There’s a specialized kind of business contract that I’ll call “general terms”—a document created by a company or other organization to describe how its system operates. A set of general terms might describe how Acme sells widgets to many different buyers, or it might describe a network, with different kinds of entities playing different roles. A set of general terms only has one counterparty at a time. It’s commonplace that a counterparty doesn’t actually sign a set of general terms; instead, the general terms are made part of some other document that the counterparty does sign.
General terms pose a challenge when it comes to verb structures, for two reasons.
A Company Imposing Obligations on Itself
First, it can seem counterintuitive, for purposes of Acme’s general terms for purchase of Acme widgets, to have Acme impose obligations on itself. That’s the case whether you, like me, use shall to impose obligations on the subject of the sentence, or whether you use must. That has given rise to the notion of using in your general terms will to impose obligations your company and must to impose obligations on the other party.
Although Bryan Garner endorses this practice (see this 2011 post), it’s truly bizarre to vary your verb structures depending on who the party is, using the nice will for yourself, the nasty must for the other guy. And using will to impose obligations on Acme paradoxically exploits the weakness of using will to express obligations—will appears unassertive because it’s also used in language of policy (as in The price will increase to $3 if …).
But despite its weaknesses, some opt for this convention—including someone at one of my consulting clients, as I learned in a conversation a couple of weeks ago. So evidently some do find challenging the idea of a company imposing obligations on itself.
Making Heavy Weather of What Is Routine
The second way that general terms make for awkward verb structures is that they can force you to make heavy weather of that which is routine.
That’s something I discuss in this post from earlier in 2018. To address Widgetco issuing invoices to Acme, you could use language of obligation, language of discretion, or language of policy, or you could use a condition (using language of obligation). But whatever your choice, it can seem clumsy, given that Widgetco issues invoices as a function of its business processes.
If you’re looking for a lighter touch in general terms, here’s an approach I just used for a client.
First step, you’re not using shall. No surprise there—shall is best kept for negotiated business contracts. Use must for obligations of the one or more other players.
Now here’s the novel part: for activities that are part of the business processes of the key player, use the simple present, to signal habitual activity. Here’s are two examples:
Acme permits Participants to inspect the record for Consortium transactions on a given day until three months after that day.
Acme initiates reimbursement five Business Days after the day it receives the Data File.
This approach has the advantage of making it clear that instead of being handled one at a time, the matters in question are part of a business process. But that constitutes the disadvantage of this approach too. It allows you to avoid assigning a given provision to a particular category of contract language, but if that provision ends up being a point of contention, you’ll be faced with the age-old question: what category of contract language should this be?
Drafters like it when general terms go down easy, so I expect that this approach will have some appeal. But you should be aware that it comes at a cost.
9 thoughts on “An Alternative Verb Structure for General Terms”
I’m puzzled by your delicacy over “shall.” I’ve always used “shall” to denote the client’s obligations (and I say client here because the terms could be imposed by a buyer as much as by a seller) in its general terms as well as its negotiated terms (and don’t be so quick to assume the general terms don’t get negotiated, though often as not the changes are put into a rider somewhere). There is always a counterparty being addressed by general terms, whether it’s a customer, a supplier, a distributor, or what have you, so the fact that the counterparty is not specifically known when you’re drafting general terms shouldn’t change the approach; you just designate it with a general category like, well, Customer, Supplier, or Distributor. And while I have used the simple present to denote ongoing policies, such as billing, doing so inevitably raises the question of the circumstances under which those policies can change without the counter-party’s consent.
And what goes for “shall” goes for “will,” “must,” “may” and the other usual categories of verb usage.
I’d say that there is an implicit “Acme states that” in front of each of Ken’s examples, so they are representations. Since they are present tense, Acme could argue that there’s no breach if Acme later changes its processes. But if I was the judge, I’d determine it to be ambiguous as applied to a change in practices and allow extrinsic evidence. Not an ideal outcome.
My post on invoicing suggests using acknowledge, but the effect is the same. I’d counsel anyone using this approach that they have to be prepared to stick with whatever arrangement is described in this manner.
It’s not my delicacy: it’s a preference I’ve encountered in the market. I’m not in a position to ignore that preference, so instead I suggest alternatives.
If I were reviewing the Acme T&Cs for a client Baker, I’d be concerned that the present tense (“Acme initiates reimbursement ….”) fails to sufficiently ~commit~ Acme to the business practice in question, but instead leaves Acme free to change the practice as it sees fit. Depending on the business practice, this flexibility might create more risk for Baker than Baker was willing to take on.
(Also, Acme’s T&Cs might make it appear that it focuses mainly on its own needs, as opposed to those of its counterparty — which in turn might raise doubts in Baker’s mind whether Acme was likely to be a reliable long-term business partner. That too would depend on the situation; Acme might not care about a long-term relationship with Baker, but then again it might.)
As you’ve pointed out previously, the NEC contract form uses present tense, but (as a commenter noted) with a single “the parties shall act as follows.” http://www.adamsdrafting.com/the-nec-and-using-the-present-tense-to-state-obligations/ That might be enough to assuage any concerns about lack of binding commitment.
Are you using “participants” for “parties”?
No, it’s a defined term used in that contract.
When parties don’t want to negotiate obligations down to the last jot and tittle, sometimes they throw the subject matter into a black box, sign, and hope the issue never arises.
So if Widgetco generally issues invoices on Wednesdays and has every expectation of continuing to do so for the duration of the contract with Acme, but doesn’t want to bind itself never to vary the day, Widgetco can state its general practice in the contract in the present tense and leave it at that (the black box of silence). As Ken says, if it ever matters, Widgetco had better be prepared for a ruling that it bound itself to the practice.
Alternatively, Widgetco could bind itself with loose shackles, using the black box of reasonableness: ‘Widgetco generally invoices on Wednesdays, and shall maintain that practice with reasonable fidelity for the term of this agreement’.
Great article with a lot to chew on, but aren’t these terms all defined in law dictionaries including what they mean in terms of how it obligates the parties?
Or does the meaning and obligation of “shall,” “will,” and the rest vary from jurisdiction to jurisdiction, state to state, and country to country?