The Miscaptioned Cross-Reference
In many cases, a cross-reference is followed by the caption of the section referred to.
For example, “… subject to Section 9.2 (Governing Law)”, where “Governing Law” is the caption of Section 9.2.
This is a good practice, especially given how often we see cross-references that point to non-existent sections. If the following caption is correct, it’s possible to determine which section is referenced even if the section number referred to is missing. If the section number is missing, or the section referred to exists but has a different caption, that’s an error. We found this mistake in 13.9% of documents analyzed on EDGAR.
If the section number exists but the caption doesn’t match, that creates ambiguity, especially when the caption also exists on a different section. If the text says “subject to Section 9.2 (Governing Law)” but “Governing Law” is actually Section 10.3, and Section 9.2 is “Venue”, how can anyone be sure which section was intended?
A very common practice is to follow a cross-reference with a capitalized term that looks like a caption although the section referenced has no caption at all. It’s sort of an ad hoc attempt to summarize the subject matter of the section. We call this the “air quotes” caption.
Let’s say Section 9.2(a) has no caption, but relates to choice of law. Instead of writing something like “Section 9.2(a) (concerning governing law)” authors often write “Section 9.2(a) (Governing Law)”, implying that the section is captioned. You could take the position that “Governing Law” is actually a defined term in this case, although it’s never used in that way. It’s more like “if that section had a caption, this is what it would be.” It’s a strange convention. And if there is another section that is actually captioned “Governing Law”, that’s a problem.