[It’s Back!] My Version of an “Irreparable Harm” Provision

[This post was originally published May 4, 2013. I’m republishing it because a client, of all people, mentioned it to me—I had completely forgotten about it. On revisiting the original post, I decided that it was worth upgrading my new language from thought piece to something I use in my contracts. So I revisited Vinny Martorana’s analysis from two years ago, and I digested further useful input from @KentPitman. I wouldn’t be surprised if I make further adjustments, but even as things stand, I think this is a great example of how you fix a stale contract provision: You read articles and look at caselaw. You put your first attempt out there. If you’re lucky, as I was, you receive a boatload of astute comments. You adjust. Then you let it sit, but ideally not for two years! Then you revisit it again, and field additional comments. Voila!]

In this recent post I invited readers to redraft a sentence that I had plucked, at random, from EDGAR. And you responded enthusiastically. (I’ve shelved for the time being my post bemoaning a drop-off in comments!) Here, again, is that sentence:

Therefore, the obligations of the Sellers under this Agreement, including, without limitation, the Sellers’ obligation to sell the Shares to the Purchaser, shall be enforceable by a decree of specific performance issued by any court of competent jurisdiction, and appropriate injunctive relief may be applied for and granted in connection therewith.

When it comes to contract verbiage, turn over any stone and you’ll likely find a wriggling mass of issues. That’s the case here—this exercise proved quite subtle. I think this language caught my eye in the first place because I instinctively noted, in passing, that it offered hidden complexities.

The first thing to note is differences in how courts react to provisions that address the granting of equitable remedies. That’s something Mark Anderson addressed today in this post, perhaps prompted by the exchange of comments in my original post. I’m glad he did so, because I had never gotten around to focusing on the Delaware Martin Marietta case.

In his post, Mark cites a Bloomberg Law article (here) by Stephen J. Shapiro and Aaron J. Fickes of Schnader. Here’s how that article summarizes how courts treat such provisions:

As indicated by Chancellor Strine and Justice Jacobs in their respective Martin Marietta opinions, Delaware courts essentially view irreparable harm clauses as binding admissions that are sufficient, standing alone, to meet the irreparable harm requirement. Federal courts, however, afford such clauses little, if any, weight and evaluate the evidence presented by the parties to independently determine whether irreparable harm will befall the movant if the court does not issue an injunction. This disparate treatment of irreparable harm clauses has wide-ranging implications for contract drafters, parties to agreements, and litigators seeking to enforce various types of agreements.

That sets the scene for my redrafting effort. In theory, when drafting a contract for a party that might want an equitable remedy, it would make sense to always use a provision that Delaware would enforce—the worst that can happen is that federal courts ignore it. That’s the theory; let’s see how it plays out in practice.

First, as always, let’s consider this issue in terms of categories of contract language. Which category makes sense? (My sentence from EDGAR seems to use language of policy and language of discretion, along with some incoherence.) Here are the alternatives, along with links to some of the comments to my original post:

  • Language of obligation imposed on someone other than the subject of the sentence. You could state, for example, that a party “will be entitled to” an equitable remedy. That’s essentially the formula used in the language at issue in Martin Marietta, and it was good enough for Delaware courts. Nevertheless, it doesn’t make sense to in effect seek to force a court’s hand.
  • Language of policy. You could state that an equitable remedy will be granted automatically. That doesn’t make sense, as it’s up to a court to determine if it wants to grant the equitable remedy.
  • Language of discretion. You could say that a party may seek an equitable remedy (see SCharlmers’s version and this version offered by Wright), but that doesn’t address the role of the courts.
  • Language of prohibition. You could say that the other party is prohibited from objecting to a request for specific performance. (See Vance’s version and Mark’s version.) But that’s just an indirect way of saying that a party may seek an equitable remedy, and it too leaves unaddressed the role of the court.
  • Language of declaration. Because courts require a showing of irreparable harm before granting an equitable remedy, it makes sense to have the parties acknowledge the prospect of irreparable harm. That’s why Sterling’s version, Chris’s version, and this version by Wright all use “acknowledge.” But there are nuances to what you have the parties acknowledge.
  • Language of intent. You could use “intend” to reflect that granting equitable remedies is in the control of the courts, not the parties. Mark’s version and Chris’s version do just that. But there are nuances in how you use “intend.”

Enough preamble; here’s my version [updated March 18, 2015, to reflect Vinny’s comments and Kent Pitman’s comment; see my replies to them]:

The Sellers acknowledge that breach by the Sellers of one or more of their obligations under section X might cause the Purchaser to suffer irreparable harm, namely harm for which damages would be an inadequate remedy. The Sellers further acknowledge that the Purchaser might suffer irreparable harm due to delay if as a condition to obtaining an injunction, restraining order, or other equitable remedy with respect to such a breach the Purchaser were required demonstrate that it would suffer irreparable harm. The parties therefore intend that if the Sellers breach one or more of their obligations under section X, then for purposes of determining whether to grant an equitable remedy any court will assume that that breach would cause the Purchaser irreparable harm.

[Here’s the original version:

The Sellers acknowledge that breach by the Sellers of one or more of their obligations under section X could cause the Purchaser to suffer irreparable harm, namely harm for which damages would be an inadequate remedy. The Sellers further acknowledge that requiring, as a condition to obtaining an injunction, a restraining order, or any other equitable remedy with respect to such a breach, that the Purchaser demonstrate that it would suffer irreparable harm could cause delay that results in the Purchaser’s suffering irreparable harm before any equitable remedy is granted. That being the case, the parties intend that if the Sellers breach one or more of their obligations under section X, for purposes of granting an equitable remedy any court will assume that that breach would cause the Purchaser irreparable harm.]

Here’s some explication:

Some provisions refer to “irreparable harm,” others refer to “harm for which damages would be an inadequate remedy.” So as to avoid any debate over which standard to use, this provision accepts that they mean the same thing.

It’s nonsense to say that breach of any obligation under a contract would result in irreparable harm. Contracts invariably contain a range of obligations, breach of only some of which might involve irreparable harm. So it makes sense to limit the scope of this provision to those obligations. In that regard, the Bloomberg Law article says, “Contract drafters may consider limiting the scope of the irreparable harm clause to subject matters typically reserved for injunctive relief. The ‘little weight’ given to such clauses may turn into ‘no weight’ if the clause appears to be inartfully-drafted boilerplate.”

Furthermore, even with respect to those hot-button provisions, it doesn’t make sense to say that breach would involve irreparable harm. Instead, the gravity of the breach would depend entirely on the circumstances. That’s why my provision uses could.

The second sentence addresses this reality by having the Sellers acknowledge that even though some breaches might not result in irreparable harm, requiring the Purchaser to demonstrate irreparable harm could result in any equitable remedy being granted too late.

The third sentence uses language of intention to say that the parties intend that a court would assume irreparable harm. That’s narrower than simply saying that the parties intend that a court would grant an equitable remedy.

My version is different from the language at issue in Martin Marietta. That means that I’m tinkering with … “tested” contract language! Oh noes! Well, the notion of “tested” contract language is a feeble excuse for perpetuating dysfunctional language (see this 2006 post). Instead, I want to articulate meaning in a way that reflects the deal and precludes confusion and needless fights, such as the Martin Marietta litigation.

Federal courts might well decline to make the assumption expressed in my version and instead require that a party seeking an equitable remedy demonstrate that irreparable harm is likely. But because my version articulates what’s a stake more clearly than does the usual language, a court might in fact pay it some attention.

Of course, this is all novel, so be prepared for me to tweak my language and change my mind.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

33 thoughts on “[It’s Back!] My Version of an “Irreparable Harm” Provision”

  1. I like your version, especially the “could – could – would” approach. I realize you may not be writing the clause in the exact form you would use in a contract, but my drafting preference is to break up paragraphs that list clauses if I need to read it over more than twice to follow it. I had to for the second sentence, though after the third read-through I understood the phrasing. I may just be obtuse.

    This is my edit which I think makes the second sentence flow better, though I still haven’t quite gotten it right. I’ve also repeated “one or more of their obligations” three times and would prefer to keep it cleaner.

    The Sellers acknowledge that:

    a. their breach of one or more of their obligations under section X could cause the Purchaser to suffer irreparable harm, namely harm for which damages would be an inadequate remedy; and

    b. if, as a condition to granting the Purchaser an injunction, restraining order, or other equitable remedy to a breach by the Sellers of one or more of their obligations in section X, a court required the Purchaser to demonstrate that it would suffer irreparable harm, this could cause delay that results in the Purchaser suffering irreparable harm before an equitable remedy is granted

    Accordingly, the parties intend if the Sellers breach one or more of their obligations under section X, for purposes of granting an equitable remedy any court will assume that that breach would cause the Purchaser irreparable harm.

    Reply
    • Sterling: Thanks for your further input. I tweaked the second sentence by moving the “as a condition” phrase, but it’s still a bit much. Ken

      Reply
      • Call me old fashioned, but I think buried clauses tend to cause confusion. Minor tweak?

        if a court required the Purchaser to demonstrate that it would suffer irreparable harm as a condition to granting the Purchaser an injunction, restraining order, or other equitable remedy to a breach by the Sellers of one or more of their obligations in section X, this could cause …

        Reply
        • Thanks for the suggestion.

          You describe as a “buried clause” putting the matrix clause first. I think the matrix clause and the conditional clause are equally important, so I don’t think I’m burying anything.

          Also, you eliminated “The parties further acknowledge that”. In my world, it’s important to signal what category of contract language you’re using.

          Reply
  2. Ken, you’re doing a public service in raising these seemingly-mundane issues and getting lawyers to pick them apart and discuss various ways of handling them.

    Reply
  3. Dear Ken,

    A few comments:

    1/ The task seems to have shifted from “redraft this clause to conform to MSCD guidelines” to “who can write a clause that makes getting equitable relief likeliest?”

    2/ Your version seems unnecessarily long for a Delaware-style jurisdiction where a simple admission of irreparable harm suffices to warrant equitable relief.

    3/ But in a “Federal-style” jurisdiction, your version seems futile, because the court deems an injunction a big deal, not to be issued without a contemporaneous judicial determination that the claimant _will_ be irreparably harmed without issuance of equitable relief. It’s irrelevant for that purpose what the parties agreed, acknowledged, admitted, believed, declared, or intended back when the agreement was signed.

    4/ In a Federal-style jurisdiction, the most the drafter can do is get agreement on concrete facts bearing on relief: “The parties jointly state that if the Vendor ceases to deliver oxygen tanks daily to the Customer, the Customer cannot operate his SCUBA diving equipment rental business.”

    5/ What’s with “assume”? “The parties intend … that any court will assume [irreparable harm]? Is this a substitute for “finding”? If this is a variation on “presumption,” is it rebuttable or irrebuttable? Attempts at estoppel by agreement aim to make it irrebuttable. Federal-style tribunals wouldn’t like that.

    6/ This exercise highlights that clarity, modernity, and efficiency may not adequately describe the goal of good drafting, where client benefit requires drafting in the way likeliest to motivate a certain court or type of court to rule in the drafter’s client’s favor in a dispute. I mean, was anything actually unclear about the original EDGAR version?

    7/ Isn’t the long and short of it that two versions are needed, one for Delaware-style tribunals and another for Federal-style tribunals?

    8/ I second D.C. Toedt’s commendation for bringing these issues to the forum for communal massage.

    9/ Like Pete Seeger getting concert attendees to join in singing “If I Had a Hammer,” you have discovered the magic of audience participation. More!

    Cordially,
    Wright

    Reply
    • Wright: My responses:

      1. The core issue here relates to categories of contract language. Ain’t nothin’ more MSCD than that.

      2. My point is that the simple admission of irreparable harm is a fiction. All sorts of obligations can be breached in all sorts of ways, and saying that each breach will result in irreparable harm is like saying that “time is of the essence” for purposes of an entire agreement. It’s helpful when a provision reflects what’s really going on, instead of something just next door to it.

      3. Sure, perhaps my version is futile for purposes of a federal-style jurisdiction. But I don’t think I’d omit it: it’s convenient to be able to use the same provision whatever the jurisdiction. But funny things happen when you’re clear instead of facile, so a federal court might find merit in my language. This reminds me of the benefits of addressing more clearly whatever issue might otherwise prompt you to use “at its sole discretion”; see MSCD 3.190.

      4. Sure, it would be a good idea to explain the consequences of breach. That would presumably have the side-effect of forcing the drafter to get specific about what breaches might be problematic.

      5. The “assumption” would be irrebuttable. (I should probably come up with a less colloquial way of expressing the idea.) Yes, I know that federal-style jurisdictions wouldn’t like that, but see my point 3.

      6. Regarding the Delaware version, see my point 2. And have suddenly you become a booster of “tested” language? Sure, on rare occasions a court says that if you want X you have to include Y in your contracts, so that’s what you do. But that’s something to be addressed on a case-by-case basis. In this case, my proposed language is a trial balloon. We’ll see where it goes.

      7. See my point 3.

      8. No altruism involved here: I need to get this stuff right myself!

      9. The online readership is a fickle beast, rousing itself unexpectedly one moment, entirely absent the next. All I can do is what interests me, and see what happens.

      Ken

      Reply
  4. Could we focus on the substance of the second sentence? It seems very US-centric, and I don’t understand it. It seems to have come from some of the contributors’ suggestions and not from the original wording you asked us to look at. Why would this delay matters? Isn’t it just an argument in court (supported by affidavit) when you are there anyway? Could this sentence be dropped?

    Reply
    • Mark: See the second paragraph of my explication (the one beginning “It’s nonsense to say …”) and the two following paragraphs, and point 2 of my response to Wright’s comment. Ken

      Reply
  5. I understand the reasons for using “could” in the first two sentences, but I think it can be stronger and still make sense in a contract.

    Firstly, I don’t think that claiming there will be “irreparable harm” for which damages are an “inadequate remedy” means that there isn’t enough money in the world that would be equal to the loss suffered. The harm can be minor, but still irreparable by its nature – such as a breach of confidentiality, which is the classic example. To my way of thinking, a breach of confidentiality always causes “irreparable harm” and damages are always “inadequate” in the sense that the confidentiality can never be restored by any amount of money. So in some cases, depending on the obligations, I think it is accurate to say “would”.

    Even when this is not strictly the case, there may be value in a deeming provision, effectively saying “regardless of the loss that actually looks likely at the time, we are agreeing that all such loss will be deemed irreparable harm, and so an injuction will be available.” This is a fiction, but fictions are perfectly acceptable so long as they are acknowledged as such. Whether this works will depend on the jurisdiction, which is perhaps why you avoided it, but from the discussions it seems as if it would work under Delaware law?

    Even if you don’t like either of those, I think you can say “is likely to”, provided you are happy that is correct – and I think you should be, following my first point. “Could” leaves it very open for the other side to say “we still agree that it could happen, so are sticking to our contract – but it’s a tiny chance and doesn’t justify an injunction”. They still have to deal with the third sentence, but the first two sentences are batted away too easily.

    Reply
    • W: Thank you for reminding me that strictly speaking, “irreparable” is a function of the quality of the breach, not its magnitude. If you’re specific enough about the obligations covered by an “irreparable harm” provision, you could indeed use “would.”

      But imagine unauthorized disclosure of the least significant bit of confidential information. It seems a little off to refer to it as causing “irreparable” harm, doesn’t it?

      I think “is likely to” doesn’t work, as it adds an element of prediction.

      And I don’t think that deem works for the third sentence, because it’s not something that the parties can decide among themselves. It’s up to the court.

      Thanks again. I need this kind of input if I’m to make progress.

      Ken

      Reply
  6. I’ve taken another stab at it, aiming particularly at concision. But as to categories of contract language:

    (1) I think the overall contract lead-in “The parties agree as follows” makes any subsequent otherwise unattributed statements of fact into joint statements of fact, so I’ve prefaced my stab with language of agreement in brackets as a reminder of its existence near the top of the contract; and

    (2) “Consents” is language of performance.

    Okay, here’s the stab:

    [The parties agree as follows:]

    Any Seller’s breach of section X will likely cause the Buyer irreparable harm justifying equitable relief, so whenever the Buyer shows by the standard for equitable relief the existence or imminence of such a breach, the Seller consents to a finding of likely irreparable harm and to the granting of equitable relief.

    This fewer-than-50-word stab seems to take care of business in a Delaware-style jurisdiction and to do all that contract text can do in a federal-style jurisdiction to reduce or eliminate pre-relief delay without actually describing the specific nature of the anticipated irreparable harm.

    Reply
    • AWB:

      I like your use of consent. I would especially like “hereby irrevocably consents” paired with a statement of the other party relying on the consent.

      Chris

      Reply
      • I don’t think “consents” works. A court doesn’t need contract parties to consent to anything, so why offer it? But it’s standard for courts to take into account the intent of the parties.

        Reply
        • Ken:

          If the two parties were in front of the judge and the defendant said, “I consent to the temporary injunction request,” the hearing would be over.

          Chris

          Reply
    • Vinny: Better two years late than never, allow me to respond to your suggestions (my numbering matches yours):

      1. In the interest of simplicity, I’ve assume that the Sellers are acting collectively.

      2. It’s irrelevant given my assumption in 1, but I don’t think your “collective” and “respective” distinction works.

      3. The logic underlying my approach requires “could.”

      4. I’m OK with “further.” I could use one verb followed by enumerated clauses, but that would be unwieldy. Since I’m stuck with the mild awkwardness of two sentences in a row with “acknowledge,” I think that “further” eases that awkwardness.

      5. There’s nothing “lofty” about this “such.”

      6. In this case, I know that the Purchaser is an “it.” And since this isn’t a template, eliminating the pronoun would be counterproductive.

      7. Noted.

      8. I’m going with your “therefore,” albeit in a different position. I’ve decided that “That being the case” is too colloquial.

      9. Using “intend” is central to what I’m trying to say.

      10. See my comment 1.

      11. Point taken, albeit with slightly different wording.

      12. There’s nothing bold about it, as that’s what the parties intend.

      Thanks for taking the time to think this through. My language is better for it.

      Ken

      Reply
  7. Gack. The overall approach seems fine, but the structure of the middle sentence is a tangled mess. I had to read that sentence about 20 times before figuring out why that “that” after the comma is thought to be legit. It absolutely does not work for me. I suggest something like this. I imagine you’d wordsmith the connective glue further, but I think it’s essential to re-order the clauses in a manner like this to keep people from forgetting mid-sentence that you were only halfway through another thought:

    Because requiring a condition to obtaining an injunction, a restraining order, or any other equitable remedy with respect to such a breach could cause irreparable harm, the Sellers further acknowledge that requiring that the Purchaser demonstrate a risk of such irreparable harm could cause delay that results in the Purchaser’s suffering that harm before any equitable remedy is granted.

    (With apologies if others have already made this comment. I didn’t read the whole discussion thread but instead was driven to action by the text of the article itself.)

    Reply
      • Ha. Your Jedi lawyer mind-tricks won’t work on me. I’m won’t be taken in by those alleged tears. The lingering problem of substance is that the use of a noun phrase that has commas in it as if it can benignly sit anywhere in a sentence without leaving ambiguities of attachment. But certainly your rewrite seems like progress and I think the roadmap you’ve provided allows me an answer you might accept, unless there is some reason lawyers don’t like rewriting ‘blah1 if blah2’ to ‘if blah2 then blah1’. (Not to say that any of this discussion is blah.) But I think I’d like that sentence to be rearranged in that way because then the commas wouldn’t have that ambiguity:

        The Sellers further acknowledge that the Purchaser might suffer irreparable
        harm due to the delay before any equitable remedy is granted if as a condition to obtaining an
        injunction, a restraining order, or any other equitable remedy with
        respect to such a breach the Purchaser were required demonstrate that it
        would suffer irreparable harm.

        As a minor additional point, I’d rather the penultimate word be ‘such’ rather than ‘irreparable’ but I don’t know your style rule on that. I can grok a concern that if you don’t religiously adhere ‘irreparable’ to the word, it might be thought to be optional and descend into mere harm. But I would hope that ‘such’ becomes a proper anaphoric reference and reduces the risk that modifications to one branch in the text get out of sync with another.

        For example, suppose it later came into vogue to say ‘hopelessly irreparable harm’, then either you have to add that new adverb everywhere or risk again that the other phrases had downgraded. But if all the other phrases are ‘such harm’, then my personal preference would be to construe that it would pick up any additional modifiers from the single-point-of-definition.

        But you’re the lawyer. The rules I’m wishing for are the kinds of rules we use in computer programming, where the maxim is DRY (don’t repeat yourself, meaning instead to define and name complicated things in one place and then incorporate them by named reference elsewhere).

        Reply
  8. Ken: It’s a little off topic, but why mention injunctions and restraing orders? Aren’t they encompassed in “equitable remedy”?

    Reply
  9. Ken:

    Have you considered language of performance? “ABC Company hereby admits that …” If the court treats it as an admission, awesome. If not, nothing lost.

    (And, on something of a tangent, you might pair it with ABC Company’s acknowledgement that the other party is relying on the admission in disclosing confidential information, or whatever the irreparable harm is related to. Reliance might make the admission more enforceable.)

    Chris

    Reply
    • Chris: I suggest that that’s in fact language of declaration.

      Regarding reliance, isn’t the Purchaser relying on a bunch of other stuff too? I’d be reluctant to single one thing out.

      Reply
  10. This post is so rich in issues, one must exercise restraint, so a few sparse comments:

    1/ It’s easy to draft an irreparable harm clause for jurisdictions that will issue injunctions if the parties agree in advance about irreparable harm. It’s impossible to draft an irreparable harm clause for jurisdictions that won’t enjoin without a finding of irreparable harm *at the time of the breach and not at the time of the agreement*. So a ‘one size fits all’ provision is a fool’s errand.

    2/

    Reply
    • Regarding your first point, the standard “irreparable harm” language doesn’t really reflect the dynamic, as I explain elsewhere. I think my language makes more sense. I don’t know how federal courts would respond to my language, so at the moment I’m not willing to accept that it’s a fools errand.

      I still suggest that we’re dealing with language of declaration.

      Reply
  11. Being from Quebec, Canada, Im currious as to the use of the expression “inadequate remedy”, while I understand that this is to allow equitable remedies, such as injunctive releif, but in the end, damage could also be sought, stating that damages would be inadequate would, in my opinion preclude to seek damages. I was wondering if “insufficient remedy” would work better in that clause, allowing for injunctive relief, while not precluding from monetary compensation.

    Reply
    • ‘Inadequate’ and ‘insufficient’ are close synonyms, each used in the definition of the other in my dictionary, so I doubt one would be likelier than the other to preclude damages. More basically, I doubt the use of either would preclude damages. The gist of both words is that damages would not be *enough*.

      Reply
  12. Ken: Here’s a counter-proposal to your March 18, 2015 update. It’s mostly an effort to reduce word count, but with a few substantive tweaks that will doubtless please you like a smoke alarm going off in the night:

    The Sellers and Purchaser stipulate that (1) any Sellers’ breach of one or more of the Sellers’ obligations under section X might cause the Purchaser irreparable harm (namely, harm for which damages would be an inadequate remedy); (2) irreparable harm might result from the delay involved in demonstrating irreparable harm to a court considering whether to grant equitable relief (namely, an injunction, a restraining order, or other equitable relief); and (3) any court considering whether to grant equitable relief for such a breach should determine on the basis of this stipulation that any such breach will cause the Purchaser irreparable harm.

    Reply

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