The Timing of Purchase

[Updated August 9, 2013: I bow to the wisdom of the commentariat! “Acme shall purchase” it is.]

Acme and WidgetCo enter into a contract providing for Acme’s purchase of 1,000 widgets. WidgetCo delivers the widgets to Acme, along with an invoice. Acme pays the invoice.

In that scenario, when does Acme purchase the widgets? I propose having the contract say, “Acme hereby purchases” the widgets, rather than “Acme shall purchase” the widgets. It’s standard commercial practice to refer to someone’s buying something when the decision to purchase is made, even though delivery and payment follow later.

Any objections?

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 Timing of Purchase”

  1. I think the “hereby” language raises some confusion. I’d like to see consistency between the language in the (obviously in this case) executory contract and the way in which title passes and revenue is reported for other purposes.

    “Hereby purchases” is language I’d expect to see in a bill of sale, where delivery and payment obligations are immediate and concurrent. Among ongoing businesses using accrual accounting, where the sale of widgets is an established process, signing the contract will usually result in revenue reporting. However, there may well be delivery and title-passage clauses in the same contract, and that may have implications for tax, warranty, rescission and other matters. For all these reasons, in an executory contract I’d prefer “shall,” with some indication later on when title passes and the obligation to pay accrues.

  2. Your use of the term “widgets” implies that you’re referring to fungible goods. Under Article 2, rights in the goods cannot pass to the buyer until the goods are identified to the contract. So, unless the goods are identified, your proposed language does not achieve your stated purpose.

  3. The consideration under contracts usually consists of promises.
    The purchase agreement concerns one party promising to supply and the other promising to pay.
    The agreement may go on to specify when title passes.
    What do you mean by “purchase”? The promise to buy/pay, or the transfer of title?
    It’s different (I think) in relation to IP licensing and assignment, where the property right takes on a more central role. There I think you can more readily say A hereby licenses to B.

    That isn’t much of a justification but it feels right.

    So I wouldn’t say hereby purchases.

  4. I agree with Vance: “hereby” is better used in a bill of sale than in an executory contract. When the “purchase” actually occurs in the context of an executory contract is a bit of a philosophical question. Upon signing, both parties are on the hook to complete the transaction, but a lot is yet to be accomplished, so language of obligation is appropriate. In contrast, a bill of sale is a conveyance instrument meant to actually transfer ownership (or at least evidence a present transfer), so language of performance is appropriate.


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