Contract Drafting Class Notes – D. C. Toedt III

1 Preface

Updated Mon. Nov. 21, 2016   20:55 CST

Welcome. This Web page contains important information about my Contract Drafting course. Please see the table of contents at the top left and the course information.

2 August

2.1 Mon. Aug. 22, 2016

2.1.1 Before class

Reading assignment: None.

Homework: None.

2.1.2 Housekeeping

  1. Check Web site for reading & homework assignments.
  2. Hand out paper name tents
  3. Circulate sheet to collect email addresses for a Google Group mailing list, which I use to send out all-hands emails.
  4. Introduce selves
  5. Break into three groups of four (these groups will be reshuffled twice during the semester on the same day as the in-class quizzes)
  6. Go over course information:
    • Each class session will last 85 minutes, ending at 5:25 p.m. / 8:55 p.m., to get seven extra class minutes and thus try to avoid having to make up canceled classes (if any). Because of holidays this semester on Labor Day and the day before Thanksgiving, the law school requires 78-minute sessions for M-W three-credit courses in order to meet an ABA accreditation standard of 700 minutes of instruction per credit hour.
    • Possibility of Webinar-style remote meeting if DCT will be absent.
    • Computer use:
      • Blackboard for quizzes, final exam, chat room (for in-class drafting exercises) and virtual whiteboard (ditto).
      • Backup plan: www.Zoom.us for chat room and remote classes, Workflowy virtual whiteboard for in-class exercises
    • Grading – 1,000 points for the semester, via the final exam, two in-class quizzes, homework, and class attendance.
  7. Possible DCT absence: Oct. 24 for a business trip (not firmed up yet).
  8. Overview of this course's approach.

2.1.4 Questions for discussion

  1. In your practice, do you expect you'll be doing more drafting of contracts, or more review of drafts that others have prepared? Explain.
  2. What do you think are the main goals of a contract drafter or reviewer?
  3. In abstract terms, what do you think is the client's overarching goal in negotiating a contract?
  4. What makes for a workable contract?
  5. What do you think is likely to be the worst bottleneck in getting a contract to signature?
  6. What kind of contract language do you think business lawyers should aspire to write?

2.1.5 Lecture: The value of speed in getting to signature sooner

I don't hand out the PowerPoint slides,* but you can download a PDF of the associated paper, Getting a Workable Contract to Signature Sooner.

* The slides contain images that I copied and pasted from the Web — while I'm comfortable that use of the images in a classroom presentation is "fair use" under the copyright laws, I'm less confident about that being the case if I were to distribute copies, where they could end up who knows where.

2.1.6 Questions for small-group discussions

  1. PROPOSITION: A contract drafter should strive to anticipate and address all harms that might arise in the course of the parties' relationship.
  2. QUESTION: What is a "vague" term? What is an "ambiguous" term? (Hint: See here.)

2.2 Wed. Aug. 24, 2016

2.2.1 Reading (yes) & homework (none)

Read:

Preamble of agreement (including the comments)

Signatures (including the comments and additional notes)

Ambiguity and vagueness

Rick's Cabaret Purchase & Sales Agreement (preamble and signature blocks only)

  • Note the preamble style
  • Note the signature-block style
  • Line 875: Note the limited-purpose signature block

Homework: None.

2.2.3 Contract-reviewer etiquette (1): The Whereas clause

FACTS: The other side sends over a draft contract. After the preamble, it includes a "WITNESSETH" heading and a bunch of "WHEREAS" recitals.

QuESTION: Do you change these things to a simple "1. Background" section?

(a) No – when reviewing and revising a first draft, avoid making purely-stylistic changes.

(b) BUT: If the Whereas clauses require substantive revision, then by all means make the needed revisions (redlining the changes, of course).

2.2.4 Contract-reviewer etiquette (2): Formatting

FACTS: Your client, ABC Corporation, is trying to sell widgets to XYZ Inc. XYZ's people send over a Word document containing XYZ's standard terms of purchase — which are formatted in two columns per page with very-long sentences and paragraphs.

QuESTION: How do you respond?

See WallOfTextReformat.

2.3 Mon. Aug. 29, 2016

2.3.1 Experiment: Hands off the computer during Q&A, please

We're going to try something today: During class, when I pose the questions in the sections below, I'd like everyone (except me) to please stay off their computers, so as not to reveal or look up the answers to the questions during class. (Looking up the answers before class is just fine and in fact is what you should be doing.)

2.3.2 Homework due today

2.3.3 Reading assignment and questions: A Somewhat-Barebones Contract

The reading assignment is here

2.4 Wed. Aug. 31, 2016

2.4.1 Homework due today: Rick's Cabaret preamble (5 points)

In a Word document, rewrite the preamble and recitals to the Rick's Cabaret purchase agreement.

  • Use Microsoft Word.
  • Use plain English.
  • Use short, simple sentences.
  • See and its commentary for tips.
  • Email me the Word document.

(I've asked the UH Blackboard people to finish the setup that will let you do these short homework assignments directly on Blackboard.)

2.4.2 Reading: Payment terms

Read the following Common Draft sections and commentary:

4.1 (payment terms) through 4.5 (deposits)

4.8 (interest) and 4.9 (usury savings)

2.4.3 Class plan

• Exercise: Payment Terms 1

• Exercise: Grammar awkwardness – Safes

• Preview — whistleblowers (relevant to backdating of contracts):

  • Monsanto pays $80MM penalty to SEC for its misleading financial statements — whistleblower gets $22 million.
  • Oracle whistleblower gets $40MM after company pays $199.5MM for breaching most-favored-customer provision.

• Show: Signing the Wrong Line on The Japanese Surrender

3 September

3.1 Mon. Sep. 05, 2016

NO CLASS – LABOR DAY HOLIDAY

3.2 Wed. Sep. 07, 2016

3.2.1 Homework due today: Rewrite UAL-CAL provision for clarity

3.2.2 Reading: Reps and warranties

Read the following Common Draft provisions and their commentary:

3.2.3 Class plan

3.3 Mon. Sep. 12, 2016

3.3.2 Homework

3.3.3 Class plan

3.4 Wed. Sep. 14, 2016

3.4.1 Reading

3.4.2 Homework: None

3.4.3 Class plan

3.5 Mon. Sep. 19, 2016

3.5.1 Homework due today (5 points total)

This homework is designed to provide an early review of what we discussed in class the previous week.

3.5.2 Reading

3.6 Wed. Sep. 21, 2016

3.6.1 Reading

• Sheryl Sandberg employment agreement (annotated)

  • The exercise(s) listed under "Class plan" below.

3.6.2 Homework

3.7 Mon. Sep. 26, 2016

3.7.1 Reading

3.7.2 Homework

3.8 Wed. Sep. 28, 2016

3.8.1 Reading

  • The exercise(s) listed under "Class plan" below.

3.8.2 Homework

No homework due today - quiz day.

4 October

4.1 Mon. Oct. 03, 2016

4.1.1 Upcoming homework

See the notes below for Mon. Oct. 10, Mon. Oct. 24; and Mon. Nov. 7.

4.1.2 Quiz 1 review

4.1.3 Ambiguity in the Sony-Spotify license agreement

Here's a case where a perceived ambiguity is necessitating discovery and further proceedings about how the streaming of digital music should be classified for license-fee purposes. The federal district court in NYC denied the parties' motions for judgment on the pleadings; as a news report notes:

If streams are treated as "broadcasts" or "transmissions," under the 19-Sony deal, that means the artists get a 50 percent royalty share.

If on the other hand, streams are treated as "sales" or "distributions," then a lower record royalty rate — typically about 15 percent — applies.

Eriq Gardner, Judge Finds Sony-Spotify Agreement to Be Ambiguous in Big Royalties Lawsuit, Hollywood Reporter, Sept. 29, 2016 (extra paragraphing added).

Thanks to Billy Walters for noticing this.

4.1.4 A comma can make a difference

Compare this sentence from Malcolm Gladwell's book David and Goliath with the rewritten version:

[Original:] Goliath didn't get what he wanted, because he was too big. [Emphasis added.]

[Rewritten:] Goliath didn't get what he wanted because he was too big.

4.1.5 Sandberg employment agreement, continued

4.2 Wed. Oct. 05, 2016

4.2.1 Reading

Review the Sandberg employment agreement and the Stanford-Tesla lease agreement; we will continue working through them and examining some of the doctrinal background and drafting issues presented.

4.2.2 Homework

None.

4.2.3 Homework review: Stanford-Tesla § 4.3 redraft

[I'll show my redraft on the monitor.]

4.2.4 Flashback: Review question

Q: Will an iron-clad LOI disclaimer prevent the parties from being locked in? Why or why not?

A: No – the parties post-LOI actions might end up being binding, as in the Energy Transfer Partners, L.P. v. Enterprise Products Partners case, which resulted in a $450-million judgment.

4.2.5 Exercises

4.2.5.1 Sandberg employment agreement, continued

4.2.6 Discussion

4.3 Mon. Oct. 10, 2016

4.3.1 Reading

Skim the headings in the text (not just the table of contents) of the Verizon-Yahoo stock purchase agreement to see what issues those drafters addressed.

4.3.2 Homework

Redraft section 4.06(b) of the Verizon-Yahoo stock purchase agreement to make it something that Warren Buffett might send to his sisters:

• Break up long sentences and paragraphs.

• Strive for simpler sentences.

• Avoid repeating long phrases such as "approve, authorize, endorse …." (Hint: consider defining a capitalized term.)

• Don't change the substance — but consider whether "reasonable best efforts" expresses a coherent thought. (Hint: See the Common Draft definition of "best efforts" and, especially, its commentary.)

4.3.4 Other substantive exercises

4.4 Wed. Oct. 12, 2016

4.4.1 Reading

Look over the exercises below.

4.4.2 Homework — none

4.4.3 Drafting-skills exercises

4.4.3.1 Clarity exercise: "Having" an option

TEXT, from a student's rewrite of Stanford-Tesla lease agreement § 4.3: "… Tenant shall automatically have the Extension Option, which Landlord shall honor if Tenant chooses to enforce the Extension Option."

EXERCISE: Rewrite.

A: One possibility:

Tenant may exercise the Extension Option as provided above for [X] days after [SPECIFY DATE OR EVENT].

4.4.3.2 Clarity exercise: In case any action

TEXT: "In case any action or proceeding be brought, made or initiated against Landlord relating to any matter covered by Tenant’s indemnification obligations under this Section or under Section 12.5, Tenant, upon notice from Landlord, will at its sole cost and expense, resist or defend such claim, action or proceeding by counsel reasonably approved by Landlord."

EXERCISE: Redraft to simplify.

A: IF: Any event occurs that is covered by Tenant’s indemnification obligations under this Section or under Section 12.5; THEN: Upon notice from Landlord, Tenant, upon notice from Landlord will, at its sole cost and expense, resist or defend such claim, action or proceeding by provide Landlord with a defense, using counsel reasonably approved by Landlord.

4.4.3.3 Exercise: Subparagraph numbering

TEXT:

(b) In case any action or proceeding be brought, made or initiated against Landlord relating to any matter covered by Tenant’s indemnification obligations under this Section or under Section 12.5; THEN:

(i) Tenant, upon notice from Landlord, will, at its sole cost and expense, resist or defend such claim, action or proceeding by counsel reasonably approved by Landlord; and

(ii) Landlord may retain its own counsel to defend or assist in defending any claim, action or proceeding involving potential liability of Five Million Dollars ($5,000,000) or more, and Tenant will pay the reasonable fees and disbursements of such counsel.

QUESTION: What's wrong with this numbering?

Subdivision (ii) wouldn't "work" grammatically if subdivision (i) were deleted and subdivision (ii) were then merged into the beginning of subdivision (b).

Each of subdivisions (i), (ii), etc., must "work" in that way.

4.4.3.4 Exercise: Withholding of approval

TEXT: From the Stanford-Tesla lease agreement, section 12.5: "Tenant will obtain Landlord's written approval of such counsel, which approval shall not be unreasonably withheld, conditioned or delayed."

EXERCISE: Rewrite the second part for plainer English.

A: "Tenant will obtain Landlord's written approval of such counsel; Landlord will not unreasonably withhold, condition, or delay its approval." [Note the addition of the serial or "Oxford" comma after "condition."]

4.4.4 Substantive exercises

4.5 Mon. Oct. 17, 2016

4.5.1 Reading

Verizon-Yahoo stock purchase agreement – just the following:

  • Article II: Representations and warranties of seller
  • Article III: Representations and warranties of purchaser
  • Section 8.16 (disclosure schedules)

4.5.2 Homework – none

4.5.3 Drafting-skills exercises

4.5.3.1 Clinton and Trump Yard Signs

QUESTION: Which of these versions, of a Facebook comment I did yesterday, is funnier?

  1. (The original:) One of our friends is a bit of a joker — he says one of his neighbors has Clinton yard sign and another a Trump yard sign, and he's thinking of switching them ….
  2. (Shortened sentences:) One of our friends is a bit of a joker. One of his neighbors has a Trump yard sign; another, a Clinton yard sign. He's thinking of switching them.
4.5.3.2 Ambiguity in the White Sox Clubhouse

From Ken Hoffman's column in the Houston Chronicle, March 22, 2016, p. D2, col. 1:

White Sox management announced this week that the LaRoche matter was closed — and the right decision was made by all parties involved.

QUESTION: Was Hoffman —

  • reporting that the right decision was made, or
  • opining that the right decision was made?
4.5.3.3 Ambiguity: Less and less people

From Mark Kleiman, The Current Crime Debate Isn't Doing Hillary Justice (WashingtonMonthly.com Feb. 2016):

When the prison population is small, it consists mostly of serious, high-rate offenders, because prosecutors and judges try to single them out. Therefore, when the population grows, it grows mostly by adding less and less dangerous people.

(Emphasis added.)

QUESTION 1. Would "fewer and fewer dangerous people" be a better fit here?

A: Possibly – but that would depend on a binary classification of prison inmates as A) dangerous people, and B) non-dangerous peopoe. That seems unlikely.

QUESTION 2. Might hyphens be useful here? (See the Grammarist notes on phrasal adjectives.)

A: One possibility: "… when the population grows, it grows mostly by adding less-dangerous people."

4.5.3.4 Ambiguity: Book of Common Prayer (in class only)

Note the ambiguity in the Book of Common Prayer (1979) of the Episcopal Church, pp. 361, 377 (Eucharistic Prayer A with the Proper Preface for Lent):

It is right, and a good and joyful thing, always and everywhere to give thanks to you, Father Almighty, Creator of heaven and earth. Through Jesus Christ our Lord; who was tempted in every way as we are, yet did not sin ….

EXERCISE 1: Ignoring the theology, rewrite this so that the phrase "Through Jesus Christ our Lord" clearly refers to the people giving thanks through Jesus.

A: One possibility: "It is right, and a good and joyful thing, always and everywhere to give thanks to you, Father Almighty, Creator of heaven and earth. We do so through Jesus Christ our Lord, who was tempted in every way as we are, yet did not sin …."

EXERCISE 2: Ignoring the theology, rewrite this so that the phrase "Through Jesus Christ our Lord" clearly refers to the Father Almighty creating heaven and earth through Jesus.

A: One possibility: "It is right, and a good and joyful thing, always and everywhere to give thanks to you, Father Almighty, who created heaven and earth through Jesus Christ our Lord, who himself was tempted in every way as we are, yet did not sin …."

4.5.4 Substantive exercises

Reference: Verizon-Yahoo Stock Purchase Agreement ("SPA")

QUESTION 1: With your group, make a list, and sketch out a generic timeline, of of some of the major events in an M&A transaction evolves, from initial discussions to the "closing."

4.5.5 General reading about the Verizon-Yahoo merger

See, e.g.:

4.6 Wed. Oct. 19, 2016

4.6.1 Reading

4.6.2 Homework – none

4.6.3 Drafting-skills exercises

4.6.3.1 Ambiguity exercise: Dog bite

Use one character to eliminate the ambiguity:

Passerby helps dog bite victim.

(Adapted from http://literarydevices.net/ambiguity)

A: The character would be a hyphen: Passerby helps dog-bite victim.

Now, use one word to eliminate the ambiguity, but this time in the opposite direction:

A: Passerby helps dog to bite victim.

4.6.3.2 Clarity exercise: "Open and acknowledged racism"

TEXT: From Ta-Nehisi Coates in The Atlantic: "Open and acknowledged racism is, today, both seen as a disqualifying and negligible feature in civic life."

EXERCISE: Ignoring the substance of this sentence, rewrite it to fix the problem with the use of "both"; feel free also to rearrange the words for additional clarity.

Here are a couple of possible rewrites:

Open and acknowledged racism is seen as both a disqualifying- and a negligible feature in civic life today. [Note the use of a hyphen after the word "disqualifying" to signal a connection with the subsequent word "feature."]

OR:

Open and acknowledged racism is seen as disqualifying — and as negligible — in civic life today. [Note that "both" has been dropped, in essence replaced by em-dashes.]

4.6.3.3 Ambiguity exercise: Going to Oregon

Consider the following sentence:

The family went to Oregon with Betty, a maid, and a cook.

In the chat room, rewrite the sentence three different times — consider using parentheses and dashes, too — to be clear that the family went to Oregon with, in this order:

  • one person
  • two persons
  • three persons

(Adapted from https://en.wikipedia.org/wiki/Serial_comma#Unresolved_ambiguity)

4.6.4 Substantive exercises

QUESTION 1: How is the purchase price to be paid? (SPA at ¶ 30.)

A: By wire transfer of "immediately available funds."

QUESTION 2: What are "immediately available funds"? (See generally this explanation by leading contract-drafting scholar Tina Stark.)

A: Just that: The money will hit the Seller's bank account and can be immediately spent.

QUESTION 3: (review) What are some common forms of payment mechanism that are used in contract transactions?

A: Checks. Certified checks. Cashier's checks. ACH. Wire transfer — possibly but not necessarily of immediately-available funds.

QUESTION 4: How much is the purchase price? (SPA at ¶ 22.)

A: The purchase price is unknown as yet; it will be finally determined after closing. The Base Purchase Price is $4.825 billion, plus or minus (see ¶¶ 17-21).

QUESTION 5: Who will (initially) determine the final purchase price — and what if there's a disagreement? (SPA at ¶ 74, ¶ 85, ¶¶ 89-90.)

A: Verizon — that is, the buyer — will determine the final purchase price, but Yahoo can ask for an independent accounting firm — KPMG, unless otherwise agreed — to make the final-final determination.

Lecture: (preview) "Baseball" arbitration.

QUESTION 6: Why does SPA § 2.07 go into such detail about the documents that Yahoo filed with the SEC?

A: Verizon, as the buyer, wants to be able to rely on Yahoo's SEC filings in lieu of doing even-more-extensive due diligence. (That's why public-to-public M&A transactions are regarded as easier to do than if either company, especially the target company, is privately held.)

Lecture about the significance of some of the language in § 2.07.

QUESTION 7: Why does SPA § 2.16 use the term "To the Knowledge of Seller …." so often? From Seller's perspective, is that the optimal term? From Seller's perspective, how could this phrasing be improved?

Lecture about the Rule 10b-5 standard for accuracy and completeness of statements.

QUESTION 8: Why did Yahoo send a proxy statement to its shareholders asking them to approve the merger?

A: (1) Under corporate law, certain type of transaction require shareholder approval. (2) IF: A company's shares are publicly traded in the U.S.; AND: A matter is to be submitted for a shareholder vote; THEN: Federal law and SEC regulations require the company to send shareholders what's referred to as a "proxy statement" providing specified information (in a specified arrangement) relating to the matter to be voted on.

4.7 Mon. Oct. 24, 2016

4.7.1 Reading

• Read ,section 5.02(a) of the Verizon-Yahoo stock purchase agreement — we will use that as a vehicle for discussing some typical issues that can come up in M&A work.

• Read the Common Draft General Provisions Baseline Terms and their commentary.

4.7.2 Homework

Redraft ,section 5.02(a) of the Verizon-Yahoo stock purchase agreement to make it something that Warren Buffett would send to his sisters — don't change any of the substantive terms, though.

4.7.3 Drafting-skills exercises

4.7.3.1 Clarity exercise: Zombie movies

TEXT: From this Get Fuzzy comic strip: "I guess this guy's quest to find a zombie movie that tells him how to raise his kids continues…" (Emphasis added.)

EXERCISE: Rewrite for clarity so that "quest" and "continues" are closer to each other.

POSSIBILITY #1: "I guess this guy's quest continues to find a zombie movie that tells him how to raise his kids…" BUT: That's awkwards because it might be read as "continues to find a zombie movie …."

POSSIBILITY #2: "I guess this guy will continue his quest to find a zombie movie that tells him how to raise his kids…"

4.7.3.2 Grammar / syntax fail: Marriott cancellation policy

FIX THIS: From a Marriott Web site (via @LawWriting): "CANCEL POLICY [¶] Cancellation's can be made free of charge up untill 24 hours prior to the time & date of arrival."
ANSWER: (A) There's not supposed to be an apostrophe in 'Cancellations.' (B) 'Until' is misspelled.

4.7.3.3 Grammar / syntax fail: Asian-Americans voting for Democrats (Houston Chronicle)

TEXT: "Tri Minh La, co-owner of Kim Son restaurants, cast his first presidential ballot in 1992 for George H.W. Bush. But this election, he will be joining the majority of Asian-American Texans who say they will be voting for Hillary Clinton." Lomi Kriel, Trump alienates Asian-American voters, Houston Chronicle, Sun. Oct. 23, 2016, at A7 cols. 2-3 (emphasis added).

QUESTION: Ignoring the politics, what's wrong with the bold-faced part of this sentence?

A: It needs a comma between "Asian-American Texans" and "who say they will be voting for Hillary Clinton."

4.7.3.4 Ambiguity exercise: The daughter of Poseidon

Heard on The Ezra Klein Show, a podcast on Vox.com, when he interviewed his Vox co-founder Melissa Bell: she said, "I was raised by the ocean in San Diego." Klein immediately responded: "I had a privileged upbringing: Poseidon was my father … I control the waves."

EXERCISE: Rewrite the bold-faced portion to eliminate the ambiguity.

Ambiguity in the Want Ads

Ambiguity: Pre-Obamacare Coverage

Ambiguity: Meow

4.7.4 Homework review: Verizon-Yahoo 4.06 redraft

4.7.5 Substantive exercises: General provisions

4.7.5.1 Amendments

QUESTION 1: Why might a court decline to enforce a contract provision requiring amendments to be in writing?

A: As then-Judge Cardozo said, parties are free to contract orally (within limits), just as much to amend an existing contract as to do anything else.

QUESTION 2: Are there any statutory provisions that might render enforceable an amendments-in-writing provision?

A: Yes. See, e.g., UCC § 2-209(2) and NY Gen. Oblig. Law § 15.301(1).

QUESTION 3: Are there any judge-made doctrines that might render enforceable an amendments-in-writing provision?

A: Yes:

  1. Equitable estoppel; and
  2. Partial performance that unequivocally relates to the oral amendment.

QUESTION 4: Is it worthwhile to include a provision stating that amendments must be in writing?

A: Yes — if nothing else, it might cause the other party to think twice about asserting an oral modification.

QUESTION 5: Which party to a contract should sign an amendment to the contract?

A: Often an amendments-in-writing provision will require both parties to sign an amendment — but some such provisions (and some case law) require only that amendments be signed by the party against which the amended provision(s) is being enforced.

QUESTION 6 (review): Name three ways of actually amending a contract.

A:

  1. A pen-and-ink change, with each change signed and dated. (Not preferred.)
  2. An amendment document (with what in the title?)
  3. A complete re-do of the entire agreement, labeled as, e.g., "First Amended and Restated Agreement …."
4.7.5.2 Entire agreement

QUESTION 1: What is a principal purpose of an entire-agreement provision?

A: To cut off attempts to vary the terms of the agreement by introducing testimony about oral modifications, side agreements, etc.

QUESTION 2: Will an entire-agreement provision preclude a party from alleging "fraud in the inducement"? If not, what if any other steps could a drafter take to reduce the likelihood of success of such an allegation?

[DCT NOTE: Notice how I phrased this as "reduce the likelihood of success," as opposed to "prevent" or "preclude" such an allegation.]

A: An appropriately-drafted no-reliance provision can reduce the likelihood of success of a fraud claim.

QUESTION 3: Is there any potential downside to including an entire-agreement provision in a renegotiated contract?

A: Yes — if the earlier contract included favorable provisions (e.g., choice of law, arbitration, etc.), then the entire-agreement provision might well wipe out those favorable provisions.

4.7.5.3 Forum selection

FACTS: You represent a small company that wants to enter into a contract with a large company.

QUESTION 1: Is there any danger in proposing a forum-selection provision specifying that all litigation must take place in your client's home jurisdiction?

A: Yes — the large company might respond, Oh, yeah, thanks for reminding us — all litigation must be in our home jurisdiction. (I call this a "sleeping dog provision.")

FACTS: A forum selection provision states: "All litigation arising out of this Agreement must be brought in the courts of New York."

QUESTION 2: Does this provision allow a lawsuit to be brought in federal court in Manhattan? If not, how could this provision be rewritten to allow for that?

A: There is case law saying that such a provision permits litigation to be brought only in state courts.

The provision could be rewritten to refer to "courts having jurisdiction in New York."

QUESTION 3: Under what circumstances might a court disregard a contract's forum-selection provision?

A: When the provision contravenes a fundamental public policy of the forum state — for example, a provision that required an employee, residing in the forum state, to go to another state to litigate claims against its employer.

QUESTION 4: Under what circumstances might it be a good idea to agree to a forum-selection provision that specified litigation in the other party's home jurisdiction?

A: It might be more economical for the client to sue the other party in the other party's home jurisdiction — e.g., to enforce a preliminary injunction. (For the same reason, it might make sense to state that the law of the other party's home jurisdiction will govern.)

4.8 Wed. Oct. 26, 2016

4.8.1 Reading, homework: None (quiz day)

4.8.2 Quiz

This will be done on Blackboard.

4.8.3 Drafting-skills exercises

4.8.3.1 Accuracy exercise: "The Jungle" in Calais

TEXT: "Some of the towns and villages hosting these 451 reception centers — abandoned barracks, hospitals, disused government vacation camps — have been demonstrating against their arrival in recent weeks; but the migrants do not know that." From Mauricio Lima and Adam Nossiteroct, ‘We Are Ready to Leave’: France Clears Out Calais ‘Jungle' (NYTimes.com Oct. 24, 2016)

QUESTION: What's wrong with the bolded part?

A:

  1. It's unlikely that entire towns and villages have been demonstrating against the migrants' arrival.
  2. The "their arrival" phrase arguably refers back to the arrival of the 451 reception centers and not to the arrival of the migrants.

EXERCISE: Rewrite the bolded parts to make them more accurate.

EXAMPLE: "In some of the town and villages hosting these 451 receptions centers … people have been demonstrating against the migrants' arrivals in recent weeks …

4.8.4 Substantive exercises: General provisions

4.8.4.1 Amendments

QUESTION 1: Why might a court decline to enforce a contract provision requiring amendments to be in writing?

A: As then-Judge Cardozo said, parties are free to contract orally (within limits), just as much to amend an existing contract as to do anything else.

QUESTION 2: Are there any statutory provisions that might render enforceable an amendments-in-writing provision?

A: Yes. See, e.g., UCC § 2-209(2) and NY Gen. Oblig. Law § 15.301(1).

QUESTION 3: Are there any judge-made doctrines that might render enforceable an amendments-in-writing provision?

A: Yes:

  1. Equitable estoppel; and
  2. Partial performance that unequivocally relates to the oral amendment.

QUESTION 4: Is it worthwhile to include a provision stating that amendments must be in writing?

A: Yes — if nothing else, it might cause the other party to think twice about asserting an oral modification.

QUESTION 5: Which party to a contract should sign an amendment to the contract?

A: Often an amendments-in-writing provision will require both parties to sign an amendment — but some such provisions (and some case law) require only that amendments be signed by the party against which the amended provision(s) is being enforced.

QUESTION 6 (review): Name three ways of actually amending a contract.

A:

  1. A pen-and-ink change, with each change signed and dated. (Not preferred.)
  2. An amendment document (with what in the title?)
  3. A complete re-do of the entire agreement, labeled as, e.g., "First Amended and Restated Agreement …."
4.8.4.2 Entire agreement

QUESTION 1: What is a principal purpose of an entire-agreement provision?

A: To cut off attempts to vary the terms of the agreement by introducing testimony about oral modifications, side agreements, etc.

QUESTION 2: Will an entire-agreement provision preclude a party from alleging "fraud in the inducement"? If not, what if any other steps could a drafter take to reduce the likelihood of success of such an allegation?

[DCT NOTE: Notice how I phrased this as "reduce the likelihood of success," as opposed to "prevent" or "preclude" such an allegation.]

A: An appropriately-drafted no-reliance provision can reduce the likelihood of success of a fraud claim.

QUESTION 3: Is there any potential downside to including an entire-agreement provision in a renegotiated contract?

A: Yes — if the earlier contract included favorable provisions (e.g., choice of law, arbitration, etc.), then the entire-agreement provision might well wipe out those favorable provisions.

4.8.4.3 Forum selection

FACTS: You represent a small company that wants to enter into a contract with a large company.

QUESTION 1: Is there any danger in proposing a forum-selection provision specifying that all litigation must take place in your client's home jurisdiction?

A: Yes — the large company might respond, Oh, yeah, thanks for reminding us — all litigation must be in our home jurisdiction. (I call this a "sleeping dog provision.")

FACTS: A forum selection provision states: "All litigation arising out of this Agreement must be brought in the courts of New York."

QUESTION 2: Does this provision allow a lawsuit to be brought in federal court in Manhattan? If not, how could this provision be rewritten to allow for that?

A: There is case law saying that such a provision permits litigation to be brought only in state courts.

The provision could be rewritten to refer to "courts having jurisdiction in New York."

QUESTION 3: Under what circumstances might a court disregard a contract's forum-selection provision?

A: When the provision contravenes a fundamental public policy of the forum state — for example, a provision that required an employee, residing in the forum state, to go to another state to litigate claims against its employer.

QUESTION 4: Under what circumstances might it be a good idea to agree to a forum-selection provision that specified litigation in the other party's home jurisdiction?

A: It might be more economical for the client to sue the other party in the other party's home jurisdiction — e.g., to enforce a preliminary injunction. (For the same reason, it might make sense to state that the law of the other party's home jurisdiction will govern.)

4.8.4.4 Independent contractor status

QUESTION 1: Under what circumstances might a court disregard a contract's declaration that the parties are independent contractors?

A: A prime example is in contracts such as independent-consultant agreements where the "consultant" relationship walks and quacks like an employment relationship.

4.8.4.5 Notices

QUESTION 1: Under what circumstances should notices by regular mail be allowed and be effective X days after mailing?

A: Generally, only in cases where a party must mail out lots of notices, e.g., in consumer contracts. Otherwise, notices should be effective upon receipt or refusal.

4.8.4.6 Redlining representation

QUESTION 1: What is the purpose of the Common Draft redlining representation?

4.8.5 Substantive exercises: Verizon-Yahoo § 5.02

QUESTION 1: In paragraph 562, Is "the representations in [omitted] are true and correct" (emphasis added) the optimum way of expressing the thought? What might be better?

A: "True and correct" seems both redundant and (arguably) incomplete — or at a minimum, vague.

"Complete and accurate" might be better.

If a party wants to soften the statement, then "both complete and accurate, in all material respects," might be a way to do so.

QUESTION 2: Compare paragraphs 562 and 566. What do you think is the difference between "in all material respects" versus "in all but de minimis respects"?

A: "All material respects" probably leaves more room for a rep or warranty to be incorrect than does "in all but de minimis respects."

QUESTION 3: Compare paragraphs 570 and 574. Are these paragraphs consistent?

A: Probably — paragraph 570 refers to the degree to which each of the specified reps and warranties is not true, while paragraph 574 refers to the cumulative impact of the falsity of the rep(s) and warrant(ies) in question.

QUESTION 4: Considering the purpose of section 5.02 in which the above paragraphs are contained, why do you think paragraphs 563 and 567 refer to the specified reps and warranties being true and correct "both at and as of the date of this Agreement and as of the Closing Date as if made on and as of the Closing Date"?

A: These statements are all related to conditions — that is, prerequisites — to Verizon's obligation to close the deal. If it comes to pass (or comes to light) that one or more of the prerequisites is not met, then Verizon can "walk the deal."

4.8.6 Preview: Common Draft general provisions – optional terms

Link

QUESTION 1: What are some of the pros and cons of allowing notices to be sent by email? How could the disadvantages be mitigated or avoided?

A: A notice by email might get lost in transit, so perhaps it should be effective only if acknowledged by a human, as opposed to by an autoresponder.

QUESTION 2: Does it make sense to require formal notice of a change of address for notice? [See this provision.]

A: That can lead to problems if the parties forget.

QUESTION 3: Should you agree to a provision requiring your client to obtain the other party's consent before assigning the Agreement?

A: An assignment-consent requirement can cause major problems for the party required to obtain another party's consent.

QUESTION 4: If your client is asked to agree to an assignment-consent provision, how might you respond?

A: Consider asking for exceptions for all-asset or line-of-business transfers, and for pledges.

4.9 Mon. Oct. 31, 2016

4.9.1 Reading

Common Draft litigation provisions and commentary

Verizon-Yahoo stock purchase agreement §§ 8.08-8.09 (governing law; waiver of jury trial)

4.9.2 Homework: Redraft Verizon-Yahoo termination right

4.9.3 Quiz #2 review

4.9.5 Substantive exercises

4.9.5.1 Injunctive relief

Reference: Common Draft litigation provisions and commentary

FACTS:

  • You represent Tiny Company, Inc., which is signing a confidentiality agreement with Gigunda Corporation under which Gigunda will disclose some of its marketing strategies to Tiny.
  • Gigunda's standard confidentiality agreement form says that the receiving party (1) agrees that Gigunda would suffer irreparable harm from any breach or threatened breach; and (2) waives any requirement that Gigunda post a bond.

QUESTION 1: True or false: Tiny Company shouldn't bother pushing back against items (1) and (2).

A: False as to item (1), as this would stipulate away a major part of Gigunda's burden of proof. The answer for item (2) is less clear, because Gigunda might well have sufficient assets that a bond would not be needed.

4.9.5.2 Arbitration

Reference: Common Draft litigation provisions and commentary

QUESTION 1: What difference (if any) is there between arbitration and mediation?

A: Arbitration is (usually) binding unless otherwise agreed; mediation is not binding.

QUESTION 2: What are some of the pros and cons of having the arbitrator decide whether a given claim is arbitrable?

QUESTION 3: How does "baseball" arbitration work?

A: Each party makes a last, best offer; the arbitrator must choose whichever of the offers strikes him or her as being "closest to the pin," that is, the closest to what the arbitrator would award him- or herself if s/he were free to do so.

QUESTION 4: What are some of the pros and cons of having even small claims be arbitrated?

A: Arbitration of small claims will often be far more expensive than taking the matter to small-claims court.

FACTS: An on-line retailer's U.S. consumer contract includes an arbitration clause, but the contract is silent as to whether multiple plaintiffs can proceed in a "class-action" arbitration. Assume interstate commerce.

QUESTION 5: Under the Federal Arbitration Act, must the retailer participate in class-action arbitrations by multiple plaintiffs?

A: No – under Supreme Court precedent, if an arbitration agreement is silent about class-action arbitration, then all claims must be arbitrated individually.

4.9.5.3 Lecture: Other litigation and dispute-resolution provisions

(As time permits)

  • Progressive dispute resolution
  • Service of process
  • Settlement-rejection consequences
  • Third-party immunity

5 November

5.1 Wed. Nov. 02, 2016

5.1.2 Homework review

Verizon-Yahoo

5.1.3 Drafting-skills exercises

TEXT: From a Politico article about foreign-policy damage done by Donald Trump's comments about NATO: "[Vice President Joe] Biden’s already been deployed to mitigate that damage by Obama." Edward-Isaac Dovere, Clinton eyes Biden for secretary of state (Politico.com Oct. 27, 2016) (emphasis added).

EXERCISE: Ignoring the politics, rewrite the sentence to make it clear that the damage in question wasn't done by the president. [Hint: Is passive voice the ideal choice?]

5.1.4 Substantive exercises

5.1.4.1 A laptop purchase agreement

FACTS (which should sound somewhat familiar):

  • Alice and Bob enter into a short letter agreement under which Bob will sell his MacBook Pro laptop computer to Alice for USD $400. (That seems to be roughly the going rate on Craigslist.)
  • The laptop has an ancient Grateful Dead sticker on the lid.
  • Alice is not a Dead fan; the letter agreement requires Bob to remove the sticker before closing.
  • The letter agreement says nothing about termination rights.
  • Bob shows up at the closing with the laptop still bedecked with the autographed Dead sticker.
  • The sticker could be safely removed from the laptop by using a clean rag and some Goo Gone adhesive remover, which costs about USD $8.00 for a small bottle.

QUESTION 1: On these facts, could Alice refuse to close the laptop purchase? Explain.

A: Probably not, because Bob's breach isn't likely to be considered a material breach, and the parties' letter agreement doesn't otherwise give Bob the right to terminate the agreement.

QUESTION 2: What could Alice have put into the letter agreement to give her the right to walk away if the Dead sticker was not removed?

A:

  1. In legalese, the letter agreement could state that Bob's failure to remove the Dead sticker would be a material breach of the letter agreement.
  2. In plainer language, the letter agreement could state that Alice would not be obligated to buy the laptop if the Dead sticker was not removed — Bob would still be in breach if he didn't remove the stickers, but Alice would have the express right to walk away.

QUESTION 3: How else might Alice have "structured the deal" to preserve her options to get the laptop?

A: The letter agreement could state that if the Dead stickers wasn't removed, then the price would be reduced to compensate Alice for the expense and inconvenience of removing the sticker herself — or if the sticker couldn't be removed, to compensate Alice for the (putative) reduction in value of the laptop.

MORE FACTS:

  • Bob's lawyer includes, in the letter agreement, a provision stating that either party can terminate the agreement if the other party files for protection under the bankruptcy laws. [Note: Professionals use proper terminology, which does not include, e.g., "filing bankruptcy."]
  • A month before the scheduled closing, Alice files for bankruptcy protection.
  • The following day, Bob learns that a billionnaire Deadhead is willing to pay him USD $2.5 million for his laptop because the Dead sticker on the lid was autographed by all the Dead members, including the late Jerry Garcia before his untimely demise.

•   Bob sends Alice a notice of termination of their letter agreement, citing her bankruptcy filing.

QUESTION 4: Is Bob on solid legal ground?

A: No –

  • Under 11 U.S.C. §541(c), when Alice filed for bankrupcty protection, Alice's contract right to purchase the laptop becamse property of her (debtor's) estate;
  • Under 11 U.S.C. §365(e)(1), the "ipso facto" termination clause is unenforceable.

See generally this article by the Cooley LLP law firm.

5.1.4.2 Other termination discussions
  • Termination of employment agreement - Sheryl Sandberg employment agreement (annotated)
  • Change-of-control termination
  • Change-of-personnel termination
  • Termination: Parachuting out of a malfunctioning airplane – but into what?
5.1.4.3 Review: Amendments in writing clause
  • Enforceable?
  • What kind of writing would work?
5.1.4.4 Assignment provisions

QUESTION 1: Should you agree to a provision requiring your client to obtain the other party's consent before assigning the Agreement?

A: An assignment-consent requirement can cause major problems for the party required to obtain another party's consent.

QUESTION 2: If your client is asked to agree to an assignment-consent provision, how might you respond?

A: Consider asking for exceptions for all-asset or line-of-business transfers, and for pledges.

5.2 Mon. Nov. 07, 2016

5.2.1 Reading

Common Draft Standards; Inspections; Restrictions and their annotations

Verizon-Yahoo stock purchase agreement §§ 4.03 (access to information)

5.2.2 Homework: Supercomputer sale (10 points)

FACTS: Retrieve your used-computer contract from the beginning of the semester. Now change the facts: The computer is a supercomputer owned by your client, an oil company, which wants to sell the supercomputer for $3 million.

ASSIGNMENT: Draft a "term sheet" of provisions giving the buyer a limited right to inspect and test the supercomputer, but without moving the supercomputer from its current location in the seller's laboratory.

  • BE SURE TO CONSIDER what if any limitations and restrictions the seller would want to impose.
  • You don't need to draft detailed terms and conditions; just the "bullet points" will suffice.
  • Feel free to work with friends, but EACH STUDENT IS TO WRITE UP THE TERMS SEPARATELY.

5.2.3 Quiz 2 follow-up - question 1

Just about everyone, including your teacher, missed a key fact: The client hasn't yet signed the agreement. The easiest way to fix the problem would therefore be:

  1. Talk to the supervising partner;
  2. Talk to the client – it's possible that the client might elect to sign the agreement as-is instead of doing one more turn of the document;
  3. Generate a new draft with the desired change (with redlining, along with a clean copy) and send it to the other side, asking them to review and sign it (and apologizing for the "confusion").

[I didn't count off for people who talked about doing a First Amended or Restated Agreement, because I botched that one too.]

5.2.4 Drafting-skills exercises

5.2.4.1 Editing exercise: Hillary Clinton's health-insurance program

TEXT: "She would expand Obamacare subsidies to entice more people to sign up; many of the remaining uninsured cite policies on the exchanges’ excessive price tags, something bigger subsidies and a public option could help with." From Dylan Matthews, Hillary Clinton’s quiet revolution (Vox.com Nov. 3, 2016).

QUESTION: Ignoring the politics: How could this be rewritten to be clear that the "excessive price tags" refers to "policies" and not to "the exchanges"?

A: One possibility: "She would expand Obamacare subsidies to entice more people to sign up; many of the remaining uninsured cite the excessive price tags of policies on the exchanges, something bigger subsidies and a public option could help with."

5.2.4.2 Editing exercise: Hillary Clinton's family-support policies

TEXT: "The lack of family leave, universal child care/pre-K, and a child allowance combine to make having children a considerably more expensive endeavor, especially for poor families, in the US than abroad."

QUESTION: Ignoring the politics: How could this be improved?

A: One possibility: "The lack of family leave, universal child care/pre-K, and a child allowance combine to make having children a considerably more expensive endeavor in the US than abroad, especially for poor families."

5.2.5 Substantive exercises: Audits

5.2.5.1 Audits: Intro

QUESTION 1: When might it be appropriate to include an audit provision in a contract?

A: Alice will want the right to audit Bob's relevant books and records any time that Alice's obligations or rights are dependent on those (Bob's) books and records.

QUESTION 2: What kind of anomalies might an audit uncover?

A: Among others: Simple bookkeeping errors. Differences of opinion in interpretation. Outright fraud.

5.2.5.2 Audits: Who should be the auditor(s)?

DISCUSS: In an audit provision, what are some of the pros and cons of letting the Auditing Party's personnel conduct audits of the Recordkeeping Party's relevant books and records?

5.2.5.3 Audits: Details

DISCUSS: What are some ways that the Recordkeeping Party might give the auditor(s) access to the Recordkeeping Party's books and records?

DISCUSS: What kind of cooperation might the auditor(s) want from the Recordkeeping Party by way of:

  • personnel access;
  • facilities
5.2.5.4 Audits: Exclusion of certain information

DISCUSS: What kinds of information could / should be excluded from audit, and why?

A: Typically, • privileged information; • in fixed-price contracts, cost information.

5.2.5.5 Audits: Interest on discrepancies

DISCUSS: Why will an audit provision almost always require payment of interest on underpayments?

DISCUSS: Should an audit provision require payment of interest on underbilling (as opposed to underpayment)? Why or why not?

5.2.5.6 Audits: Expense shifting

DISCUSS: Under what circumstances should the Recordkeeping Party be required to reimburse the Auditing Party for its audit expenses?

5.2.5.7 Audits: Frequency

DISCUSS: How often should audits be allowed, and why?

5.2.5.8 Audits: Flowdown requirement

QUESTION: What is a flowdown requirement?

A: A flowdown requirement mandates that particular contract provisions be replicated in any subcontracts. (This is often an issue in U.S. Government contracts.)

5.3 Wed. Nov. 09, 2016

5.3.1 Reading

Common Draft guaranty provisions and associated annotations

5.3.2 Homework: Redraft a release

5.3.3 Drafting-skills exercises

TEXT: From the Stanford-Tesla lease agreement, lines 1247-49: "Either party shall notify the other party if the policy of insurance carried by it does not permit the foregoing waiver [of subrogation]."

QUESTION 1: Is there a better way of phrasing the "Either party shall notify the other party" term?

A: "Each party shall notify the other party …."

QUESTION 2: Is there a better way of phrasing the "policy of insurance carried by it" term?

A: "Each party shall notify the other party if the notifying party's insurance policy …."

or

"IF: A party's insurance policy does not permit waiver of subrogation; THEN: That party will so notify the other party."

QUESTION 3: How likely is it that either party actually checked its insurance policy to make sure it complied?

QUESTION 4: What tool could a party use to be sure that it complied with its contractual obligations?

A: A transaction checklist — see generally, e.g., Atul Gawande, The Checklist Manifesto.

QUESTION 5: What exactly is subrogation, and what does a waiver of subrogation mean?

A: See generally the IRMI article, What Is Subrogation … and Why Is My Contract Waiving It? (IRMI stands for International Risk Management Institute, Inc.)

QUESTION 6: If Tenant's insurance didn't include a waiver of subrogation, what could (and likely would) be the legal consequence if Landlord tried but failed to make a claim against Tenant's insurance?

A: Tenant could be in breach of contract.

FACTS: Assume that the Stanford-Tesla lease agreement requires Tesla to carry insurance policies in which Stanford is named as an "additional insured."

QUESTION 7: How can Stanford know that Tesla has complied with this insurance requirement?

A: By requiring Tesla to cause its insurance carrier(s) to issue a certificate of insurance to Stanford, certifying the existence of (and other information about) the insurance policy and certifying that Stanford is an additional insured under the policy. See this sample certificate.

5.3.4 Grammar fail: Substituted

Sandberg employment agreement, line 202:

Notwithstanding the foregoing, if in connection with a Change of Control, the RSUs are not assumed or substituted for [should be "replaced by] an equivalent award (within the meaning of Section 15(c) of the Plan), then you shall be eligible to receive accelerated vesting of the RSUs effective immediately prior to the Change of Control in accordance with the preceding paragraph.

5.3.5 Grammar fail: Works made for hire

TEXT: From Sheryl Sandberg's employment agreement, line 163: "I further acknowledge that all Inventions which are made by me (solely or jointly with others) within the scope of and during the period of my Relationship with the Company are 'works made for hire' …." (Emphasis added.)

QUESTION: What's wrong with this sentence?

It should be, "I further acknowledge that all Inventions that are made by me …."

For an easy-to-understand explanation of the rule and a couple of illustrative examples, see Brian A. Klems, Which vs. That (WritersDigest.com 2012).

For more explanation and examples, see The Chicago Manual of Style Online.

5.3.6 Substantive exercises: Background checks

5.3.6.1 Background checks: Intro

FACTS: Alice is negotiating a contract with Bob, whose company will perform certain IT-related services for Alice's company.

DISCUSS: Why might Alice want to require Bob to have background checks run on his employees?

5.3.6.2 Background checks: Types

QUESTION: What are some typical types of background checks that can be run?

A: Credit checks. Criminal history. Driving-record check. Drug testing. Education verification. Employment verification. Liens, judgments, bankruptcy checks. Personal reference checks. Residence-addres checks.

5.3.6.3 Background checks: Pitfalls

QUESTION 1: What are some legal pitfalls of doing background checks (in the U.S.)?

A: Consider the Fair Credit Reporting Act and the HIPAA Privacy Rule. Also check on "ban the box" measures in some states. Consent might be required under some circumstances. Discrimination charges might be an issue.

QUESTION 2: Why might it be a good idea to independently verify the contact information for reference checks?

A: Because the subject of the background check might provide contact information for an imposter.

5.3.7 Substantive exercise: Disparagement prohibition

DISCUSS: What are some of the pros and cons of contractually prohibiting the other party from disparaging your client or your client's products or services?

5.3.8 Discussion: Employee nonsolicitation restrictions

DISCUSS: What are some of the pros and cons of contractually prohibiting another party from "poaching" your employees?

5.3.9 Discussion: Good faith commitment

DISCUSS: What are some of the pros and cons of requiring each party to abide by the covenant of good faith and fair dealing?

5.4 Mon. Nov. 14, 2016

5.4.1 Reading

Common Draft Model Employment Agreestnment Provisions (yellow-highlighted & footnoted)

5.4.2 Drafting-style exercises

5.4.2.1 Ambiguity in the obituaries

From an obituary (paraphrased): "Doris is survived by her loving husband Mark of 15 years."

QUESTION: Were Doris and Mark married for 20 years? Or is Mark 15 years old? How could this be clarified? REWRITE in the Zoom.us chat room.

COMMA QUESTION: Is it possible that Doris had more than one husband? How could this be clarified?

5.4.2.2 Ambiguities and vagueness

REWRITE the following in the Zoom.us chat room:

  • I will give you and your husband $1 million.
  • The judge sentenced the killer to die in the electric chair for the second time.
5.4.2.3 Ambiguity in deadlines

EXERCISE: In the Zoom.us chat room, rewrite the following to eliminate the ambiguities:

  1. Bids may be submitted until March 1.
  2. The lease expires at 12:00 a.m. on March 1.
5.4.2.4 Clarity exercise: A family of persecutors

FACTS: This is from an Easter Sunday service booklet at my church (with the family's name changed):

Easter flowers and decorations are given
To the glory of God and in memory of Jane Doe
In honor of all Christians,
Especially those persecuted
By the Doe Family

EXERCISE: Rewrite, in the Zoom.us chat room.

5.4.2.5 Clarity exercise: "Having" an option

TEXT, from a student's rewrite of Stanford-Tesla lease agreement § 4.3: "… Tenant shall automatically have the Extension Option, which Landlord shall honor if Tenant chooses to enforce the Extension Option."

EXERCISE: Rewrite.

A: One possibility:

Tenant may exercise the Extension Option as provided above for [X] days after [SPECIFY DATE OR EVENT].

5.4.3 Substantive exercises

5.4.3.1 Exercise: Transferring between affiliates

FACTS: Alice, a native Texan, works for Able Corporation, a Texas corporation headquartered in Houston. She has signed an at-will employment agreement with Able Corporation. ¶ Able Corporation has just established a French subsidiary, Alouette SA, based in Paris. ¶ The executive vice president of Alice's department wants to promote Alice and send her to Paris to run the corresponding department for Alouette SA.

QUESTION 1: If Alice refuses to relocate to Paris, can Able Corporation fire her for that reason alone?

A: Yes – in an at-will employment jurisdiction such as Texas (and most if not all other U.S. states), either party can end the employment for any reason or no reason.

QUESTION 2: On these facts alone, will Alice's employment agreement with Able Corporation automatically transfer to Able's subsidiary Alouette SA?

A: No.

QUESTION 3: If Alice does accept the transfer to Paris, will her employment agreement with Able Corporation still apply when she begins working for Able's subsidiary Alouette SA?

A: Probably not.

QUESTION 4: Could Able Corporation have set up its employment-agreement form so that it would apply even though Alice stopped working for Able Corporation and began working for Able's subsidiary Alouette SA?

A: Yes – see the model agreement § 13(g).

QUESTION 5: Can Aloutte SA use the same employment-agreement form as Able Corporation?

A: Substantively, the same employment form can be used if it conforms to French law. BUT: In France a written employment agreement must be in French, even if both parties use a non-French language.

QUESTION 6: Suppose that Able Corporation wants for its U.S. and French employment-agreement forms to have slightly-different terms and conditions. "Mechanically," how could Able do this?

A: Use • a standardized "master" form together with • a country-specific addendum for each country in which Able Corporation or one of its subsidiaries does business. In that case, the defined term "Company" can refer to the specific corporation or other entity that is entering into the agreement. (See the model form's definition of "Company" in section 1.)

5.4.3.2 Exercise: Firing in France

MORE FACTS: Alice doesn't adjust well to her new life in Paris. Her boss there, Annette, the managing director ("MD") of Alouette SA, wants to fire her.

QUESTION 1: Can Annette fire Alice just as would be the case in the U.S.?

A: Probably not — French law imposes tight restrictions on terminating an employment.

5.4.3.3 Exercise: Assignment of employment agreement
Suggested reading
Facts

A friend of yours is about to start a new job. Her new employer has asked her to sign an employment-agreement form. She has asked you to take a look at it.

  • The employment agreement says that the employee may not assign the agreement.
  • The employment agreement is silent as to whether the employer may assign the agreement.
Questions
  1. Can your friend assign the employment agreement, that is, hire someone to do her job for her?
  2. If instead the agreement were silent on the employee's right to assign, could your friend assign the agreement?
  3. Can the employer assign the employment agreement, e.g., if the employer decides to sell off, to another company, the division in which the employee works?
  4. What if any changes to the employment agreement assignment language might you suggest that the employee request? (Hint: Put yourself in the shoes of the employer.)
  5. Could your friend sue you or your law firm for malpractice if she didn't like the way things turned out with her employer? What if any steps could you take to reduce that risk to your career and your personal net worth?
5.4.3.4 Review: Warranty disclaimers in England

FACTS:

  • Your client, Seller, headquartered in Dallas, manufactures widgets.
  • Seller's CEO, while on a vacation in London, had the good fortune to make friends with a prominent British industrialist; the CEO landed a big order to deliver 1 million widgets to the industrialist's company in Liverpool, and brought back a signed purchase order.
  • You happen to know that Seller's standard terms-of-sale document:
    • includes a statement of limited warranties and remedies;
    • includes the following statement: "ALL OTHER WARRANTIES ARE DISCLAIMED"; and
    • is silent about choice of law.
  • You don't know whether the British industrialist's company has seen Seller's standard terms-of-sale document.

QUESTION 1: TRUE OR FALSE: Texas law will likely apply.

A: False – English law will probably apply.

QUESTION 2: TRUE OR FALSE: If article 2 of the Texas UCC applies, Seller's disclaimer will be enough, under UCC § 2-312, to disclaim an implied warranty that Seller has the legal right to convey ownership of the widgets to the purchaser.

A: Under UCC § 2-312(2), the implied warranty of title must be expressly disclaimed (or the disclaimer must be apparent from the circumstances).

QUESTION 3: TRUE OR FALSE: If English law applies, Seller's disclaimer will likely be enough to disclaim all potential liability about the widgets other than as stated in Seller's standard terms-of-sale document.

A: No - need disclaimer of implied conditions too.

5.5 Wed. Nov. 16, 2016

5.5.1 Reading

Common Draft confidentiality provisions and their annotations

5.5.2 Drafting-skills exercises

TEXT: From "Courts do not, however, always accept the parties’ invitation to devise proxies for high-level standards."

BETTER: "Courts, however, do not always accept the parties’ invitation to devise proxies for high-level standards"

5.5.3 Discussion: Intentionally-vague contract provisions

For general reference (not required reading)

5.5.4 Substantive exercises

5.6 Mon. Nov. 21, 2016

LAST DAY OF CLASS! This will be an (almost) all-review session.

5.6.1 Drafting-style exercise

TEXT (in a Facebook discussion about whether to abolish the Electoral College):

"Should then the interests of the oil and gas industry in the midwest control the interests of Californians and what my good friend in Delaware who is fighting the clean energy fight thinks?"

REWRITE.

A: How about: "Should, then, the interests of the oil and gas industry in the midwest control the interests of Californians? I have a good friend in Delaware who is fighting the clean-energy fight; should the midwest oil-and-gas interests override what he thinks?"

5.6.2 Comma Queen video (from The New Yorker): "Excuse Me! Your Participle is Dangling"

See this two-minute YouTube video — I heard about this video series last night and am thinking about using it next semester.

QUESTION: Would this series be worth selectively watching in class?

5.6.3 Course-takeaways review

Working in groups: Review your notes and come up with key takeaways from the entire course. Do it in Workflowy:

Course takeaways (Workflowy) for 4:00 p.m. class

Course takeaways (Workflowy) for 7:30 p.m. class

Feel free to ask questions.

5.6.4 Thorns, buds, roses

What worked in the course? What could use work? Possible topics:

  • In-class study groups
  • End-of-course group review
  • Homework
  • Negotiation psychology (e.g., who has what incentives)
  • Litigation planning
  • Specific types of contract (real-estate lease, employment agreement, M&A)
  • Reading materials – Common Draft clauses & commentary
  • Mid-course adjustments to the syllabus
  • Zoom.us chat room
  • Workflowy
  • Dialing into class in lieu of being absent
  • Would Google Docs and Google Chat have been better?

Here are a few of my own ideas for what to do better next time:

  • Allocate some class time for students to work collaboratively on homework assignments.
  • Get the marked-up homework assignments back to students sooner.
  • Have teams of students "negotiate" the supercomputer terms sheets.

Please do this in Workflowy:

What-worked (Workflowy): 4:00 p.m. class

What-worked (Workflowy): 7:30 p.m. class

5.6.5 Jeopardy!

This is it. We'll play in three teams.

5.6.6 Course evaluations

You know what to do. Please do fill out the course evals.

6 Course information

6.1 Contact information; computer use; email addresses

  • I can be reached at dc@toedt.com or (713) 364-6545 (which forwards to my cell); see also my About page.
  • Computer use in class is not just encouraged but required; you will need in-class Web access for some of the exercises (we will do some in-class drafting via an on-line chat room and/or a "virtual whiteboard"). If this will be a problem, be sure to contact me well in advance.
  • On the first class day I will be asking for your email addresses so that I can include it in a class Google Group. Please provide an email address that you check regularly.

6.2 Course goals, materials, assignments, etc.

6.2.1 Course goals

The goal of this course is to help students prepare for a type of assignment they will likely see throughout their careers: that of (sometimes) drafting, (very often) reviewing, analyzing, explaining, and negotiating contracts. Students will:

  • explore various legal- and business issues that might need to be addressed in various types of contract (see the list below);
  • study principles of plain-English drafting for contracts and other legal documents;
  • review the etiquette and ethics of contract negotiations;
  • survey some legal pitfalls that could lead to jail time for both clients and lawyers, such as backdating contracts, violating antitrust laws, failing to comply with Sarbanes-Oxley Act obligations, paying off foreign officials, etc.
  • discuss how to tactfully advise clients (and supervising lawyers) about their options, so as to earn a reputation as a deal-maker, not a deal-breaker;
  • compare and contrast the roles of outside- versus in-house counsel in contract negotiations;
  • consider ways of positioning the client for future litigation, just in case.

6.2.2 Course materials

As an experiment this semester, we will not use a course book per se; instead, we will make greater use of other materials available for free on-line, such as:

6.2.3 Course approach

We will take up various worksheets, exercises, and other assignments; I'm in the process of revising the order.

Homework assignments will be due on specified dates.

Each student should be prepared to answer all questions in the agenda for each class. (But don't worry, I won't embarrass you if you don't know an answer.)

6.2.4 Homework

We will work through a series of short homework- and in-class worksheets and other assignments; some will involve drafting, others will involve short answers. Some will be turned in, others not. I will generally mark up and return the turned-in assignments, but I normally won't grade them other than pass-fail, that is, either zero points or full points for that particular assignment, based on whether it has been timely turned in and appears to reflect a good-faith effort. I want your best effort on each assignment, but I understand and accept that you might not get it exactly right on the first try.

EXCEPTION: If a submitted assignment has serious problems that I judge could have been avoided by more-careful work, I reserve the right to deduct points.

WARNING: In one past class, a student got a (low) passing grade on the final exam, but failed the course because the student had turned in almost none of the assignments.

We will review each drafting assignment in a subsequent class, in many cases using group discussion.

6.2.5 Collaboration

Unless I say otherwise in a particular case, feel free to consult with your classmates in doing homework, worksheets, and other assignments, but each student is to do, and turn in, his or her own work. (That's how it often happens in law firms and companies.) If you do so, please indicate whom you consulted with, so that when I see similar- or identical work I’ll know it’s OK.

6.2.6 Deadlines

Worksheet homework and drafting assignments are to be turned as specified. I will accept submissions that, for good reason, are not terribly late, but I reserve the right to deduct up to 20% of the possible points for lateness.

6.3 Grading: 1,000 points

6.3.1 Required average

As required by law school policy for a writing class, grades will be adjusted proportionally so that the average of the final class grades (before any class-participation bump-up) falls between 3.0 and 3.4.

6.3.2 Final exam: 400 points

The "essay" part of the final exam will be take-home, open-book, open-notes. It should take roughly four to six hours to complete. It will consist mainly of (brief) essay questions along with a couple of drafting- and review problems.

The essay portion will be distributed no later than the end of the last class period and is due at the library two weeks later (exact date and time to be determined). Late exams will not be accepted without the specific approval of the Associate Dean. The library staff will time-stamp the exams as they are submitted. WARNING: One semester, several students showed up at the library desk 30 seconds before the deadline, but the library staff was busy and wasn’t able to time-stamp the exams until after the deadline had passed. Plan accordingly.

In addition, I hope to have part of the final exam consist of a timed series of true-false, multiple-choice, and short-answer questions to be done on the UH Blackboard system.

6.3.3 Two midterm quizzes (Sept. 14 and Oct. 5): 400 points total

We will have two, in-class,* midterm quizzes, each lasting about 20** minutes.

*  Style note: I used commas to separate the interchangeable adjectives in the phrase "two, in-class, midterm quizzes." See Comma Rule 2 at GrammarBook.com.

*  Style note: I used the Arabic numerals “20” — not “twenty,” and *certainly not “twenty (20)” — to indicate the number of minutes.

The questions will be based pretty much entirely on the homework- and in-class assignments covered to date — but with some curve balls thrown in — so that the quizzes themselves serve as a reinforcing review that takes advantage of the testing effect.

The quizzes will be open-book, but it will behoove you to review all of the previous assignments in advance.

In preparing for the midterm quizzes and final exam, you might want to:

  • make flash cards from the worksheet questions and answers; and
  • work together to drill each other.

6.3.4 Homework (pass-fail): 100 points total

There will be up to 20 short homework assignments, graded pass-fail, each worth either 5 or 10 points.

6.3.5 Class attendance: 100 points

Because we will be doing a significant amount of in-class discussion and a significant number of in-class exercises,* in two- to four-person teams, it's important for each student to attend each class, not just for his or her own benefit, but so that his or her team won't be shorthanded.

* Note how it’s an AMOUNT of discussion (“discussion” is an uncountable noun) and a NUMBER of exercises (“exercises” is a countable noun); see the Grammarist.com discussion.

ABA accreditation rules and school policy require attendance at 80% of the class meetings for each course. We have 27 class meetings; rounding to the nearest whole number of classes, a student must attend at least 22 class periods to comply with the 80% rule.

To reward students who attend class, a student who attends a minimum number of class periods will automatically earn points out of the 1,000-point total for the course, as follows:

MIN. CLASSES ATTENDED (of 27) POINTS EARNED
26 to 27 100
24 to 25 50
23 or fewer 0

This means, of course, that students who miss more than two classes will have to do better in other areas to keep up with their classmates on the school-required grading curve.

EXCEPTION: I normally disregard absences for "official" law-school team travel, e.g., for moot-court competitions, etc., as long as I'm informed in advance.

When I see that all students are present, I don’t circulate a sign-in sheet; otherwise, I do, so that I can know who’s missing and have documentary evidence that the other students were present.

6.3.6 Class participation bump-up

As permitted by law-school policy, I will increase a student's grade by one-third of a grade level for outstanding class participation, e.g., from a B to a B-plus, assuming that this doesn't cause the class average to exceed the maximum permitted. Here's how it works administratively:

  • I send the Registrar a list with the final course grade for each exam number.
  • At the same time, I send the Registrar a list of the names of students who are to get a one-half grade increase for class participation, ranked in order of priority as subjectively and finally determined by me.
  • The Registrar then combines these two lists, implementing as many of one-half grade increases as will not cause the overall class average to to exceed the maximum.

I do not reduce grades for sub-standard class participation — but if you aren't here, you won't be earning the attendance points.

6.4 Office hours

I will be available for office hours from 5:30 (after the 4:00 p.m. class) until 7:30 p.m. (when that class starts). p.m. until Adjunct professors don't have offices at the school.

I'm happy to do office hours by appointment by Skype video or by phone.

I’m also pretty responsive to email questions — if I think your question might be of general interest, I'm very likely not to respond directly to you, but instead to email the question (without your name), and my response, to the whole class. (Note how I used commas for clarity in the last part of the previous sentense.)

6.5 Recording my lectures

I don't make audio recordings of my lectures, but I have no objection to students doing so and sharing the recordings with other UHLC students.