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“Shall Not … Unless” Versus “May … Only If” (Updated!), by Ken Adams, Adams On Contract Drafting Blog

http://tinyurl.com/mdnboct

One of the privileges of blogging is that it gives you the opportunity to talk utter BS without doing much damage. A case in point is this post, originally published on August 4, 2014.

To recap, the issue was whether one of the two following alternatives was preferable to the other:

Acme shall not sell the Shares unless Widgetco consents.
Acme may sell the Shares only if Widgetco consents.

In an August 6 update I opted for the version with shall not, saying that it avoids the uncertainty inherent in the version using may … only. Well, I’m here to tell you that that’s incorrect, in that both versions incorporate uncertainty.

In the version with shall not, the question is what category of contract language applies if Widgetco consents. Our old friend the expectation of relevance (more about that here) suggests that Acme may sell the Shares if Widgetco consents, but it’s conceivable that it might instead be obligated to sell the Shares if Widgetco consents.

And in the version with may . . . only, the expectation of relevance suggests that Acme may not sell the Shares if Widgetco doesn’t consent, but it’s conceivable that it might instead be obligated to sell the Shares if Widgetco doesn’t consent.

So in terms of uncertainty, there’s nothing to choose between the two. To eliminate that uncertainty you’d have to say the following:

Acme shall not sell the Shares, but it may sell the Shares if Widgetco consents.

(You could say instead Acme shall not sell the Shares unless Widgetco consents, in which case Acme may sell the Shares, but I have a slight preference for the version using except, as it’s shorter.)

Would I go to the trouble of eliminating the expectation of relevance? I think so, but I acknowledge that doing so would be pretty hard-core.

If you don’t want to eliminate the expectation of relevance, which of the two original options would I go for now? Still the version with shall not. The default position is that absent contract restrictions, one may do stuff, so it follows that it’s the prohibition that has teeth; I’d lead with it.

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