A contract that I recently analyzed and a blog post that I recently read gave me inspiration to do a post about notwithstanding. On a fairly regular basis, I encounter and employ notwithstanding in contracts. What does this potentially daunting word mean? I think of it as meaning “despite.” Notwithstanding is used to create exceptions to rules in a contract or to circumstances or events. So, for example, suppose we have the following provisions in a sublease between Bert and Ernie:
Section 1. Ernie shall not annoy Bert.
Section 2. Notwithstanding Section 1, Ernie is permitted to annoy Bert on Christmas morning.
Here, the general rule is set forth in Section 1. Section 2, however, subordinates that general rule in certain cases (namely, on Christmas morning). Section 2 does this by using Notwithstanding. The provision is telling the reader (colloquially): Despite what I said in Section 1, here comes an exception.
There are other ways to convey exceptions in contracts (e.g., except and subject to), but I’ll save the larger topic of exceptions generally for another blog post. For now, I’d like to discuss the virtues and vices of notwithstanding. Let’s start with the vices.
1) Confusion as to its meaning
The first issue with notwithstanding is its tendency to confuse readers. This is just about as lawyerly a word as you can get in contract drafting without straying into Latin. Ipso facto, it tends to confuse readers. I think it took me about two years of practicing law to be able to come across this word and not have to access the recesses of my brain to figure out what I was reading. Many people, in fact, confuse notwithstanding (which subordinates the text that immediately follows it) with its polar opposite, subject to (which elevates the text that immediately follows it).
2) It tends to subordinate rules that are not always readily identifiable
In our example above, it’s clear which rule notwithstanding is subordinating because that rule is specifically referenced. But notwithstanding is often coupled with anything to the contrary in this Agreement. In other words, it often serves as an all-encompassing rule that trumps all. The “contrary” provision could be located in the immediately prior provision. Or it could be located 80 pages away.
Moreover, using notwithstanding in this context begs the question: what exactly in this Agreement is “contrary”? This issue arises with respect to exceptions generally (and will be the subject of a future blog post). But, when coupled with a broad notwithstanding anything to the contrary in this Agreement, the issue becomes magnified. The drafter had better have a firm understanding of what provisions are or might be contrary, or else be comfortable that the “trumping” rule being implemented really should trump all.
3) The battle of the notwithstandings
A related issue is that, in the throes of negotiating a 90-page document (or several 90-page documents), you end up with more than one all-encompassing notwithstanding rule. The question then arises as to which notwithstanding “wins.” I’ll post an example of this tomorrow, using our friends Bert and Ernie…
4) The problem of the foregoing
Notwithstanding also often gets coupled with the foregoing, as in: Notwithstanding the foregoing, the Seller is permitted to disclose the transaction to Bob. The foregoing means, more or less, “that which came before” or “the thing mentioned before.” This can cause trouble in its own right, but is a pitfall that often arises when used with notwithstanding. For example:
Bill shall not disclose the existence of the time machine. Bill shall not disclose where Bill has been on Wednesday. Notwithstanding the foregoing, Bill is permitted to tell Ted that he has been to England.
Suppose that Bill visits medieval England on Wednesday. He can tell Ted that he’s visited England on Wednesday. But can he tell Ted that he visited England in 1431 using his time machine? The last sentence wouldn’t necessarily permit that conclusion; it’s unclear “how far back”the foregoing”reaches.”
Notwithstanding my commentary under the heading “The Vices” (see what I did there?), notwithstanding has its virtues. I’ve separated those out below in separate points, but the benefits are all interrelated and each has to do with practicalities rather than pure logic and precision. And each involves coupling notwithstanding with anything to the contrary in this Agreement when your client is the party that is the beneficiary of the trumping rule.
As such, Notwithstanding anything to the contrary in this Agreement can be useful in the following situations:
1) Your client needs a broad rule
In an ideal world, you’d know your contract inside and out. The contract would be free from ambiguity and would be perfectly easy to read. Moreover, all parties would have a clear understanding of how all of the provisions of the contract interact. While we strive for these characteristics in drafting, the practicalities of the day creep in and do so pretty quickly. We don’t always have the time or money to analyze each provision of a contract or of multiple contracts to determine whether that provision should or should not be subordinated. And we might have a pretty clear directive that the exception is meant to be all-powerful. For example, if my client tells me that, above all else, the company cannot be liable for more than $50 million under the contract or with respect to matters relating to the contract, you can bet that I’ll drop in a Notwithstanding anything to the contrary in this Agreement-type provision implementing that concept.
2) You know which provisions should be subordinated…and there are many of them
Suppose that you want to implement a trumping rule in your contract. Suppose, also, that you do in fact know your contract inside and out and have identified 23 provisions that need or might need to be subordinated, depending upon the circumstances. Rather than separately stating the 23 discrete provisions that should be subordinated, a Notwithstanding anything to the contrary in this Agreement might do the trick, especially if your client is the beneficiary of the trumping rule.
3) You’ll likely need to subordinate additional provisions as negotiations proceed
If you know that more provisions are forthcoming in your contract and that those provisions will likely need to be subordinated to the general rule, then, rather than providing “subject to [trumping rule]” as each new provision is inserted, you might simply want to make your trumping rule apply notwithstanding anything to the contrary in the contract. Moreover, you might want to do this to also avoid a negotiation with your counterparty as to whether a given provision does or does not require subordination. And, as a practical matter, once you’ve gone the route of using subject to to subordinate provisions, it might be difficult later on to reverse course and implement a notwithstanding anything to the contrary in this Agreement approach.
In the end, I tend to stay away from notwithstanding. It’s more verbose than other methods of subordinating language, and, when coupled with anything to the contrary in this Agreement, it can affect provisions without warning. Moreover, it can give rise to ambiguities. That being said, I do tend to use notwithstanding from time to time. But I do so consciously and for practical purposes. Specifically, notwithstanding anything to the contrary in this Agreement can be particularly useful if your client is the beneficiary of the trumping language, if you and your client are confident that the trumping language should apply in all cases, and if you are concerned about not “catching” one or more provisions that should be subordinated.