Royal lives clause

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A Royal lives clause is a contract clause which provides that a certain right must be exercised within (usually) the lifetime plus 21 years of the last living descendant of a British Monarch who happens to be alive at the time when the contract is made.

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[edit] Form

A sample clause would read:

“ The option must be exercised before the end of the period ending at the expiry of 21 years from the death of the last survivor of all the lineal descendants of [his late Majesty King George V or some other British monarch] who have been born on the date of this agreement. ”

[edit] Rationale

The clause became part of contractual drafting in response to common law rule developed by the courts known as the rule against perpetuities.[1] That rule provided that any future disposition of property must vest within "a life in being plus 21 years". The rule generally affects two types of transaction: trusts and options to acquire property. Generally speaking, such transfers must vest before the end of the maximum period, or the grant will be void. Under the old common law, a transaction would be void even if the property might possibly vest after the end of the maximum period, but now most jurisdictions have, by statute, adopted "wait and see" laws.

In an attempt to mitigate the perceived harshness of the common law rule, and to maximise the possible length of time for which trusts in particular could subsist, lawyers began to draft so-called Royal lives clauses. Royal lives were chosen because (a) it was assumed that being affluent, at least one or two members of the family could be assumed to live a reasonably long period of time, and (b) being Royalty, it would be reasonable easy to calculate the lives of the descendants. In practice, a dead monarch was usually chosen so as to maximise the possibility of a grandchild or great-grandchild who would be outside of the immediate Royal family having recently been born.[2]

Despite the purported ease of finding out the descendants of British Monarchs, attempts to choose much older Monarchs to widen the pool of descendants has periodically been known to cause trouble.

[edit] Outside the United Kingdom

In some areas of the United States, President's lives clauses are used for similar reasons, but with a patriotic twist; well-documented political and industrial families (such as the Kennedys and Rockefellers) are also used. In the Commonwealth, use of Royal lives tends to persist. In Ireland, the descendants of Éamon de Valera are frequently used.

[edit] Footnotes

  1. ^ The rule originated in the Duke of Norfolk's Case (1682) 3 Ch Cas 1, 22 ER 931. Henry, Earl of Arundel (later the Duke of Norfolk) had tried to create a shifting executory limitation so that one of his titles would pass to his eldest son (who was mentally deficient) and then to his second son, and another title would pass to his second son, but then to his fourth son. The estate plan also included provisions for shifting the titles many generations later, if certain conditions should occur. When his second son, Henry, succeeded to one title, he did not want to pass the other to his younger brother, Charles. Charles sued to enforce his interest, and the House of Lords) held that such a shifting condition could not exist indefinitely. The judges believed that tying up property too long beyond the lives of people living at the time was wrong, although the exact period was not determined until another case, Cadell v. Palmer (1833) 1 Cl. & Fin. 372, 6 ER 936, a full 150 years later.
  2. ^ For example, if one was to utilise a Royal lives clause in 2007 using Queen Elizabeth II, her youngest descendant at that time would be Lady Louise Windsor, who is 3 years old, and you would limit the pool to 7 grandchildren who might conceivably all die in wars, accidents or of disease at an early stage. But by choosing the deceased King George V there would be a much larger number of younger Royal descendants, the youngest of whom is Xan Windsor, Lord Culloden, born on 12 March 2007.