Interested in Twitter v. Musk? Here’s a Primer on Uncertain Meaning in Contracts
Obviously, all eyes are on the fight between Twitter and Elon Musk in the Delaware Court of Chancery. Well, not quite all eyes. I’m keeping only half an eye on it—I’m not a big-deal watcher.
On the other hand, I am a contract-language watcher. With that in mind, here are some suggestions for how not to get more confused than necessary when considering whatever contract language both sides end up arguing about.
First off, let’s get vagueness and ambiguity straight. For linguists, text is ambiguous if it’s capable of expressing two or more inconsistent meanings. If some who read a contract provision think it means one thing and others think it means something else, that provision is ambiguous. Because ambiguity creates confusion and causes many contract disputes, we should aim to eliminate ambiguity from contracts. There are different sources of ambiguity, and it gets complicated. For an introduction, go here for my 2016 article in the Michigan Bar Journal entitled Know Your Enemy: Sources of Uncertain Meaning in Contracts.
But ambiguity is just one of several sources of uncertain meaning in contracts. Vagueness is another.
Vague words used in contracts include the adjectives prompt, reasonable, material, negligent, satisfactory, significant, and substantial (among many others) and the related adverbs. Vagueness is a function of there being no clear demarcation between, say, being prompt and not being prompt. But another feature of vague words is that whether a given standard has been met is a function of context. For example, how fast a contract party must act to comply with an obligation to do something promptly depends on the circumstances, with the standard being what a reasonable person would have done in those circumstances. In interpreting contracts, the issue of context generally looms larger than does the issue of borderline cases.
Why get into this? Because many (or most) have no idea what ambiguous and vague mean, beyond connoting some sort of confusion. Consider the headline to this Yahoo Finance article, Elon Musk's Legal Battle With Twitter Turns on Ambiguous Contract Language. Does it really? Here are the buzzphrases mentioned in that article and others on Twitter v. Musk and whether they’re ambiguous or vague:
material adverse effect—vague
reasonable business purpose …—vague
… related to the consummation—vague
reasonable judgment …—vague
… cause significant harm—vague
reasonable best efforts—vague
So the battleground is primarily vagueness. That’s no surprise: vagueness is unavoidable in big deals with a delayed closing, given all the unknowns. Unlike ambiguity, vagueness is an essential tool for the drafter, to be used carefully when being precise isn’t the best option.
But ambiguity is still there, lurking in the shadows. That’s because fights over vagueness can turn into fights over ambiguity. Efforts provisions are vague, but they’re also ambiguous, because those who work with contracts can’t resist thinking that different efforts provisions (reasonable efforts, best efforts, commercially reasonable efforts, and yes, reasonable best efforts, among many others, some sillier than others) express a hierarchy of different levels of onerousness. It’s to the credit of the Delaware Court of Chancery that they’ve consistently resisted that notion, but Twitter v. Musk might reopen that can of worms.
And material too is not only vague but ambiguous. In Akorn, Inc. v. Fresenius Kabi AG, the Delaware Court of Chancery acknowledged as much (see this 2018 blog post), but detailed analysis will have to wait until my recently completed article on the subject is unleashed on an unsuspecting world.
Let’s see how this all plays out in Twitter v. Musk.
(Incidentally, in Akorn, the Delaware Court of Chancery cited my writings on material, and in AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC and Menn v. ConMed Corp. (just last week), they cited my 2019 law review article on efforts provisions (here).)
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