Actually, a Contract Is No Place for the Word “Actually” (With One Exception)

The word actually doesn’t have many friends. Commentators think it’s overused; see this article by Claire Carusillo in the New Republic and this article by Heidi Stevens in the Chicago Tribune. But in contracts, the problem with actually goes beyond overuse.

In general discourse, actually, meaning “in fact,” signals difference of opinion or disagreement over facts. Contracts aren’t for debating, so as a general rule actually has no place in contract prose. I’d eliminate it from each of the following examples:

The Company shall pay or reimburse all Expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

Subject to Section 14 hereof, the Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment … of the amounts otherwise indemnifiable hereunder.

For purposes of the preceding sentence, “debt service” means the greater of (x) … or (y) debt service that would be due and payable during such fiscal year if all such indebtedness were amortized over 30 years (whether or not amortization is actually required) …

The Notes will bear cash interest at a rate of 1.75% per annum (the “Fixed Interest”), with an additional cash payment payable on the Notes on each Interest Payment Date equal to the product of (i) the amount of cash dividends per share actually paid by the Company on the outstanding Common Stock …

To the extent that shares of Common Stock are not delivered after the expiration of such rights, options or warrants, including because the issued rights, options or warrants were not exercised, the Conversion Rate will be decreased to the Conversion Rate that would then be in effect had the increase with respect to the issuance of such rights, options or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered.

… (it being understood that for purposes of this Agreement, a Person shall be deemed to be a holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected).

But I can think of one exception—when actually is used with the verb know, as in the following example:

… except that for the purposes of determining whether the Trustee shall be protected in conclusively relying on any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded.

The phrase actual knowledge is a term of art—actual knowledge is distinct from constructive knowledge. (Go here to see what Wikipedia has to say about those terms; this isn’t the place for me to get into that.) So I can’t object to actually knows. But you might want to say instead “has actual knowledge.” That would make it simpler for you to specify which “actual knowledge” standard applies by tacking on the appropriate standard: “without any requirement to investigate,” or “after inquiry of [specify persons],” or “after reasonable investigation.” For more on that, see MSCD 13.364.

Posted in Selected Usages | 2 Comments

  • Chris Lemens

    Ken:

    I would almost disagree with you on some expenses. Many expense reimbursement provisions in contracts cover travel-related expenses. Many companies have, in their employee-travel policies, a per-day allowance for meals or some other category. If the client wants only to reimburse out-of-pocket expenses, then saying it will reimburse actually incurred expenses seems like it might do the trick. But it doesn’t, because the company with that policy actually incurs the expense by reimbursing its employee inappropriately. Instead, I think that the right way to characterize it is out-of-pocket expenses paid by the employee and reimbursed by the employer.

    I think I do disagree with you on the debt service item. The “if” in the dependent clause preceding the parenthetical in which “actually” appears is an “if” in the sense of “in the same manner as would has occurred if.” That is, it is a potentially counter-factual situation. In a counter-factual situation, it seems appropriate to contrast it to the factual situation, or at least to say that the factual situation is irrelevant. That seems to be what the “actually” parenthetical does. Why do you dislike that usage?

    Chris

    • http://www.adamsdrafting.com/ Ken Adams

      Chris: I dislike use of actually in the debt-service example because … actually haters gonna hate.

      Actually, I think that “whether or not” by itself is enough to express counter-factual situation.

      Ken