The Limits of Language of Belief

In this post last month I proposed yet another category of contract language—language of belief. Here’s a cleaned-up version of my example of language of belief:

The parties believe that this agreement complies with the requirements of section 409A of the IRS Code.

But consider the follow observation by Glenn West, which comes from our recent exchange (see this post):

In modern times, however, many warranties and representations are not in fact factual assertions by the party making them; rather they are factual predicates that the party receiving them has required be asserted by the other party as a risk allocation device (which include “facts” about which the party making such assertions may not even know are facts—e.g., legal enforceability of the agreement).

In other words, many standard statements of fact should, strictly speaking, be statements of belief, with risk allocation being addressed separately, by means of indemnification, termination fees, or otherwise.

Glenn mentions statements regarding enforceability, but presumably he could have also mentioned other topics covered by a standard closing opinion: formation, existence, good standing, no violations of law, etc.

I’m not inclined to insist that all such matters be handled by means of language of belief coupled with a risk-allocation provision. For one thing, the current practice has economy going for it. But if it’s unobjectionable to have parties make statements of fact regarding what are in fact legal opinions, is there any place for language of belief? Or is it only of theoretical interest?

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.

4 thoughts on “The Limits of Language of Belief”

  1. What do you think about just making statements about the extent of the documents provided, the documents reviewed, or efforts made to comply? For example: we did such and such to comply; we provided you with such and such documents; we reviewed the electronic records  with the office of the Secretary of State; we reviewed the electronic court records and the results of the review were … , etc. This approach requires more detail, but might avoid those nebulous words such as belief, to the best of my knowledge, that are ripe for litigation. 

    • Andrew: Your approach makes sense, but the question is whether a buyer would accept it. There’s no reason why they wouldn’t, if you address the risk-allocation side too. Ken

  2. Ken:

    I think it is useful because I remember using language of belief at some point. I don’t remember the exact circumstance (too many years ago now), but it was where I was unwilling to accept the risk in a risk-allocation sense, but the other side thought I was sand-bagging and that I actually believed there was liability (or the fact was false or whatever it was). So we made a (mutual, I think) representation about our belief. That was the fact pattern that always stuck with me. I’ve probably used it many times since, but just don’t remember doing so.


  3. Maybe we should lump together statements of fact, statements of law, and statements of mixed questions of fact and law, as well as statements of belief and predictions about the future of law and fact into a category of “predicate statements” concerning which the agreement allocates risk. 

    The Seller states the following predicate statements:

    The Affordable Care Act in its entirety is constitutional.

    Connecticut’s sales tax will remain below 10%.

    Georgia will be a right-to-work state

    The Buyer states the following predicate statements:

    Abortion will continue legal as a matter of federal constitutional law in all 50 states for not less than 10 years from the signing of this agreement.

    Gambling and prostitution will continue legal in Nevada for the term of this agreement.

    The Buyer is in compliance with all federal, state, and local laws regarding the handling, transport, and disposal of hazardous waste.

    A separate provision would allocate the risk using indemnification language.

    When would a contract require statements of belief apart from risk allocation?

    That question occurred to me in the context of imagining a listing of “jointly stated predicate statements” (The parties jointly state the following predicate statements:). 

    All that comes to mind is the possibility of rescission (or recision) of the contract for mutual mistake — the falsity of one or more jointly stated predicate facts.

    The purpose of making such joint statements would be to make clear what will happen (what the remedy will be) if one or more such statements turns out to be false (“You mean the sun doesn’t come up like thunder out of China ‘cross the bay?”).

    So a contract could have, say, three kinds of predicate statements: party A’s, party B’s, and joint AB statements, with separate remedies for the present or future falsity of any of each kind (indemnification by A; indemnification by B; rescission).


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