May 26, 2020

May 26, 2020

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Missing Apostrophe Ruling Affirms a Clause's Purpose

Consider the following provision of in a contract between a general contractor and a subcontractor:

"Ten percent (10%) of Subcontractor’s contract amount shall be withheld and will be released 35 days after completion of subcontractors work."

After the subcontractor abandons the job, the general contractor refused to pay the 10% retention even after the job is completed by another subcontractor.  The subcontractor argued that the reference to "subcontractors" (no apostrophe) must mean any subcontractor, not just itself.  Thus, it was entitled to payment of the retention when the replacement subcontractor finished the job.  The general contractor took the position that "subcontractors" refers to the first sub-contractor and since it did not finish the job, it is owed nothing more.  Who won?

The trial court found for the general contractor and the Court of Appeal affirmed based on a literal interpretation. Regency Midland Constr. v. Legendary Structures, 2019 Cal. App. LEXIS 1110.  The Court of Appeal supported its holding by referring to the purpose of the retention clause - to ensure proper performance.

"He said: "IT DOESN'T, 'n YOU CAN'T!"

Why we use an apostrophe to denote possession is somewhat mysterious.  The word is derived from two Greek words, ἀπό (meaning away from) and στρέφειν (meaning to turn away).  Thus, an apostrophe is used to denote an elision.  In can't, for example, the apostrophe denotes the elision of no.  But what does elision have to do with possession.  In Old English, singular possessives were often formed by adding es to a word.  For example, the singular possessive of the Old English word for ship, sċip, is sċipes.  The theory is that the apostrophe was used to denote the elision of the e.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...