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Ramming Bow Contracts

posted by Mitu Gulati

Have you heard of Ramming Bows? Or did you know that they describe a category of boilerplate contract provisions?  Until a couple of weeks ago, I had not either.  That was when I came across Glenn West’s two delightful blog posts at the Weil Gotshal & Manges site (here and here). Glenn is a senior partner in the Private Equity/M&A practice at Weil. And in his spare time, he writes wonderfully witty blog posts and articles about wide range of legal issues; many of which are about the bizarre world of sophisticated boilerplate contracting.  Even if you have no interest in contract law, let alone boilerplate contracts, I suspect that you will enjoy his writing.  It is insightful about the way in which contracts get produced and evolve in the real world and, even better, is funny.

First, Ramming Bows. The term Ramming Bow, Glenn tells us, describes a structural feature of warships that was introduced in 1866 after the Battle of Lissa (in what is Croatia today). In that battle, between the Austrians and the Italians, the respective fleets were a combination of wooden and ironclad boats.  And the weaker Austrians were apparently able to beat the Italians because the older wooden boats of the Austrians were able to ram the newer ironclads of the Italians.   End result, virtually every warship constructed for decades had to have ramming bows, in case they got into close proximity with enemy boats and needed to ram them.

The problem with this was that the Battle of Lissa kind of ramming almost never happened again. Weapons like guns and torpedoes became prevalent.  And the ramming bows mostly only caused damage to friendly ships – since those were the only ships to get close.

Glenn’s blog post tells the story of a type of ramming bow contract, the No Third Party Beneficiary clause that has long been standard.  The clause basically captures the common law rule that contracts give rights only to the parties to the contract. Put differently, there is little danger that the absence of such a clause will cause a court to think that third party beneficiaries have rights under the contract (US courts require a clear indication that the third party has the right to sue under the contract, before she may receive it).

Where the rubber meets the road in the ramming bow contract story are situations where the transaction is designed to explicitly give rights to third party beneficiaries to sue and yet, in the boilerplate that just got copied over from some prior deal, there is a No Third Party Beneficiary clause. And these kinds of situations can very easily occur in the private equity/M&A world, Glenn explains (one example is the No Recourse provision in private equity deals)

Now this is not to say that the courts won’t recognize that some antiquated piece of boilerplate should not be ever be allowed to trump a bespoke provision.  But it is not always that clear which provision is which. And, further, best I know, there is no doctrine of contract interpretation that says that boilerplate contract provisions are to be given less effect than bespoke ones (although maybe such a doctrine would make sense).  (For a discussion of a recent case from the Delaware Chancery court, Dolan v. Altice USA Inc. (2019), where this issue came up, see here)

More generally, I wonder how many more old clauses are out there that neither party has focused on that pose the risk of knocking out some new clause that the parties actually bargained for.  Surely there are more.

For another one of Glenn’s delightful posts on how the failure to recognize icebergs in one’s contracts can result in disaster, see here.

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