“This Agreement Contemplates”

I sometimes get from unexpected quarters ideas for new bits of contract language for to me ponder. Last week, my web designer, the inestimable Selene Bowlby of iDesign Studios, asked me about the phrase “this agreement contemplates,” which she had seen in a contract for web-design services.

An astronomer contemplates the universe. An existentialist contemplates being and nothingness. I contemplate my navel. But a contract … ?

Recitals

One place you see the phrase this agreement contemplates is in recitals. Put on the hazmat suits—here are some samples from EDGAR:

This Agreement contemplates a transaction in which Buyer will purchase from Seller, and Seller will sell to Buyer, all of the issued and outstanding Common Shares of Target owned by Seller, and Buyer will purchase from Target the New Common Shares (as defined below), in each case for the consideration and on the terms set forth in this Agreement and in consideration of the performance of certain covenants as set forth herein.

This Agreement contemplates a transaction in which Purchaser will purchase from Seller substantially all of Seller’s assets (and assume certain liabilities) related to the Program in return for a promissory note and the issuance of shares of common stock of the Purchaser.

WHEREAS, ViewCast, Osprey and VideoWare desire to establish their borrowing potential on a consolidated basis to the same extent possible if they were merged into a single corporate entity, and this Agreement contemplates a loan which would not otherwise be available to ViewCast, Osprey and VideoWare if they were not jointly and severally liable for payment of all of the Indebtedness (as defined below); and

There are two problems with using this agreement contemplates in recitals. First, it unhelpfully foreshadows the contract. Given that the recitals describe the background to the contract and build up to the parties saying, in the lead-in, that they agree to what follows, alluding in the recitals to what’s in the contract disrupts the narrative flow.

And second, contemplates, meaning “has in mind,” is way too casual, besides being a little too anthropomorphic for my tastes.

So use instead the parties desire, the parties intend, or—gasp!—the parties want.

Body of the Contract

Whenever this agreement contemplates is used in the body of the contract, you can convey the intended meaning more directly:

Company and Bank agree that this Agreement contemplates the extension of credit by Bank to Cardholders and [read The Company acknowledges that (1) the Bank anticipates extending credit to Cardholders and (2)] that Company’s submission of Charge Transaction Data to Bank shall constitute assignment by Company of any and all right, title and interest in such Charge Transaction Data and the Cardholder Indebtedness reflected therein.

Thus, notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Director expressly acknowledges that the release above is intended to include in its effect, without limitation, any and all claims which Director does not know or suspect to exist in his favor at the time of execution hereof, and that this Agreement contemplates the extinguishment of such claims [read entry into this agreement will serve to extinguish those claims].

This Agreement contemplates the rendition of personal services by Executive and is not [read Any services performed by the Executive under this agreement will be personal services and will not be] assignable by Executive.

An indication of the shortcomings of this agreement contemplates for purposes of the body of the contract is that I can’t make it fit into any of the categories of contract language.

Adjectival Phrase

What about use of this agreement contemplates as an adjectival phrase? Here’s an example:

consummation of the transactions that this agreement contemplates

On EDGAR, this usage vastly outnumbers one alternative that came to mind, that this agreement provides for (6,138 contracts in the past 12 months versus 98). I think it would be a bit pedantic to find fault with this use of this agreement contemplates.

Why am I willing to tolerate this agreement contemplates in an adjectival phrase but not as the main subject and verb of a sentence? Perhaps because the adjectival phrase serves as an economical way to allude to what the parties intend for the contract to accomplish. By contrast, the main subject and verb seek to do the heavy lifting, so more is expected of them.

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.