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The Last Word: Adventures in Literal Document Reading

Being a literal reader can be thankless, particularly when parsing accepted phrases and usages. An accepted phrase like “enclosed please find” sounds silly to a literal reader. Must the reader look through an envelope to try to find the attachments? In an email, it’s ludicrous. Clearly “attached are” is the more accurate, though less elegant, description.

The literal reader’s tendency to critique (at least mentally) harmless correspondence has slight practical value, but a lawyer’s ability to see the literal meaning of phrases and defined terms can be a blessing when editing documents that must be precise and clear. Two examples are the use of “Closing Date” in a purchase agreement to describe more than one date and the use of “to lease” in a lease document to describe a final, agreed lease.

The Closing Date

Many purchase agreements define the “Closing Date” as either a fixed date (perhaps a calendar date or the 10th or 30th day following the end of an inspection period) or a fixed date “or such other date to which the parties mutually agree.” These agreements then refer to the date on which the closing actually occurs as the “Closing Date.”

But these two dates often are completely different dates. The drafter needs two date concepts: one to designate the fixed deadline for closing, and the other to describe the date on which the closing requirements are satisfied and title is transferred.

The parties really need a deadline for closing that is a fixed date. If the closing does not occur by this fixed date, then someone should be in default. If “Closing Date” might also mean the date on which the closing actually occurs, which might be earlier or later than the fixed deadline, then a clever litigator representing the party charged with the default may claim that the closing deadline never occurred, so no default (and no closing).

A literal reader recognizes the mismatch and its potential for confusion. Rather than using “Closing Date” with two meanings, the drafter should either make clear that this term refers only to the fixed date or use the term “Closing Deadline” to designate the fixed deadline for closing.

The second date is a functional one, usually ascertained after execution of the purchase agreement, depending on the parties’ later agreement and performances. The drafter needs a term to describe the date on which each party delivers all of its required documents, the buyer pays the purchase price, and seller transfers title. “Closing Date” works fine for this date if it doesn’t also mean the deadline for the accomplishment of these requirements—the “Closing Deadline.” The “date of Closing” (“Closing” must also be defined) will also work, but using “Closing Date” to mean that the date on which the closing actually occurs and “Closing Deadline” to mean the deadline for closing is clearer.

Is the Landlord Leasing or Agreeing to Lease?

Many lease documents state that the “landlord agrees to lease to the tenant and the tenant agrees to lease from the landlord” the designated property on the terms set out in the lease. Does this mean that this lease is a done deal, subject to described conditions and diligence rights? Or does it mean that the document is an executory contract, with the parties contemplating a subsequent closing at which they will sign additional documents to obligate themselves and transfer the leasehold? See Ryan v. Stanger Inv. Co., 620 S.W.2d 505, 508 (Tenn. Ct. App. 1981) (“An agreement to lease is not a lease”).

Purchase agreements make clear that the seller is agreeing to sell, and the buyer is agreeing to buy certain property—at some time in the future. The phrase “agrees to” indicates an obligation to be performed in the future.

Most parties believe that a written lease imposes binding obligations when it is executed. Even when the lease term is to commence later and the tenant has the right to terminate before that commencement date based on specified conditions, the parties view their original agreement as the real lease. There will be no later so-called closing.

A literal drafter recognizes the ambiguity stemming from the future-action meaning of “agrees to lease” and instead provides that the landlord actually “leases the premises to tenant,” and the tenant actually “leases the premises from landlord.” It’s a done deal—the lease term will commence automatically on the commencement date unless the specified conditions are not satisfied.

Conclusion

These examples are only a few of the phrases that create ambiguity when interpreted literally. See Marie A. Moore, Three Common Cringeworthy Errors, Prob. & Prop., May/June 2019, at 64 (the term “and/or” as another example). We should all be—or strive to become—literal readers of our documents and the documents we edit, to keep astute (and desperate) litigators from arguing a literal meaning that we did not intend.

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