The “Amendment” Section and Categories of Contract Language

Once you’re attuned to my framework of “categories of contract language,” as laid out in chapter 2 of MSCD, you’ll see its implications at every turn.

A big part of my recent article on the AAA standard arbitration clause (pdf here) was a discussion of categories of contract language. The boilerplate governing how contracts are amended raises a similar issue.

Here’s what a text on contract boilerplate offers as a “basic” no-oral-modification provision (optional language omitted):

Amendments. The parties may not amend this Agreement, except by written agreement of the parties.

That’s language of prohibition. It follows that if the parties amend other than by written agreement, they’re in breach. That doesn’t make much sense.

Here’s my version:

Amendment. No amendment to this agreement will be effective unless it is in writing and signed by both parties.

That’s language of policy, which is used to state the groundrules for how the contract is to operate. I think it states more clearly what’s going on.

As is often the case, you could use a yet another category of contract language to express the same meaning. Here it is expressed as a condition using language of obligation:

Amendment. To amend this agreement, the parties must express the amendment in a writing signed by both parties.

This version exhibits the elements of this kind of condition: must used instead of shall, because you’re not stating a duty, and an introductory phrase that makes it clear that you’re dealing with a condition. But using a condition to express this meaning is way too cumbersome—I’d stick with language of policy.

At this point you might be asking yourself why anyone should care about this. After all, no one would ever find themselves in a dispute over whether the “amendment” section articulates prohibition or policy. I can think of three reasons:

First, it might be that not much is at stake with respect to any one provision, but the cumulative effect of minding your categories of contract language is dramatic.

Second, mishandling the categories of contract language can give rise to disputes. A classic example of this is confusion over whether a given provision states a condition or an obligation (see this January 2007 blog post).

And third, minding your categories of contract language throughout a contract enforces discipline on the drafter. Spotting a categories-of-contract-language glitch, such as a shall that fails the “has a duty” test, can result in your picking apart the provision and restructuring it. That’s what I did with the AAA standard arbitration clause.

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.