Pick the Category of Contract Language!

It’s time for that ever-popular game, Pick the Category of Contract Language! Bob, please tell our viewers what the choices are!

  • Acme shall make all decisions relating to commercializing Licensed Products. [By using language of obligation, this expresses, appropriately, the idea that Widgetco wouldn’t want Acme to ignore what’s required to commercialize products. But it doesn’t express that Acme will be in charge.]
  • Acme will be responsible for all decisions relating to commercializing Licensed Products. [I recommend using will be responsible to say that Acme doesn’t have an obligation to do something, but if it doesn’t to it, it will be liable, as in Acme will be responsible for all taxes. That meaning doesn’t make sense here.]
  • Acme may make all decisions relating to commercializing Licensed Products. [This could be understood as meaning that if Acme doesn’t make the decisions, someone else will. And it doesn’t convey that Acme will be in charge.]
  • Widgetco shall not make any decisions relating to commercializing Licensed Products. [This suggests that Widgetco might be in a position to make decisions; it won’t be. And it’s silent on Acme’s role.]
  • Acme will be in charge of all decisions relating to commercializing Licensed Products. [So how about this?]

Anyone want to set me straight?

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.

22 thoughts on “Pick the Category of Contract Language!”

  1. It seems to me that the reason all these examples fall short is that the concept to be expressed hasn’t been adequately nailed down. It isn’t clear (at least to me) precisely how the provision is intended to affect the obligations of the parties, and I think that one would have to know more about the transaction to make it clear. If the intent is to give Acme some kind of priority over Widgetco in making commercialization decisions, determining the appropriate language would depend on Widgetco’s relationship to those decisions. Will those decisions impose affirmative obligations on Widgetco? If so, it would probably be best to spell those obligations out. Will Widgetco have no affirmative obligations, but be required not to take some action that could impede Acme’s decisions? Does the contract just need to specify that Acme’s commercialization decisions don’t excuse Widgetco’s performance? Is there, as implied in the first example, also an obligation undertaken by Acme to make commercialization decisions? If so I don’t see any reason why one should seek to roll it into the same sentence that creates Widgetco’s obligation.

    These alternatives are all pretty different from the standpoint of performance, so I don’t find it surprising that a provision that doesn’t distinguish between them would end up being vague. The problem seems to be one of ambiguous purpose rather than ambiguous drafting. In practice I find that provisions like this are usually just useless flotsam stuck into an agreement by someone who wanted to feel like he was describing the deal accurately without thinking about whether it had any impact on the parties’ obligations.

    • Widgetco is licensing technology to Acme, which then runs with it.

      Perhaps you’re seeing greater complexity than is in fact there. For one thing, you’re invoking ambiguity and vagueness (terms with specific implications) where I see neither vagueness nor ambiguity.

      • Is the reason for stating that Acme will make commercialization decisions, then, that Widgetco could otherwise claim that the license didn’t extend to making those decisions? Is there some way in which the license would otherwise give Widgetco the right to make commercialization decisions? I still think we’d need to know more about the circumstances creating the need for the sentence to draft it precisely.

        I didn’t mean to say there’s much drafting ambiguity about any of these–it’s fairly clear what “Acme will be in charge of . . .” means as a statement of fact. What isn’t clear to me from any of the examples, however, is how they affect the parties’ obligations under the agreement–in short, what the sentence is supposed to be doing. I think that lack of clarity is why it becomes difficult even to assign the statement to a category of contract language.

    • I share some of Procius’ concerns. I think one needs to understand the underlying relationship and the drafter’s intention; the wording itself is unclear. I assume this clause would appear in an exclusive licence agreement. Over the lifetime of the agreement, decisions may need to be taken about a range of issues, including patent filing decisions, whether to sue infringers, decisions on what products to develop, the development activities, how the products will be commercialised (markets, pricing, etc), and so on.

      Three potential terms can be gleaned from the examples above: (1) licensee has exclusive right to take these decisions vis-a-vis licensor, (2) licensee shall take these decisions, (3) licensee shall indemnify licensor against liability arising from taking these decisions (“be responsible for”).

      I suspect the drafter’s intention may have been to clarify that, as part of the grant of exclusive rights, these decisions will be for the licensee alone and the licensor won’t retain any rights to decide these matters. In the absence of such a provision, national patent laws may reserve some of these rights to the licensor, eg the right to sue infringers. I also suspect that the drafter wasn’t thinking in terms of imposing obligations on the licensee; “you will take decisions” is a particularly vacuous obligation. Perhaps there is a separate clause requiring the licensee to use “reasonable efforts” to bring products to market in a timely manner (!)

      • Sure, there’s a broader context. But how do we handle this part? Saying has exclusive right isn’t consistent with categories-of-contract-language analysis. It’s language of discretion, so if I were in your shoes I’d say only the Licensee may. My version doesn’t use only; maybe adding that is enough to make it the winning entry.

  2. It looks to me like you’re trying to convey two distinct ideas with one verb. It might be better to separate them, e.g.: Acme shall commercialize the Licensed Products, and in so doing may make such decisions as it deems appropriate.

    • Isn’t the second component an empty husk? “Vance shall complete the crossword puzzle, and in so doing shall make such decisions as he deems appropriate.”

      • Point taken, but the question still remains of how to distinguish the two concepts, one an obligation and the other an assignment of oversight. So you could substitute “will be in charge of all decisions relating to that commercialization.”

  3. What are your thoughts on “Acme will be in charge of, and shall make, all decisions relating to commercializing Licensed Products”?

  4. I have no dog in this hunt, but I am curious about what category of contract language applies to ‘Acme will be responsible for all taxes’. I would have guessed ‘obligation’, as in ‘Acme shall answer for all taxes’, but I see no ‘shall’ in the formula, so I am in doubt.

  5. How about: “Acme has sole authority to make all decisions relating to commercializing Licensed Products.”

  6. “Any decisions to be made relating to commercializing Licensed Products shall be made by Acme.”


    “Acme alone shall make decisions relating to commercializing Licensed Products.”

    • Hi. Your first option is in the passive voice. And it suggests that existence of decisions is separate from who makes them, which I don’t think makes sense. Your second option has the same issue.

      • Fair enough on the issue of passive voice.

        On the second one, I take your point but am of the view that that the existence of decisions on commercializing the Licensed Products is inherently distinct from who makes them, especially if any such decisions made by one party would affect the position of the other(s).

        That said, what about “Acme shall make any decisions relating to commercializing the Licensed Products”? (Option 1, replacing only “all” with “any”.) Includes both language of obligation and shows that Acme has discretion to make decisions, rather than quietly implying that decisions must be made.

        • You can’t separate existence of decisions from who makes them. It’s not as if decisions arise on their own, in a vacuum. Instead, you figure out your plans, and that leads to decisions, which you then make.

  7. Ken:

    Like some other commentators, I think you are trying to hit two targets with one sentence, though I think the targets are different from what they identified. The first target is the idea that, as between the parties, Acme makes the decisions and Widgetco defers to them. (I think this was the main point of your question.) The second target is the idea that Acme can hold Widgetco to some standard of commercialization, below which some remedy might be appropriate. (I think this part got mixed in where it [possibly didn’t belong in your initial question.)

    If I’ve read your intention correctly, then I’d suggest two sentences.

    The first sentence would address the first target: “Widgetco shall not interfere with any decisions that Acme makes relating to commercializing Licensed Products.” This is language of prohibition. I think the key thing here is not to state that Acme will make decisions, but that Widgetco won’t. The fact that Widgetco must make some decisions gets handled by the second sentence.

    (Depending on industry practice, there might be other things that need to be negated. For example, one might need to say “Widgetco is not required to consult with Acme on any decisions it makes relating to commercializing Licensed Products.” That is language of discretion.)

    The second sentence would address the second target. If a claim of breach is the right remedy, then it would be language of obligation: “Acme shall use reasonable efforts to commercialize Licensed Products.” If only termination (either of the agreement or of exclusivity) is the remedy, , then language of discretion might be appropriate: “Widgetco may terminate this agreement [or exclusivity] if Acme fails to use reasonable efforts to commercialize Licensed Products.” The idea that Widgetco must make decisions related to commercialization is implicit in the obligation to use reasonable efforts to commercialize Licensed Products. There are other things that Widgetco must also do, so I wouldn’t call out decisions in this sentence.

    (In addition, the parties could more closely define what reasonable efforts might mean, or might adopt proof-shifting mechanisms, like sales below some number shifting the burden of proof to Widgetco to show that it had made reasonable efforts. Much of that might be language of policy.)


  8. Some comments, after a few days’ reflection:

    1/ A better name for the game might be: ‘Which of the Following Formulations Best Expresses the Drafter’s Unstated Idea?’

    2/ When it finally comes out that the drafter’s exact unstated idea is that ‘Acme will be in charge of X’ (whatever that means), it’s a no-brainer that the best choice is ‘Acme will be in charge of X’.

    3/ I confess my inability to ‘pick the category’ of specimens 2 and 5. They don’t use ‘shall’, so they’re not language of obligation. That seems to leave language of policy, which is troubling, since they both in substance impose an obligation.

    4/ That brings up the question whether the categories of contract language are categories of form or categories of substance. I respectfully submit that if an ‘idea’ exists that can be expressed accurately and fully in more than one category of contract language, then those categories are matters of form and not of substance.

    5/ If the same idea can be expressed in a either of two formulations, each belonging to a different category of contract language, the choice which to use seems to come down to concision (with clarity being a component of concision — brevity without clarity is not concision).

    6/ Consider the following two formulations: (a) ‘Acme shall never do ABC’ (prohibition) and (b) ‘Acme shall always do things other than ABC’ (obligation). If these are deemed differing expressions of the same idea, then concision favours (a) as briefer and more direct.

    7/ I guess my point is that if the original idea is murky, trying to express it in different categories may sharpen up the idea. Once the idea is sharp, the best category will usually become obvious. The process reminds one of the Zen saying, ‘When the pupil is ready, the teacher appears’.


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