Consider this sentence from a contract between Acme and Widgetco:
Acme may sell the Widgets.
Does it mean that under the contract, Acme has the discretion to sell the widgets? Or is Acme asserting the fact that nothing in the world at large prevents Acme from selling the widgets? (I’m ignoring whether may is used in this sentence to mean might.) (By the way, if you’re not familiar with the expression the world at large, I like the definition I found here: the world at large means “the world beyond whatever smaller, more limited setting the writer initially described.”)
And consider this sentence:
Acme is not prohibited from selling the Widgets.
Does it mean that under the contract, nothing prevents Acme from selling the widgets? Or is Acme asserting the fact that nothing in the world at large prevents Acme from selling the widgets?
And consider this third sentence:
Acme must sell the Widgets.
I’m sure you’re getting the drift. Does it mean that under the contract, Acme has the obligation to sell the widgets? Or is Acme asserting the fact that because of some external obligation, Acme is required to sell the widgets?
Then how about this sentence:
Acme shall sell the Widgets.
Ah, this sentence is different, as it couldn’t reasonably be understood to mean that Acme is asserting the fact that because of some external obligation, Acme is required to sell the widgets. Instead, in this context, shall connotes that the obligation is being created by this sentence.
So where does that leave us?
Let’s consider the first sentence again. It would be standard to interpret it to express the first of the two meanings—that under the contract, Acme has the discretion to sell the widgets. It would be burdensome and awkward to require drafters to express that meaning by making it explicit that the discretion arises under the contract, for example by saying Widgetco hereby grants Acme the right to sell the Widgets. Or Under this agreement, Acme has the right to sell the Widgets.
That suggests that if you want to express the second meaning—that Acme is asserting the fact that nothing in the world at large prevents Acme from selling the widgets—the burden is on you to make that meaning clear. Here’s how you do that: Acme states that it may sell the Widgets. (No, we’re not getting into states here. If you’re curious about that, go read this 2015 article.)
What about the second sentence? Unlike in the case of the first sentence, it’s actually routine to express the first meaning—that under the contract, nothing prevents Acme from selling the widgets—by saying exactly that: Nothing in this agreement prevents Acme from selling the Widgets. But I find that annoying, as it suggests that for not good reason, the default meaning of the first sentence doesn’t apply to the second sentence. I’d prefer to apply the approach I suggest for the first sentence: stick with the second sentence to apply the first meaning, and say this to express the second meaning: Acme states that it is not prohibited from selling the Widgets.
What about the third sentence? It’s different, because instead of relying on the first meaning to be the default meaning, you can instead use the fourth sentence to express the first meaning of the third sentence. That offers an advantage: the fourth sentence has only one possible meaning, so using the fourth sentence instead of the third sentence precludes any confusion. If you want to express the second meaning, say this: Acme states that it must sell the Widgets.
The main takeaway is that if a party is making a statement of fact, always use language of declaration to make it explicit that it’s a statement of fact. (“Language of declaration” is one option in my “categories of contract language” framework. For more about that, see this 2023 blog post for a link to the “quick reference” chart in the fifth edition of A Manual of Style for Contract Drafting.)
I’m not aware that this potential ambiguity has ever given rise to a fight, but it’s always best to be clear.
(By the way, this is the first new thinking I’ve done in a long time regarding the categories of contract language. It’s nice to be back. 🙂)
