In English, “may” and “may not” are words that are commonly used in contracts, together with alternatives such as “has the right to”, “is entitled to”, “shall not” and “must not”.
In Chinese, the equivalent words that are most commonly seen are ke [可], keyi [可以], you quan [有权] and bude [不得].
This column explores the ways in which these words and expressions are used, and identifies some of the drafting challenges that arise.
The English words
The word “may” is often referred to as the language of discretion or the language of permission, as distinct from the language of obligation as in the case of “shall” and “must” (see China Business Law Journal volume 1 issue 5, page 84: Shall or must? Words of Obligation).
The word “may” is commonly used to mean “is permitted”, “is entitled” or “has the right” to do something, either in a contractual or legal sense. For example:
Either party may terminate this contract in the event of a material breach by the other party.
In English, “may” is also used to mean that something is possible. For example:
If the application does not contain all relevant details, the authorities may require [i.e. it is possible that the authorities will require] the applicant to submit a supplementary application.
In common law jurisdictions, disputes have often arisen over the interpretation of the word “may” and whether it actually means “shall” or “must”. This issue arose in the recent UK case of Ener-G Holdings v Hormell .
In this case, the England Wales Court of Appeal considered the use of the word “may” in the context of the following notice clause:
13.1 Notice in writing
Any notice or other communication under this agreement shall be in writing and signed by or on behalf of the party giving it.
Any such notice may be served by delivering it personally, or by sending it by pre-paid recorded delivery post to each party (in the case of the buyer, marked “for the attention of directors”) at or to the address referred in the Agreement or any other address in England and Wales, which he or it may from time to time notify in writing to the other party.
In dispute was whether a notice concerning a claim for a breach of warranties had been validly served when it had been left at the defendant’s premises instead of being handed to the defendant personally. A related question was whether the word “may” in clause 13.2 was intended to be permissive or exclusive; in other words, were the methods of service in clause 13.2 simply two examples of permitted methods of service under the agreement, or were they in fact the only two permitted methods of service?
By a majority of two to one, the Court of Appeal decided that “may” was intended to be permissive rather than exclusive, and that “may” should be given its ordinary meaning. This might come as a surprise to some lawyers, as they might assume that notice clauses generally prescribe the permitted methods of service to the exclusion of any other methods of service. One of the majority judges stated that exclusivity requires clear wording. In support of their conclusion, both the majority judges noted that the word “shall” had been used in the immediately preceding clause, suggesting that the parties had intended that the use of the word “may” should be contrasted with the use of the word “shall”.
By contrast, the minority judge decided that although the use of “may” usually contrasts with the use of the words “shall” or “must”, it was possible to interpret the clause as setting out the only methods of service that were authorised or permitted. In this sense, it was the same as saying “notice may be served either by method A or by method B, but by no other methods”.
Of course, any ambiguity would have been overcome by using the word “must”, or “may only”, as set out below:
Any such notice [must/may only] be served by delivering it personally or by sending it by pre-paid recorded delivery post to each party (in the case of the buyer, marked “for the attention of directors”) at or to the address referred in the agreement, or any other address in England and Wales which he or it may from time to time notify in writing to the other party.
This clause highlights some of the inherent challenges in the use of the word “may”. Interestingly, it is also an example of how the word “may” has two distinct meanings. The focus of the second “may” in this clause highlights the possibility that something may occur, instead of highlighting that something is permitted:
… which he or it may from time to time notify in writing to the other party
In most contexts, “may” can be used in place of the phrases “has the right”, “shall have the right”, or “is entitled”. In his book, A Manual of Style for Contract Drafting, the drafting expert Ken Adams suggests that the phrase “is entitled to” is preferable to “may” in circumstances where whatever it is that the party is entitled to do will depend on the actions of others. Take, for example, the following provision, where the purchase of shares would require the cooperation of the seller:
On exercising the option, Party B will be entitled to purchase the shares …
However, Adams also suggests that instead of drafting the provision as set out above, it would be better to focus on the seller’s obligation.
What about the use of the words “may not”?
Most drafting experts are of the view that “may not” has the same meaning and legal effect as “shall not” or “must not”. Literally, it means “is not permitted to” or “does not have the authority to” do something, as distinct from “is under an obligation not to” do something. Logically, one could argue that using “shall not” or “must not” is preferable to using “may not”, as it is better to express a prohibited action in the form of a direct prohibition than to refer indirectly to the fact that an action is not authorised or permitted.
Alternatively, sometimes a prohibited action can be expressed as a permitted action. For example, the following wording is often seen in a shareholders agreement:
A shareholder may not transfer its shares to a third party without the prior written consent of the other shareholders.
As an alternative, it could be expressed as follows:
A shareholder may transfer its shares to a third party only with the prior written consent of the other shareholders.
Although the legal effect is the same (i.e. a shareholder must obtain the prior written consent of the other shareholders before it assigns its shares to a third party), the second version is arguably better as it expresses the meaning in a positive manner and avoids the double negative in the phrase “may not … without” (see China Business Law Journal volume 1 issue 2, page 78: The vexed question of the double negative).
Of course, the choice of the drafter will often depend on whether there is a preference to emphasise the action that is prohibited (i.e. transferring shares to a third party without consent) or the action that is permitted (i.e. transferring shares to a third party with consent).
Note that it is important to be careful with the phrase “may not” as it may result in ambiguity, particularly in the context of legal advice. Take, for example, the following sentence:
If all of the conditions are not satisfied, approval may not be granted.
Does this mean that it is possible that approval will not be granted, or that it is not permitted for approval to be granted?
The Chinese words
In Chinese contracts and legislation, the words ke [可] and keyi [可以] are the words that are most commonly used to indicate that a person is permitted to do something.
The expression you quan [有权] , which can be translated as “has the right” in English, is used commonly in Chinese legislation to refer to the situation where a person has the legal right – as distinct from the contractual right – to do something. Take, for example, the following provision in the Contract Law:
Either party has the right to request a people’s court or an arbitration body to modify or rescind any of the following contracts:
1. any contract that is made as a result of a major misunderstanding; or
2. any contract that obviously lacked fairness when it was entered into.
Where a party causes the other party to enter into a contract against its true will by means of deception, coercion or taking advantage of its difficulties, the injured party has the right to request a people’s court or an arbitration body to modify or rescind the contract.
Where the party requests a modification to the contract, the people’s- court or arbitration body shall not rescind it.
The above example also includes the Chinese characters that are commonly used as the equivalent of “may not” or “shall not” in English; namely, bude [不得]. The characters buke [不可] and bu keyi [不可以] are also used for this purpose, but it is generally considered that bude [不得] is stronger.
A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at www.vantageasia.com.