Today’s I offer you another interesting contracts verb structure, hereby instructs. Here are some examples from EDGAR:
The Employee hereby instructs the Company to transfer to such Managers Insurance and/or Pension Plan the amount of Employee ’s and the Company’s contribution from the Monthly Salary, as detailed in Annex A.
The Collateral Manager hereby instructs the Collection Account Bank, on the Business Day immediately preceding each Distribution Date, to convert amounts on deposit in the Collection Account into Dollars using the Applicable Conversion Rate to the extent necessary to make payments in Dollars pursuant to this Section 8.5.
The Issuer hereby instructs the Trustee and the Trust Collateral Agent to treat the Notes as indebtedness for all applicable tax reporting purposes, and each Noteholder (or beneficial Note Owner) shall be deemed, by virtue of acquisition of an interest in such Note, to have agreed, to treat the Notes as indebtedness for all applicable tax reporting purposes.
Tenant hereby instructs Landlord that, upon delivery of an Application for Payment and receipt of the foregoing supporting materials, Landlord shall pay eighty percent (80%) of the amount due under such Application for Payment (not to exceed, in the aggregate, the Available Allowance ) directly to Tenant ’s general contractor, Devcon Construction, Inc., (“Tenant’s GC”).
Where’s the Obligation?
The issue with hereby instructs is that it poses the question, Where’s the obligation? If you instruct me to do something, that’s not equivalent to my having to do it. You could argue that it’s implied, but I could just as easily argue that although I was open to doing whatever it was, under the circumstances it turned out to be impossible or inappropriate. As a drafter, I don’t want to invite that sort of fight.
Some other contract might supply the missing obligation: under that contract, if Party A instructs Party B, that triggers a Party B obligation. If that’s the case, instead of hereby instructs it would be helpful to be clear about the context: In accordance with [contract], …
But if there’s no such external obligation, it would be preferable to use language of obligation: instead of Acme shall instruct Widgetco to, say Widetco shall. That’s easily done in each of the examples above. That the action in question would be at the behest of the other party shouldn’t be a source of concern: the whole point of a contract is to get the other party to act in a way that’s consistent with your goals.
And it might be possible to address more simply whatever underlies hereby instructs. Here’s an example:
Before: Bennett hereby instructs Intuit to transmit $110,531.25 to the U.S. Treasury as Federal income tax withholding.
After: On behalf of Bennett, Intuit shall transmit $110,531.25 to the U.S. Treasury as Federal income tax withholding.
Using hereby instructs presents a different problem when it’s used to have a party instruct its counsel to deliver an opinion:
A favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of Dechert LLP , counsel for the Obligors, in form and substance reasonably satisfactory to the Administrative Agent, in substantially the form of Exhibit C, and in each case covering such other matters relating to the Obligors, this Agreement or the Transactions as the Required Lenders shall reasonably request (and the Borrower hereby instructs such counsel to deliver such opinion to the Lenders and the Administrative Agent).
In such provisions, a party is instructing a nonparty. That accomplishes nothing.
EDGAR also offers examples of use of hereby instructs that are devoid of any possible justification:
hereby instructs you to[read: recommends that you] consult with an attorney before executing this Agreement. FOAMIX hereby instructs and authorizes ASM to[read: ASM shall] manufacture the Products in accordance with the Manufacturing Process and FOAMIX’s manufacturing instructions.
And Let’s Not Forget Hereby Directs
There’s also hereby directs (not to mention hereby instructs and directs):
The Seller hereby directs the Servicer to instruct all Obligors to make payments of all Pool Receivables to one or more Collection Accounts or Lock-Boxes or Payment Processors.
For the moment, I’m assuming it raises the same sorts of issues as hereby instructs.
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4 thoughts on ““Hereby Instructs””
I wonder if anybody can dig up the history behind that phrase. It feels like something that may have been a habitual phrase from some particular line of law that got misappropriated for the broader uses you have demonstrated (by lawyers who charge by the word I suspect).
My guess was that the formulation originates in the banking world, where it’s commonplace for a customer to instruct its bank to do things, with the bank being obligated to do them. The only example in the banking-related bits of the UCC I could find was section 4A-302 in the (evidently) newish article on funds transfers.
I’m also reminded of the peculiar notion of British solicitors “taking instruction” from their clients.
This discussion seems off-base. At least as I have used it, “hereby instructs” is not intended to create an obligation on either party. Instead it is a provision which entitles one party to rely on the instruction of the other party, i.e. it is a liability-shifting provision.
For example, party A “hereby instructs” party B to deliver a payment that is owed to party A to non-party C. Party B can rely on the instruction to deliver the payment without liability to party A.
I imagine Ken will respond that the original payment obligation should be expressed as “party B shall deliver payments for party A to non-party C.” That is fine, but often the context makes the “hereby instructs” construct better. For example, (1) the payment obligation may be part of a separate agreement which is too difficult to amend, (2) the payment obligation may be part of a multi-party or multi-payment obligation which would make the specific payment to non-party C too cumbersome to express, or (3) party B may want the ability, but not the requirement, to deliver to non-party C (for example, party C may be hard to locate).