A court opinion doesn’t have to come from an exalted court in order for it to raise an issue of interest to drafters generally.
A case in point is Managment Strategies v. Hous. Auth. of New Haven, 2009 Conn. Super. LEXIS 1550 (Conn. Super. Ct. June 2, 2009). In that case, the following release language was at issue:
Upon completion of the Completion Work, [FNICA] and [the plaintiff] shall, immediately upon full payment by [the defendant] of all amounts due hereunder, release [the defendant] from any and all liability hereunder, under the Contract, and with respect to any action taken by [the defendant] with respect to the Contract, the [Takeover] Agreement, and the Project.
The plaintiff never issued the release, even though the defendant had satisfied the conditions. Then in the lawsuit, the plaintiff objected to the defendant’s motion for summary judgment, claiming that because the plaintiff hadn’t released the defendant, the defendant wasn’t entitled to summary judgment. Sensibly enough, the court held that the plaintiff couldn’t base it its claim on its failure to issue a release that it had been required to issue under the contract.
The plaintiff would have been precluded from making this lame argument if the release had been automatic. And more generally, making a release automatic should simplify matters. Chasing after Acme to get it to issue a release could be a nuisance—if Acme’s not inclined to do you favors, it might be willing to drag its heels.
How do you make a release automatic? Instead of saying If X, Acme shall release Widgetco, you say If X, Acme will be deemed to have released Widgetco. (The former is language of obligation; the latter is language of policy, using deem; see MSCD 12.65.) The release happens automatically, without requiring Acme to do anything.
Making a release automatic would work only if the conditions to the release can easily be established and if the party being released doesn’t need to show someone (for example, a lender) a piece of paper called a release.
The court in Managment Strategies referred to the notion of a release being automatic, but it also expressed the same concept by using the term “self-executing.” Black’s Law Dictioary defines self-executing as “(Of an instrument) effective immediately without the need of any type of implementing action.” But the term is applied primarily to treaties, and I don’t see that anything would be gained trying to apply it to contracts too. I think it makes more sense to refer to an automatic release.
14 thoughts on “Making a Release Automatic”
I think I would say:
“Upon X, Widgetco shall be released automatically…”
I am happy with the use of the passive voice, because in this case no party should need to take any action. I prefer it to “deem” simply because, for me, “deem” is used to create a fiction for the purposes of the contract. In this case the fiction would presumably be that Acme has expressly released Widgetco – this works, but it seems neater to me to entirely remove the concept of Acme’s active involvement in the release.
I also considered removing “automatically” as verbiage, but that might leave the door open for a pedant to argue that Acme should still actively release Widgetco, as argued in the Management Strategies case, by inferring “by Acme” to the end of the phrase. I don’t think that argument would succeed, but it would be better to avoid it entirely.
Art: I’m not keen on your solution. Using the passive voice doesn’t eliminate the implication of action, it simply hides it, sort of. And incidentally, your shall fails the “has a duty” test. Ken
Here’s the way I do it:
Conditioned and effective upon X, Acme hereby releases Widgetco.
I don’t like “deemed” because there really shouldn’t be any “fiction” here, and “hereby” indicates that this act is the operative one and that no further document is required (MSCD 2.13).
Ken, what about the following alternative formulation: “If X, Acme without further action on its part hereby releases Widgetco….”
This formulation using language of performance obviates the “fiction” concept that concerns Art. [end]
Robert and MAli: Your proposals share the same problem, to my mind a fatal one: you’re releasing now (using language of performance) rather than releasing later, once the conditions have been satisfied.
And I don’t have any problem with the legal-fiction connotations of deem. The notion of Acme’s releasing Widgetco suggests that Acme is required to act; if you use deem, no action is required, hence the legal fiction.
I don’t think Acme is making a present release—I think Acme is performing an act now that will become operative (without further action) when the condition is satisfied. I would analogize it to signing a deed (which states that title is hereby conveyed) and making a conditional delivery of the document (the condition being performance of the buyer’s obligations). The deed is phrased as a present act, but it is not effective until the conditions of delivery are satisfied.
Robert: I don’t think the analogy is apt. What you’re trying to do is like telling a prisoner, “You’re free now, on condition that you spend the next 90 years in jail.” Ken
Ken: It was use of the word “automatically” that I was using to eliminate the implication of action, rather than the passive voice per se – it is just that, as there is no actor, there is no absolute need for an active voice as there would usually be. Sorry for not making my first post clear on that score.
An active voice could equally be used, and would in principle be clearer, but a good word didn’t occur to me in the time that I wrote my post – it would be something along the lines of “the liabilities shall fall away”, with the liabilities as the subject of some more appropriate verb.
Regarding “shall”, although it usually means, in a legal context, that a person will have a duty to do whatever it is they “shall” do, I think that sense is more restrictive than the full scope of the future imperative tense actually allows. When Cinderella is told “You SHALL go to the ball”, it doesn’t mean that she has a duty to go the ball, but that the fairy wants to make it happen. Or “We Shall Be Free”, by Garth Brooks (sorry), which is again not a duty but a desire.
In this case I used “shall” to show the intention of the parties. If the clause said “will be released”, it could perhaps seem like a statement of fact (or a prediction) rather than an expression of what the parties want to make happen. For the record though, I don’t think either “will” or “shall” would cause any legal problems given the clarity of the context. Though of course that is no excuse not to get it right if one can.
A few thoughts:
1. I agree with Ken about the difficulties of a “hereby releases” formulation. There are some precedents for this working in specific legal contexts. Eg section 91(1) of the UK Copyright, Designs and Patents Act 1988 provides:
“Where by an agreement made in relation to future copyright, and signed by or on behalf of the prospective owner of the copyright, the prospective owner purports to assign the future copyright (wholly or partially) to another person, then if, on the copyright coming into existence, the assignee or another person claiming under him would be entitled as against all other persons to require the copyright to be vested in him, the copyright shall vest in the assignee or his successor in title by virtue of this subsection.”
The above wording allows a present assignment of future copyright. (I have a vague idea that there may be something similar in US copyright law?) However, in the absence of specific legal authority, I would not be keen on assuming that a present release could be effective in respect of a future event.
2. Lawyers are used to working with the idea that an event can be deemed to occur. A quick Google of “deeming provisions” throws up lots of examples. But clients are not always familiar with this idea. I vividly recall a client (a university science professor) querying a reference to deemed events in a contract – he had a problem with the concept of a deemed event and expressed his disapproval in trenchant terms. So perhaps use of this concept falls into the category of lawyer’s stuff which a plain English agreement should avoid? Or is it a sufficiently important concept that we should use it despite it being potentially difficult for a layman to understand?
3. Therefore, the best I can come up with is a formulation such as:
“Upon X, WidgetCo shall be released… Such release shall take effect automatically upon X, without the need for further action on the part of Acme.”
Art, Mark: You know how to drive a guy crazy!
Art: Your musings on shall are incoherent. Among other problems, I think that in referring to “the future imperative tense” you’re garbling your grammar terms. And you also don’t take into account that historically, the meaning of shall shifted depending on whether you were using the first and second person or the third person.
But more generally, you discuss use of shall as if you were the first person to broach the subject. A good few pages of MSCD are devoted to use of shall, as are a few posts on this blog. It requires some gumption to presume to school me on the subject without tackling my analysis. It’s a topic I feel strongly about: without rigorous use of shall you can’t master verb use, and without mastering verb use you can’t control contract language.
Mark: I take issue with (1) your use of the passive voice, (2) your use of such as a pointing word (see MSCD 12.349), and (3) the redunancy (using both “automatically” and “without the need for further action …”).
I hope I’m not being too feisty …
Ken, be as feisty as you like!
1. Passive (if that is what it is) is necessary as we want to avoid active steps. I did consider saying “become” rather than “be” released, as we are talking about – if you will forgive the floweriness – a transcendent state rather than a passive voice.
2. I like pointing, and dislike “the said …” It saves time. If I weren’t writing a contract, I might say “The release…”. “Such” gives me another defence [US: defense] against hostile interpretation by traditionally-minded lawyers. I want my wording [US: language] to win in court, even if it doesn’t win style competitions.
3. Repetition for emphasis is inelegant, I admit. But it is belt and braces [US: suspenders] to get the point across. After all, this debate is about avoiding adverse interpretations. Will you forgive the redundancy if I say it is a rhetorical device, and use a Greek expression to dignify it, eg palilogia, scesis onomaton, or pleonasmus (but not tautologia or homiologia)?
All the best, Mark
PS On “shall”, my view, based partly on reading my late mother-in-law’s school English grammar book, is that contracts are generally written in the emphatic mood, and that some self-appointed grammarians, probably in the 18th century, decided to distinguish between the emphatic and the future by making the following rules:
I shall, you will, he, she or it will, for the future;
And reversing it for the emphatic, ie I will, you shall, he, she or it shall.
Contracts are usually written in the third person singular, emphatic mood. “Party X shall…” is the style adopted by leading English law firms.
Ken, I don’t think this is fundamentally contradicting MSCD [2004 edition, I’m afraid] in sections 3.16 to [US: through] 3.20, although you use different terminology and deal with many more issues and examples.
Mark: I return to the fray, much of my feistiness drained out of me by a day-long seminar.
You did indeed use the passive voice. That doesn’t dispense with the need for action, it merely disguises it.
The alternative to “Such release” isn’t “Said release” *makes gagging noise* but rather “That release.” That’s what humanoids say, and it isn’t subject to confusion. Using such as a pointing word says to the reader that it’s more important to the writer to project an image as a pointy-headed lawyer than it is to write clearly.
As regards redundancy, I quote Talking Heads: “Say something once, why say it again?” As for its rhetorical merits, Congratulations, you’re following in the footsteps of the author of Beowulf. And I love the Greek erudition! Me, I’m following in the footsteps of writers of computer code. I’m not trying to convince anyone or impress anyone. I just want to regulate conduct.
I’m no grammarian, and I don’t have my books handy, but I think the concept of the “emphatic mood” is marginal, and doesn’t have anything to do with shall. Otherwise, your outline is basically in line with my account. So what’s the issue?
Actually, I’ll tell you what the issue is—you need to get hold a copy of the second edition of MSCD! The discussion of shall is significantly expanded compared with the first edition.
Thank you for your indulgence.
I think we’re all exhibiting a bit too much confidence that ‘upon X’ is necessarily an objective measurement. Automatic deemings work well if ‘upon X’ is an inarguable thing, but all too often ‘X’ is something that reasonable people may argue over (such as “the job was finished”).
So, folks usually think there’s some need for both parties to get an opportunity to look at the facts and come to a conclusion that X has in fact occurred, which may well preclude automatic deeming provisions.
Which is why I would rarely see a pure automatic deeming. There’s usually a need to have some process that involves both parties. But, the clumsy method shown in the example is probably the poorest of choices for the very reason shown in the case—it depends on the non-benefitting (sp?) party doing something purely for the benefit of the other party (with little consequence to doing that job poorly or not at all).
Instead, particularly if I’m working for the benefitting party, I’d craft something like having the benefitting-party with an obligation to give a notice to the other party when the benefitting party believes X has occurred, stating that “we hereby certify that X has occurred”, and the contract would set out that unless non-benefitting party gives some indication of a disagreement with that certification the automatic deeming will occur. In short, it doesn’t depend on the non-benefitting party actually doing something, but nonetheless allows for some opportunity to object.
Of course, even that doesn’t work if the definition of X is so poorly concocted that it’s unlikely that reasonable parties will draw the same conclusions based on the same set of facts.