How Well Do You Draft?

June 24, 2013

Here’s a simple test:  which of the following sentences is drafted correctly?

1.  This Agreement shall be governed and construed according to the laws of the State of New York.

2.   The Contractor shall have the right to submit an application for progress payments each month as provided in Section 13.1 of the General Terms and Conditions. 

3.  The City shall be obligated to pay for goods and services received only to the extent that money has been appropriated and encumbered for this purpose. 

4.  The Seller shall not have any obligation to keep confidential any Information if and to the extent disclosure is required by applicable Law.

5.  At the Closing, Seller shall deliver the Certificates to Buyer.

Drafting is a fundamental skill for virtually all lawyers, yet most practicing lawyers have had no formal training in drafting contracts.  Written contracts are plagued with drafting errors that most lawyers are unaware they are making.  An informal survey counted the number of “shalls” in a variety of contracts; it was used an average of 20 times per page of text and misused about 90% of the time.  The remaining 10% of correct usage was more likely coincidental than deliberate.  Most lawyers will be unable to discern that number 5 above is correct and the other sentences, though typical of language seen in contracts, are examples of incorrect usages of “shall.”

“Shall” should be used exclusively to impose a direct duty on a named party to the agreement.  Every other usage should be avoided in order to protect the power of “shall” to signal a direct duty.  Every incorrect usage of “shall” weakens the force and effectiveness of the word within the contract because sloppy usages of “shall” call into question whether a duty is intended even when the word is used correctly.  Test the usage of “shall” by substituting “has a duty to”:  after substituting these words, if a named party to the contract has a duty to do something, “shall” is being used correctly.

1.      This Agreement shall be governed and construed according to the laws of the State of New York.

This is an example of incorrect usage of “shall” because “Agreement” is not a party to the agreement; therefore, “Agreement” cannot have an obligation under it:  “This Agreement [has a duty to] be governed and construed according to the laws of the State of New York” makes no sense.  The drafter intended to impose a duty on someone that the contract be governed and construed according to the laws of the State of New York, but this language is flawed because 1) the parties are not responsible for governing and construing the agreement; and 2) the “person” who is responsible for governing and construing the agreement is not a party to it and, therefore, is not directly obligated by it.  Rather than “shall,” use a present tense verb to state policies, like this:  This Agreement is governed and construed according to the laws of the State of New York.

2.     The Contractor shall have the right to submit an application for progress payments each month as provided in Section 13.1 of the General Terms and Conditions. 

After substituting “has a duty to,” the problems in this example are immediately obvious:  “The Contractor has a duty to have the right….”   “Shall” should never be used to signal a right.  In this example, the word “shall” doesn’t contribute anything at all to the meaning of the sentence; it is entirely superfluous and is better omitted:  “The Contractor has the right….”  “Is entitled to” can also be used to create a right:  “The Contractor is entitled to….”

3.     The City shall be obligated to pay for goods and services received only to the extent that money has been appropriated and encumbered for this purpose. 

If not for the phrase “be obligated to,” which is redundant, the “shall” in this example would be correct if the sentence ended after “received,” because the drafter’s intention is to create a duty on the City to pay for goods and services received.  The first error here is using “shall” with “be obligated to,” which is tantamount to saying “The City has a duty to be obligated to pay for goods and services received….”  Either “shall” or “be obligated to” could be correct; the better choice is to use “shall” to create a direct duty because flip-flopping between the two options could give the impression that one creates a stronger obligation than the other:  “The City shall pay for goods and services received.”

On the other hand, a second problem with this sentence has to do with the order in which its components are arranged.  The second part of the sentence apparently is intended to create a condition (that money has been appropriated and encumbered), which means that unless and until the condition has been met, the City does not have a duty to pay.  A better approach would be to set the sentence up in a logical “if … then” format with the condition first, and then the duty, like this:  “If and to the extent that money has been appropriated and encumbered, the City shall pay for goods and services received.”

4.     The Seller shall not have any obligation to keep confidential any Information if and to the extent disclosure is required by applicable Law.

Substituting “has a duty to” and compensating for the negation, the first part of this sentence would read “The Seller does not have a duty to have any obligation,” which illustrates another redundant and incorrect usage of “shall.”  Beginning with “shall not” has thrown the drafter off the focus of the sentence, because “shall not” creates a duty not to act.  The drafter has attempted to correct this problem by adding words to extinguish the obligation “shall not” set up; a better approach to fix the circular logic would be to eliminate “shall” altogether and focus on what the Seller is not required to do:  “The Seller is not required to keep Information confidential if and to the extent disclosure is required by applicable law.”     Again, this conditional exception would be better stated by rearranging the components into an “if…then” format:  “If and to the extent disclosure is required by applicable law, the Seller is not required to keep any Information confidential.”

5.     At the Closing, Seller shall deliver the Certificates to Buyer.

This sentence illustrates the correct usage of shall:  imposing a direct duty (to deliver the Certificates) on a named party to the agreement (Seller).  Substituting “has a duty to” makes sense:  “At the Closing, Seller has a duty to deliver the Certificates to Buyer.”