Loan documents contain a number of boilerplate provisions that are often overlooked in a cursory review of drafts. Those provisions can wreak havoc, however, if the transaction goes south and winds up in litigation. A seemingly standard jury trial waiver can prove unenforceable if a court determines that the clause is not conspicuous.
The Texas Supreme Court has held that a waiver of constitutional rights, such as the right to a trial by jury, must be knowing and voluntary. If the provision is conspicuous within the document, it is prima facie evidence of a knowing and voluntary waiver. The Texas Business and Commerce Code defines conspicuous as written, displayed, or presented so that a reasonable person should have noticed it. In other words, the waiver needs to stand out.
In recent litigation handled by Strasburger, the jury trial waiver in a guaranty agreement came under fire. The court agreed with the guarantor that the waiver was not enforceable, because the waiver clause was only marginally conspicuous. The waiver provision was in a separate paragraph with the heading “Waive Jury,” but the font size was very small. The heading and the text were bolded, but so were a number of other paragraphs in the document. In fact, the headings of all the other paragraphs were also in bold. Finally, after the document was copied, the text in the waiver paragraph became so faint it was hard to tell it was bolded.
If a separate paragraph with bold text is not considered conspicuous, what is? Although some lower courts have enforced waivers without bold or capitalized text, Texas Supreme Court cases establish that a jury waiver written in capital letters, bolded and underlined is conspicuous. Be sure to evaluate the conspicuousness of the jury trial waiver in the context of the entire document. In addition to bolding the text, to make the provision stand out, you may need to increase the type size as well as capitalize and underline it. The goal is to make the jury waiver provision patently conspicuous; otherwise, it may not be enforced. Beware of the boilerplate!
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