rental contracts, cemetery plot contracts, or attorney contingency fee agreements. Others are sweeping. Consider the Pennsylvania Plain Language Consumer Act, which covers, with certain exceptions, contracts up to $50,000 for borrowing money, or obtaining personal property, real property, services, or credit.

While most of these laws seem to promote consumer protection by making non-negotiable contracts more understandable, some apply to commercial contracts. For example, Georgia requires plain language in certain tobacco contracts between a grower and a supplier, while Texas requires plain language in certain private prison contracts. Whatever the circumstance, a growing amount of data suggests both consumers and sellers benefit from plain language contracts.

What Do Plain Language Laws Require?

The laws apply one of four kinds of standards.

1. Descriptive Standards

Descriptive Standards describe the contract’s design without explaining how to achieve that description. For example, they might require the contract to use “plain language” or “plain English,” but do not define either term. Another variation requires the contract to be understandable to the average person.

2. Readability Standards

Readability Standards require the document to achieve a score on an objective test. For example, the Flesch Reading Ease Test counts how many syllables are in each word and how many words are in each sentence to calculate a numerical score on a 0 to 100 scale.

3. Features Standards

Features Standards list a series of writing features that either must be in the contract or cannot be in the contract. For example, a Features Standard might require using headers and prohibit double negatives.

4. Hybrid Standards

Hybrid Standards combine a Readability Standard with a Features Standard or give drafters a choice between them.

Compliance With Plain Language Laws

In addition to obtaining the advantages of plain language, compliance avoids any statutory or regulatory penalties. But compliance is challenging. No two jurisdictions have the same approach to plain language laws.

Therefore, if you use the same contract in multiple states, you may need to design a contract that complies with different plain language laws. Even within jurisdictions, the design of plain language laws varies dramatically. One document might be subject to one standard, while a different document is subject to another.

Learn how to comply with the different kinds of standards. Doing so will involve a learning curve. It may require changing habits, altering templates, or changing your drafting process. Investing in plain language training will help prepare you and your team while creating a competitive edge clients may find appealing.

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