Greetings from Geneva! I’m here giving a series of seminars, but I received word that in his recent opinion in GRT, Inc. v. Marathon GTF Technology, Ltd., 2011 WL 2682898 (Del. Ch. July 11, 2011) (go here for a PDF copy), Chancellor Strine of the Delaware Court of Chancery discusses at modest length, in footnote 79, what A Manual of Style for Contract Drafting has to say about “survival” of contract provisions.
For those of you who aren’t inclined to check out the opinion, here’s the text of footnote 79:
A pertinent example of this type of commentary is Kenneth A. Adams’ thought-provoking A Manual of Style for Contract Drafting. From the outset, Adams makes clear that his manual’s purpose is not to comment on the traditional lexicon of contract drafting as it has evolved and been interpreted by the courts, but is instead to advocate for a method of contract drafting that prefers “standard English” over “tested” contract language, or what Adams pejoratively dubs “legalese.” KENNETH A. ADAMS, A MANUAL OF STYLE FOR CONTRACT DRAFTING xxvi-xxvii (2d ed.2008). Indeed, his manual’s opening section makes plain that “[t]he usages [the manual] recommend[s] are those that are clearest and most efficient for accomplishing a given drafting goal. That’s the case even if what [the manual] recommend[s] does battle with the conventional wisdom ….” Id. at xxii (emphasis added).
With respect to survival clauses, consistent with his manual’s thematic underpinning—one that openly rejects the “popular rationale for retaining legalese in contracts … [solely because] traditional contract language has been litigated, or ‘tested,’ and so has a clearly established, or ‘settled’ meaning—Adams, without citation, advocates to putting an end to the standard practice of using survival clauses to serve as a contractual limitations period:
It’s commonplace for most representations in a given contract survive [sic] for a limited time (perhaps a year), whereas others survive until the applicable statutes of limitations expire and still others survive indefinitely. Although it’s entirely standard to refer in this manner to survival of representations, it’s unhelpful to do so. For one thing, you should resort to such legal jargon in a contract only if no clearer alternative presents itself. And furthermore, referring to survival of representations addresses only one of the potential bases of a claim for indemnification—for instance, it doesn’t serve to put time limits on when you can bring a claim for indemnification for breach by the indemnifying party of any of its obligations. That’s why it’s preferable instead to address this topic, head-on and more broadly, in a section entitled “Time Limitations.” ADAMS at xxvii, 300 (emphasis added).
In other words, Adams suggests doing away with the use of the traditional approach to addressing the limitations period applicable to claims seeking remedies for breaches of representations and warranties, which has been tied to the lifespan of the representations and warranties themselves (such as their death at closing) and being more specific by setting forth an express limitations period. His view on progress has adherents. See generally LENNÉ EIDSON ESPENSCHIED, CONTRACT DRAFTING: POWERFUL PROSE IN TRANSACTIONAL PRACTICE 109–112 (ABA 2010) (considering and rejecting arguments against using “plain, conversational English” in contract drafting, including one that promotes adherence to the traditional lexicon because courts have “ ‘blessed’ “ the “archaic jargon and customs” in prior cases, because “language that has been litigated by definition is subject to two or more interpretations.”); see also ABA Model Asset Purchase Agreement (2001) at 228–229 (advocating for the inclusion of a section that is separate and distinct from a general survival clause, entitled “Time Limitations,” that expressly provides when claims for indemnification based on breaches of surviving representations and warranties must be noticed); ABA Revised Model Stock Purchase Agreement With Commentary, Working Draft (Dec. 14, 2009) at 198 (same). Adams’ policy proposal may well have utility, but its admirably candid nature as an advocacy piece underscores the difference between the roles served by courts and judges, on the one hand, and commentators like Adams, on the other. In contrast to a commentator, like Adams, who is free, as he does, to “disregard [ ] [“entrenched assumptions held by many who draft and review contracts”]” and espouse his own beliefs about the lexicon contracting parties ought to use, ADAMS at xxvi, a judge’s role in a contractual interpretation case is to read and understand a contract in the manner that the parties who drafted it intended. Lorillard Tobacco Co. v. Am. Legacy Found.,903 A.2d 728, 739 (Del.2006) (“When interpreting a contract, the role of the court is to effectuate the parties’ intent.”). Although reading a contract inherently involves a degree of interpretation, a judge’s interpretative prowess must be constrained by settled principles of law that are themselves outgrowths of the traditional contractual lexicon as it has been developed by practitioners, and read and interpreted by the courts. One can even share and in fact applaud Adams’ encouragement of clearer forms of contract drafting but find it not useful in interpreting a contract written in the form Adams wishes to abandon. The judge must honor the parties’ bargain by being faithful to his role and not superimposing on them his own views of appropriate drafting.
I’m pleased that Chancellor Strine has seen fit to consult MSCD. My one regret is that he was forced to add a “[sic]” to the passage he quoted—the word “to” got lost in the shuffle. *author gnashes teeth*
And I think that what he says makes sense. Determining how to articulate a concept clearly in a contract differs from the task of making sense of contract language that’s unclear.
Once I’m done with my seminars I’ll take a closer look at this case.
An interesting case. I believe that all that contracts that I have seen with a survival clause use the concept to extend obligations beyond the termination of the contract (i.e. of the other clauses – obviously a contract remains in existence if certain obligations survive). A typical example would be the confidentiality provisions, which the parties will often want to remain in force indefinitely (or for a fixed period) after the commercial relationship is terminated.
I have not seen “survival” language used to amend the period in which claims for breach can be brought. However, the discussion in the case seems to show that this is, in fact, very common in the US (my experience being mainly in English law, though I deal with US firms a lot). I would be interested to know what others have experienced.
Congratulations on the citation Ken, by the way. Even if the judge didn’t run with your line of thinking on this occasion, I think he acknowledged that this was because his job is to interpret what has been drafted, whereas yours is to draft.
I read the footnote and its accompanying text (only); given the politesse of judicial opinions, it looked to me as if the chancellor might have been intending to publicly scold you, Ken:
–begin quote–
… This commentary [MCDS] is therefore designed more to advocate how M & A agreements should be drafted if the traditional lexicon is abandoned than to explain what the traditional lexicon means. But the task before me is the interpretation of a contract using the traditional lexicon. Moreover, the commentary of this kind seems to hew more closely to the policy concerns embraced by the courts in California and New York …. [79]
* * *
[79] … From the outset, Adams makes clear that his manual’s purpose is not to comment on the traditional lexicon of contract drafting as it has evolved and been interpreted by the courts, but is instead to advocate for a method of contract drafting that prefers “standard English” over “tested” contract language, or what Adams pejoratively dubs “legalese.” …
… Adams’ policy proposal may well have utility, but its admirably candid nature as an advocacy piece underscores the difference between the roles served by courts and judges, on the one hand, and commentators like Adams, on the other.
In contrast to a commentator, like Adams, who is free, as he does, to “disregard [] [“entrenched assumptions held by many who draft and review contracts”]” and espouse his own beliefs about the lexicon contracting parties ought to use, ADAMS at xxvi, a judge’s role in a contractual interpretation case is to read and understand a contract in the manner that the parties who drafted it intended.
… a judge’s interpretative prowess must be constrained by settled principles of law that are themselves outgrowths of the traditional contractual lexicon as it has been developed by practitioners, and read and interpreted by the courts.
One can even share and in fact applaud Adams’ encouragement of clearer forms of contract drafting but find it not useful in interpreting a contract written in the form Adams wishes to abandon.
The judge must honor the parties’ bargain by being faithful to his role and not superimposing on them his own views of appropriate drafting.
–end quote [extra paragraphing added]–
This, thought, might not be a bad thing for you and the book: everyone loves to watch a good fight, and having the chancellor single you out sends the signal that your views are worthy of attention.
D.C.: I disagree entirely. If someone creates confusion in a contract by sticking with the dysfunctional conventional wisdom, a judge has no choice but to clean up that mess, and odds are that MSCD will be of uncertain use in that regard. I like to think that when Chancellor Strine says “One can even share and in fact applaud Adams’ encouragement of clearer forms of contract drafting,” he might well be discretely including himself in that group. Ken
Ken, on the merits I tend to agree that a survival clause shouldn’t have the effect of shortening the statutory limitation period unless it says so expressly. But I think you’re being unrealistic, to put it mildly, about Strine’s views concerning MSCD.
Despite the judicial make-nice language, you don’t have to look very hard between the lines to see that Strine is going out of his way to upbraid you. In his main opinion he leaves no doubt that (in his view) the relevant contract language, in the context of the governing Delaware law, is neither confusing nor dysfunctional, but straightforward and unambiguous. In footnote 79, he takes you to task for peremptorily announcing a contrary position, on no authority save your own: “Adams, without citation, advocates to [sic] putting an end to the standard practice of using survival clauses to serve as a contractual limitations period” (emphasis in original; looks like he found your lost “to”).
If I had to guess, I’d say Strine sees MSCD as wanting to set itself up as the universal stylistic standard against which all contract language is to be judged, and that this doesn’t sit very well with him. I think his footnote 79 could fairly be read as implying, “Who the [expletive] is Ken Adams?”
I can’t imagine why he singled you out like this; it could be that he thinks your views are likely to be influential, which indirectly might be good news.
But it does suggest that if you want to get judges on your side, you might want to rethink some of your presentation style, which sometimes can veer toward the imperious side.
D.C.: I don’t claim expertise at reading between the lines of judicial opinions. Others are welcome to suggest what they think. Ken
D.C.: I didn’t read the chancellor’s comments as scolding Ken and others (including, presumably, the ABA model agreements he also cites) who advocate for changing drafting conventions. But if that was the intent, I wish the chancellor had been more clear on that point so those of us who don’t appear before judges would have understood his meaning.
I agree that contract drafting should be improved and that many conventions–even those that have been blessed by courts–do more to confuse matters than to set forth clearly the intent of the contracting parties. As a practitioner, though, I’m very interested in how changes to the “lexicon” would be received by a court passing judgment on my own contracts. Indeed, I would welcome any data on that front even if it came via a good fight between authorities. Any entertainment value from watching the fight would be gravy, although I don’t really see that here.
Regarding your anguish over omitting a “to,” a more compact and–dare I say–more elegant solution would be to change the “for” to “that” earlier in the sentence, which obviates the need for “to.” Also, Chancellor Strine commits a few lexical peccadilloes of his own. He twice used “advocate[s]” as an intransitive verb, necessitating adding “for” (or once, incomprehensibly, “to”) after it, when he could have simply treated “advocate” as the transitive verb it always has been, with what it is you advocate (word or phrase, equally OK) as the direct object. And there you are, out of your difficulty at once.
Congrats Ken!
Whether or not the court agreed with you, it’s great that the court cited and discussed your argument. It’s that much easier for another judge to come along, disagree with this one, and endorse your view.
Either way, kudos!
Apparently, the court removed the citation or I am looking in the wrong place. Your link to the opinion is to a corrupted PDF. So, I searched for and found the case, but I’m afraid it had no reference to your work. Can you please update this post with a working link to the opinion that contains the reference to your book.
Sorry about that. The citation is GRT, Inc. v. Mara thon GTF Technology, Ltd., No. CIV.A. 5571-CS, 2011 WL 2682898, at *14 n.79 (Del. Ch. 11 July 2011).
Thanks for the quick response. It’s actually “at 34 n.79”. :-)