A Manual of Style for Contract Drafting refers only once to the verb acknowledge. Heck, it doesn’t even merit an entry in the index. I’ll now give it the treatment it deserves.
Language of Performance, Revisited
I have to start by reassessing the categories of contract language. (If you just want the nitty-gritty, you might want to skip to the next section.)
In MSCD I state that one of the categories of contract language is language of performance, which serves to memorialize actions of the parties that are contemporaneous with the signing of the contract.
Here’s an example of language of performance: Acme hereby grants the License to Smith. In my first book, I call this kind of language a “ritual performative.” MSCD ¶ 3.8 notes that this kind of language of performance is to be distinguished from language of performance that uses a verb of speaking, such as acknowledge or agree.
MSCD offers language of representation as one of the other categories of contract language. But that creates a problem: Acme acknowledges that the Widget Contract has been terminated and Acme represents that the Widget Contract has been terminated both constitute, in grammatical terms, performatives using verbs of speaking. Consequently, any analysis of categories of contract language should group together provisions using acknowledge and provisions using represent.
That’s why in the next edition of MSCD I anticipate moving into its own category all language of performance using verbs of speaking. At the moment I have in mind calling that category “language of declaration,” but I’m open to suggestions. That category will subsume the current category “language of representation.” This tweaking of categories means that language of performance will no longer contain all performatives, but lawyers won’t care. I hope linguists will be understanding!
I don’t expect that this reassessment will rock anyone’s world, but I’m pleased to have come up with it, albeit belatedly. Language of representation as currently conceived always struck me as a little flimsy.
Appropriate Use of “Acknowledge”
So when is it appropriate to use acknowledge? Black’s Law Dictionary gives as a definition of acknowledge “To recognize (something) as being factual or valid,” but that provides little in the way of practical guidance. Here’s my take: Both represent and acknowledge serve to introduce statements of fact. You should use represent if the party in question has first-hand knowledge of that fact; you should use acknowledge if the party in question doesn’t have first-hand knowledge of that fact but instead is accepting as accurate a fact asserted by another party.
Here are three examples of appropriate use of acknowledge:
Acme acknowledges that the Consultant is in the business of providing services and consulting advice to others.
The parties acknowledge that breach of any obligation stated in this section 10.2 will cause irreparable harm to the Disclosing Party and that monetary damages will not provide an adequate remedy.
Each Shareholder acknowledges that the Merger Shares have not been registered under the Securities Act and are instead being issued under an exemption from registration.
Relation to Recitals
An alternative to having Party X acknowledge that a fact asserted by Party Y is correct would be to include that fact in the recitals. If the fact in question relates to the background to the transaction, it would certainly fit in the recitals. But if the fact is particularly important, it might be best to reinforce that importance by having one or more parties acknowledge that fact in the body of the contract.
Alternatives to “Acknowledge”
What about understand? And accept? They serve essentially the same function as acknowledge, so in keeping with the first overarching rule of drafting—be consistent!—I suggest that you dispense with them in favor of acknowledge.
Inappropriately Used to Introduce Other Language
Acknowledge should only be used to introduce a fact asserted by another party. It shouldn’t be used to introduce language that itself constitutes a category of contract language.
In the following two examples, acknowledge is used inappropriately to introduce language of obligation and language of policy, respectively:
acknowledges that itshall conduct its own independent investigation of the financial condition and affairs of each Borrower. The parties acknowledge that this[read This] agreement does not supersede, modify, or otherwise affect the terms of any stock options that Acme granted the Executive before the date of this agreement.
For Fans of Rhetorical Emphasis
Drafters will sometimes have a party “unconditionally acknowledge” or “expressly acknowledge” something. Those usages constitutes rhetorical emphasis. (For more on rhetorical emphasis, see this post.)
Used in Combination with Other Verbs
It never makes sense to use acknowledge in combination with another verb. Acknowledge and agree is a particularly common example of this practice; depending on what follows the verbs, you should either use acknowledge on its own or dispense with both verbs. (MSCD ¶ 3.31 says that because in the contract lead-in the parties state that they agree to that which follows, nothing is served by having the parties state in the body of the contract that they agree to a given provision.)
Sometimes a drafter will throw in the kitchen sink:
The Consultant hereby represents, warrants, and acknowledges to and covenants and agrees with the Company as follows: