JR KASMAN, PLLC TRANSACTION TIP SERIES: HEREIN LIES A PROBLEM

January 19, 2017 | by

The word “herein” is ubiquitous in contracts. When time permits, and your client allows, it is best practice to search for the term before executing a draft of any form of contract — loan documents, joint venture agreements etc. Often times, the word “herein” is contained in an enumerated section, paragraph or sub-section. Without using the term “this Agreement” or this “section” (as applicable) in lieu of “herein”, it may be unclear whether herein is referring only to the specific section or sub-section it appears in or the entire contract. As lawyers, we know that not every client permits time or cost flexibility for us to vet every ounce of boilerplate in a contract. However, it may be worth reminding clients that courts are not hesitant to interpret even simple terms in a contract. Recently, we read an article by Kelli Hinson of Carrington Coleman describing an instance where the Dallas Court of Appeals rejected an argument that “this agreement” used in a contract literally meant only such single contract (thus holding that an arbitration clause contained in one contract was applicable to a separate contract as well). Another option is to make sure that a general clause along the following lines is included in a contract (to the extent you are not intending to limit the scope of “herein” in any particular instance). Words such as “herein,” “hereto,” “hereinafter,” “hereof,” “hereby” and “hereunder,” when used in this Agreement, refer to this Agreement as a whole. However, be careful not to agree to a similar variation of this provision which may create similar ambiguity (the differences between the two provisions are underlined). Words such as “herein,” “hereto,” “hereinafter,” “hereof,” “hereby” and “hereunder,” when used with reference to this Agreement, refer to this Agreement as a whole, unless the context otherwise requires. Arguably, in the later case, herein would still need a reference to “this Agreement” to refer to the contract as a whole and the last clause opens the door to ambiguity and dispute.

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