A reader recently asked as follows: If someone is signing a contract on behalf of more than one party, and that person serves each party in the same capacity, would it be OK to use just one signature block, as in the following example? ACME HOLDINGS, LLC ACME ACQUISITIONS, LLC ACME INVESTMENTS, LLC By: ______________________ [...]
What happens if a contract says that someone is personally liable for an obligation, but that person signs the contract not in their individual capacity, but as an officer of a limited liability company? In this newsletter article, Doug Batey of Stoel Rives considers a recent Washington Court of Appeals opinion that addressed exactly that [...]
You sometimes see a contract that has a paragraph entitled “Acknowledgement” added at the end, after the party signatures. For example, a search on the SEC’s EDGAR system quickly retrieved this document, a “forebearance agreement and amendment to indenture” between Gulfstream International Group, Inc. and Shelter Island Opportunity Fund, LLC. Here’s what came after their [...]
In this January 2008 blog post I noted that the requirements for what constitutes a “contract under seal” have been relaxed to the point of ludicrousness. But I also noted that in some states whether a contract is under seal has a bearing on which statute of limitations applies. From @Richards1000‘s prolific Twitter outpouring I [...]
The following oddity from a reader: When is an amendment not an amendment? When it’s a separate agreement! From the introductory paragraph of a supplier’s attachment to another agreement: IMPLEMENTATION ASSISTANCE AMENDMENT NUMBER ONE TO BASIC LICENSE AGREEMENT NUMBER [redacted] CUSTOMER: [redacted] This Amendment, together with the terms and conditions contained int he Basic License [...]
On the website of the state bar of Wisconsin I came across an article entitled “Backdating Documents: Not Necessarily the Stuff of Scandal.” It contains the following passage: Drafting and executing a document after an event occurs, but in a manner that accurately reflects the date on which the event transpired, is a permissible form [...]
Methinks that the recitals in the average big-time-M&A merger agreement are bloated. By way of example, below are the recitals from the August 31, 2009, merger agreement for Disney’s acquisition of Marvel. I’ve noted some big-picture comments in bracketed italics; I’ll spare you my many micro-level objections. RECITALS WHEREAS, the parties intend that, subject to the terms [...]
Today the Law Shucks blog posted this item about a former IBM executive, David L. Johnson, who is claiming that his noncompetition agreement with IBM is unenforceable. One element of his defense is that he signed the contract in the space where IBM was supposed to sign. According to Bloomberg: Johnson told Robinson he signed the [...]
Having parties to a contract date their signatures makes sense when there’s a lag time between when the first party signs and the last party signs. And some auditors are requiring that their clients use dated signatures in all their contracts. But dating signatures can be a nuisance. As I noted in this November 2008 [...]
Here’s what I understand of the practice of having those signing a contract also initial each page of the contract: It’s commonplace in wills, apparently as a check against substitution of pages. It’s required by statute in the case of some contracts. For example, under Ohio Revised Code 1349.55, each page of a contract providing [...]
In any given contract, the signature block for a legal entity will routinely contain two signature lines rather than just one. Why have two people sign for one party? I suspect that in most or all contexts it’s because the organizational documents for that entity require that two officers sign all contracts, or contracts worth [...]
Here’s a usage I haven’t written about before: placing under the contract signature block of an corporation, below the signature line, the notation I have authority to bind the corporation. Some wrinkles: When a signature block provides for two signatures, the notation is in the plural: We have authority to bind the corporation. Sometimes corporation is [...]
Yesterday I got a call from a reader inquiring about verb use in my recommended form of introductory clause. I love that kind of inquiry. More specifically, he pointed to the introductory clause in MSCD sample 1. It begins as follows: This asset purchase agreement is dated May 3, 2008, and is between … He [...]
Here’s the approach that’s reflected in MSCD: If you could accomplish any given drafting goal in a number of different ways, consistency and efficiency would be enhanced if you, and everyone else, were to choose, and stick with, just one of the ways. And if you look closely, more often than not one of the [...]
When you assemble the components of a contract that refers to schedules and exhibits, which should come first after the main part of the contract? The schedules or the exhibits? Thanks to a reader inquiry, I’ve now considered that gripping question for the first time. I recommend you put the schedules first: Schedules consist of [...]
One topic we discuss at my “Language and Layout” seminars is when it’s appropriate to have signatories date their signatures, as opposed to relying on the date stated in the introductory clause. (This is discussed in MSCD at 1.16–21 and 4.3–7.) In a couple of recent seminars I was asked what one does if, in a [...]
Victoria Pynchon—she of the Settle It Now Negotiation Blog—asked me the following question: While I was practicing, it was common for the opposition to put signature lines on settlement agreements for the attorneys’ signatures. I always refused to sign these, saying, “I’m not a party to this contract and I don’t think my signature adds [...]
I often come away from a seminar having learned something new. For example, a participant at my recent Vancouver seminar asked me what I thought of the phrase dated for reference, as used in the introductory clause. I confessed that I hadn’t previously encountered it. After I arrived home, I searched on Lexis for use [...]
I don’t include in the introductory clause the address of a party that’s a legal entity. That’s because the introductory clause serves to distinguish a given party from any other person or entity with that name. For a legal entity, that’s accomplished by giving its jurisdiction of organization or its registration number; you don’t also [...]
Special thanks to reader Tony for reminding me of a usage that had slipped my mind: becoming party to a contract with respect to only certain provisions. For example, in an acquisition, the buyer’s parent might be party to the acquisition agreement solely to guarantee the buyer’s obligations or solely to undertake to pay a [...]
In the past year, 265 contracts filed as “material contracts” on the SEC’s EDGAR database contained a provision stating that the recitals were true and accurate. Here’s an example: The above recitals are hereby made a part of this Agreement and the Borrower acknowledges and agrees that each of the recitals is true and correct. [...]
Here’s yet another issue regarding the introductory clause that I haven’t previously written about: How, if at all, should you address in the introductory clause the fact that performance under the contract will be by a division of a company? You could ignore it. After all, the company will be on the hook, not the [...]
Here’s another fresh extract from the manuscript of MSCD2. It’s from the section “The Title,” and it addresses at greater length something I mention in MSCD 2.3: And don’t feel obligated to track the terminology of state statutes. For example, statutes in Nevada, New York, and other states use the term “plan of merger.” As [...]
I’ve snickered at the notion of contracts under seal, but I’ve never studied the topic. Here’s what I found out: In medieval England, a seal—consisting of wax attached to a writing and bearing an impression—served as a marker to identify the parties to an agreement. As literacy increased, signatures slowly replaced seals as identifying markers. [...]
In this comment to an October 2007 post, reader Michael Fleming said the following: Speaking of things we find in the introductory clause—How about some research and commentary into the British drafting habit (or is it a requirement???) of including the “company number” as part of the name of the corporate party (e.g., “Top Hat, [...]
Last year I drafted the following introductory clause to a merger agreement: This merger agreement is dated March 23, 2006, and is between DARIUS TECHNOLOGIES, INC., a California corporation (“Parent”), SWORDFISH ACQUISITION, INC., a California corporation and a wholly-owned subsidiary of Parent (“Sub”), TROMBONE SOFTWARE, INC., a Delaware corporation (“Target”), and the stockholders of Target, [...]
Way back in this August 2006 post I described how select information is often pulled out of the body of a commercial contract and placed at the top. In my post I expressed reservations about this practice, but the commenters set me straight. I referred to this practice as “the box,” given that the abstracted [...]
In this March 2007 post I discussed language to use, and language not to use, when making an ancillary document—including a web page—part of a contract without physically attaching it. (I subsequently invented the term “virtual attachment” to describe any such ancillary document.) What prompted that post was a case that held that saying that [...]
Consider the following purpose recital, plucked from an agreement filed last month on the SEC’s EDGAR system: WHEREAS, in connection with the transactions contemplated by the Asset Purchase Agreement, Buyer desires that Seller Manufacture (as defined herein) and supply certain Products to Buyer, and Seller desires to Manufacture and supply such Products to Buyer in [...]
Here’s a point that I don’t make in MSCD but will be sure to make in MSCD2: Don’t use in the recitals defined terms that are defined later in the contract. The job of the recitals is to introduce the transaction. If you put in the recitals a defined term that’s defined later, you force [...]
Via Ray Ward of the (new) legal writer, I learned that Lowering the Bar had a take on the saga of the contract written in blood. I’d previously heard about this story but I didn’t think it had much bearing on what I do—my notion of what falls under the rubric “contract drafting” isn’t broad [...]
In this blog post, I described how in certain circumstances you might want to date a contract by having the parties date their signatures rather than by including a date in the introductory clause. I also mentioned how adopting that approach would require that you use a different concluding clause than the one you’d use [...]
I recently reviewed for a company a draft settlement agreement that had been prepared by outside counsel retained by the company. I thought the draft needed help. In particular, I found the recitals bloated and vague: RECITALS A. As of the date of this Settlement Agreement a dispute exists between AcmeTek and Widgetz regarding the [...]
One of the pleasures of contract drafting is that the parties are as a general matter left to their own devices. Of course you have to structure any given transaction in a way that takes into account legal, tax, regulatory, or other considerations, but as a rule how you do that is up to you. [...]
My background is in drafting for deals rather drafting commercial agreements. (By “commercial agreement” I mean, vaguely enough, a form agreement relating to the supply of goods, services, or technology to customers.) But in my consulting activities, I’ve recently been dealing exclusively with commercial agreements. Because any given commercial agreement will likely be entered into [...]
It’s commonplace for drafters to assume that unless they say so explicitly, schedules and exhibits attached to a contract don’t constitute part of that contract. Here’s an assortment of contract language reflecting this assumption: Schedule A constitutes a part of this agreement. All exhibits referenced in this agreement are made a part of this agreement. [...]
In MSCD (¶¶ 2.64–71) and a Business Law Today article on the subject, I recommend strongly that drafters dispense with the traditional recital of consideration. The traditional recital of consideration is the consideration language that clogs the lead-in to the body of the contract in a majority of contracts. The language varies, but here’s an [...]
