Corporate & Securities Law

?Can? and ?Cannot?

By Ken Adams

If you’ve perused chapter 2 of MSCD (Categories of Contract Language), you’re aware that I have a mania for disciplined use of verbs in contracts. But I haven’t previously had occasion to discuss use of can and cannot; I’ll do so now.

The word can is used to express physical or mental ability, as in he can open beer bottles with his teeth. In contracts one occasionally sees can used appropriately enough, in representations and in other contexts, to express this meaning:

The Seller’s financial position is such that the Seller can afford to retain the Shares for an indefinite period of time without realizing any direct or indirect cash return on its investment.

Confidential Information means any information … , except for any information that … the recipient can demonstrate by its written records was in the recipient’s possession.

But in general usage, can is sometimes used instead of may to express permission. This is the case in contracts too; you should stick with may:

Purchaser can [read may] increase or decrease its firm order quantities with Manufacturer’s prior agreement.

The Participants acknowledge that there is no guarantee that any such payments can [read may] be made to Participants residing outside of the United States.

No change in this Note or waiver of any right or remedy hereunder can [read may] be made except in a writing signed by the Bank.

The same applies to with respect to cannot. By all means use it to indicate inability:

If any payment required to be made to UT under this agreement cannot be made when due … .

But it would be best not to use it to indicate failure:

If the parties cannot [read fail to] agree upon the selection of a mediator within five business days after the Notice Date … .

And don’t use it as language of prohibition:

The Acceptance, together with the Offer, will constitute a firm order that Acme cannot [read may not] cancel.

Full post as published by AdamsDrafting on November 03, 2008 (boomark / email).