Contracts come in all shapes and sizes but, essentially, they are put in place to record an agreement between two or more people or entities. The process starts when someone makes an offer and another accepts it. The contract is legally formed when the parties exchange or promise to exchange something of value such as cash in return for goods or services. As you might expect, dollar sums are a feature of most contracts. It's important to write this number clearly so there is no scope for dispute in the future.
Write in Words and Numbers for Clarity
If you're creating a legal contract with someone as part of your business, understand that there are no hard-and-fast rules about how you should write an amount in dollars and cents. All you're really striving for is clarity, so there are no misunderstandings about the agreed price. The starting point is to write the amount in words and in numbers. For example, if you've agreed to pay Mr. Brush the decorator $500 for painting your garage, you could write, "the client will pay Mr. Brush the sum of Five Hundred Dollars exactly ($500)."
In Law, Words Generally Prevail
The reason lawyers write the amount in words as well as numbers is that it's easy to mistype a number, for instance, by writing $125,826 instead of $128,526. If the words and the numbers do not match, and there's no other evidence about the amount you've agreed to pay, a court usually will decide that the words trump the numbers. That's because it's much harder to make a mistake when you're writing out the full word.
How to Write Portions of the Dollar
Amounts in cents are treated exactly the same way as whole-dollar amounts. For example, a contract for the sale of a bicycle for $225.50 would say, "The Buyer shall pay the Seller the sum of Two Hundred and Twenty-Five Dollars and Fifty Cents ($225.50)."
If you handle contracts a lot, you'll see that some lawyers use a mix of words and numbers to describe the cents portion of a settlement figure. The phrasing generally follows that of a check: "Thirty Thousand One Hundred and Twenty-Five Dollars and no/100 Cents ($30,125.00)" or "Thirty Thousand One Hundred and Twenty-Five Dollars and 75/100 Cents ($30,125.75)" Writing the cents as a portion of the dollar is the preferred style of many law firms as the meaning is quite clear.
Understanding AP Style
The Associated Press, or AP Stylebook, used by U.S. journalists and the PR professionals is the English grammar guide against which all news writing is measured. While regular Joes may not have heard of the AP Stylebook – let alone be cracking open an edition whenever they're writing a contract – it does contain a series of suggestions for writing numbers that can be helpful in this context. Here are the important rules :
- Hyphenate two-word numbers: "Thirty-three"
- Use commas when writing large numbers: "8,431", "7,654,321"
- For very large numbers in the millions or billions, choose the format that is the most readable, i.e., "$600 million" instead of "$600,000,000."
While there is no absolute rule, you generally write the dollar amount in words and numerals so there's no mistaking the amount that's being paid.
Jayne Thompson earned an LL.B. in Law and Business Administration from the University of Birmingham and an LL.M. in International Law from the University of East London. She practiced in various “Big Law” firms before launching a career as a commercial writer. Her work has appeared on numerous legal blogs including Quittance, Upcounsel and Medical Negligence Experts.