Stating that Contract Text Is Conspicuous

Parts of the Uniform Commercial Code require that text be “conspicuous.” For example, section 2-316(2) states that a disclaimer of the implied warranty of merchantability must be conspicuous.

Although section 1-201(10) of the UCC specifies that “language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color,” the UCC doesn’t say anthing about all capitals. And Amercian General Finance, Inc. v. Bassett, 285 F.3d 882 (9th Cir. 2002), debunked the notion that text needs to be in all caps to be conspicuous.

The lack of more detailed guidelines means that drafters can be nervous about whether contract text is conspicuous. So I was intrigued but not surprised when a participant at last week’s “Drafting Clearer Contracts” seminar in Denver mentioned how he had recently encountered a contract that contained a provision stating that the text that had to be conspicuous was in fact conspicuous.

Here, from EDGAR, are two examples of such provisions:

GRANTOR AND GRANTEE AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE OR ENFORCEABLE, THE PROVISIONS IN THIS CONVEYANCE IN ALL CAPS FONT ARE “CONSPICUOUS” FOR THE PURPOSE OF ANY APPLICABLE LAW.

ASSIGNOR AND ASSIGNEE AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LEGAL REQUIREMENTS TO BE EFFECTIVE, THE DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES OF ANY APPLICABLE LEGAL REQUIREMENT.

And here are two examples that take a different approach, in that they have each party agree not to claim that the text in question isn’t conspicuous:

Each party hereto agrees and covenants that it will not contest the validity or enforceability of any exculpatory provision of this Mortgage on the basis that the party had no notice or knowledge of such provision or that the provision is not conspicuous.

EACH PARTY HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS MORTGAGE ON THE BASIS THAT THE PARTY HAD NO NOTICE OR KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT “CONSPICUOUS.”

The drafting of these provisions is, of course, clumsy, but that’s not what interests me. Instead, these provisions had me wondering which category of contract language is most appropriate. Using stripped-down language, here are the possibilities:

  • Language of agreement: The parties agree that the text is conspicuous. [The lead-in is the only place for language of agreement. It’s redundant elsewhere, including here.]
  • Language of policy: The text is conspicuous. [Whether text is conspicuous isn’t an objective fact, so language of policy wouldn’t work.]
  • Language of belief: The parties believe that the text is conspicuous. [This acknowledges that conspicuousness represents a legal standard,  but using language of belief suggests that conspicuousness is unrelated to the parties’ views on the matter. I don’t think that makes sense.]
  • Language of prohibition: Neither party shall claim that the text is not conspicuous. [I’m wary of provisions that prevent a party from claiming something. I’d rather have it acknowledge that it has no basis for bringing a claim.]
  • Language of declaration: The parties acknowledge that the text is conspicuous. [This is what I’m inclined to go with, except that …]
  • Language of declaration: The Buyer acknowledges that the text is conspicuous. [… perhaps it makes sense to limit this sort of acknowledgment to the party to whom the conspicuous text is directed.]

Sorting through the possible categories of contract language helps a drafter determine exactly what they’re trying to say.

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.