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Perspectives

ReferenceInternational Business Law

All-Caps Clauses in Commercial Contracts

Contract parties often use capitalized clauses in commercial contracts. This makes reading unnecessarily hard. There is a simple solution.

Peter Poleacov (updated )8 min

Yellow type specimen booklet with a blue letter G, open at a page of typeface samples in four languages

Many contracts contain capitalized clauses, for example:

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

US Law

Indeed, some statutes specify that certain statements must be in all capitals. Arizona Revised Statutes § 12-1366(C), for example, requires bold and capital letters. Others do so de facto by stating in all capitals text that one contract party must include in certain contracts. One example is Florida Statutes § 718.202(3) in its 2021 version.

Apart from such exceptions, § 2-316(2) of the Uniform Commercial Code (U.C.C.) only requires a written disclaimer of the implied warranty of merchantability (the warranty implied by law that the goods are fit for their ordinary purpose) to mention merchantability and to be conspicuous. What is conspicuous follows from U.C.C. § 1-201(b)(10). The test is whether a reasonable person against whom the term operates ought to have noticed it. That is a decision for the court. The provision names capitals only as an example of a conspicuous heading, and even there alongside a contrasting type, font, or color. For the language of the term itself, it gives as examples larger type, a contrasting type, font, or color, or symbols that set it off. Capitals are one means among several, not a requirement.

In 2002 a US federal court of appeals debunked the notion that text needs to be in all caps to be conspicuous.1 The court stated:

German Law

It is amusing to see all-caps clauses in commercial contracts, even when US law is not applicable. Section 305c of the German Civil Code (Bürgerliches Gesetzbuch, BGB) provides that a surprising 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 this works in both directions. Emphasis can remove the element of surprise. Emphasis in the wrong place creates it. One example is a form whose front prominently states a contract period of “one year at a time”. It refers only generally to terms on the back, and those terms contain a renewal provision. If the user does not point it out during the negotiations, incorporation of that provision fails as a rule – including against business parties. The safest course is therefore a single coherent provision, or a clear cross-reference where the reader is looking.2

What German law does require is 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. According to the German Federal Court of Justice (Bundesgerichtshof, BGH), the terms were readable only with a magnifying glass, and even then only with effort. They therefore never became part of the contract. So the jurisdiction clause in them did not apply either. The cargo insurer was able to sue in Hamburg rather than Bombay.3 Barely legible terms do not become part of the contract with merchants either. This holds even where, as here, the clause is very customary in overseas trade. The clause was not surprising, and in the court’s view merchants needed less protection than non-merchants. Even so, a party handing over terms that can barely be deciphered may not assume, in good faith (Section 242 BGB), that a merchant on the other side agrees to their content.

The same senate supplied the counter-example almost 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. The terms were legible and therefore validly incorporated. The claim failed on the agreed jurisdiction in Bogotá.4 What makes the terms legible, then, is contrast, clean print, and emphasized headings. Neither decision turns on capital letters.

Swiss Law

Emphasis also matters in Swiss law. Swiss law is among the laws that parties choose most often for international contracts.5 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. In the renewal provision of a gym membership contract, for example, the word “Ablauf” (expiry) was set in bold and in a larger font. That sufficed for the Swiss Federal Supreme Court as notice of a fixed term.6

The unusualness rule applies between businesses as well. An IT provider stipulated in its terms 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. The claims of around 92,000 francs based on it fell away.7 Under that 2023 decision, the party using the terms has in principle drawn sufficient attention to an unusual clause if it has worded the clause clearly and unambiguously and set it off by printing techniques such as bold type.89

In a 2025 decision, a freight forwarder had referred to its terms in tiny print in its emails, after the sign-off and sender details. For the Federal Supreme Court, that was not enough to incorporate the terms into the contract. Even if they had been incorporated, the limitation of liability in them would not have applied. It was unusual for the pharmaceutical trader, who was outside the industry, and the forwarder had not drawn separate attention to it. According to the cantonal court’s findings, the fact that the reference was underlined and in capitals did not make it particularly more visible. The Federal Supreme Court did not set this finding aside.10

Conclusion

As a result, unless a statute requires it, do not use all capitals to emphasize a provision. Where the law requires emphasis, use bold type or a larger font.

Incidentally, conspicuousness and readability are not the same. Using all capitals makes reading laborious once the reader’s attention is on the clause. Modern contract design achieves both at once.

That all caps barely serves even its own purpose has now been measured. In an experiment, readers were exactly as likely to answer a question about a capitalized clause incorrectly as a question about the same clause in ordinary print. The authors were able to rule out statistically any meaningful advantage of capitalization (10 percentage points or more). It remains common all the same. Roughly 77 percent of the 500 US standard form contracts surveyed contain at least one fully capitalized paragraph.11

Notes

  1. American General Finance, Inc. v. Bassett (In re Bassett), 285 F.3d 882 (9th Cir. 2002). ↩

  2. BGH, judgment of 1 June 1989 – X ZR 78/88 (on Section 3 of the former German Standard Business Terms Act, AGB-Gesetz, AGBG, now Section 305c(1) BGB); there the front of the form stated “jeweils 1 Jahr = 12 Ausgaben” (one year = 12 issues at a time) in capital letters. 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. ↩

  3. BGH, judgment of 30 May 1983 – II ZR 135/82; on the color of the print, BGH, judgment of 3 February 1986 – II ZR 201/85. ↩

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

  5. On how often parties to international contracts choose Swiss law, see Patrick Ostendorf, RabelsZ Online First 3/2025, section I with note 25. ↩

  6. BGer, judgment of 15 July 2014 – 4A_475/2013, consid. 5.3.1. ↩

  7. BGer, judgment of 11 July 2023 – 4A_372/2022, consid. 3.3, 3.6, 3.8, 3.10. ↩

  8. BGer, judgment of 11 July 2023 – 4A_372/2022, consid. 3.3. ↩

  9. On the place of the unusualness rule in commercial dealings, comparatively, see Patrick Ostendorf, RabelsZ Online First 3/2025 (open access), section IV. ↩

  10. BGer, judgment of 2 July 2025 – 4A_287/2024, consid. 4.3.1, 5.3.2, 5.3.3, 5.3.4.2. ↩

  11. 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-Caps Clauses in Commercial Contracts. INN.LAW. https://inn.law/en/perspectives/allcaps/