All Cap Clauses in Commercial Contracts

Many contracts contain capitalized clauses, for example:

Does any law require a provision in commercial contracts to be in capital letters?

U.S. Law

Indeed, some statutes specify that certain statements must be in all capitals, for example, 2021 Arizona Revised Statutes § 12-1366(C). Others do so de facto by stating in all capitals text that one contract party must include in the contract, for example, 2021 Florida Statutes § 718.202(3) and 2021 Oregon Revised Statutes § 93.040.

Apart from these exceptions, Section 2-316(2) of the Uniform Commercial Code (U.C.C.) only states that a disclaimer of the implied warranty of merchantability must be conspicuous. In addition, Section 1-201(10) of the U.C.C. specifies that “language in the body of a form is ‘conspicuous’ if it is in larger or other contrasting type or color”; it doesn’t say anything about all capitals.

American General Finance, Inc. v. Bassett (In re Bassett), 285 F.3d 882 (2002) debunked the notion that text needs to be in all caps to be conspicuous. The court stated:

German Law

It’s amusing to see all capital clauses in commercial contracts, even when U.S. Law is not applicable. Section 305c of the German Civil Code (BGB) provides that an unusual provision in standard business terms does not form part of the contract. Whether a provision comes as a surprise also depends on the layout, and it cuts both ways. Emphasis can remove the element of surprise. Emphasis in the wrong place creates it: where the front of a form prominently states a term of “one year at a time” and the renewal provision sits on the back among the standard terms, incorporation fails – including against business parties. What works against surprise is therefore not typography but structure: a single coherent provision, or a clear cross-reference where the reader is looking.¹

What German law does require is something else: legibility. A carrier had squeezed its bill of lading terms into two columns on a back page slightly smaller than A4. More than 150 lines per column, line height 1 mm at most, line spacing even tighter, printed pale blue on faintly gray paper. The BGH: readable only with a magnifying glass, and even then only with effort. The terms never became part of the contract, the jurisdiction clause buried in them fell with them, and the cargo insurer was able to sue in Hamburg rather than Bombay.² This applies expressly to merchants as well, and to a clause customary in overseas trade: the clause was not surprising, but it was illegible. A party handing over terms that can barely be deciphered may not assume, in good faith (Section 242 BGB), that the other side agrees to their content.

The same senate supplied the counter-example three years later. Again bill of lading terms in small print, again tight line spacing, but printed black on white in clean technical execution, with bold headings for the individual terms. Legible, therefore validly incorporated: the claim failed on the agreed jurisdiction in Bogotá.³ What carries legibility, then, is contrast, clean print, and emphasized headings. Capital letters appear in neither decision.

Swiss Law

There is one jurisdiction where emphasis genuinely counts, and it is among the most frequently chosen laws for international contracts. Where a party adopts a set of terms wholesale, unusual clauses become part of the contract under the Swiss unusualness rule only if the party using them draws separate attention to them. What that looks like is illustrated by a gym membership: in the renewal provision, the word “expiry” was set in bold and in a larger font, and that sufficed for the Swiss Federal Supreme Court as notice of a fixed term (BGer, judgment of 15 July 2014 – 4A_475/2013, consid. 5.3.1).

The rule applies between businesses as well. An IT provider had its terms state that invoices count as accepted unless the customer objects by registered letter within 30 days. Both parties were commercial companies of equal economic standing, but the customer was outside the industry, and nothing had drawn its attention to the clause. The clause was therefore unusual and unenforceable, and the claims based on it – around 200,000 francs – fell away (BGer, judgment of 11 July 2023 – 4A_372/2022, consid. 3.3, 3.6). Under that decision, attention is sufficiently drawn where the clause is worded clearly and unambiguously and set off by printing techniques such as bold type. For liability limitations customary in an industry, by contrast, the rule’s requirements will rarely be met.⁴

What is remarkable is something else: even where a legal system does require emphasis, it means bold type and font size, not capitals.

Conclusion

As a result, unless a statute requires it, don’t use all capitals to emphasize a provision.

Incidentally, conspicuousness and readability are not the same. For example, using all capitals makes it hard to read once readers focus their attention on it. Modern contract design is a better way to achieve both.

That all caps fails even at its own purpose has now been measured. In an experiment, readers answered a question about a capitalized clause exactly as often incorrectly as they did about the same clause in ordinary print; the authors were able to rule out any advantage of capitalization statistically. It remains common all the same: three-quarters of the standard form contracts surveyed at major U.S. providers contain at least one fully capitalized paragraph.⁵

Notes

1. On the interplay between layout and the element of surprise, and on the drafting recommendations that follow from it, see Hans-Friedrich Müller/Florian Schmitt, Verlängerungsklauseln in der AGB-Kontrolle, NJW 2017, 1991, 1995. ↩

2. BGH, judgment of 30 May 1983 – II ZR 135/82. ↩

3. BGH, judgment of 3 February 1986 – II ZR 201/85. ↩

4. On the place of the unusualness rule in commercial dealings and on the standing of Swiss law as a governing law, comparatively, see Patrick Ostendorf, RabelsZ Online First 3/2025 (open access), section IV. ↩

5. Yonathan A. Arbel/Andrew Toler, All-Caps, 17 Journal of Empirical Legal Studies 862 (2020), DOI 10.1111/jels.12272. The study examined consumer contracts; the authors also find some evidence that all caps harms older readers. ↩

Reference: Poleacov, P. (2026). All Cap Clauses in Commercial Contracts. INN.LAW. https://inn.law/en/perspectives/allcaps/

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