Conspicuous
In a rare foray into analysis of the legal systems of Johnny Foreigner, we add a note here to shed light on WHY AMERICANS LIKE TO SPRAY THEIR LEGAL DOCUMENTS WITH LARGE SWATHES OF TEXT IN CAPITALS. IT ISN’T BECAUSE AMERICANS LIKE TO SHOUT ALL THE TIME — THOUGH YOUR CORRESPONDENT’S UNSCIENTIFIC OBSERVATIONS ON THIS TOPIC TEND TO SUGGEST THAT THEY DO, BUT BECAUSE, SO AMERICAN LAWYERS HAVE BEEN CONDITIONED TO THINK, THE UNIFORM COMMERCIAL CODE REQUIRES IT FOR SO-CALLED TERMS THAT THE CODE REQUIRES TO BE “CONSPICUOUS”.
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Towards more picturesque speech™
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But “conspicuous” doesn’t mean all-caps.
The Uniform Commercial Code defines it thus:
- “Conspicuous”, with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is “conspicuous” or not is a decision for the court. Conspicuous terms include the following: (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and (B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.
And the judiciary have thrown in their, ah, dime:
- “Lawyers who think their caps lock keys are instant ‘make conspicuous’ buttons are deluded. In determining whether a term is conspicuous, we look at more than formatting. [...] A sentence in capitals, buried deep within a long paragraph in capitals will probably not be deemed conspicuous. Formatting does matter, but conspicuousness ultimately turns on the likelihood that a reasonable person would actually see a term in an agreement. Thus, it is entirely possible for text to be conspicuous without being in capitals.”
- In Re Bassett, 285 F.3d 882, 886 (9th Cir. 2002) (Conspicuity added)
Now it is well-established in the literature that text in all caps is harder to read than ordinary text, so you might form your own opinion as to what possesses securities lawyers to render acres of their prospectuses in a less legible way — so less legible that even their own proof-readers have trouble catching every nuance, as the example from US Nuclear Corp’s offering memorandum, in the panel, illustrates.
And there is more than that: if the passage in question appears only on page 406 of an information memorandum relating to Wickliffe Hampton’s TRL300,000,000,000,000 26⅔% Subordinated Convertible Credit-Linked Bonds Due 4035 then, we humbly submit, there is no typographical contrivance in existence — or even possible in the realms of plausible science fiction, for that matter — that could be “so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it” since there is not a reasonable person alive who reads past the first five pages of an information memorandum anyway.
On the other hand, we find the passage buried in a document that, by unerring market convention, will be examined and critiqued by legal eagles from all sides — and draft bilateral contracts in the financial services world are exactly such documents, and the legal counsel who gorge themselves on their verbosity review them are implicitly “reasonable” readers — then there is no chance that a reasonable person would miss it. A lawyer who doesn’t notice a clause in a contract whatever fontsize it is in is, Q.E.D., negligent, which is Q.E.D. unreasonable.