Updated: Language of Performance for Buying Stuff

Updated October 11, 2015:

Gee, I go away for a couple of days and commenters have a party!

Here’s where I end up on this:

First, hereby purchases and hereby sells are both valid to effect sale of whatever it is. I checked with Chris Kunz, and she confirmed as much.

Second, despite suggestions to the contrary in the comments, it doesn’t matter whether you use purchases or sells. Each verb refers not to a unilateral action but instead to transfer of the item in question. The verb you choose simply determines which party’s perspective you adopt; it has no substantive significance.

Third, sells might be the more popular choice. After all, UCC Article 2 is called “Sales”, not “Purchases”.

Fourth, in the interest of logic and concision, I wouldn’t use both hereby purchases and hereby sells, but if someone asked for both, I wouldn’t waste time objecting—I’d give them both.

Fifth, if you use language of performance, the purchase price could be paid as follows:

  • on signing the contract, using language of performance to transfer something (for example, a license) in exchange for whatever is being sold;
  • concurrently with signing, perhaps using language of concurrence (on signing this agreement, X is paying); or
  • later, using language of performance (shall pay).

Sixth, if instead of language of performance you use language of obligation, it would be standard to subsequently effect the transfer by means of a bill of sale that uses language of performance.

And seventh, even though you can use language of performance to effect transfer, if might not be the best way to structure a given transaction.

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Original Post, October 5, 2015:

Last week I received the following inquiry from Kevin Toll, a litigator based in Southfield, Michigan:

Is there any difference between “Acme hereby purchases the Assets from Doe” and “Doe hereby sells the Assets to Acme”? Is one better than the other? And is it ever necessary to say “Acme hereby purchases the Assets from Doe and Doe hereby sells the Assets to Acme”?

That’s the kind of inquiry that makes me want to whack myself upside the head and then buy Kevin a drink. Because it’s so basic, yet it’s something I’ve never asked myself.

To answer Kevin’s first question, Acme hereby purchases the Assets from Doe and Doe hereby sells the Assets to Acme are equivalent. The bigger question is whether one needs to say both, in a reciprocal arrangement.

As a matter of logic, the answer is clearly no, one does not. If Acme is purchasing the Assets from Doe, it follows that Doe is selling them. I routinely say that there’s no point in using agreement of purchase and sale as a title, as it’s obvious that if someone is selling, someone else is also buying—nothing is gained by referring to both sides of transaction. That should apply equally to language of performance. This is Kevin’s view too.

If I’m going to use only one verb, which one would I use? I’d go with hereby purchases, just because the side with the money generally calls the shots.

But a quick survey of the mud volcano that is the SEC’s EDGAR system shows that the reciprocal arrangement (with all sorts of bogus accretions) is way more popular than using just hereby purchases or hereby sells. I see two possible causes.

First, slipshod extension from language of obligation, where reciprocity makes sense: if you omit one of the obligations from Acme shall purchase the Assets from Doe and Doe shall sell the Assets to Acme, the party in question would be free to back out.

And second, I suspect that drafters feel more comfortable having the language explicitly reflect the reciprocal nature of the transaction, even at the cost of redundancy.

So what would I do? And what would I recommend that you do? My heart is on the side of using just hereby purchases, but I wonder whether you’d so routinely be asked to make it reciprocal that you’d have to be stubborn not to do so from the get-go.

What say you?

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.