Another Flavor of Passive-Type Policy: “Will Be Recoverable”

Here’s what MSCD 3.244–45 has to say about “passive-type policies”:

Some policies are characterized by adjectives such as exercisable and payable and have a structure that’s analogous to the passive voice. This manual refers to such policies as “passive-type policies.” Passive-type policies have two shortcomings. First, as with passive verb phrases (see 3.11), the agent can be expressed by a by-agent, but in contracts the agent is often omitted (see [8-7] and [8-8]), leaving unstated the party responsible for performing the action. Second, if a contract states that the fee is payable by April 20, 2014, that could, depending on the context, mean that the party in question is obligated to pay the fee by the date in question, or has discretion to pay the fee, or that timely payment of the fee is a condition. Passive-type policies should be rephrased as language of obligation (see [8-7b]), as language of discretion (see [8-8b]), or as conditional clauses.

Another example of a passive-type policy is The First Installment is due by March 1, 2014. It would be better expressed as language of obligation: The Purchaser shall pay the First Installment by March 1, 2014.

Well, here’s another phrase that features in passive-type policies: will be recoverable. It’s afflicted with the same shortcomings as payable. Below are two examples fresh from the SEC’s EDGAR system, with my recommended fix:

Such Interest will be recoverable from the Tenant [read The Tenant shall pay the Landlord that Interest] as if it is rent in arrears.

… the Guaranteed Amounts will be recoverable from the Guarantor LP [read the Guarantor LP shall pay the Bond Trustee the Guaranteed Amounts] in the manner set out in Section 7.1, as a separate and distinct obligation of the Guarantor LP …

  • AWrightBurkeMPhil

    In the second example from EDGAR, you revised out the first occurrence of “recoverable” and left the second intact. Why? –Wright

    • Ken Adams

      Why? Why? So you can make me look foolish, that’s why! *cackles insanely*

      Actually, I didn’t even notice it. Some WordPress magic and, hey presto! The second “recoverable” is gone.

  • AWrightBurkeMPhil

    It seems a little off the mark to call passive-type adjectives passive-type “policies” when they are often not policies at all, but poorly constructed obligations or poorly constructed grants of discretion. Perhaps it would be better to call them “passive-type adjectives” requiring further analysis to determine the category of contract language to which they belong.