John Gillies, director of practice support at the Toronto law firm Cassels Brock, spoke on contract drafting at a conference put on by the Ontario Bar Association last week. He was kind enough to send me the paper he had prepared.
John is no stranger to what I do. For one thing, I’ve conducted a couple of seminars at Cassels Brock, and I’m pleased that I’ll be visiting them again later this month. So it came as no surprise that John mentioned me and MSCD a few times in his paper. But the following sentence caught my eye:
Although it is American, much of the advice in [MSCD] is equally applicable [in Canada] (subject to the usual caveat that you will have to ensure that you can distinguish what is not applicable).
Parts of MSCD don’t apply outside the U.S.? I thought it worth exploring that notion further.
The General Rule
Here’s what I say in the introduction to MSCD:
Anyone drafting contracts in English, wherever they may be, could safely use this manual. Just as the differences between British and American English are trivial, contracts drafted in the U.S., the United Kingdom, Australia, Canada, and other English-speaking countries share the same basic contract concepts, use essentially the same language, and exhibit comparable layout. Any differences are for the most part a function of loose custom and could be disregarded in favor of whatever usages are most efficient.
I say essentially the same thing in this site’s note to non-U.S. lawyers.
What about caselaw or statutes? The law affects what you say in a contract, but it should have no bearing on how you say whatever it is you want to say. When it comes to articulating the intent of the parties to a contract, the drafter should aim to speak directly to the reader.
In particular, speaking instead to the courts—in other words, relying on caselaw to give meaning to your contract language—would be entirely counterproductive, for the following three reasons:
- Readers can’t count on understanding what’s going on in any given contract, as many business contracts are hightly technical, but they do expect to understand the building blocks of language that are used. It would be hopelessly unrealistic to expect them to be aware that a court has parsed some bit of everyday language in a way that wouldn’t make sense to the average educated reader.
- Caselaw is full of instances of courts displaying a poor grasp of semantics. It would be foolhardy to rely on courts to be arbiters of everyday language.
- Courts in different jurisdictions have seen different meanings in everyday usages. A prime example of that is how U.S. courts treat efforts (or endeavours) provisions very differently than do English courts. Such differences could not conceivably reflect differences in everyday understanding in those jurisdictions, so relying on courts to determine the meaning of everyday usages is to invite inconsistency.
But MSCD does refer to caselaw sporadically, all of it from the U.S., except for a few English cases and a couple of Australian ones. (It also refers to some statutes.) If I say that drafters shouldn’t look to caselaw to give meaning to contract language, why do I cite caselaw in MSCD? Because caselaw serves an invaluable function: it highlights those usages that contract parties, and judges, find confusing. So I take caselaw into account when determining which usages are the clearest. Mostly limiting my research to the U.S. doesn’t represent much of a compromise: after all, it represents the biggest legal market. And you don’t have to be a U.S.-based drafter to benefit from lessons learned from U.S. caselaw.
What about differences in terminology? Might not warranty mean something different in Finland than it does under California law? Yes, it might, and which meaning applies would depend on what law governs the contract in question. But a recurring theme of MSCD is that you should address issues directly rather than hoping that confusing jargon will get you there.
In rare instances, caselaw and statutes do have a bearing on the building blocks of contract language in that they unhelpfully state that certain words and phrases have a magic effect beyond their usual meaning. Under the Uniform Written Obligations Act, enacted only in Pennsylvania, any written release or promise will not be unenforceable for lack of consideration if the signer says that it intends to be legally bound; see MSCD 1.124. And the Supreme Court of Texas has said that for purposes of options contracts, a sham recital of consideration is effective; see MSCD 1.123. Those are the only two instances I can think of under the laws of the U.S. states.
A drafter might wish to take advantage of such unfortunate oddities. For all I know, the caselaw or statutory law of any one or more jurisdictions outside the U.S. may in comparable ways work to give words magical effect, but I have no reason for thinking that happens anything but very rarely, if at all.
The above discussion relates to any given word or phrase having different meanings in different jurisdictions. One can identify other, less problematic differences between jurisdictions.
Contract language will reflect differences in everyday English. For example, use of timely as an adverb would likely appear archaic to British readers; see MSCD 12.30. And whereas a U.S. drafter would state a date in the introductory clause using the format April 1, 2009, a drafter in another country might use the format 1 April 2009. Because I mention such differences in MSCD, they don’t represent a conceptual limitation on MSCD‘s usefulness outside the U.S. And in the scheme of things, such differences are trivial. But I could do better: I neglected to mention the alternative date formats in MSCD 1.23, and I’m sure readers could point out other differences worth noting.
Differences in how institutions operate in other jurisdictions might require that you adjust the information stated for a party in the introductory clause. I say as much in MSCD 1.50.
And in this recent blog post on using and defining the word subsidiary, I mentioned that in a given context you might want to refer instead to the definition stated in the IRS code. In a comment, reader Art noted that English drafters tend to refer to the definition of subsidiary contained in the Companies Act. In Canada, drafters would presumably look to the definition contained in the Business Corporations Act of a given province. If this topic makes it into the third edition of MSCD, the related discussion will reflect these nuances. And I’d aim to have MSCD reflect such cross-jurisdictional subtleties wherever they crop up.
To sum up: If you see MSCD as being of varying utility depending on what jurisdiction you happen to be in, then it might be that you misunderstand an important part of my approach to contract language. Contracts should speak to the reader in standard English, rather than using magic words in an attempt to speak to the courts. If the law in any given jurisdiction is wacky enough as to trump the everyday meaning of words, that happens too rarely to detract from MSCD‘s general relevance. As for other variations in how drafting usages are employed in different jurisdictions, MSCD aims to note them.
So, dear reader, can you suggest ways in which the recommendations in MSCD don’t apply in your jurisdiction, or variations in drafting usages that I should note in the next edition?
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