Corporate & Securities Law

The ?Amendment? Section and Categories of Contract Language

By Ken Adams

Once you’re attuned to my framework of “categories of contract language,” as laid out in chapter 2 of MSCD, you’ll see its implications at every turn.

A big part of my recent article on the AAA standard arbitration clause (pdf here) was a discussion of categories of contract language. The boilerplate governing how contracts are amended raises a similar issue.

Here’s what a text on contract boilerplate offers as a “basic” no-oral-modification provision (optional language omitted):

Amendments. The parties may not amend this Agreement, except by written agreement of the parties.

That’s language of prohibition. It follows that if the parties amend other than by written agreement, they’re in breach. That doesn’t make much sense.

Here’s my version:

Amendment. No amendment to this agreement will be effective unless it is in writing and signed by both parties.

That’s language of policy, which is used to state the groundrules for how the contract is to operate. I think it states more clearly what’s going on.

As is often the case, you could use a yet another category of contract language to express the same meaning. Here it is expressed as a condition using language of obligation:

Amendment. To amend this agreement, the parties must express the amendment in a writing signed by both parties.

This version exhibits the elements of this kind of condition: must used instead of shall, because you’re not stating a duty, and an introductory phrase that makes it clear that you’re dealing with a condition. But using a condition to express this meaning is way too cumbersome?I’d stick with language of policy.

Full post as published by AdamsDrafting on March 31, 2010 (boomark / email).