A banker asked us: Forthwith vs. Promptly - it's only a matter of time

Q: What's the difference between "forthwith," "promptly" and "as soon as possible"? I have seen all of these terms in credit agreements and never understood the distinction between them.

A: All of these terms refer to indefinite or unspecific periods of time in which an undertaking is to be completed, or an action or covenant in a credit agreement is to be taken or performed.

Ideally, when undertakings are given or covenants are made by borrowers, setting out a specific number of days for performance, or a specific date by which performance is required, is clearly the best strategy for any lender. However, some undertakings and covenants involve third parties or other circumstances where borrowers seek to limit references to a specific number of days or a specific date to avoid triggering a default arising from things beyond their control. Instead, borrowers often wish to frame their obligations in terms of indefinite dates that still convey a sense of dedication or diligence on their part to their lender, while avoiding the need to extend the undertakings or covenants on account of third party delays or involvement. Thus the terms "forthwith", "promptly" and "as soon as possible" have developed over time to, generally speaking, describe different spots along the 'time for performance' spectrum.

Surprisingly, there are very few recent Canadian cases to offer guidance as to the difference between these terms in a commercial context. Canadian judicial interpretation has been largely limited to criminal law situations where the concepts relate to how quickly actions must be taken in respect of an accused person, or in a labour and employment context where the concepts relate to how quickly actions must be taken in respect of an employee.

Nevertheless, these terms are referred to in many legal dictionaries and commercial practice has developed over the years as to their general interpretation based upon those definitions. "Forthwith" is generally seen as the strongest expression of the time commitment for the performance of a covenant or undertaking. It means "immediately" or "without delay"¹, and "as soon as … a thing may be done" often indicating that action is to be taken within 24 hours.² Some courts have determined that the word "forthwith" requires vigorous action, without any delay, and have suggested that whether there has been such action is a question of fact, having regard to the circumstances of the particular case.³ Others have suggested it means the action must be taken without pause or delay, or done at once,⁴ while some judges have commented that the nature of the act to be done is to be taken into consideration when determining the required immediacy.⁵

Moving along the time for performance spectrum, the term "promptly" is generally seen as the next step down from "forthwith" in terms of urgency or immediacy. Although in some criminal law cases, "promptly" has been construed as having the same meaning as "immediately", in the commercial context it is generally considered as being less strict or severe. While "prompt" performance must still be done quickly and diligently, performance within three to five business days might be construed as being sufficient.⁶

Finally, the term "as soon as possible", has been defined as meaning no more than "without reasonable delay" or "within a reasonable time."⁷ Some cases have suggested that the length of the period of time involved for performance is subject to a reasonableness standard rather than a sense of urgency, and may be influenced by trade practice, custom and other circumstances.⁸

The bottom line with any undertaking or covenant is to prescribe a specific date for performance, and when circumstances prevent you from being specific, use the term "forthwith" if you really want an undertaking or covenant to be performed quickly.

The author acknowledges the assistance of Travis Evens, Articling Student, and Jenifer Elmy, Articling Student, with the research for and preparation of this article.