“Warrant,” “Warrant Agreement,” and “Warrant Certificate”

Today’s topic is warrants. By warrant, I mean an instrument granting the holder a long-term option to buy shares at a fixed price. (I discuss elsewhere the unrelated verb to warrant and noun warranty.)

A warrant is an intangible right, but it’s evidenced by a document. Many drafters don’t bother distinguishing between the two, in that they refer to exercise of this Warrant (that is, the intangible right) and surrender of this Warrant (in other words, the document evidencing that right). In the interest of not confusing your readers, I recommend that you draw the distinction.

But what do you call the piece of paper? If it’s signed by the issuer and the holder, call it a warrant agreement; if it’s signed by the issuer only, call it a warrant certificate. Often you’ll have a warrant agreement that provides for issuance of warrant certificates.

In the piece of paper, you’ll want to refer to this agreement or this certificate, as the case may be. I suggest that when referring to the underlying warrant, you use the defined term the Warrant rather than referring to this warrant.

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.

2 thoughts on ““Warrant,” “Warrant Agreement,” and “Warrant Certificate””

  1. I find the same issue in license agreements, and frequent confusion between the document (the agreement which is used to grant the license) and the license itself (an intangible right held by the grantee in the license grant). It really gets folks into trouble when the term of the license and the term of the agreement are different.

    For example, imagine a grant of a perpetual license to use a piece of software in one part of the license agreement, coupled with another part of the agreement which might describe a set of peripheral services that the licensor may be providing to the licensee (such as software maintenance). I get annoyed when there’s lots of band-aiding in the drafting to clear up that a termination of the agreement (done primarily for the purposes of ending the relationship with regard to the services) won’t terminate the license (except, of course, where we do mean to terminate the license because there was a material breach of something or the other by the licensee). When the drafter fails to distinguish the license itself as a separate intangible right (the widget that’s being sold in a sense), you end up with a mish-mosh that intertwines the term of the agreement with the term of the license without recognizing how they are different things.

  2. Michael,
    I wrote a contract for a supply of software and services to a client (I am an engineer) about a month ago.

    I listed three separate items that I would supply: (1) A license (that lasts forever) to use the software in a particular manufacturing plant, (2) An agreement to provide, for 90 days, certain maintenance services for free, and(3) an agreement to provide, for one year, certain other consulting, training, and other services at a specified rate schedule. (The exact wording was more detailed).

    My attorney and the clients purchasing department approved the contract and it was signed. The clear separation of the individual components of the contract, each with their own termination times, should eliminate any ambiguity. At least that is what the attorneys on both sides think. The client said that most similar contracts had not clearly define the different services and licenses supplied; they now insist on such definition.


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