Reader Matthew pointed out to me an ambiguity I hadn’t thought of.
Here’s the language at issue:
If the Escrow Agent receives from the Seller a Counter Notice before 2:00 p.m. on the date that is 20 Business Days after the Escrow Agent received the corresponding Claim Notice, the Claim must be resolved in accordance with section X.
Matthew was concerned that this could be read in two ways: Meaning one is that a Counter Notice would be valid if delivered any time during the 20 business days up to 2:00PM on the 20th business day. And meaning two is that to be valid, a Counter Notice would have to be received on the 20th business day before 2:00PM, as opposed to any of the preceding 19 business days.
I agree with Matthew that although meaning one is presumably what had been intended, meaning two is also possible. And whenever you have such ambiguity, you have the potential for a dispute.
Here’s the language I’d use to convey meaning one unambiguously:
If the Escrow Agent receives from the Seller a Counter Notice by 2:00 p.m. 20 Business Days after the Escrow Agent received the corresponding Claim Notice, the Claim must be resolved in accordance with section X.
I eliminated on the date that is. That served to eliminate the focus on the 20th Business Day.
I asked Matthew about the reference to 2:00 p.m., which seemed unusual. (I suggest in MSCD 9.16 that midnight is the best time of day to use for specifying a point in time by which something has to be done.) He explained that the company in question is a trust company—because of their internal controls, they prefer to account for escrow notices, objections, and such like by 2:00 p.m. on each business day. In addition to facilitating internal reporting during business hours, it also allows them to initiate wire transfers on the same day in urgent circumstances or if an agreement so requires.
Wouldn’t the clearer language be “If the Escrow Agent receives from the Seller a Counter Notice *not later than* 2:00 p.m. 20 Business Days . . . .”
Hugh: I don’t think your formulation changes the meaning, so I’ll go for one word over three. Ken
What about just creating a defined term (e.g., “Deadline”) and using that instead?
“If the Escrow Agent receives from the Seller a Counter Notice by the Deadline, the Claim must be resolved in accordance with section X. “Deadline” means 2:00 p.m. on the 20th Business Day after the Escrow Agent received the corresponding Claim Notice.”
I generally try to avoid creating a defined term if it’s only used once except to improve readability or clarify intent. In this case I think it helps clarify intent.
Steve
Steve: I’m still comfortable that my version doesn’t allow alternative meanings. Ken
Given the multi-jurisdictional aspect of transactions these days, it would also be appropriate to eliminate ambiguity in the time zone involved unless this is already covered in the interpretations sections of the contract. I usually do it by specifying local time in the particular place rather than reference to actual time zones, standard time or daylight savings time. For example:
… Notice by 2:00 p.m. local time in Vancouver, British Columbia 20 Business Days …
Chris: You raise a different issue that’s discussed in this October 2007 blog post as well as in MSCD 9.19–24. Ken