Usage. The vague term substantially is often used to allow for some minimal deviations after entering into an agreement. In major M&A-transactions, various affiliated contracts will be in an ‘agreed form’ on the signing date, ready to be entered into on the closing date of that transaction. An example of such ‘agreed form’ is often defined as:
Patent Licence Agreement means the patent licence agreement substantially in the form attached as Schedule X.
Effect. The effect of the qualification ‘substantially in the form’ is that a party might impose small modifications of a rather immaterial nature on the other party, requiring that such other party should not unreasonably reject such modifications. These may be desirable to fit the final contract terms to developments during the intermediate period between signing and closing or because (immaterial) inaccuracies were discovered whilst preparing the closing. Substantially then implies that any proposed change may be rejected by the other party if it touches upon the material aspects of the contract. The Vienna Convention on the international sale of goods (art. 19 par. 3) illustrates what may be considered material to (accepting an offer to conclude) a contract:
…terms relating, among other things, to the price, payment, quality and quantity of the goods, place and time of delivery, extent of one party’s liability to the other or the settlement of disputes are considered to alter the terms of the offer materially.
Usage (2). Substantially is also used in meet-or-release and most-favoured-customer clauses: pursuant to such contract provisions, a buyer may require price adjustments if the same goods or services can be sourced from a third party on terms and conditions which are substantially the same (or reasonably similar) to those from the seller. A meet-or-release provision would entitle the buyer to terminate the supply of goods or services if the seller elects not to meet the terms and conditions. A most-favoured-customer provision would entitle the buyer to be charged the lowest price offered by the seller to its other customers (and sometimes even to the lowest price available in the market). Needless to say that the enforcement of this most-favoured-customer provision should be secured by a right to audit the seller’s books or require an audited best-price-confirmation letter.