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v

C O N T E N T S

CHAPTER1 The Front of the Contract 1

The Title 1

The Introductory Clause 2 Format 3

Reference to the Type of Agreement 3

Verb 4

Date 4

Between Versus Among 7

Identifying the Parties 8 Parties with a Limited Role 8

Referring to Lists of Parties 9

Describing the Parties 9

Dened Terms for Party Names 12

The Dened Term This Agreement 17

Recitals 18 Function 18

Giving the Recitals a Heading 20

Enumeration 20

Use Simple Narrative Prose 20 Using In Accordance with this Agreement in Purpose Recitals 21

Incorporation by Reference 21

True and Correct 22

Dened Terms in the Recitals 22

The Lead-In 22 Wording 22

Consideration 23

Giving a Heading to the Body of the Contract 26

Cover Sheet, Table of Contents, and Index of Dened Terms 26

List of Tables xvii

List of Samples xix

Preface xxi

Introduction xxv

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CHAPTER2 Categories of Contract Language 27

Preliminary NoteUsing the Third Person 28

Language of Agreement 28

Language of Performance 29 Use of Hereby in Language of Performance 29

Dont Use the Passive Voice in Language of Performance 30

Other Problematic Usages 31

Indicating Absence of Performance 31

Language of Obligation 31 Language of Obligation Imposed on the Subject of a Sentence 32

Language of Obligation Imposed on Someone Other Than the Subjectof a Sentence 40

Language of Discretion 45 Using May to Convey Discretion 45

Whether Discretion Is Limited 47

The Ambiguity Inherent in May . . . Only 48

Using May to Convey Possibility 49

May Require 50

Using At its Discretion with May 51

May and the Timing and Frequency of Permitted Actions 55

Hereby Grants . . . the Right To 56

Using Is Entitled To in Language of Discretion 57

Using Is Not Required To in Language of Discretion 58 Discretion by Way of an Exception to Language of Obligation 60

Language of Prohibition 60 Using Shall Not in Language of Prohibition 60

Using May Not in Language of Prohibition 60

Using Is Not Entitled To in Language of Prohibition 61

Prohibition by Way of an Exception to Language of Discretion 61

Choosing Between Discretion and Prohibition for an ActionSubject to Consent 62

Language of Policy 62

Tenses to Use in Policies 62 Passive-Type Policies 64

Dont Use Shall in Policies 65

Expressing Conditions 65

Conditional Clauses 65

Language of Policy Used to Express Conditions 68

Language of Obligation Used to Express Conditions 70

Language of Declaration 71 Representations 72

Acknowledgments 72

Shall and May in Restrictive Relative Clauses 73

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CONTENTS vii

CHAPTER3 Layout 75

The Components of the Body of the Contract 75 Articles 75

Sections 75

Subsections 80

Enumerated Clauses 80

The MSCD Enumeration Scheme 85

Using a Two-Column Format 85

Arranging Provisions in the Body of the Contract 87 Division 87

Classication 87

Sequence 87

Frontloading 89

Cross-References 90 Function 90

Wording 91

Updating 92

CHAPTER4 The Back of the Contract 95

The Concluding Clause 95

The Two Kinds of Concluding Clause 95 Using Signing Rather Than Executing and Delivering 96

Which Tense to Use 97

Using an As Of Date in the Concluding Clause 98

Traditional Concluding Clauses 98

Avoiding Signature-Page Mix-Ups 99

The Signature Blocks 99 Format 99

Parties with Limited Role 101

Seals 101

Witnessing Signatures 102 Notarizing Signatures 103

Signing a Contract Electronically 103

Blank Space After the Body of the Contract 104

Giving the Signature Page an Identifying Notation 104

Attachments 105 Kinds of Attachments 105

References to Attachments 105

Exhibits 105

Schedules 106

Attachments as Part of a Contract 108 Virtual Attachments 109

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viii A MANUAL OF STYLE FOR CONTRACT DRAFTING

CHAPTER5 Defined Terms 111

Purpose 111

The Nature of Dened Terms 111

Selecting Dened Terms 112

Types of Denitions 113 Autonomous Denitions 113

Integrated Denitions 116

Which Type of Denition to Use 120

The Denition Section 121 Versus Dening Terms On Site 121

Where to Place the Denition Section 122

Cross-References to Denitions 123 The Index of Dened Terms 123

Referring to the Denition Section 124

When a Dened Term Is Used Before It Is Dened 124

Use Dened Terms Efciently 125

CHAPTER6 Sources of Uncertainty in Contract Language 127

Ambiguity 127

Undue Generality 128Inconsistency 129

Redundancy 129

Conict 130

Vagueness 130

CHAPTER7 Reasonable Efforts and Its Variants 133

The Function of Efforts Provisions 133

The Spectrum of Efforts Standards 133What the Different Efforts Standards Mean 134 The Semantics of Best Efforts and Reasonable Efforts 134

The Semantics of Other Efforts Standards 136

The Semantics of All Reasonable Efforts 136

U.S. Caselaw 136

Other Caselaw 138

The UCC 139

Enforceability of Efforts Provisions 140

Determining Whether a Party Has Made Reasonable Efforts 140

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CONTENTS ix

Establishing a Benchmark 141

Balancing Without a Benchmark 142

Narrowly Directed Efforts 142

Use Only Reasonable Efforts 143

Dening What Reasonable Efforts Means 143 The Core Denition 144

Carve-Outs 144

The Wording of Reasonable Efforts Provisions 146

CHAPTER8 Material and Material Adverse Change 149

Material 149

A Source of Ambiguity 149 How Material Is Used 150

Dening Material 152

Dening Signicant 153

Limiting Use of Qualications 154

Basic Protection 155

Material Adverse Change 156 Using MAC 156

Dening MAC 164

CHAPTER9 References to Time 181

Points in Time 181 The Prepositions 182

When in a Given Day a Point in Time Occurs 183

Alternatives to Ambiguity 183

Specifying the Time of Day 184

Time Zones 185

Periods of Time 186 Forward-Running Periods of Time 186

Backward-Running Periods of Time 187

Avoid Using Within 188

Which Unit of Time to Use 188

Using On to Denote a Day-Long Period of Time 190

Apportioning Quantities Per Unit of Time 190 The Possible Meaning of Certain Units of Time 190

Handling Short Periods 191

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x A MANUAL OF STYLE FOR CONTRACT DRAFTING

CHAPTER10 Ambiguity of the Part Versus the Whole 193

Plural Nouns 193 Subject Ambiguity 193

Direct-Object Ambiguity 194

Subject-and-Direct-Object Ambiguity 195

And 195 Subject Ambiguity 196

Direct-Object Ambiguity 196

Subject-and-Direct-Object Ambiguity 198

Multiple Verb Phrases 198

Ambiguity of Direct Object Plus Objects of Preposition 199

The Effect of Adjectives 200

The Ambiguity of Every X and Y 202

Or 202 Background 202

As Applied to Contracts 204

Plural Nouns 205

The Effect of Adjectives 207

And/Or 209

And . . . Or 210

Every, Each, and Any 210

Practical Considerations 212 Minding Your Ands and Ors, and Supplementing Them 212 On Seeking to Eliminate Every Ambiguity 213

CHAPTER11 Syntacc Ambiguity 215

Modiers 215 Modiers Preceding or Trailing Two or More Nouns 215

Modiers Occurring Between Two or More Nouns 218

Squinting Modiers 219

Modiers of Uncertain Length 219 Poorly Placed Modiers 220

Opening and Closing Modiers 221

That and Which 223 Background 223

Current Usage 223

Recommendation 225

Commas 225

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CONTENTS xi

CHAPTER12 Select Usages 227

Action or Proceeding 227

Applicable 227 Applicable Plus Noun 227

The Verb To Be Plus Applicable 228

As Applicable 229

Arising Out Of and Relating To 229

As Amended 229

As the Case May Be 231

Automatically 231

Basis (Including Timely) 232

Bylaws 233Certain 234

Certify 234

Change in Control or Change of Control? 234

Competitive 235

Complete and Accurate 235

Costs and Expenses 237

Coupled with an Interest 237

Deem 239

During the Term of This Agreement 240

Execute and Deliver 240

Form and Substance 242

For the Avoidance of Doubt 243

From the Beginning of Time 245

Guaranty and Guarantee 245

Half and 50% 246

Here- and There- Words 246

Including Without Limitation 246

Illustrative Versus Restrictive 247 Few Cases Holding That Including Is Restrictive 248

Weak Caselaw Holding That But Not Limited To Makes

Including Illustrative 248

Cases Disregarding But Not Limited To in HoldingThat Including Is Restrictive 249

Conclusion 250

How to Avoid Any Uncertainty 251

Incorporated by Reference 251

IndemnifyWhether to Say Hereby Indemnies or Shall

Indemnify 253

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Indemnify and Hold Harmless 253 Meaning 253

Risks of Using Indemnify and Hold Harmless 254

Defend 255

Indenture 255

It Being Understood 256

Joint and Several 258

Knowledge 258

MoneyStating Amounts Of 260 Words and Numerals 259

Decimal Fractions 259

Very Large Amounts 260

Currencies 260 Provision Specifying Drafting Conventions 261

Moral Turpitude 261 Background 261

What Crime? 262

Involving? 263

Exclusion? 263

What Procedural Posture? 264

Which Jurisdiction? 264

Doubling Up? 264

Recommendation 265

Mutatis Mutandis 265

Mutual and Mutually 266

NoticeThe Apostrophe in Five Days Notice 267

Notice and Prior Notice 267

Notwithstanding, Subject To, and Except as OtherwiseProvided In 269 Notwithstanding 269

Subject To 270

Except as Otherwise Provided In 271

Eliminating Nullied Provisions 271ObligationsSome Terminology 272 Obligation Versus Covenant 272

Obligation and Prohibition 273

Obligation Versus Duty 273

Perform and Comply With 273

Breach and Its Alternatives 273

Only 274

On the One Hand . . . On the Other Hand 274 To Indicate Which Conjunction Has Scope Over the Other 275

To Divide a List into Two Categories 276 Used Unnecesarily 276

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CONTENTS xiii

Parentheses 278

Party as an Adjective 278

Promptly and Immediately

278 Promptly 279 Immediately 280

The Semantics 281

Recommendation 282

Provided, However, That 282

Representations and Warranties 284 Distinguishing Between Representations and Warranties 284

Signicance of Use in Contracts 286

Which Term to Use 288

Jurisdictions Outside the U.S. 289

RepresentationsCertain Related Terminology 290

Respective and Respectively 291 Respective 291

Respectively 292

Said Used as a Pointing Word 293

Same Used as a Pronoun 294

Satisfactory 294

Stockholder or Shareholder 295

Such As 295

Such Used as a Pointing Word 297

Survival 298 Survival of Claims 298

Survival of Provisions 299

Survival of Representations 300

Termination and Expiration 300

Termination for Convenience 302 The Implications of Termination for Convenience 302

Alternative Language 303

That Certain 304The Earlier [or Later, Greater, or Lesser] of X and Y 305

Third Party 305

Throughout the Universe 306

Time Is of the Essence 307

TrademarksReferences To 308 All Caps or Initial Caps? 309

Registration Symbol or No Registration Symbol? 310

Relationship to Trademark Guidelines 311

Unless the Context Otherwise Requires 312

Unless the Parties Agree Otherwise 312

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The Virgule, Also Known as the Forward Slash 312

Warrant, Warrant Certicate, and Warrant Agreement 313

Warranty

313 Background 313 Denition of Warranty and To Warrant 313

Using the Verb To Warrant to Introduce a Statement of Fact 314

Using the Verb To Warrant to Introduce an Obligation 315

Using the Word Warranty 316

Willful 316

Without Limiting the Generality of the Foregoing 317

Words that Dont Belong in the Body of the Contract 319

CHAPTER13 Numbers and Formulas 321

Words or Numerals 321

Formulas 322 Using Prose 322

Using Mathematical Equations 329

Consecutive Ranges of Numbers 330 Distinguishing Between Stepped Rates and Shifting Flat

Rates 330

Gaps and Overlaps 332

CHAPTER14 Provisions Specifying Draing Convenons 335

Provisions that Might Be Moderately Useful 335

Provisions that Should Be Redundant 336

Provisions to Avoid 338

CHAPTER15 Typography 341

Typefaces 341 ClearType 343

Aesthetic Considerations 344

Compatibility 345

Serif Versus Sans Serif 346

Weighing Change 346

Justication 347

Emphasis 348 Emphasizing Names and Article Headings 348

Emphasizing Section Headings and Dened Terms 350

xiv A MANUAL OF STYLE FOR CONTRACT DRAFTING

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CONTENTS xv

What Not to Emphasize 350

Emphasizing Provisions 350

Font Size 352

Characters Per Line 353

Line Spacing 355

Space After Punctuation 355

Curly and Straight Quotation Marks and Apostrophes 357

CHAPTER16 Draing as Wring 359

Dont Make Sentences Too Long 359

Keep Subject, Verb, and Object Close Together 360Dont Bury Verbs 361

Avoid Redundant Synonyms 363

Avoid Needless Elaboration 365

Be Restrained in Using Rhetorical Emphasis 366

Avoid Gender-Specic Language 367

Avoid Lawyerisms 368

Avoid Other Wordy Phrases 369 To the Extent That 369

The Fact That 369

There Is, There Are 370

Use Possessives 371

Dont Overuse Initial Capitals 371

The Extraneous The 372

Dont Use (s) 373

Contractions 373

CHAPTER17 Amendments 375

Amending, or Amending and Restating 375

Title 376

Introductory Clause and Recitals 376

The Lead-In 376

Language of Performance 377

Distinguishing Between Amending and Supplementing 377

Adding, Deleting, and Replacing Language 377 Change Affecting Part of a Provision 377

Change Affecting an Entire Provision 378

Layout 380

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xvi A MANUAL OF STYLE FOR CONTRACT DRAFTING

CHAPTER18 Leer Agreements 381

Function 381

Components 381 Senders Address 381

Date 381

Recipients Address 382

Salutation 382

Introductory Sentence 382

Substantive Terms 382

Closing Sentence 382

Senders Signature 383

Recipients Signature 384

CHAPTER19 Draing Corporate Resoluons 385

The Title 386

The Lead-In 386

Recitals 388

Resolutions 388 Where to Place the Verb Resolve 388

Factual Resolutions 389

Suasive Resolutions 391 Dont Use Language of Obligation 392

The Concluding Clause 393 Wording 393

What Date to Use 394

Counterparts 395

The Signature Blocks 395

Attachments 396

A Sample Written Consent, Before and After 396

Appendix 401

Appendix Part A: Before 402

Appendix Part B: Before, Annotated 410

Appendix Part C: After 425

Certain Works Cited 433

Cases Cited 439

Index 443

About the Author 455

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xvii

L I S T O F T A B L E S

Table 1 Language of Performance 29

Table 2 Language of Obligation Imposed on Subjectof Sentence 32

Table 3 Language of Obligation Imposed on Someone Other than Subject of Sentence 41

Table 4 Language of Discretion: May 46

Table 5 Language of Discretion: Is Entitled To 58

Table 6 Language of Discretion: Is Not Required To 58

Table 7 Language of Policy 63

Table 8 Conditional Clauses 66

Table 9 Conditional ClausesThe Matrix Clause 67

Table 10 Language of Policy Used to Express Conditions 69

Table 11 Language of Obligation Used to Express Conditions 70

Table 12 Language of Declaration 71

Table 13 Misuse of Shall and May in Restrictive Relative Clauses 74

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xix

L I S T O F S A M P L E S

Sample 1 Title and Introductory Clause 3

Sample 2 Recitals 19

Sample 3 MSCD Enumeration Scheme, Articles Version 76

Sample 4 Staggered First-Line-Indent Format 78

Sample 5 Staggered Hanging-Indent Format 79

Sample 6 Integrated and Tabulated Enumerated Clauses 82

Sample 7 Tabulated Enumerated Clauses Followed by Dangling Test 83

Sample 8 MSCD Sections Enumeration Scheme in Two-Column Format 86

Sample 9 The Concluding Clause and Signature BlocksDate Stated in Introductory Clause 96

Sample 10 The Concluding Clause and Signature BlocksSignatures Dated 100

Sample 11 Typefaces 341

Sample 12 Justication 347

Sample 13 Emphasis 348

Sample 14 Font Size 353

Sample 15 Line Spacing 356

Sample 16 Use of Italics in Amendments 380

Sample 17 Letter Agreement 383

Sample 18 Before Version of Written Consent 397

Sample 19 After Version of Written Consent 399