One of the participants at my recent Chicago seminar discussed with me what he described as the “optics” of contract drafting.
What he was referring to was the value of not waving a red flag at the other side. He provided the following example of alternative section headings:
Limitation of Customer Remedies.
Aaron preferred the second heading—why have the lawyer for the customer expect the worst, before they’ve even read the section in question?
I agree with Aaron, but only up to a point.
If a given section includes provisions that might give the other side pause, clarity doesn’t require that you flag just those provisions in the section heading. And doing so anyway would seem counterproductive.
But you don’t want to be misleading. If the section in question says, in effect, “The Customer will be entitled to no remedies” and you give it the heading “Customer Remedies,” a court might decide that the heading is misleading and that the section is therefore unenforceable. There’s caselaw to that effect, although a sophisticated party represented by counsel might have a hard time claiming that it was misled by a section heading.
8 thoughts on “Accentuating the Positive in Section Headings”
Not enough reward for gaming the contract by inserting misleadling section headings. The other side won’t be fooled unless their legal expert is in a hurry or stupid or both.
A sound approach, but as you point out, there are limits. One of my early mentors advocated subterfuge to make the other side think they were getting much more than the contract actually gave them. He would start with “Tenant shall have the absolute right to assign this Lease [I know, that’s poor drafting, but as an associate I learned quickly that I could not change it] Seller shall have all remedies available at law” and then follow it with a limitation that limited the remedies to almost nothing. I used to call his approach “Promise them anything, but give them our page” , after the old Arpege perfume commercials.
I could not wait until I had the seniority to avoid having to submit my work for his review. Apart from the ethical issues, the backhanded approach was impractical, unless the other side’s lawyer was incompetent. To my thinking, gambling on the other lawyer’s incompetence only delays the deal, builds ill will, and causes the client unnecessary expense.
I’m new here but why is “Tenant shall have the absolute right to assign this Lease” an example of poor drafting?
I would say, “Tenant has the right to assign this Lease.” “Absolute” is redundant, and “shall have” for the verb tense is antiquated, though I’m guility of this verb usage in my contracts more often than not.
MPW and Chadwick — of course it is poor drafting. That was my point. If the sentence was intended to mean the tenant could assign the lease, “absolute” would have been redundant. (And yes, using shall have is archaic and misuses language of obligation.)
In the actual lease, “absolute” was worse than redundant. The drafter inserted “absolute” in order to disarm and distract the reader, drawing attention away from the condition that followed — obtaining the landlord’s permission in advance, which the landlord could withhold in its sole discretion. As Chadwick pointed out, this tactic does not work if the other side has a competent lawyer. I pointed out the same thing in my post.
Chadwick: As I noted above, I’d use may. It’s more concise than “has the right.” Also, “has the right” could be understood as meaning that Tenant somehow has that right independent of the contract. Ken
MPW: Welcome. That language raises two issues.
First, the verb use is suboptimal. This is language of discretion, so ideally you’d use a verb structure that conveys discretion clearly and without overlap with other categories of contract language. So rather than using a wordy verb structure using a word associated with obligations, shall, I’d use may. I think disciplined handling of the categories of contract language is required for controlled drafting; Chapter 2 of my book A Manual of Style for Contract Drafting discusses the subject in depth. You can also consult the “categories of contract language” blog posts on this blog and my old blog at AdamsDrafting.
Second, “absolute” is worse than redundant, in that it suggests that the drafter might be attempting an end-run around the implied duty of good faith. That’s a problematic notions in many jurisdictions, and it’s unhelpful to contract relations. I’m currently working on an article about this; it’s also discussed in the book.
Assume the contract includes headings that could be interpreted as misleading, such as the one you cite (“Customer Remedies” but then none actually exist). Then assume in the Miscellaneous Section toward the end of the contract includes the following provision: “Headings. The headings used in this agreement are provided for convenience or reference only and shall not be deemed to limit, characterize or in any way affect any provision of the Agreement. All provisions of the Agreement will be enforced and construed as if no heading had been used in the Agreement.” I do not like any headings disclaimer but putting that aside, do you think such disclaimer would give a court license to overlook the ambiguity or misleading nature of the headings?