“And … Or” Ambiguity in California Corporations Code § 313

Consider California Corporations Code § 313 (emphasis added):

Subject to the provisions of subdivision (a) of Section 208, any note, mortgage, evidence of indebtedness, contract, share certificate, initial transaction statement or written statement, conveyance, or other instrument in writing, and any assignment or endorsement thereof, executed or entered into between any corporation and any other person, when signed by the chairman of the board, the president OR any vice president AND the secretary, any assistant secretary, the chief financial officer or any assistant treasurer of such corporation, is not invalidated as to the corporation by any lack of authority of the signing officers in the absence of actual knowledge on the part of the other person that the signing officers had no authority to execute the same.

The question is, does the “or” have scope over the “and,” or is it the other way around?

If the “or” has scope over the “and,” the presumption of authority is established if the document in question is signed by (1) the chairman, (2) the president, or (3) both (A) any VP and (B) one of the secretary, any assistant secretary, the CFO, or any assistant treasurer.

If the “and” has scope over the “or,” the presumption of authority is established if the document in question is signed by (1) the chairman, the president, or any VP and (2) the secretary, any assistant secretary, the CFO, or any assistant treasurer.

California courts have held that the latter meaning is the one intended (see Snukal v. Flightways Mfg., Inc., 23 Cal. 4th 754, 3 P.3d 286 (2000)), but it would be preferable to have the statute preclude alternative meanings.

In case you’re wondering, no, I haven’t suddenly developed an interest in legislative drafting in general or the California Corporations Code in particular. It’s just that I don’t see this kind of ambiguity very often. If you know of a contract example of this kind of ambiguity, do tell.

For more on this kind of ambiguity, see MSCD 10.61.

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.