Corporate & Securities Law

?Mere Condition?? ?Mere Covenant??

By Ken Adams

The phrases “mere condition” and “mere covenant” (and the latter phrase’s more modern equivalent, “mere obligation”) occur quite often in caselaw. A search of Lexis’s “Federal & State Cases, Combined” database found 940, 536, and 353 instances, respectively, of those phrases.

But those phrases, and analogues using “merely,” make me uneasy, particularly when used to compare conditions and obligations. Here are a couple of examples of that, selected at random, the first referring to a “mere condition,” the second referring to “merely covenants”:

“We are clear, also, that this lack of identity, taken in connection with the whole record, at least tended to show that the provision about ‘giving us all your cotton’ was not a mere condition, but was a covenant on the part of the defendant.” Phoenix Cotton Oil Co. v. Churchill, 274 F. 53, 55 (6th Cir. Tenn. 1921).

“Thus, if the terms of the Artistic License allegedly violated are both covenants and conditions, they may serve to limit the scope of the license and are governed by copyright law. If they are merely covenants, by contrast, they are governed by contract law.” Jacobsen v. Katzer, 535 F.3d 1373, 1380 (Fed. Cir. 2008).

Using the word “mere” (or “merely”) in such comparisons suggests that one category of provision trumps the other, but in fact we’re dealing with apples and oranges: Failure of a contract party to satisfy a condition will relieve the other party of any related obligation. Failure to a contract party to comply with an obligation will entitle the other party to claim damages and, in an M&A context, might relieve the other party of any obligation to close the transaction. Because conditions and obligations serve different functions, it doesn’t make sense to describe one category as inherently trumping the other.

That much is suggested by the fact that on Lexis, instances of “mere condition” are roughly equal in number to the aggregate instances of “mere convenant” and “mere obligation.” If one kind of provision inherently trumps the other, you wouldn’t expect those references to balance each other out. The fact that they do indicates that the relative significance of one kind of provision over the other is entirely a function of context.

And use of the rather fusty “mere” in this context suggests that use of these phrases is primarly a matter of parroting jargon.

So I suggest that you not use “mere” or “merely” when comparing categories of contract language.

Full post as published by AdamsDrafting on April 29, 2010 (boomark / email).