Friday, December 17, 2010

Trumping language

In playing cards you can have a trumping suit that has priority over cards of all other suits.  In contracts you may have language that gets inserted in the agreement with the express intent of overriding or having priority over a commitment in the same or another section of the agreement. That type of language it referred to as trumping language.

There are four different types of common forms of trumping that can occur.

You can see language that contains exclusions to avoid doubt to establish and clarify the intent and in doing so override other terms. For example:
“For the avoidance of any doubt, Supplier’s maximum liability under this agreement shall not exceed $ ___________.
This would trump all provisions in the agreement where the Supplier might be liable.

You can have language that says something like “notwithstanding anything to the contrary”.  This overrides anything that’s contrary to it with respect to where its used.

You can have language similar to “except as otherwise provided”. This gives precedence to the otherwise provided language in the agreement.

You can have a proviso that qualifies or overrides the concept that precedes it. For example the proviso here is in red.:

“In no event will either party be liable to the other for any lost revenues, lost profits, incidental, indirect, consequential, special or punitive damages.This mutual Limitation of Liability does not limit the obligations and liability of Supplier provided in the Section titled Supplier Liability for Third Party Claims or the Subsection titled Epidemic Defects in this Base Agreement and/or SOW

First there is the broad limitation against all damages other than direct, but in the second sentence it overrides that for the specific sections listed.

When a Supplier proposes any trumping language it should raise a red flag and you should be checking what the impact of that trumping language will be on other terms that you may have agreed.  The most subtle and dangerous ones are “notwithstanding anything to the contrary” and “except as otherwise provided” as it requires you to search through the document to see what is really being committed. “Except as otherwise provided” could be nullifying the commitment being made in that section where its used and “notwithstanding anything to the contrary” can be overriding other commitments.

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