This is a little subtle. Bear with me.
In this 2017 post, I consider whether it’s OK to use in a contract, unadorned, the phrase is not prohibited from, as in Acme is not prohibited from selling Widgets to Uzbekistan.
The vigorous discussion in the comments to that post considers whether you should make it clear that is not prohibited from relates just to the regime under the contract, that it doesn’t preclude Acme from being subject to other constraints that prevent it from selling Widgets to Uzbekistan.
After further thought, I find myself OK with the position I took in the comments to that post:
I don’t think it’s necessary to make it clear that absence of prohibition is achieved exclusively by agreement of the parties. After all, nothing about Acme may says that it expresses only agreement of the parties as opposed to some extracontractual mechanism. And nothing about language of policy, for example The Option Price will increase to $5, says that it’s achieved through the contract; saying so in the contract is all that’s required.
But I now think it’s appropriate to leave it to drafters to decide whether they want to make it clear that absence of prohibition is considered purely from the perspective of the contract. That being the case, what’s the best way to express that?
The phrase is not prohibited from is a passive-voice structure. In the 2017 post, I suggest an active-voice structure: This agreement does not prohibit Acme from …. But on further reflection, I’m not keen on making the contract an actor. The contract isn’t doing the prohibiting, it’s the regime under the contract that’s doing the prohibiting, and that would make for an awkward active-voice structure.
That leaves me with two alternatives:
- Under this agreement, Acme is not prohibited from ….
- Nothing in this agreement prohibits Acme from ….
I’m inclined to go with the first option. It’s a word longer but is more straightforward, as it applies the negation directly to the concept of prohibition.
But if the other party thinks that broader legal constraints might prevent Acme from selling Widgets to Uzbekistan, it might want to add to the contract something like this: Acme acknowledges that it is responsible for determining whether it is subjected to broader legal constraints that would prevent it from selling Widgets to Uzbekistan. That would render redundant anything done to make it clear that absence of prohibition is considered purely from the perspective of the contract.
Any thoughts?
(By the way, issues raised by is not prohibited from apply also to is not required to.)
What is the issue? If acme violates federal export controls by selling to Uzbekistan, is there a concern that acme would try to defend itself by reference to the contract language? Will the court be selling tickets to the public on the day acme’s lawyers try to argue that?
Yes, that’s basically it! I don’t think anyone is under any illusion that it would ever result in a fight; we’re just trying to determine what’s the clearest, most sensible thing to do.
I suppose if someone (meaning uptight lawyer) is really concerned, they could include a provision where acme indemnifies (and holds harmless, of course) the other party from any costs incurred in dealing with this scenario, but that just seems like it’s compounding the problem.
If anyone is concerned, I think the way to deal with it is to make it explicit, in the way I suggest.
This is such a narrow, technical point that if I ever ran into it in practice, I hope I’d stop, breathe, pull my head out of the sand, and get a grapple on context again. The overwhelming majority of live-fire transactions should not depend on fitting something this wonkish and abstract airtight.
Contracts typically expresses obligations. That gives “not prohibited from” the flavor of a double negative, which does not arise readily in nature. If such a phrase nonetheless flowed fluently off some fool’s fingers, strong context is clearly at play setting an expectation that a party will or would usually be prohibited. The language is bucking some established trend.
Is there a norm in the industry that the parties want to modify? Has the contract itself set up some general obligation from which it now seeks to deviate? Is this some runaway lawyer playing LSAT games, who needs a time-out and a do-over? If it’s the lawyer, redraft. Otherwise, figure out the context an express the exception, context very much included. “As an exception to the XXX’s obligation in Section YYY….” “Despite the norm in XXX agreements like this one, ….” If the upshot is that a party can’t bring a breach-of-contract claim, consider spelling that out. Leave no doubt about what “under this agreement” would mean to accomplish.
Whatever you do, don’t tee something like this up as a pure question of abstract contract interpretation for some poor judge. The last thing clients need is more law elucidating what happens when their lawyers fail to write English that makes sense to the people involved.
In comments to the 2017 post, people with a good track record as informed consumers of contract language disagreed on this issue. Hence I looked into it, and I elected to look into it again in this post. I continue to think it’s not an issue, but I took the liberty of considering how I’d express the concept, if I wished to. Whenever we’re offered choices, I like to make an informed choice.
[Shunting my tweeted response over here.]
“Subject to applicable law, …” is my catchall for other obligations, restraints, rights, remedies, and their limits. It’s the worst kind of legalese that feels compelled to specify often that the rest of the world exists.
I see it often with internal references in agreements: Section 1.1: subject to Section 1.2,…. When the reference is far off, sure, it can be helpful. But when you say this sentence is subject to the next one, it’s hard to imagine how we got to this place.
I guess the usages discussed in this post are looking to do the opposite.
I don’t know whether these qualify as ‘thoughts’, but they do come from between my ears:
1/ Another way of framing the issue is whether ‘Acme is not prohibited from selling Widgets to Uzbekistan’ means (a) or (b):
(a) ‘Acme takes on no obligation under this agreement to refrain from selling Widgets to Uzbekistan’;
(b) ‘Nothing in the universe places any obligation on Acme to refrain from selling Widgets to Uzbekistan’.
2/ If the issue were just that ambiguity, the fix is to ditch the ‘is not prohibited’ formula and use something like (a) or (b) instead.
3/ But a deeper issue is why drafters would *ever* want to specify a thing the contract does *not* prohibit or does *not* require. After all, it’s a tautology that a contract prohibits what it prohibits and not what it doesn’t prohibit and requires what it requires and not what it doesn’t require (he said, anthropomorphising the contract for brevity’s sake).
4/ For example, a three-sentence provision: (a) ‘Acme shall paint the houses on the SOUTH side of Brimley Street. (b) Acme assumes no obligation under this agreement to paint the houses on the NORTH side of Brimley Street. (c) Acme assumes no obligation under this agreement to refrain from painting houses on the NORTH side of Brimley Street’.
In my view, (b) and (c) are needless and should be deleted.
5/ That reasoning pushes me to propose a ban on all ‘is not prohibited from’ and ‘is not required to’ formulations. Let drafters express boundaries on duties in the articulation of the duties, not in companion statements of lack of duty.
6/ Another issue is that if ‘Acme is not prohibited from selling Widgets to Uzbekistan’ means ‘Nothing in the universe places an obligation on Acme to refrain from selling Widgets to Uzbekistan’, what kind of contract language is that? Mutual acknowledgement? Language of declaration? Does it affect any party’s liability to any other party if Acme gets caught illegally selling Widgets to Uzbekistan and is legally sanctioned? A ban on ‘is not prohibited’ would make drafters face warranty, representation, and indemnification issues directly.
Happy New Year. –Wright