A Reminder of the Limitations of Terms of Art

Reader D.C. Toedt let me know about the recent opinion of the Eighth Circuit Court of Appeals in Camelot LLC v. AMC ShowPalace Theatres, Inc., and he wrote about it himself here.

But I take away from it a slightly different lesson than does D.C., in that I think it provides a useful reminder to practitioners that what matters is the deal broadly considered rather than the dictionary definition of a term of art used in articulating that deal, in this case the verb extend.

The litigants were party to a lease. Here’s the language at issue:

[T]his Lease [will be] extended on the same terms and conditions set forth herein, except that … (ii) no Rent concessions, abatements, lease buyouts, tenant allowances or limitations on tax or expense passthroughs granted with respect to the Lease Term hereof shall be applicable to any Option Period, (iii) Minimum Rent for each Option Period shall be as shown above.

Camelot argued that this language granted AMC an option to renew if the parties agreed on new, negotiated terms, that it didn’t constitute an option to extend on the terms contained in the existing lease. For reasons I won’t go into, the district court agreed with Camelot, and the Eighth Circuit affirmed.

It caught my eye that AMC didn’t attempt to argue that use of the word “extended” means that the language at issue constituted an option to extend. But I suspect that if presented with that language, many practitioners would regard use of the word “extended” as reason enough to attribute to that provision the meaning sought by AMC.

The same literal-mindedness is what has practitioners thinking that something won’t constitute a representation unless it includes the word “represents,” or believing that use of the word “indemnify” necessarily brings in its wake all sorts of implications that wouldn’t apply if you were simply to say “will be liable for.” (That’s something I discussed a couple of weeks ago in this blog post).

When a drafter uses in a contract a word or phrase that scholars or judges use as a term of art, there’s no reason to assume that the drafter is using that word or phrase to convey the same meaning as that conveyed by the term of art. So when considering the meaning of a given word or phrase as used in a contract, consider the broader context. It would make sense to do so, and Camelot LLC suggests that that’s the approach that at least some courts would adopt.

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.