You may have noticed that sometimes contracts contain sections written in ALL CAPS. Why?
Some provisions of contracts are required to be “conspicuous.” This is so that people don’t miss crucial information and so that the party drafting the contract can’t bury this information in mountains of text. A term is “conspicuous,” as defined by the Uniform Commercial Code (“UCC”), if it is “so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it.”1 Contract sections that are typically required to be “conspicuous” include disclaimers of warranty2 (those blocks of text limiting the warranty of the item you’ve purchased) and indemnity clauses.3
Provisions written in all caps fulfill the conspicuousness requirement provided that they really do stand out and are not buried within another block of text that’s in all caps, or are otherwise hidden somehow, for example by being written in small type.4 So really–just as your mother said when you were a kid–the yelling is for your own good.
But, as you might have responded way back then (or even recently), is the yelling really necessary? Well…no. All caps isn’t the only way to make text conspicuous: the text can be set off by larger type, different fonts or colors, or symbols that call attention to the text.5 Somewhere along the way, though, lawyers equated conspicuousness with all caps, so you’ll just have to put up with getting yelled at by most of your contracts — at least until the manicule comes back into vogue.
- Some contract provisions are required to be “conspicuous” because they are considered especially important. These including limitations on warranties and indemnification provisions.
- Putting these provisions in all caps is one way of satisfying the conspicuous requirement, and the way that tends to be most favored by lawyers. But it’s not the only one.
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- UCC § 2-101(b)(10). ↩
- The exclusion or modification of implied warranties of merchantability must be conspicuous. UCC § 2-316(2). ↩
- An indemnity is the duty of one party to compensate another for the losses it suffers. Black’s Law Dictionary (9th ed. 2009), indemnity. The Texas Supreme Court has imposed the requirement that indemnity agreements be conspicuous. Dresser Indus., 853 S.W.2d at 507-09 (holding that indemnity agreements and releases have two fair notice requirements, conspicuousness and express negligence). ↩
- See In re Bassett, 285 F.3d 882, 886 (9th Cir. 2002) (in determining whether a right-to-rescind provision was “clear and conspicuous,” examined the use of all caps in contracts, noting that its use does not automatically make provisions clear and conspicuous, as it is dependent on context). ↩
- “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.” UCC § 2-101(b)(10). ↩