“Closing” Versus “The Closing”

[Overhauled 8:40 p.m. EST on 12 November 2016, thanks to input from Neal Whitman on Twitter.]

It’s time to pick over the carcass of the “Magic Circle” extract that I dissect in this post. Consider the following with respect to the word Closing in that extract and in my version of it:

The original version:

… under a new contract of employment to take effect on or before Closing.

My version:

… under a contract to take effect on or before the Closing.

Why did I add the before Closing? To understand that, let’s look at the different ways the word closing is used, both in contracts and elsewhere. (I found the contract extracts, warts and all, on EDGAR.) I cheerfully relied on two analyses (here and here) prepared by the independent linguistics researcher and writer Neal Whitman, aka @LiteralMinded.

Nouny Gerund

A gerund is a noun formed by taking a verb and adding the suffix -ing. But even though a gerund is a noun, sometimes it acts more like a noun, and sometimes it acts more like a verb.

The word closing can mean the moment a transaction is consummated. That’s how it’s used in the following example:

The financial statements of Company to be prepared after the Agreement Date and prior to the Closing (A) will be true, accurate and complete in all material respects …

In this context, closing can be described as a “nouny” gerund (Neal’s phrase), in that it act more like a noun, in three respects:

First, the gerund begins with the definite article, the. Definite articles usually come before nouns.

Second, in this context Closing could be modified by an adjective, for example first, instead of by an adverb. Adjectives usually modify nouns.

And third, because Closing is a defined term meaning the closing of the transaction contemplated by the agreement in question, the object of the Closing in effect is the prepositional phrase of the transaction contemplated by this agreement. The phrase is headed by the preposition of; prepositional phrases that start with of usually follow nouns.

Verby Gerund

In the sentence Closing deals is hard work, the word closing is part of the gerund phrase closing deals. (I haven’t found on EDGAR an example of this kind of use of closing in a contract, or at least one that makes sense.)

In this context, closing refers to a process, not a moment dividing the time before the deal and the time after the deal. It follows that this example differs in two respects from the “nouny gerund” example above, with closing acting more like a verb:

First, in this example, closing could be modified by an adverb, for example quickly, not an adjective.

And the object, deals, comes right after the gerund, just like it would after an ordinary verb, not inside a prepositional phrase like the one that started with of in the previous example.

Present Participle

In the following example, the first instance of the word closing is used as a present participle:

… if the Qualified Preferred Equity Investment is closing concurrently with the closing of the Permitted Direct Assumption …

Attributive Noun

In the phrase closing price in the following example, the word closing is used as an attributive noun:

“Market Value” means, upon Listing, the market value of the outstanding Shares, measured by taking the average closing price for a single Share over a period of 30 consecutive trading days …

Conclusion

In the “Magic Circle” extract, as in the “nouny gerund” example, the word closing is used to mean the moment a transaction is consummated. So in the “Magic Circle” extract too, closing acts as a nouny gerund. It follows that it would be best to use it with the definite article, the.

Omitting the word the suggests that closing is being used as a verby gerund and refers to the process of consummating a transaction. In the context of the “Magic Circle” extract, that doesn’t make sense. Opting for that meaning would also raise the question, Closing what?

It isn’t hard to find on EDGAR other examples of this sort of misuse of the word closing. Here’s one:

On or prior to Closing, the undersigned shall deliver to the Company …

Does this misuse matter? Not really, as it wouldn’t create confusion. But if you’re the one doing the drafting, you might as well get this use of closing right.

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.