Sure, plenty, or even most, lawyers know the Latinisms you refer to. But it would be rash to assume that all businesspeople do, and with each passing year fewer people understand them. Replacing them with standard English alternatives would be a simple matter.

Ken

Consumer contracts should, of course, be drafted in plain English that an average person can understand. On the other hand, an agreement between a private equity firm and a portfolio company about a new round of capital is intended to be read by people who are familiar with the lingo.

Using words like pari passu, de minimis and quid pro quo in a consumer contract should be a no-no, but struggling to substitute “plain English” words for a Latin phrase that all of the intended readers of the contract will readily understand seems like an unnecessary exercise.

Incidentally, in your example above I might be tempted (unless talking about a winding up) say “have the same rights” rather than or “rank equally in all respects”. “In all respects” implies that we are not talking about merely winding-ups, but if, for example, certain shares carry rights to receive information, does the word “rank” make any sense if we are trying to say that the option shares have that same right? Could the phrase be interpreted to only apply to rights where ranking is an issue?

Here’s the definition of pari passu offered in Black’s Law Dictionary: “Proportionally; at an equal pace; without preference (creditors of a bankrupt estate will receive distributions pari passu).” In the example offered in the definition, I’d use a simpler Latinism, pro rata.

Here’s an example of how pari passu is more usually used in contracts: Shares allotted upon the exercise of an Option will rank pari passu in all respects with the Shares in issue on the date of the exercise. Why not use equal instead of pari passu?

Ken

That principle does imply, of course, that where a Latin phrase is well understood by the people who are using and subject to the contract, there is no reason not to use it. For example, “pari passu” has a specific legal meaning when applied to share classes that can only be explained in English using considerably more words, so I am happy to use it in contracts where the parties know the phrase.

I would call this one a rule of thumb rather than a strict rule – but then I see most things in that way.