Another Flavor of Passive-Type Policy: “Will Be Recoverable”

Here’s what MSCD 3.244–45 has to say about “passive-type policies”:

Some policies are characterized by adjectives such as exercisable and payable and have a structure that’s analogous to the passive voice. This manual refers to such policies as “passive-type policies.” Passive-type policies have two shortcomings. First, as with passive verb phrases (see 3.11), the agent can be expressed by a by-agent, but in contracts the agent is often omitted (see [8-7] and [8-8]), leaving unstated the party responsible for performing the action. Second, if a contract states that the fee is payable by April 20, 2014, that could, depending on the context, mean that the party in question is obligated to pay the fee by the date in question, or has discretion to pay the fee, or that timely payment of the fee is a condition. Passive-type policies should be rephrased as language of obligation (see [8-7b]), as language of discretion (see [8-8b]), or as conditional clauses.

Another example of a passive-type policy is The First Installment is due by March 1, 2014. It would be better expressed as language of obligation: The Purchaser shall pay the First Installment by March 1, 2014.

Well, here’s another phrase that features in passive-type policies: will be recoverable. It’s afflicted with the same shortcomings as payable. Below are two examples fresh from the SEC’s EDGAR system, with my recommended fix:

Such Interest will be recoverable from the Tenant [read The Tenant shall pay the Landlord that Interest] as if it is rent in arrears.

… the Guaranteed Amounts will be recoverable from the Guarantor LP [read the Guarantor LP shall pay the Bond Trustee the Guaranteed Amounts] in the manner set out in Section 7.1, as a separate and distinct obligation of the Guarantor LP …

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.