Let’s fill a gap in A Manual of Style for Contract Drafting!
MSDC has something to say about mutually agree, and it has something to say generally about reasonably modifying a verb, but it doesn’t say anything about reasonably agree.
I’m here to tell you that if you’re contemplating using reasonably agree in a contract, you might want to hold off.
Here’s an extract from a merger agreement:
As soon as reasonably practicable after the Effective Time … Parent and the Surviving Company will … send to each record holder of an outstanding share of Company Common Stock as of immediately prior to the Effective Time … (A) a letter of transmittal … in customary form and with such other provisions, in each case as Parent and the Company may (prior to the Effective Time ) reasonably agree, for use in effecting delivery of shares of Company Common Stock outstanding immediately prior to the Effective Time and entitled to Common Stock Merger Consideration pursuant to Section 3.01 to the Paying Agent, and (B) …
Use of reasonably agree in this extract suggests that if Parent and the Company agree, but their agreement is unreasonable, the standard won’t have been met. But Parent is the acquirer, the Company is the target, and the merger agreement is between Parent, a merger sub, and the Company. If Parent and the Company agree to something, who is there to object!
Same with this, from some other bit of EDGAR flotsam:
The Purchasers shall have received from Cooley LLP, counsel for the Company, an opinion, dated as of the Closing, in customary form and substance to be reasonably agreed upon with the Purchasers and addressing such legal matters as the Purchasers and the Company reasonably agree.
If the Purchasers and the Company agree to something, who is going to challenge that the agreement was unreasonable? Might the Company suggest, after the fact, that its agreement with the Purchasers had in fact been unreasonable? That wouldn’t make sense.
The one context where reasonably agree might work is when those doing the agreeing consist of one or more parties representing one side of the transaction, or one or more nonparties. Here’s an example of the former:
The Credit Parties shall satisfy the milestones set out on Schedule 1 on or before the dates indicated therein (or such later dates as the Requisite Holders may reasonably agree) (collectively, the “Milestones”).
The Credit Parties are the borrower and two guarantors; the Requisite Holders own a majority of the notes in question. So it’s conceivable that the Credit Parties might have thoughts on later dates selected by the Requisite Holders. But I suggest it would be clearer to have reasonableness address not agreement of whoever it is, but instead whatever is the subject of the agreement—in this case, the dates. Here’s how I’d do that:
The Credit Parties shall satisfy the milestones set out on Schedule 1 on or before the dates indicated therein (or any reasonable later dates the Requisite Holders agree to) (collectively, the “Milestones”).
To summarize: Don’t use a standard based on whether both sides to a transaction reasonably agree to something: if they agree, end of story! But if the standard is based on whether one or more parties representing one side of the transaction, or one or more nonparties, reasonably agree to something, that makes sense, but you might want to have reasonableness relate not to agreement of whoever it is, but instead whatever is the subject of the agreement.
