This post on use of all capitals in contracts—it’s from Legal Frontier, Andrew Mitton’s blog—reminded me of a question that I’ve asked myself occasionally.
The Legal Frontier post is about how use of all capitals makes contract text harder to read. That wouldn’t come as a surprise to anyone who pays the slightest attention to typography, but it bears repeating, as all capitals remains in widespread use among contract drafters. I particularly liked Andrew’s practice of using Word’s “change case” function to change all capitals when he’s reading a contract on screen.
If you’re using all caps for anything other than article headings and party names in the introductory clause and signature blocks, you might want to reconsider. I use instead bold italics. If that doesn’t make text conspicuous enough for you, put a box around it.
But here’s my question: Andrew says that some laws require that certain provisions be written in all capitals. Can anyone cite for me any such laws?
And no, the Uniform Commercial Code doesn’t count. Parts of the U.C.C. require that text be “conspicuous.” For example, section 2-316(2) states that a disclaimer of the implied warranty of merchantability must be conspicuous. But section 1-201(10) of the U.C.C. specifies that “language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color”; it doesn’t say anthing about all capitals.
And American General Finance, Inc. v. Bassett, 285 F.3d 882 (9th Cir. 2002), debunked the notion that text needs to be in all caps to be conspicuous. I particularly like this sentence from that case: “Lawyers who think their caps lock keys are instant ‘make conspicuous’ buttons are deluded.”
Incidentally, I’m not sure that conspicuousness and readability are the same thing. You can make a particular provision catch the eye, for instance by using all capitals, but at the same time make it hard to read once readers focus their attention on it.
One such law is section 718.202(3), Florida Statutes, which requires the following in new construction condominium contracts if the developer intends to use a portion of the deposit to fund costs of construction:
“A contract which permits use of the advance payments for these purposes shall include the following legend conspicuously printed or stamped in boldfaced type on the first page of the contract and immediately above the place for the signature of the buyer: ANY PAYMENT IN EXCESS OF 10 PERCENT OF THE PURCHASE PRICE MADE TO DEVELOPER PRIOR TO CLOSING PURSUANT TO THIS CONTRACT MAY BE USED FOR CONSTRUCTION PURPOSES BY THE DEVELOPER.”
The statute doesn’t expressly state that the disclosure must be in all caps, but any readability benefit is far outweighed by the (admittedly small) chance that a buyer would argue that the statute wasn’t followed.
For grins, I took a quick scan of some of the federal financial services regulations which I’m passably familiar with, such as Reg B (the Equal Credit Opportunity Act regulations), Reg Z (Truth in Lending Act regulations) and Reg M (consumer leasing regulations), each of which regulates certain forms of written disclosures that must be given to consumers by lenders. I was not able to find any rules that required the use of all CAPS. As with UCC Article 2, many of these regs require that disclosures be clear and conspicuous, but I could not find a mandate to use ALL CAPS to achieve that policy goal.
The staff commentary attached to Reg Z agrees that no particular means of making a writing conspicuous is required. For example, “Clear and conspicuous. The clear and conspicuous standard requires that disclosures be in a reasonably understandable form. Except where otherwise provided, the standard does not require that disclosures be segregated from other material or located in any particular place on the disclosure statement, or that numerical amounts or percentages be in any particular type size.”
However, they do allow that one means of making something more conspicuous could be the use of ALL CAPS. “The disclosures may be made more conspicuous by, for example:
• Capitalizing the words when other disclosures are printed in lower case.
• Putting them in bold print or a contrasting color.
• Underlining them.
• Setting them off with asterisks.
• Printing them in larger type.”
(emphasis added)
(Both of the above quotes are from the Reg Z staff commentaries at Supplement I to 12 CFR Part 226.)
The “more conspicuous” standard applies to a very limited set of disclosures however, and would seem to only apply to things that we might call ‘headings’ or ‘defined terms.’ There is no suggestion to give a long grammatical sentence or paragraph written in all caps. (For example, in certain required disclosures the terms FINANCE CHARGE and ANNUAL PERCENTAGE RATE need to be ‘more conspicuous’ and therefore could be set off in ALL CAPS.) Moreover, the use of ALL CAPS is certainly not mandated over the other choices, particularly where the Fed has already stated that other typographical devices could be used to achieve the same goal. (That said, nobody is going to lose their case for lack of ‘more conspicuousness’ for making the choice to use ALL CAPS.)
Bottom line — I cannot find anything in this stack of laws that MANDATES THE USE OF ALL CAPS (although the regs, or at least the staff comments, do seem to justify the choice of that method in certain limited instances). But, this was merely what I could find in a short period of review and would welcome any true expert on those regs pointing out what I might have missed.
The items that Michael refers to and the sentence in J.D.’s comment are both short enough that I wouldn’t lose too much sleep over having them in all capitals. But the Florida sentence could do with being rewritten entirely.
I’ve actually always wondered whether making the party names in all capitals makes much sense. It’s not obviously a universal convention, but you make the point in 2.25 (and it’s also in the drafts of MSCD2) as if it were.
I think that parties use all capitals for things like disclaimers and waiver of jury trials because we KNOW that courts have interpreted all capitals as meeting the “conspicuous” test. Though, I think there’s a really good argument for failing that test if a whole page is all capital letters.
Also, on some level, the loss of readability may be precisely the point: you have to stop and think really hard about reading those sections.
Mike: Am I going to defend to the death the idea that party names in the introductory clause should be emphasized at all? Or that the form of emphasis used should be all capitals? No. But I find it modestly convenient.
Regarding your confidence in the conspicuousness of all capitals, I point you to the sentence I quoted from the American General Finance case.
And the logic of your closing point reminds me of that perhaps apocryphal bit of Vietnam-era doublespeak, “We had to destroy the village in order to save it”! If something is harder to read, it means that you need to spend more time reading it to derive the intended meaning, assuming you don’t simply give up. I don’t think one can spin that into something constructive.
Ken
Oregon Revised Statutes (ORS) 93.040 requires the following disclosures in deeds and real estate sale agreements:
(1) The following statement shall be included in the body of an instrument transferring or contracting to transfer fee title to real property except for owner’s sale agreements or earnest money receipts, or both, as provided in subsection (2) of this section: “BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON’S RIGHTS, IF ANY, UNDER ORS 197.352. THIS INSTRUMENT DOES NOT ALLOW USE OF THE PROPERTY DESCRIBED IN THIS INSTRUMENT IN VIOLATION OF APPLICABLE LAND USE LAWS AND REGULATIONS. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY THAT THE UNIT OF LAND BEING TRANSFERRED IS A LAWFULLY ESTABLISHED LOT OR PARCEL, AS DEFINED IN ORS 92.010 OR 215.010, TO VERIFY THE APPROVED USES OF THE LOT OR PARCEL, TO DETERMINE ANY LIMITS ON LAWSUITS AGAINST FARMING OR FOREST PRACTICES, AS DEFINED IN ORS 30.930, AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING PROPERTY OWNERS, IF ANY, UNDER ORS 197.352.”
(2) In all owner’s sale agreements and earnest money receipts, there shall be included in the body of the instrument the following statement: “THE PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE PROTECTION DISTRICT PROTECTING STRUCTURES. THE PROPERTY IS SUBJECT TO LAND USE LAWS AND REGULATIONS THAT, IN FARM OR FOREST ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE AND THAT LIMIT LAWSUITS AGAINST FARMING OR FOREST PRACTICES, AS DEFINED IN ORS 30.930, IN ALL ZONES. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON’S RIGHTS, IF ANY, UNDER ORS 197.352. BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING DEPARTMENT TO VERIFY THAT THE UNIT OF LAND BEING TRANSFERRED IS A LAWFULLY ESTABLISHED LOT OR PARCEL, AS DEFINED IN ORS 92.010 OR 215.010, TO VERIFY THE APPROVED USES OF THE LOT OR PARCEL, TO VERIFY THE EXISTENCE OF FIRE PROTECTION FOR STRUCTURES AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING PROPERTY OWNERS, IF ANY, UNDER ORS 197.352.”
(3) In all owners’ sale agreements and earnest money receipts subject to ORS 358.505, there shall be included in the body of the instrument or by addendum the following statement: “THE PROPERTY DESCRIBED IN THIS INSTRUMENT IS SUBJECT TO SPECIAL ASSESSMENT UNDER ORS 358.505. ORS 358.515 REQUIRES NOTIFICATION TO THE STATE HISTORIC PRESERVATION OFFICER OF SALE OR TRANSFER OF THIS PROPERTY.”
ORS 93.040 does not specifically mandate the use of all caps but, as J.D. noted, if all caps are not used one runs the risk of having to defend a claim that the statute wasn’t followed. The statute is a good example of how readability suffers from the use of all caps. I tend to use boxes for indemnity clauses (which are usually lengthy and by Oregon law must be conspicuous or separately signed) for this reason.
Ken: A couple of Arizona statutes actually mandate the use of capital letters. Here’s an example:
ARS 12-1366(A)(1) If a contract for the sale of a dwelling or an association’s community documents contain commercially reasonable alternative dispute resolution procedures. If the contract for the sale of a dwelling contains the procedures, the procedures shall conspicuously appear in the contract in bold and capital letters. If the contract for sale of a dwelling contains the procedures, a disclosure statement in at least twelve point font, bold and capital letters shall appear on the face of the contract and shall describe the location of the alternative dispute resolution procedures within the contract.
The legislature even put in that statute twice. (See also: ARS §§ 44-287, 15-1770.) Apparently in Arizona, capital letters equate to conspicuity for some reason. I agree all caps are very difficult to read, particularly in the font of which I am most fond. I have, in the past, merely changed the font, which makes the section more conspicuous, I suppose.
Craig
I wonder how the Arizona legislation would view the use of the ‘Small Caps’ font option one can use in WinWord?
(A few other nasty things you may not know about WinWord and the use of ALL CAPS — Many installations of Word are set up to ignore spell-check for text that is in all caps. There is an option to uncheck if you wish, although this leads to the other problem of too many false positives.
Also, Word’s find function will, depending on how you’ve set it up, often fail to find words that are in ALL CAPS — this usually happens when you are searching for a defined term that has just an initial capital letter and you’ve checked ‘match case’ in the search. I’ve been caught in the past when I did a universal replace and failed to note that one of the things that should have been found/replaced was not because it was in ALL CAPS. However, if you have used the Small Caps option for that text rather than ALL CAPS, Word’s find/replace works as you would expect it to work.)
In a prior life, I had been told by a Texas licensed lawyer that in order for indemnities to be enforced without question in Texas that they should be in all caps.
South Carolina requires all caps (underlined, no less; how’s that for readability?) for disclaimers in employee handbooks. S.C. Code Ann. § 41-1-110 states that “a disclaimer must be in underlined capital letters on the first page of the document.”
A quick Westlaw search of “all caps” and “all capital letters” in the databases for 50 state statutes and in the USC didn’t turn up any requirements for all capitals. So Ken brings up a good point and there’s probably a good case that conspicuousness does not mean all capitals. I have always associated conspicuousness with all capitals, but now will look for other ways to do it. If only we could make text on paper blink and rotate the way it can in Microsoft Word.
This thread is a great example of how legislators think they can regulate content presentation without any regard for the usability/digestability of their approach. Certainly when lawyers couple the mandatory all-caps language with other permissive all-caps provisions, the result probably interferes with the legislators’ objectives more than it facilitates it. Eric.
Responding to Larry, the Texas courts have held that if a party intends to be indemnified against the consequences of its own negligence, this must be expressly stated in the document and must be conspicuous. Texas courts have expanded these doctrines to cover indemnities where a party wants to be indemnified against a matter for which it would otherwise be strictly liable.
“Conspicuous” does not mean all caps, but that’s the practice about 95% of the time, it seems. I use bold/small caps, because it’s more readable.
The FTC’s holder rule lists the following disclosure in all capital letters, and I would not be comfortable telling a client to remove the caps:
In connection with any sale or lease of goods or services to consumers, in or affecting commerce as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act for a seller, directly or indirectly, to:
(a) Take or receive a consumer credit contract which fails to contain the following provision in at least ten point, bold face, type:
NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
or,
(b) Accept, as full or partial payment for such sale or lease, the proceeds of any purchase money loan (as purchase money loan is defined herein), unless any consumer credit contract made in connection with such purchase money loan contains the following provision in at least ten point, bold face, type:
NOTICE
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
The citation for the holder rule mentioned in the last comment is: 16 CFR 433.2.
Other state consumer credit statutes require consumer contracts to include disclosures in all capital letters as well. By way of random example, Code of Ala. § 5-18A-13 requires deferred presentment contracts to include a schedule of fees to include the following statement in all capital letters and in l2-point type or larger immediately above the space for the borrower’s signature: NOTICE: FEES FOR DEFERRED PRESENTMENT TRANSACTIONS MAY BE SIGNIFICANTLY HIGHER THAN FOR OTHER TYPES OF LOANS.
I was searching the UCC form for my state and right above the PDF of the form it states:
“EFFECTIVE OCTOBER 1, 2001
DUE TO NEW POLICIES IN THE UCC DIVISION ALL FORMS MUST BE TYPEWRITTEN, INCLUDING SEARCHES. THIS MEANS THAT WE WILL START REJECTING ALL HANDWRITTEN INFORMATION, SUCH AS TYPE OF ORGANIZATION, JURISDICTION AND ORGANIZATION ID NUMBER. ALSO PLEASE KEEP IN MIND THAT THE DEBTOR AND SECURED PARTY INFORMATION MUST BE IN ALL CAPS AND 12 POINT TIMES NEW ROMAN FONT.”
ORS 71.2010 provides an interesting definition of “Conspicuous” that differentiates between text in the heading or the body of an agreement:
(10) “Conspicuous”: A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it. A printed heading in capitals (as: NONNEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is “conspicuous” if it is in larger or other contrasting type or color. But in a telegram any stated term is “conspicuous.” Whether a term or clause is “conspicuous” or not is for decision by the court.
Interestingly, all caps is used as an example for how to make heading conspicuous, but not for language in the body of an agreement.
Putting a box around something *might* make it more conspicuous, but also suggests to the reader that it can be skipped. In traditional graphic design, items in boxes are not key elements of the text but are examples or supplementary information — think of sidebars as an example.
Bold or italics make more sense.
An additional note,
Most 10pt fonts are not 10pts from the bottom of a capital letter to the top of the capital letter.
SCOTUS rejects many(most?) filings to them because of this issue with computer generated fonts generally being undersized.
Laws specifying exact font size seem to me to be ripe for litigation. (also I would invest in a ruler with points on it to check on minimum font size. instead of trying to figure out if the font is greater than 3.528mm or not.
Just thinking about applying to law school at a time when there are no job openings in the legal profession.
§ 501.1377 (5)(a) 1. provides, in part:
“A foreclosure-rescue transaction must include a written agreement prepared in at least 12-point uppercase type…”
Unclear as to whether the “at least” applies merely to the “12-point” or also to the “uppercase.”
(“But your honor, it’s in uppercase AND italics…”)
The FTC Franchise Rule mandates the use of all caps, bold font, and other styles for use in Franchise Disclosure Documents. Some states (Illinois) will actually deny registration based on failure to follow the typecase requirements by the FTC.
That is not true. The FTC expressly states in the statement of basis and purpose that there is no font requirement.
It seems counter-intuitive to me that any text in a contract need be made conspicuous. It would imply that some words or phrases are more important than others. However, in court, every word counts, just as much as the last. I would concentrate more on being thorough, than being careful to “highlight” certain elements. We are adults, we are not texting, anyone signing the contract had better read it carefully, as all parts are equally enforceable.
You’ll get no argument from me.
Hi Ken,
You mention in the article about putting a box around text to emphasize it or make it more conspicuous. I’ve heard that doing so nullifies whatever is inside said box in consideration to the four corners rule in contract law or some other rule (that I have yet to source). I’m not a lawyer but am researching law and have heard this rule applies (whatever is inside a closed box is not admissible).
Any help to get to the bottom of this mystery, for myself at least, would help greatly!
Regards,
Chris