Day-by-Day Class Plans: Contract Drafting Spring 2022

By D. C. Toedt III, email: dc@toedt.com
Attorney & arbitrator — tech contracts & IP
Adjunct professor, University of Houston Law Center

Updated Monday January 24, 2022 15:45 Houston time

The SYLLABUS sets out general information about this course.

Today’s class plan (to be updated for each class)

This is a working document, some parts of which are hidden for now, and other parts of which will be updated as the semester progresses. The class plans are based on how things went in past semesters, but every semester (and every course section) is different, so what a course section does on any given night could be different than what’s listed below.

Other necessary documents for this course:
• the reading materials: Notes on Contract Drafting, a work-in-progress of mine (“NCD”), including an interim draft of the Tango Terms annotated contract provisions;
• the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save)

• [NEW:] an extremely simple contract template to use for homework assignments

For those who would like a bound book, a 200-page, 8.5x11“ paperback of NCD (not including the Tango Terms because of printing size restrictions) is available from Amazon for $5.50 per copy plus tax and shipping, which is basically printing cost. Disclosure: I get a royalty of $0.05 per copy sold.

1. Detailed class plans: January

1.1. Class 02: Mon. Jan. 24

1.1.1. In the news: Retail center sale

From today’s Houston Chronicle (article by Katherine Feser): “Houston-based Fidelis Realty Partners acquired Shadow Creek Ranch, a 613,468-square-foot, H-E-B-anchored retail center at 2805 Business Center Drive in Pearland’s Shadow Ranch community. ….”

QUESTION: What kinds (plural) of contract documents are likely to be involved here?

QUESTION: What sorts of things might the different parties be concerned about?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save)

1.1.2. Ambiguity: Once more into the breach ….

From this article: “Anti-vaccination sentiment was once more evenly distributed between parties and ideologies ….” (Emphasis added.)

QUESTION: How could this be clarified?

1.1.3. Homework review - signature blocks

Each group is to choose a spokesperson for each question.

  1. Is “Employment Agreement” an acceptable title, and can the Agreement refer to Gigunda as “Employer”? EXPLAIN.
  2. What does “LLC” stand for? Is there a difference between an LLC and a corporation?
  3. Is it appropriate to say that MathWhiz LLC is “incorporated in Texas”? EXPLAIN. (There are two issues to spot here.)
  4. How important is it to include a party’s full legal name in a contract? EXPLAIN.
  5. Must each party’s full legal name be include in that party’s signature block? EXPLAIN.
  6. What’s Gigunda Energy’s full legal name? What would you do if you didn’t know that when drafting?
  7. What type of organization is Gigunda Energy? What would you do if you didn’t know that when drafting?
  8. Which signature block version should we use for Mary — the two-blank-lines version, or the four-blank-lines version?

1.1.4. Reading review: Chapter 2

QUESTION: From Chapter 2:

  • What surprised you (if anything)?
  • What struck you as important for summer associates and new lawyers to know?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save)

1.1.5. In the news: Joint venture agreement

From today’s Houston Chronicle (article by Katherine Feser): “Houston-based Hicks Ventures signed a $100 million joint venture agreement with metropolitan Washington, D.C.-based Artemis Real Estate Partners to develop inpatient rehabilitation facilities and behavioral health hospitals nationwide. Hicks and its principals, Patrick Hicks, David Steidley and Larry Vaile, have completed more than $1 billion in healthcare development projects in the last 20 years. …”

QUESTION: What kinds (plural) of contract documents are likely to be involved here?

QUESTION: What sorts of things might the different parties be concerned about?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save)

1.1.6. Drafting fail: Babies and dietary guidelines

From CNN (since changed): “New US dietary guidelines include babies and toddlers for first time” A friend posted a screen grab on Facebook with the comment, “Thanks for the offer, but I’m vegan.”

1.1.7. In the news: Was this a written agreement?

The Houston Chronicle reported on a guarantee agreement that was never signed but was supposedly agreed to. Excerpt:

At the meeting [the lawsuit says], Parker presented a written agreement, and while Souki agreed to the terms, *he refused to sign the agreement, explaining that he could not sign a written agreement since he had not disclosed to his bank his liability to Parker and Red Mango ….

Parker accepted based on the two having “a long history” and on Parker’s continued faith in Tellurian’s core business model, according to the lawsuit.

In October 2021, Parker texted Souki to set up a “firm date to close out on the guarantee,” the lawsuit says, but while Souki confirmed that he and Parker had “talked in Aspen,” he did not commit to paying Parker or fulfilling his obligation.

“Since that date, Parker, on behalf of himself and Red Mango, has demanded that Souki made the payments required of him under the contract,” the lawsuit says. “However, Souki has failed to do so in breach of his agreement.”

Natalie Postgate, Tellurian investor sues co-founder Charif Souki over millions in losses (HoustonChronicle Jan. 22, 2022) (emphasis added).

1.1.8. Reading review: Chapter 3

QUESTIONS: From Chapter 3:

–  What surprised you (if anything)?

–  What struck you as important for summer associates and new lawyers to know?

–  Which question(s) from the exercises and discussion questions would you like to do in class?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save)

1.1.9. Ambiguity: Plush carpets

From an article in The Guardian:

There will be plush lecture theatres with thick carpet, perhaps named after companies or personal donors.

Martin Parker, Why we should bulldoze the business school, The Guardian, Apr. 27, 2018 (https://perma.cc/F5N6-46RE).

QUESTION: What, exactly, is named after companies or personal donors?

QUESTION: How could this sentence be rewritten to clarify it?

1.1.10. In the news: Data centers purchased

From today’s Houston Chronicle (article by Katherine Feser): “Dallas-based DataBank will expand to Houston with the purchase of four data centers from CyrusOne for $670 million, the company announced. The facilities consist of 4201 Southwest Freeway and three buildings on Westway Park Boulevard campus in west Houston. …”

QUESTION: What kinds (plural) of contract documents are likely to be involved here?

QUESTION: What sorts of things might the different parties be concerned about?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save)

1.1.11. Reading review

What’s the fastest way to signature?   Worksheet

Each group is to choose a spokesperson for each question.

1.1.12. On the lighter side: The unreasonable effectiveness of commas

See this post.

1.2. Class 01: Wed. Jan. 19

1.2.1. Introduction

  • Introduction of each student via Zoom chat.

1.2.2. Set up email list and Canvas, etc.

Please provide emails for a (private) Google Groups email list on the Group 1 virtual whiteboard at the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 (Caution: I will very likely “erase the whiteboards” after each class session, so be sure to copy anything you want to save). IMPORTANT: Please provide an email address that you check regularly. [I’ll be deleting the email addresses from the whiteboard when I transfer them to the Google Groups email list.]

Canvas setup: Self-enroll at https://canvas.instructure.com/enroll/LA8HCM — be sure to use your name so I can track progress and watch out for possible issues.

IMPORTANT: If you omit your name, you won’t show up on the Canvas roll-call page as being present in class, nor as having completed the homeworks and quizzes.

1.2.3. Ambiguity: To Mars!

From Twitter: “Elon Musk predicts he will rocket people to Mars in less than 10 years” – does that mean people will depart for Mars in less than ten years, or that it’ll take them less than ten years go get there?

1.2.4. Discussion: Selling a used computer

In your small groups, answer the questions in this worksheet. (Once you’re in the worksheet, click on the table-of-contents link to get to your group; Groups 1-4 are in the 6:00 p.m. section, Groups 5-8 are in the 7:30 p.m. section.)

1.2.5. Read-along lecture

DCT to talk through the syllabus and the introductory parts of the Notes on Contract Drafting (a work-in-progress of mine). BE SURE TO READ these materials.

1.2.6. Tales from the practice: Contract “signed” by email

1.2.7. Introduction: MathWhiz & Gigunda

Read along: Chapter 1: Introduction

QUESTION: Most contract preambles identify the parties as, e.g., “ABC Corporation, a Texas corporation.”

  • How would we identify MathWhiz?
  • How would we identify Gigunda Energy?

1.2.8. Ambiguity: Lohhh-lahhh 🎵

TEXT, from The Kinks’ famous song Lola (play the relevant clip on YouTube): “Well I’m not the world’s most masculine man | But I know what I am and I’m glad I’m a man | And so is Lohhh-lahhh …..” 🎵

QUESTION: When the artists sing, “And so is Lola,” what exactly is Lola?

EXERCISE: In your small groups:

  • Consider how that lyric line could be clarified. (Don’t worry about rhyme or meter.)
  • Choose a spokesperson for your group — I’ll call on a group quasi-randomly.

2. Homework, week by week

2.1. Homework due Mon. Jan. 24: Signature blocks (5 pts P/F)

See the hypothetical facts at NCD § 1.2.

Draft the signature blocks for a Gigunda-MathWhiz agreement. Use the hypothetical facts given — and for those facts that aren’t given, either:

  • use placeholders such as “[INSERT FULL LEGAL NAME]” etc.; or
  • leave blank lines for the signer(s) to fill in the appropriate information, e.g., date signed.

IMPORTANT: Upload your Word document for this homework to Canvas — that allows me to quickly review and comment.

Be sure to review the examples and guidelines at NCD § 3.7.

2.2. Homework due Wed. Jan. 26: Preamble (5 pts P/F)

Draft a preamble for a services agreement between MathWhiz and Gigunda — use the hypothetical facts at NCD § 1.2 and leave placeholders — e.g., “[FILL IN ADDRESS FOR NOTICE]” — for anything else you think you need.

Be sure to review the examples and guidelines at NCD § 3.5.

2.3. Homework due Mon. Jan. 31: Tenant audit rights (5 pts P/F)

Rewrite the following, from this real-estate lease:

  • to break up the “wall of words”
  • to be more reader-friendly, as though you were talking to a lay jury; and
  • to correct any drafting-type “issues” that you see, such as:
    • passive voice;
    • D.R.Y. issues;
    • run-on sentences.

(Don’t worry about fixing the substance of the provision — yet.)

6.5 Tenant’s Audit Rights. Landlord shall keep reasonably detailed records of all Operating Expenses and Real Estate Taxes for a period of at least two (2) years. Not more frequently than once in every 12-month period and after at least twenty (20) days’ prior written notice to Landlord, Tenant together with any representative of Tenant shall be permitted to audit the records of the Operating Expenses and Real Estate Taxes. If Tenant exercises its audit rights as provided above, Tenant shall conduct any inspection at a reasonable time and in a manner so as not to unduly disrupt the conduct of Landlord’s business. Any such inspection by Tenant shall be for the sole purpose of verifying the Operating Expenses and/or Real Estate Taxes. Tenant shall hold any information obtained during any such inspection in confidence, except that Tenant shall be permitted to disclose such information to its attorneys and advisors, provided Tenant informs such parties of the confidential nature of such information and uses good faith and diligent efforts to cause such parties to maintain such information as confidential. Any shortfall or excess revealed and verified by Tenant’s audit shall be paid to the applicable party within thirty (30) days after that party is notified of the shortfall or excess to the extent such overage or shortfall has not previously been adjusted pursuant to this Lease. If Tenant’s inspection of the records for any given year or partial year reveals that Tenant was overcharged for Operating Expenses or Real Estate Taxes by an amount of greater than six percent (6%), Tenant paid such overage and such overage was not otherwise adjusted pursuant to the terms of this Lease, Landlord shall reimburse Tenant for its reasonable, third party costs of the audit, up to an amount not to exceed $5,000.

2.4. Homework due Mon. Feb. 07: Signatures - the Addams family (5 pts P/F)

FACTS:

  1. Your client is Addams Investments, L.P., a “family” limited partnership of the very-wealthy Addams clan in Galveston. The sole general partner of the limited partnership is Addams Operations, Inc.
  2. It’s 12:00 noon Houston time on March 31. The president of Addams Operations, Ms. Wednesday Addams, is on the phone. It’s a bad connection, but she wants to talk about a contract that you and she have been negotiating for Addams Investments, L.P.
  3. Under the contract, will buy a large quantity of widgets from Widgets, Inc., a Houston company that recently went public. (Family patriarch Gomez Addams is convinced the family will make a killing in the widget market.)
  4. Wednesday Addams says that she has talked by phone with her opposite number at Widgets, Inc.; she reports that Widgets, Inc., has agreed to the last contract draft that you sent over, and that everyone is ready to sign.
  5. The Widgets, Inc. people really, really want to get the contract signed and delivered today, March 31. They’ve told Wednesday Addams that they’re willing to make significant pricing concessions to make that happen.
  6. There’s a problem, though: As you learn from Wednesday Addams over the bad phone connection, she and the rest of the Addams family are at the end of a rugged backpacking vacation on a small, primitive island in Hawai’i. The island has no Internet service and barely has cell phone service.
  7. The family has just emerged from the back country. The plan is for everyone, smelly as they are, to take a private plane from a dirt landing strip on the island to the Honolulu airport. A shuttle bus will take them to a nearby hotel for a quick shower and change of clothes. The family will then board a United Airlines “redeye” overnight flight that will land in Houston on the morning of April 1.
  8. One more thing, she says: In the interest of traveling as light as possible, no one in the group brought a laptop.

EXERCISE: Draft the signature block for Addams Investments, L.P.

QUESTIONS to answer in the Word document:

  1. Why might the Widgets sales rep be so eager to get the contract signed on March 31? (Hint: It has to do with the fact that Widgets, Inc. is a newly-public company.)
  2. What about just signing it on April 1 when the family gets back to Houston?
  3. Is it physically possible for you to “make it happen” for the contract to be signed and delivered to Widgets, Inc. today, March 31? If so, how might you go about it?
  4. If Wednesday Addams asks you to sign it as the company’s lawyer, how should you respond?

2.5. Homework due Mon. Feb. 14: Employment agreement (10 pts P/F)

See generally the hypothetical facts at NCD § 1.2.

FACTS:

• Mary Marvel (MathWhiz’s CEO) has told you that MathWhiz has agreed to hire a new director of business development, “Dave Doright,” who splits his time between his home in Houston and his second home in Boise, Idaho.

• Dave is someone whom Mary really wants to “get”; he has several other companies interested in him.

• Mary has known Dave for a few years; she believes he is smart, ambitious, and driven, but also an honorable guy who — out of concern for his professional reputation, if nothing else — would not try to take undue advantage of MathWhiz.

• Mary would like for you to put together a simple, letter-style employment agreement that covers just the absolute bare minimum of issues, to increase the chances that Dave will sign the letter without getting a lawyer involved, because that could delay things and possibly jeopardize her “closing the deal” to get Dave on board at MathWhiz.

• BUT: Mary still wants the letter to be enough that she could take Dave to court if necessary. (See also my Tom Arnold story from earlier in the semester).

HOMEWORK ASSIGNMENT:

1. In a Word document, draft such a letter agreement — feel free to look for issue ideas in the model employment agreement provisions and in Sheryl Sandberg’s employment agreement, BUT: Remember Mary’s concerns about having the letter agreement cover just the absolute bare minimum of issues.

(The letter agreement should refer to “you” for Dave and to “MathWhiz” as the company.)

2. At the end of the Word document, draft the text of an email to Mary: In the email, provide a list of no more than three omitted issues that:

(i) you think are sufficiently important that you would normally want such a letter agreement to address — and why that’s the case, i.e., what could go wrong if the issues aren’t addressed in the letter agreement, BUT:

(ii) given the circumstances and Mary’s expressed concerns, you think that in Dave’s case it’s likely an acceptable risk to omit those issues from the letter agreement.

Your draft email text should explain the above to Mary in matter-of-fact, nonjudgmental terms — DON’T write it in an accusatory tone implying that you don’t support Mary’s decision to proceed in this way.

(Remember: Our job as lawyers is to point out (i) possible what-if events; (ii) potential consequences if those events occur; and (iii) opportunities for avoiding or at least mitigating those risks. As long as we don’t veer into unethical- or illegal territory, it’s always the client’s decision what risks to take or not take.)

THEN: At the end of the email, invite Mary to contact you if there’s anything she’d like to discuss further.

2.6. Homework due Mon. Feb. 21: Earn-out computations (10 pts P/F)

For general background, see this video and article.

ASSIGNMENT: Simplify the following provision:

(c)     Within sixty (60) days after the end of an applicable Earn-Out Year, Purchaser shall (i) prepare or cause to be prepared a statement setting forth: (A) following Year One, the calculation of the Annual Earn-Out Payment applicable to Year One; (B) following Year Two, the calculation of the Annual Earn-Out Payment applicable to Year Two; (C) following Year Three, the calculation of the Annual Earn-Out Payment applicable to Year Three; (D) following Year Four, the calculation of the Annual Earn-Out Payment applicable to Year Four and (E) following Year Five, the calculation of the Annual Earn-Out Payment applicable to Year Five (with respect to each Earn-Out Year, an “Earn-Out Calculation”) and (ii) deliver the applicable Earn-Out Calculation to Seller, together with (A) reasonable supporting documents and (B) payment to Seller, by wire transfer of immediately available funds to an account designated in writing by Seller, of the Annual Earn-Out Payment, if any, calculated by Purchaser to be payable based on such Earn-Out Calculation. Seller shall have a period of thirty (30) days after receipt of the applicable Earn-Out Calculation with respect to the applicable Earn-Out Year to notify Purchaser in writing of Seller’s election to accept or reject such Earn-Out Calculation as prepared by Purchaser. In the event Seller rejects in writing such Earn-Out Calculation as prepared by Purchaser, such rejection notice (the “Rejection Notice”) shall contain the reasons for such rejection in reasonable detail and set forth the amount of the requested adjustment. In the event no Rejection Notice is received by Purchaser during such thirty (30)-day period, the Annual Earn-Out Payment for such Earn-Out Year (as set forth in Purchaser’s Earn-Out Calculation) shall be deemed to have been accepted and shall be final, conclusive and binding on the Parties hereto. In the event that Seller shall timely reject an Earn-Out Calculation, Purchaser and Seller shall promptly (and in any event within thirty (30) days following the date upon which Purchaser received the applicable Rejection Notice from Seller rejecting such Earn-Out Calculation) attempt in good faith to make a joint determination of the Annual Earn-Out Payment for the applicable Earn-Out Year, and such determination and any required adjustments resulting therefrom shall be final, conclusive and binding on the Parties hereto. In the event Seller and Purchaser are unable to agree upon the Annual Earn-Out Payment for the applicable Earn-Out Year within such thirty (30)-day period, then Purchaser and Seller shall jointly engage the Accounting Firm to resolve such dispute and promptly submit such dispute for resolution to the Accounting Firm. The Parties shall jointly instruct the Accounting Firm to make a determination within thirty (30) days after its engagement or as soon as practicable thereafter. The Accounting Firm’s determination shall be limited to resolving the disagreement set forth in the Rejection Notice. The determination of the Accounting Firm and any required adjustments resulting therefrom shall be final, conclusive and binding on all the Parties hereto. The fees and expenses of the Accounting Firm shall be allocated between and paid by Purchaser and/or Seller, respectively, based upon the percentage that the portion of the contested amount not awarded to each Party bears to the amount actually contested by such Party, as determined by the Accounting Firm.

DCT example:

(c)     Within 60 days after the end of an applicable Earn-Out Year, Purchaser will do the following:

      (1) cause to be prepared a statement setting forth, for that Earn-Out Year, the calculation of the Annual Earn-Out Payment for that Earn-Out Year (the “Earn-Out Calculation” for that Earn-Out Year); and

      (2) deliver to Seller: (A) the applicable Earn-Out Calculation; (B) reasonable supporting documents[;] and

      (3) pay the Annual Earn-Out Payment, if any, by wire transfer of immediately available funds to an account designated in writing by Seller.

(d)     Seller will have 30 days after receipt of an Earn-Out Calculation to notify Purchaser in writing of Seller’s election to accept or reject the Earn-Out Calculation.

(e)     If Seller rejects an Earn-Out Calculation, the notice of rejection (the “Rejection Notice”) must set forth the reasons for rejection in reasonable detail and set forth the amount of the requested adjustment.

(f)     If Purchaser does not receive a Rejection Notice before the end of the 30-day period, then the Annual Earn-Out Payment for that Earn-Out Year will be final, conclusive[,] and binding on the Parties.

(g)     If Seller timely rejects an Earn-Out Calculation, Purchaser and Seller will promptly attempt in good faith to make an agreed determination of the Annual Earn-Out Payment.

(h)     If Seller and Purchaser are unable to agree upon the Annual Earn-Out Payment for the applicable Earn-Out Year within 30 days after Purchaser receives the Rejection Notice, then Purchaser and Seller will: (1) jointly engage the Accounting Firm to resolve the dispute; and (2) promptly submit the dispute to the Accounting Firm for resolution within 30 days or as soon as practicable thereafter.

(i)     The Accounting Firm’s determination is to be limited to resolving the disagreement set forth in the Rejection Notice.

(j)     The Accounting Firm’s determination, and any required adjustments resulting therefrom, will be final, conclusive and binding on the Parties.

(k)     The fees and expenses of the Accounting Firm are to be allocated between and paid by Purchaser and/or Seller, respectively, based upon the percentage that the portion of the contested amount not awarded to each Party bears to the amount actually contested by that Party, as determined by the Accounting Firm.

2.7. Homework due Mon. Feb. 28: Termination clause (10 pts.,  P/F)

This exercise concerns the agreement-termination provision below, from the agreement by which Verizon acquired Yahoo!.

FIRST: Look at the abomination that is subdivision (b)(i):

This Agreement may be terminated at any time prior to the Closing, whether before or after the Seller Stockholder Approval is obtained, as follows: …

(a) [omitted]

(b) by either Seller or Purchaser, if:

(i) the Closing shall not have occurred by April 24, 2017 (the “Outside Date”); provided, that (A) if the SEC shall not have cleared the Proxy Statement by March 10, 2017, then either party (provided that it has complied in all material respects with its obligations under Section 4.02(a)) may, by written notice delivered to the other party, extend the Outside Date by three (3) months; and (B) if on the fifth (5th) Business Day prior to the Outside Date (including as extended one time pursuant to Section 6.01(b)(i)(A) or this Section 6.01(b)(i)(B)) the conditions set forth in Section 5.01(b) and Section 5.01(c) (solely on account of a temporary or preliminary Governmental Order) are not satisfied, but all other conditions set forth in Article V shall have been satisfied or waived (excluding conditions that, by their terms, cannot be satisfied until the Closing, which conditions would be capable of being satisfied at such time), then either Seller or Purchaser (provided that it has complied in all material respects with its obligations under Section 4.05) may, by written notice delivered to the other party hereto, extend the Outside Date by three (3) months; provided, further, that the right to terminate this Agreement under this Section 6.01(b)(i) shall not be available to a party, if any failure by such party to fulfill its obligations under this Agreement shall have been the primary cause of, or shall have resulted in, the failure of the Closing to occur on or prior to the Outside Date (as extended pursuant to clause (A) or clause (B) of this Section 6.01(b)(i)) ….

[remaining subparagraphs omitted]

SECOND: Take a stab at rewriting the following subdivision b(ii) by breaking up the “wall of words” — each subparagraph should address one

This Agreement may be terminated at any time prior to the Closing, whether before or after the Seller Stockholder Approval is obtained, as follows: …

(a) [omitted]

(b) by either Seller or Purchaser, if:

(i) [omitted - it’s shown under FIRST above]

(ii) any Governmental Authority of competent jurisdiction shall have issued or entered any Governmental Order or taken any other action permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the Sale and the Reorganization Transactions, and such Governmental Order or action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 6.01(b)(ii) shall have used its reasonable best efforts to remove such Governmental Order or other action; and provided, further, that the right to terminate this Agreement under this Section 6.01(b)(ii) shall not be available to a party whose failure to fulfill its obligations under this Agreement shall have been the primary cause of, or shall have resulted in, the issuance of such Governmental Order or taking of such action; or

[remaining subparagraphs omitted]

I’ll show my rewrite in due course. Here it is:

This Agreement may be terminated at any time prior to the Closing, whether before or after the Seller Stockholder Approval is obtained, as follows: …

(a) [omitted]

(b) by either Seller or Purchaser, if:

(i) [omitted]

(ii) subject to subdivisions (XX) and (YY): any Governmental Authority of competent jurisdiction shall have has issued or entered any Governmental Order or taken any other action permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the Sale and the Reorganization Transactions, and such Governmental Order or action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 6.01(b)(ii) shall have used its reasonable best efforts to remove such Governmental Order or other action; and provided, further, that the right to terminate this Agreement under this Section 6.01(b)(ii) shall not be available to a party whose failure to fulfill its obligations under this Agreement shall have been the primary cause of, or shall have resulted in, the issuance of such Governmental Order or taking of such action; or

[other subparagraphs omitted]

(XX) The party A party seeking to terminate this Agreement pursuant to this Section 6.01(b)(ii) shall must have used its reasonable best efforts [???] to remove such Governmental Order or other action.

(YY) ; and provided, further, that the right to A party may not terminate this Agreement under this Section 6.01(b)(ii) shall not be available to a party whose if that party’s failure to fulfill its obligations under this Agreement shall have been was the primary cause of, or shall have resulted in [QUESTION: Does “resulted in” swallow “primary cause”?], the issuance of such Governmental Order or taking of such action

Without redlining:

This Agreement may be terminated at any time prior to the Closing, whether before or after the Seller Stockholder Approval is obtained, as follows: …

(a) [omitted]

(b) by either Seller or Purchaser, if:

(i) [omitted]

(ii) subject to subdivisions (XX) and (YY): any Governmental Authority of competent jurisdiction has issued or entered any Governmental Order or taken any other action permanently restraining, enjoining or otherwise prohibiting or making illegal the consummation of any of the Sale and the Reorganization Transactions, and such Governmental Order or action has become final and non-appealable; or

[other subparagraphs omitted]

(XX) A party seeking to terminate this Agreement pursuant to this Section 6.01(b)(ii) must have used its reasonable best efforts [???] to remove such Governmental Order or other action.

(YY) A party may not terminate this Agreement under this Section 6.01(b)(ii) if that party’s failure to fulfill its obligations under this Agreement was the primary cause of, or resulted in [QUESTION: Does “resulted in” swallow “primary cause”?], the issuance of such Governmental Order or taking of such action

2.8. Homework due Mon. Mar 07: Gross-up provision (20 pts. NOT P/F)

TEXT: From this guaranty:

2. No Setoff or Deductions; Taxes; Payments. The Guarantor represents and warrants that it is organized in the United States of America. The Guarantor shall make all payments hereunder without setoff, counterclaim, restrictions or condition, and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein unless the Guarantor is compelled by law to make such deduction or withholding. If any such obligation (other than one arising (i) with respect to taxes based on or measured by the net income or profits of the Lender, or (ii) with respect to any withholding tax to the extent that such withholding tax would have been imposed on the relevant payment to the Lender under the laws and treaties in effect at the time such Lender first became a party to this Agreement or otherwise became entitled to any rights hereunder) is imposed upon the Guarantor with respect to any amount payable by it hereunder, the Guarantor will pay to the Lender, on the date on which such amount is due and payable hereunder, such additional amount in U.S. dollars as shall be necessary to enable the Lender to receive the same net amount which the Lender would have received on such due date had no such obligation been imposed upon the Guarantor. The Guarantor will deliver promptly to the Lender certificates or other valid vouchers (to the extent available) for all taxes or other charges deducted from or paid with respect to payments made by the Guarantor hereunder. The obligations of the Guarantor under this paragraph shall survive the payment in full of the Guaranteed Obligations and termination of this Guaranty.

EXERCISE:

1.  Break up this provision. (Consider: Does the first sentence in this provision really belong here, given the subheading of the provision?)

2.  Rewrite just the italicized portion to be more reader-friendly, as though you were talking to a lay jury.

2.9. Homework due Mon. Mar 28: Referral agreement (30 pts.  NOT P/F)

See the hypothetical facts at NCD § 1.2.

FACTS: MathWhiz wants to have a simple agreement form under which MathWhiz can pay a referral commission to individuals and/or organizations that refer business to it. The amount of the commission will be 5% of the first sale that MathWhiz makes to a given customer.

EXERCISE: Draft such a form — use this bare-bones contract template.

  • Don’t necessarily include all the bells and whistles of the Tango Terms referral provisions — remember, MathWhiz wants a simple agreement that ideally can get signed without the other side getting its lawyer(s) involved.
  • Consider putting key business details in a schedule at the beginning

3. Reading, by week

3.2. Reading for Mon. Jan. 31

3.3. Reading for Mon. Feb. 07

Skim the following except as otherwise indicated:

3.4. Reading for Mon. Feb. 14

NOTE: The definitions in the following clauses are not official; they can be included in contracts precisely because the law might not have uniformly-agreed definitions. (W.I.D.D. — When In Doubt, Define!)

Just skim the following except as otherwise indicated:

3.5. Reading for Mon. Feb. 21

3.6. Reading for Mon. Feb. 28

Skim the following to get a sense of the subjects except as otherwise indicated

3.7. Reading for Mon. Mar 07

Read:

3.8. Reading for Mon. Mar 21

Read:

3.10. Reading for Mon. Apr. 04

Skim the following except as otherwise indicated:

Skim the following except as otherwise indicated.

Optional reading: See this article at the Contract Nerds blog. Excerpt:

What we wish we could say: “Stop submitting last-minute contracts for legal review!”

What we actually say: “No problem, I’ll get right on that.”

This happens ALL the time and is one of the greatest challenges for in-house attorneys to overcome.

* * * 

[T]his issue should be equally frustrating to the entire organization because it is bad for business, too. A rushed contract review negatively impacts the entire deal, including commercial terms, and can cost the business thousands, if not millions, of dollars in economic loss.

* * * 

If you’re brought in to “review” a contract that has already been negotiated (or worse, already been agreed to by both parties), then you’ve already lost. And, arguably, so has your business client, even if they can’t see the repercussions just yet because they’re too distracted by the short-term glory of signing the contract. …

Optional reading for your future reference: In the course of starting a new client project, I ran across what seems to be a very-useful long CLE paper summarizing some nuances of Texas case law about noncompetition covenants. See Zach Wolfe, Wolfe on Texas Non-Compete Litigation, or, My Big Fat Texas Non-Compete Paper (2021). The author reviews:

  • the current Texas non-compete statute, starting at page 14 of the paper;
  • what he refers to as the Five Year Rule about what constitutes a reasonable time period;
  • case law concerning reasonable geographic- and operating scope.

3.11. Reading for Mon. Apr. 11

Look for the main takeaways in the following:

Selected defined terms:

3.13. Reading for Mon. Apr. 25