Add rightfully and rightful to the list of words that are best omitted from any contract.
The word rightfully occurs in 661 contracts filed as “material contracts” on the SEC’s EDGAR system, which makes it a relatively commonplace feature of the contract landscape. Here are some examples:
Confidential Information shall not include information that: … the Licensee rightfully obtains from a third party that has the right to transfer or disclose such information.
… or Becomes available to the general public through no fault of either party, or Is rightfully disclosed to either BSA or NuGen by a third party without a present obligation of confidentiality; … .
The obligations of this Section shall not apply to … (c) information which was rightfully in the possession of the receiving party prior to disclosure by the disclosing party; or … .
Without limiting the generality of the foregoing, the Administrator, the LC Bank, the LC Participants, the Purchasers and the Purchaser Agents and each of its Affiliates … (v) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located;
Licensee shall, at its own expense, provide attorneys reasonably acceptable to UFRF to defend against any actions brought or filed against any party indemnified hereunder with respect to the subject of indemnity contained herein, whether or not such actions are rightfully brought.
The first three examples occur in one of the standard exceptions to the definition of “confidential information” in a confidentiality agreement. This use accounts for about half of the instances on EDGAR.
The word rightful is used less often. Here are some examples:
“Governmental Acts” means any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Governmental Authority.
After the Final Settlement Date, each Party covenants and agrees that it will hold and promptly transfer and deliver to the rightful Party, from time to time as and when received by it, any cash, checks with appropriate endorsements … or other property that it may receive which properly belongs to the other Party … .
In furtherance and not in limitation of the foregoing, the applicable Revolving Credit Lenders, the applicable Letter of Credit Issuer and the Agent shall not be responsible for … : … (H) any consequences arising from causes beyond the control of the applicable Revolving Credit Lenders, the applicable Letter of Credit Issuer or the Agent, including any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority; or …
Upon termination of the contract, this URL shall be assigned to the Company as the rightful owner.
The problem with rightfully and rightful is that they’re imprecise. Rightful means “having a just or legally established claim; held by right or just claim.” But neither rightfully nor rightful gives the contract reader any sense of the basis for the entitlement in question.
For example, regarding use of rightfully in the exclusion from the definition of “confidential information,” it’s not clear whether rightfully means that the recipient must not have received the information in question from someone who is under an obligation of confidentiality not to disclose that information, or whether it means that the recipient must not have somehow broken to the law to get that information, or whether it’s meant to convey both of those meanings.
(Incidentally, reader and Koncision editorial-board member Chris Lemens suggests that this provision accounts for a large proportion of uses of rightfully because rightfully used to be a term of art in trade-secrets analysis.)
So either rightfully and rightful are fluff, or they grope toward some legitimate meaning. Delete them or replace them with a clearer alternative.
Of course, it follows that the same applies to wrongfully and wrongful. I don’t need to root around on EDGAR to know that that’s the case, but of course I will; you can expect at some point a blog post on that subject.