Not shall and will (but only one of them)

A contract drafter should either use shall or will and anyhow use it consistently. But what is actually the truth about shall and will?

A contract drafter should either use shall or will and anyhow use it consistently. Often, in combining contract provisions from different sources or in marking up a draft contract, a party easily introduces the other verb. Do not hesitate to mark-up any inserted shall or will wording to restore consistency.

There are drafting experts, such as Ken Adams[1], who distinguish different types of contract language:

(a)     provisions imposing an obligation on a party (e.g. Seller shall deliver the Product), where shall could be replaced by has an obligation to;
(b)     provisions signalling an obligation on a third party (e.g. the Parties agree that 3X shall first deliver the raw materials), where shall would preferably be replaced by must (and where replacing it by has an obligation to is ineffective in view of 3X being an outsider to the contract);
(c)     provisions addressing, as a matter of policy (not necessarily requiring any action), a consequence upon the occurrence of a specified event (e.g. this call option agreement shall terminate upon the Majority Shareholder selling its Shares), where shall would more appropriately be replaced by will.

The distinction between several types of contract provisions suggests that ‘consistent drafting’ means that shall should always be used for party obligations and that contract policy rules should be signalled by will (implying that both shall and will may properly co-exist in one contract). Others would dispose with such distinction if the use of will psychologically smoothens the sharp edges from the obligatory shall helping the other party to assume such obligation.

Interesting enough, the Oxford English Dictionary makes another distinction: the traditional use of shall and will prescribes that when forming the future tense, shall should be used with the first person I and we, while will should be used with the second or third person you, he, she, it and they. When emphasising determination or a command (including obligations?) the rule is reversed: will is used with I and we; and shall with you, he, she, it and they. This distinction largely follows the above distinctions and becomes visible in letter agreements (in which the parties are often referred to as you and we; as opposed to contracts where parties act as “it” or anyhow as the second person).

The OED continues to explain that in real life, the rules are not followed so strictly and that the contracted (!) forms I’ll or we’ll are often used instead, albeit in particular in spoken or informal context. You should never contract will or shall!

[1]         See Kenneth A. Adams, A manual of style for contract drafting.

For the avoidance of doubt … and the sake of clarity

The commonly used phrase for the avoidance of doubt makes something explicit that is already covered by the other wording of the contract but could (reasonably) be interpreted otherwise. It is drafted all too often.

For the avoidance of doubt (or equally, for the sake of clarity) is invariably used in connection with a preceding sentence or contract clause, which it attempts to further clarify. A contract drafter should avoid the overuse of for the avoidance of doubt.

In short, the message addressed ‘for the avoidance of doubt‘ is already within the contractual wording even though you don’t immediately see it, but because it is important it is made more explicit. More elaborately, for the avoidance of doubt should be used only if:

  • either:(a)
        the subject matter followed by the phrase is already covered by the preceding contract clause, but an informed, objective reader of the contract might not clearly interpret such subject matter to be included in (or excluded from) that contract clause; or

    (b)

      there may be a contradiction or an overlap between the preceding contract clause and another provision in the agreement; and
  • considering the agreement as a whole, the subject matter is important enough to be addressed (i.e. not being aware of the to-be-avoided doubt may be a source of disputes or disappointment for the parties).

For example, a clarification ‘for the avoidance of doubt’ is desirable when the preceding sentence is relatively broad, or unspecific, and conceivably not of key importance, whereas the subject matter that is addressed for the avoidance of doubt is both specific and (relatively) important.
Clarification may also be desirable in the opposite case, if the preceding sentence contains restrictions of scope, which do exclude certain subject matters that may be considered to be included under the preceding sentence upon a prima facie reading of that sentence. An example is the grant of a software license, where for any required, underlying software applications (for the avoidance of doubt) the licensee should still obtain a license from a third party in order to be free to enjoy the full benefit of the software.

3. Best practice regarding the text of a definition

This is the third and last part three blogs on best practice rules for drafting and using definitions and defined terms.

You’re of course very welcome to provide feedback, sample definitions and other comments.

C.  BEST PRACTICE PRINCIPLES RELATED TO THE TEXT OF A DEFINITION

This blogpost was removed, since the best practice rules have been included in the book Drafting contracts, which you can read on this website (click here).

2. Best practice on placement and presentation of defined terms

This is part two of three on best practice principles for drafting and using definitions and defined terms.

B.  BEST PRACTICE PRINCIPLES ON PLACEMENT AND PRESENTATION OF DEFINED TERMS

This blogpost was removed, since the best practice rules have been included in the book Drafting contracts, which you can read on this website (click here).

1. Best practice regarding the use of defined terms

Defined terms and definitions are a powerful tool to improve the readability of a contract. At the same time, it is a contract drafting discipline in which almost invariably mistakes or drafting flaws are found. Thanks to M&A-practice, several ‘best practice principles’ can be identified for drafting and using definitions and defined terms. Those principles are what this blog and the following two blogs are about.

Terminology. In the best practice principles below, I adopted a fairly strict terminology: definition refers to the description, or object, of what is defined; defined term refers to the word or words chosen to refer to the definition. In common parlance, both are somewhat interchangeably referred to as definitions. The body text refers to the preamble, warranties, conditions, covenants, and contract clauses other than the definitions article.

A.  BEST PRACTICE PRINCIPLES RELATING TO THE USE OF DEFINED TERMS

This blogpost was removed, since the best practice rules have been included in the book Drafting contracts, which you can read on this website (click here).

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Willem