How to avoid some of the most common drafting errors in agreements

How to avoid some of the most common drafting errors in agreements

If you are not a lawyer, please look away now.

Gone? Jolly good!

For the rest of us legally trained bods, today's post will concentrate on common drafting errors in agreements.

So let's start with an easy one:

Per cent v percentage points

As you know, interest rates are typically referred to as being [x] 'per cent'—as opposed to [x] 'percentage points'—above the relevant rate (such as the base rate of the Bank of England).

This is technically incorrect.

I know. This surprised me a bit when I first came across it. Like many lawyers, I am not exactly what you call mathematically gifted.

The problem is that the terms ‘per cent’ and ‘percentage points’ are often used interchangeably with most lawyers favouring the former.

For example, Directive 2000/35/EC (on combatting late payment in commercial transactions) refers to 'percentage points' (at article 3(d)) whereas the Late Payment of Commercial Debts (Rate of Interest) (No 3) Order 2002 (which sets out the current statutory interest rate) refers to 'percentage' (at article 4).

No wonder lawyers are confused.

Arguably the manner in which the term 'per cent' is used in this context is known and accepted by many lawyers. So perhaps the use of ‘per cent’ is effectively correct? Everybody knows what you mean.

On balance, my view is that the safer route is to follow the approach of, for example, the Bank of England and to favour the use of the term 'percentage point' when quoting an interest rate (eg '[x] percentage points above the base rate of [specify bank]').

If you don’t believe me, perhaps

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