The Texas Court of Appeals on Words-and-Digits Inconsistency

While in Seattle last week I had the opportunity to reconnect with Jessica Pearlman, a corporate partner in the Seattle office of K&L Gates. (We were on an ABA panel together many moons ago.)

During our conversation, Jessica mentioned a recent case highlighting the perils of stating a number using words and digits. She later sent me a link to the case. It was Charles R. Tips Family Trust v. PB Commercial LLC, 459 S.W.3d 147 (Tex. App. 2015) (PDF here).

Here’s how the Texas Court of Appeals described the dispute:

The parties to this appeal entered into a residential loan agreement and guaranty for the principal amount of “ONE MILLION SEVEN THOUSAND AND NO/100 ($1,700,000.00) DOLLARS.” The loan documentation thus identified the amount of the loan in two different ways, with one number favoring the borrower—one million seven thousand—written out in words and a larger number favoring the bank—$1,700,000—set out in numerals. The bank alleged a default on the loan, and litigation ensued. The parties filed competing motions for summary judgment, and the trial court rendered a final summary judgment in favor of the bank.

The Court of Appeals reversed, holding that the words prevailed over the digits—the principal amount of the loan was $1,007,000.00. By itself, that should come as no surprise, as courts generally accept the principle of interpretation that words prevail over digits. Furthermore, the Uniform Commercial Code as enacted in Texas says that “[i]f an instrument contains contradictory terms, typewritten terms prevail over printed terms, handwritten terms prevail over both, and words prevail over numbers.”

But what gives one pause is that the court refused to consider parol evidence that the borrowers allegedly received $1.7 million from the lender. Why did it refuse? Because “a court may not consider extrinsic evidence about a contract’s meaning unless the contract is ambiguous.” That doesn’t make sense. A principle of interpretation offers a convenient way for a court to resolve ambiguity. What it doesn’t do is make it as if that ambiguity never existed. The court should have considered parol evidence. The bank in this dispute has reason to feel hard done by.

But my primary responsibility is avoiding fights rather than sorting through the entrails of confusing contract language. In that regard, this case has prompted me to stiffen my resolve. I have long recommended that you use words for whole numbers one through ten and digits for 11 onward. But in seminars I sometimes suggest that if you have the urge to use words and digits for the amount of a loan, that would be less annoying that using words and digits for all numbers in the contract. But this case serves as a reminder that the big number in a contract is as prone to words-and-digits inconsistency as any other number, and that the consequences of any such inconsistency can be particularly unhappy. So no longer will I indulge in the oh-okay-use-words-and-digits-once-if-you-must approach.

Also, let me take another crack at expressing what makes using words and digits to express a number so pernicious. Yes, you’re saying the same thing twice, so not only are you adding unnecessary words, you’re also introducing the possibility of inconsistency. But—and here’s something I haven’t expressed previously—saying the same thing twice also reduces the likelihood of spotting an error. If I say $1,000 and the number should be $2,000, there’s a good chance I’ll notice the mistake. The same applies if I say one thousand dollars ($1,000). But if I say one thousand dollars ($2,000), there’s a decent chance that I’ll focus on the more eye-catching digits and not notice that the words state an incorrect number.

So using words and digits to express a number not only introduces inconsistency, it also makes it more likely that you’ll fail to spot that inconsistency.

(Not enough words-and-digits excitement for you? See this 2014 post.)

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.

5 thoughts on “The Texas Court of Appeals on Words-and-Digits Inconsistency”

    • This isn’t my territory, but I’m not sure we’re dealing with mutual mistake. There was no problem with the deal itself, as the lender got $1,700,000. Instead, the problem was with the paperwork, and it was to the detriment of one side only.

  1. This dislodges a few related thoughts:

    1/ The ‘Australian passport problem’, where there’s a mismatch between the stated duration of the passport (10 years) and the description of the validity period (from issuance to the end of the same date 10 years later). The lesson is, if you feel you must describe the same thing in two ways, make sure they agree.

    2/ Numbers do catch the eye more than words, which explains the temptation to write ’12:00 noon’ instead of just ‘noon’ and ’12:00 midnight’ instead of just ‘midnight’. I think MSCD says to reject the temptation, but I may be wrong.

    3/ Off topic: the bank may be limited to a US$1,007,000 recovery on the note, but if it actually parted with US$1,700,000, it may be able to recover a judgment for the other US$693,000 on a non-note basis, like restitution or ‘money had and received’. This may be no consolation to the bank if the recipient of the loan proceeds is judgment-proof and the guarantors are liable on only the note debt.

    4/ I notice that when changing passwords, Web sites often make one state the new password twice, to insure that the first try was accurate. This suggests that if a contract drafter wants redundancy as an assurance of accuracy, better than words-and-digits is digits-and-digits: ‘…shall pay US$1,700,000, yes lads, that’s US$1,700,000’. The eye that is comparing digits to digits may catch mismatches more than the eye that compares digits to words. (Easy, Ken, just kidding.)

    Happy Independence Day to Ken and all the Yanks who follow this great ‘blawg’.

  2. I’d like to make the argument for using digits, regardless of whether the number is above or below 11 for AWrightBurkeMPhil’s second reason: they catch the eye. Why must we spell out number values below 11? I realize that is the standard way of doing things in English, but I don’t see why there needs to be two rules for the same thing.

    Lately I’ve leaned towards always using digits in my contracts because it helps me identify important timelines, whether it’s notice periods (3 days’ notice), days by which a certain obligation is to occur (the Seller must within 5 days of receiving…), or a formula for determining a closing date (7 business days after subject removal). Having those numbers appear as digits makes it much easier for my eye to identify the timelines when noting up a signed contract for diarization, for simply double-checking a timeline for a client, or for any reason where I need to identify a timeline.

    Is there any good reason for spelling out numbers 1 through 10?

  3. 24-yr transactional atty, currently at a BigLaw firm. One of my peeves is the “and No/100ths” and the “.00” in the number. If fractions of a dollar are involved, great. If not, keep it clean and don’t include unnecessary letters/digits.


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