Contract Drafting syllabus (Toedt - Fall 2017)

Updated 2017‑11-27 18:56

1 Preface

Welcome. This Web page contains important information about my Contract Drafting course. Update Sept. 6: This syllabus is being adjusted to take into account the disruption of Hurricane Harvey, including the Law School's week-long shutdown; more changes might be necessary as the semester unfolds. Please see the email that I sent to students on September 3.

Please see:

3 Class plans

3.1 Class plan: Mon. Aug. 21

3.1.1 Reading for today

Look over the general course information.

in On Contract Drafting, read sections 1.1 and 1.2 and briefly look over the remainder of Chapter 1.

I encourage you to email me (dc@toedt.com) with any questions you might have about anything you found confusing or difficult in the reading.

3.1.2 Initial small-group assignments

These groups will be reshuffled twice during the semester, on the dates of the second and fourth quizzes, so that students will have an opportunity to work with different people.

4:00 P.M. SECTION:

Binford Caberto Dryden
Fisher Herrera Hively
Jin Kellam Kepadia
Montes Niedzwiedz Sullivan

7:30 P.M. SECTION:

Clawson del Villar Harrall
Li Mathews McCormick
McKnight Nguyen Oliver
Pohl Thal Waterwall

3.1.3 Housekeeping

  1. Introduce selves
  2. Go over the general course information
  3. Possibility of Webinar-style remote meeting if DCT will be absent
  4. Use Workflowy page to collect email addresses for a Google Group mailing list, which I use to send out all-hands emails
  5. Overview of this course's approach:
    • In-class exercises, often in small groups (sort of like in-class study groups)
    • "Enhanced Socratic method" – lots of small-group discussion before answering
    • Homework assignments – many of them relatively short
    • Lots of in-class review (a.k.a. "spaced repetition") to help with long-term retention

3.1.4 First exercise

It's a good idea to look up the people on the other side of a contract negotiation — or for that matter, anyone else you'll be dealing with. Google and LinkedIn are extremely useful for that purpose.

As an illustration:

  • Where did I go to law school?
  • What did I do between college and law school?

3.1.5 Blackboard practice run: Quiz on general course info

This is a zero-points quiz to make sure everyone can get onto Blackboard.

3.1.6 Ambiguity exercise: Hillary's email server

SOURCE: A Politico piece titled FBI could leak Clinton email investigation, Grassley warns.

TEXT: "A hypothetical leak could occur, he said, if officials believed Clinton was not being prosecuted for political reasons." (Emphasis added.)

EXERCISE: There are two possible meanings of the italicized portion of the above sentence.

  1. Go to your small group's Workflowy page.
  2. Each student is to rewrite the sentence twice, once for each meaning, to make that meaning clear. (Don't put your names on the rewrites; see #4 below.)
  3. Then, within your small groups, critique your rewrites.
  4. Finally, the whole class will briefly look at each small group's rewrites.

3.1.7 In-class exercise: Shall, will, must, etc.

QUESTION: In your small groups, discuss which of the following Professor Toedt thinks is not a good choice:
A. Bob will pay Alice $1,000 no later than December 24.
B. Bob shall pay Alice $1,000 no later than December 24.
C. Bob must pay Alice $1,000 no later than December 24.
D. Bob is to pay Alice $1,000 no later than December 24.

3.1.8 In-class exercise: Responsibility for building permits

Discuss in your small groups: TRUE OR FALSE: In a contract to remodel a kitchen in a house, the following would be an acceptable drafting style: All building permits are to be timely obtained.

3.2 Class plan: Wed. Aug. 23

3.2.1 Reading for today

In On Contract Drafting, read:

  • 2.1 A hypothetical example
  • 2.2 The title
  • 2.3 The preamble

and look over:

  • the rest of Chapter 2 (recitals, defined terms, alternatives)
  • Chapter 3 (signature blocks)

In the Supplement, briefly look through "A Somewhat-Barebones Contract," including the annotations (page 1). In Adobe Acrobat or Reader, you can open the Bookmarks bar in the left-side navigation pane.

I encourage you to email me (dc@toedt.com) with any questions you might have about anything you found confusing or difficult in the reading.

3.2.2 Ambiguity exercise: Costly medical care

• FIX THIS: "The [health-insurance] companies wanted to minimize the risk of losing money by paying for costly medical care for too many of their customers." (From Reed Abelson, Trump’s Vow to Repeal Health Law Revives Talk of High-Risk Pools, NYTimes.com).

  1. Go to your small group's Workflowy page.
  2. Each student is to rewrite the sentence to make the meaning clear. (Don't put your names on the rewrites; see #4 below.)
  3. Then, within your small groups, critique your rewrites.
  4. Finally, the whole class will briefly look at selected rewrites.

3.2.3 In-class exercise: Selling a used computer (part 1)

SETTING UP: Groups 1 and 2 will represent Sarah Seller; Groups 3 and 4 will represent Billy Buyer.

FACTS:

  • Sarah Seller owns a three-year-old laptop computer. She wants to sell it so that she can buy the latest and greatest model.
  • Billy Buyer is interested in buying Sarah's computer. Billy is wealthy, so he wants the actual purchase to be made by his family office, Buyer Investments L.P.

ASSIGNMENT:

  1. In your three-person groups, and using your group's Workflowy page, each group is to think of a list of provisions that you would want to see in a "minimum viable contract," that is, a contract that you think would:

    • survive a motion to dismiss for failure to state a claim;
    • cover the likely risks for your client; and
    • get signed reasonably quickly so that Sarah and Billy can go on their way and get on with their lives.

    Feel free to ask me questions.

  2. Groups 1 and 4: Compare your lists and see what if any consensus you can reach. Groups 2 and 4 do the same.
  3. Finally, the entire class will briefly look at each group's list.

3.2.4 Ambiguity exercise: The burglars and the bystander

From the Houston Chronicle, Aug. 22, 2016 "Police apprehended two men accused of burglarizing two homes on the North Side with the help of a civilian who chased them Monday afternoon."

QUESTION: Did the citizen help the police, or the burglars?

QUESTION: Did the citizen chase the burglars, or the police?

EXERCISE: Each student is to rewrite this to clarify it (in your small group's Workflowy page as above).

3.2.5 Class discussion: A Somewhat-Barebones Contract (Part 1)

We will spend some time discussing "A Somewhat-Barebones Contract" in the Supplement to get an overview of some important issues that might confront a contract drafter or reviewer.

In your small groups, discuss the following and be prepared to "report out" to the class as a whole.

1. Title: Why not just have the title be “Agreement”?

A: If the title were just "Agreement," then* the title wouldn't be as informative when the title is listed in an index or other referring document.

*  Notice how I used the word "then" as a separator — this helps the reader see more quickly where the "if" clause ends and the "then" clause begins.

2. First paragraph: What is a one-word name by which this first, unnumbered paragraph is typically called?

A: That paragraph is referred to as the preamble.

3. First paragraph: The words “Agreement,” “Buyer,” and “Seller” are in bold-faced type and surrounded by quotation marks and parentheses. Why?

A: This flags the definitions of those defined terms; when the first instance of a defined term is eye-catching in this way, it helps the reader to find the term's definition more quickly.

4. First paragraph: Why does this paragraph state (i) the type of organization of Betty's Used Computers, LLC ("BUCL") and (ii) the state in which BUCL is organized?

A:

  1. If Seller were ever to have to sue Buyer, it would be important for the complaint (in federal court and some state courts) or original petition (in Texas state courts) and subsequent documents to identify Buyer precisely.
  2. One reason to state the type of entity is to inform future trial counsel, because that could affect whether a federal court can exercise diversity jurisdiction. That's because for diversity-jurisdiction purposes, courts generally treat LLCs as having the citizenships of its members, in contrast to a corporation having its own citizenship. See generally, e.g., Sevan Ogulluk and Jason Lissy, How to Determine the Citizenship of LLCs (Hint: Keep Digging!) (BNA.com 2014).

5. First paragraph: Why does this paragraph state Buyer’s principal place of business?

A: To establish at least one permissible location for (i) personal jurisdiction, and (ii) venue — which are two different things (albeit related).

6. First paragraph: Why does this paragraph state Buyer’s initial address for notice? Why not just put that information in the Notices provision (if there is one)?

A: It's convenient to have that information on the front page, so that future readers don't have to go paging through the document looking for it.

7. First paragraph: Why state Sam’s place of residence (which is not necessarily the same as his initial address for notice)?

A: To establish one permissible location in which Sam could be sued if necessary.

3.2.6 Ambiguity exercise: Making babies

TEXT (forwarded by a spring-2016 student): Mice Breeding Chinese Scientists Say Making Babies in Space Is Possible (Inverse.com). The student's comment: "TL;DR: Hyphens are important, yo."

EXERCISE: Each student is to rewrite this to clarify it (in your small group's Workflowy page as above).

3.2.7 Clarity exercise: The judge's daughter

BACKGROUND: The sentence below is something I typed (before revising it) in a Facebook conversation. For content, a federal judge had made his minor daughter give back a bracelet that her boyfriend had given him because the value of the bracelet exceeded the $50 maximum allowed by judicial ethics rules. (I said I thought that was a bit much, because the judge would have to recuse himself in any case involving the boyfriend anyway.)

Anyway, what I typed originally was: "I didn't know the judge, but as the father of a daughter, another possibility comes to mind: Maybe the judge just didn't like the boyfriend?"

QUESTION: What's wrong with the italicized part?

EXERCISE: Each student is to rewrite this to clarify it (in your small group's Workflowy page as above).

3.2.8 Clarity exercise: The Iranian navy

From CNN: "The Iranian vessels moved at high speed toward the [USS] Nitze, which was operating in accordance with international law in international waters and ignored maritime "rules of the road" as set out in the 1972 Convention on the International Regulations for Preventing Collisions at Sea. "

QUESTION: What's wrong with the italicized part?

EXERCISE: Each student is to rewrite this to clarify it (in your small group's Workflowy page as above).

3.3 Class plan: Wed. Sept. 6

3.3.1 Reading for this week

In On Contract Drafting:

  • Look through Chapter 4 (ten basic writing rules).
  • READ Chapter 5 (ambiguity) and Chapter 6 (Getting paid).
  • Look through Chapter 7 (reps and warranties).
  • Look through Section 12.1 (Honeywell purchase-order terms), section 16 (seller's warranties)

I encourage you to email me (dc@toedt.com) with any questions you might have about anything you found confusing or difficult in the reading.

3.3.2 In the news: An elephant takes a selfie?

From this tweet: "Man trampled to death by elephant trying to take a SELFIE"

3.3.3 Homework review

3.3.4 Class discussion: A Somewhat-Barebones Contract (Part 2)

We will continue discussing "A Somewhat-Barebones Contract" in the Supplement to get an overview of some important issues that might confront a contract drafter or reviewer.

8. What's a romanette?

A: A romanette is a lower-case Roman numeral in parentheses.

9. Section 1: What advantages might there be in including so much information about "the deal” in this paragraph?

A: To give future readers — e.g., company exectives, trial counsel, judges — a quick introduction, to help get them up to speed.

10. Section 1: This contract does not include recitals, a.k.a. "whereas" clauses, nor "words of agreement," e.g., "The parties agree as follows." Why might that be?

A: At least in U.S. jurisdictions, a contract doesn't need any of these things to be enforceable.

11. Section 1: “Seller will sell” and “Buyer will buy”: Why includes both of these?

A: Otherwise, the contract might bind only Seller or only Buyer (in which case the contract would be a call option or a put option).

12. Section 1: “Seller will sell”: Why not “Seller shall sell”?

A:

  1. "Seller shall sell" is certainly acceptable for the U.S., because here the word shall is generally understood as mandatory. That might not be the case, though, in other English-speaking countries; see the Common Draft definition of "shall" and its commentary (scroll down to the New Zealand and Australia mentions).
  2. When drafting a contract for a seller, I prefer to use, for example, "Customer will do X" instead of "Customer shall do X" because the former is arguably more respectful in tone — because after all the customer doesn't have to do the deal ….

13. Section 1: In the term "USD $800," what does the prefix "USD" mean?

A: "USD" is a standard abbreviation for U.S. dollars. Note how the usage is "USD $800."

14. Section 1.3: What’s the point of this section – as a matter of law, aren't the parties free, if they so agree, to change the Closing Time and Closing Location?

A: Yes, of course parties are free to change the Closing Time and Closing — but sometimes it doesn't hurt to throw in things like this anyway, to give some reassurance to non-lawyer readers on the other side of the deal.

15. Section 1.4: What is a "safe harbor" clause in the context of a contract (as opposed to a statute or regulation)?

A: A "safe harbor" clause says, in essence (for example), you don't have to do things this way, but if you do, you can't be attacked for having failed to do it properly. (Safe harbors are often seen in securities law and tax law.)

16. Section 1.4: What’s the significance of “for the avoidance of doubt”?

A: "For the avoidance of doubt" is a British-ism, a signal to a judge that what follows is a guide to interpretation. (Some practitioners dislike for-the-avoidance-of-doubt provisions, feeling that contract language should be clear enough not to need such interpretive guides. This is a worthy aspiration, but in practice it might not always be achieved.)

17. Section 1.4: Any danger in using “for example”?

A: Unless the term is defined, a court might treat the term as being subject to the doctrine of ejusdem generis.

18. Section 2: What types of agreement are likely to include this kind of clause?

A: Any clause for the sale of one or more assets is likely to include a clause like this, which could be referred to as a "lockdown" clause.

We see similar provisions in merger- and acquisition agreements, in wnich the seller is required to continue running the business "in the ordinary course," and thus requiring the seller to get the buyer's approval for extraordinary transactions.

19. Section 2: Note the phrasing, “Seller will not use the Computer ….” How else could that be phrased? Is there any significance to the “will not” phrasing?

A: If you wanted to be more emphatic, you could try "Seller may not use the Computer …" or "Seller must not use the Computer …."

20. Section 2.1: In the real world, would this sort of exception normally be included in a draft agreement prepared by Buyer? Contrariwise, if Seller had drafted the agreement, then would Seller have included section 2 at all?

A: No and no — but Seller might have included section 2 as a way of increasing the "curb appeal" of the total offering.

21. Section 3: “Seller will cause” a clean install of Mac OS X: Why phrase the obligation this way — why not just say that Seller will perform a clean install?

A: Seller might not be the one to actually perform the clean install (e.g., Seller might take the computer to the Apple Genius bar).

22. Section 3: What type of covenant is this?

A: An affirmative covenant (as contrasted with a "thou shalt not" negative covenant).

23. Section 4: What term might traditional contract drafters use here instead of “prerequisite”?

A: A "condition."

24. Section 4: Why include this section?

A: Because Buyer wants the right to walk away from the deal — and not be in breach of contract for doing so — if the stated prerequisites aren't met.

25. Section 4: Why cross-reference to “the obligation stated in section 3,” instead of just saying, “Seller’s obligation to do a clean install is a prerequisite ….”?

A: "D.R.Y. — don't repeat yourself." Repetition is dangerous: You might change one instance but forget to change the other. (A bank lost $693,000 that way.)

3.3.5 Questions for discussion [if time permits]

In your small groups, discuss the following, and be prepared to "report out" to the whole class:

  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?
  7. TRUE OR FALSE: A contract drafter should strive to anticipate and address all harms that might arise in the course of the parties' relationship.
  8. PREVIEW QUESTION: What is a "vague" term? What is an "ambiguous" term?

3.3.6 Experiment: The value of speed in getting to signature sooner [if time permits]

I will email a PDF of a slide deck to students; please don't distribute it because of copyright issues.* You can download a PDF of the associated paper, Getting a Workable Contract to Signature Sooner. (I'm in the process of transplanting the content of the paper into the On Contracts Drafting document.)

* 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.

3.4 Class plan: Mon. Sept. 11

3.4.1 More homework comments

These comments are for the Alice and Bob preamble, background, and signature-block homework that (per the post-Harvey schedule) was due Sept. 6.

BEFORE AFTER
the 30th day of August, 2017 August 30, 2017
Employer Client (or perhaps "Company")
Hirer Client (this is easier to say than "Hirer")
Recitals: Background
"Consultant has expertise and several years of experience in analyzing and marketing fashion designs …." (Consider making this an explicit representation by Consultant)
"Client and Contractor enter into this Agreement in consideration of the mutual representations, warranties, …." The parties agree as follows. (That is, unless your supervising partner prefers the "Before" version.)
"The Parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above" (Leave blank, or just use "AGREED:")
Printed name (in signature blocks) (Include the signers' actual names, since those names are known)
Date Signed Date signed (note the change in capitalization)
   

Some other notes:

  • For a contract in which an individual is a party, the individual's address for notice might not be his/her residence address; in that case, it might be especially important to recite the county of residence.
  • Also, you wouldn't use a signature block "Alice Harvey, by:" — it'd be just "Alice Harvey" under the signature line.
  • Gamesmanship: "Client wants to hire Consultant for marketing consulting services, on a temporary basis. …."
  • Avoid too much detail in the Background section (D.R.Y. to R.O.O.F.).
  • Not every contract needs a Background section.
  • "Concurrently with the execution and delivery of this Agreement, Employer and Employee, are entering into a Temporary Employee Contract-Marketing Consultant Agreement."
    1. Substantively this is redundant — the execution and delivery IS the entry into the Agreement.
    2. You wouldn't use a comma in the phrase "Employer and Employee, are entering …."
    3. We talked about "Employer" vs. "Client."

3.4.2 Clarity exercise: Donald Trump and Nigel Farange

From a tweet: "You can’t have observed Nigel Farage in recent years and not think Trump may win in November, writes @NYTimesCohen nyti.ms/2bMhUUj" (emphasis added)

QUESTION: How could this be improved?

I would change "Trump may win" to "Trump might win" or "Trump could win" — "may" is too often used to signify permission, e.g., "Alice may charge Bob interest on any past-due amount."

3.4.3 Grammar fail: Email attachments

TEXT (from an email to DCT): "Attached are three files, the event surveys, the CLE sheet for DC and the mailing list sign up form."

QUESTION: What's wrong with this sentence? (Hint: It's the internal punctuation and spelling.)

A: The sentence should be written as: "Attached are three files: The event surveys; the CLE sheet for DC; and the mailing list sign up form."

3.4.4 In-class exercise: Payment Terms Worksheet 1

1. PROVISION: "Alice represents that she will pay Bob net 30 days." In your small groups, prepare to discuss the following:

QUESTION: What does "net 30 days" mean?

Full payment is due in 30 days (but 30 days from when?).

QUESTION: Is anything wrong with the "net 30 days" part?

It doesn't specify when the 30 days starts.

QUESTION: Is anything else wrong with this provision?

Yes — this isn't a representation, it's a covenant.

2. ASSIGNMENT: On the facts of #1 above, and in your small group's Workflowy whiteboard, each student is to draft a replacement for the quoted provision. Feel free to consult your classmates, but do your own writing.

3. FACTS: (A) Bob wants Alice to agree to the following provision: Alice will notify Bob of any dispute about a payment obligation no later than the due date of the payment. (B) Alice's lawyer objects to this provision.

QUESTION: Should Bob push hard for this provision?

Presumably so.

QUESTION: Should Bob read anything into the fact that Alice's lawyer objected to this provision?

Alice's lawyer's objection might be a clue that the lawyer, or Alice, or both, might be difficult to deal with.

3. FACTS: A contract payment provision states that past-due payments will bear interest at 8% per month beginning on the due date. Texas law applies.

QUESTION: Any problem with this provision?

Yes:

(a) 8% per month is 96% per year — that should trigger worries about usury statutes.

(b) Under Texas usury law, a safe harbor for interest rates is to have the interest start to accrue 30 days after the due date of the payment.

QUESTION: How should you respond if you see this while reviewing a contract drafted by another party — that is, if it were your client that putatively would have to pay interest on past-due amounts?

A: One possibility would be not to do anything to this provision, because under the Texas usury statute, the interest provision might very well be void as usurious. (But you'd want to make sure that the usury statute actually applied, i.e., that the late-payment charge would be properly characterized as "interest" under the statute.)

3.4.5 Preview lecture: Reps and warranties

3.4.6 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.

3.5 Class plan: Wed. Sept. 13

3.5.1 Quiz today [CANCELED]

3.5.2 Homework review

Students will exchange their hard-copy homework submissions so that we can review them en masse in class.

3.5.3 In the news: What if you spot an ambiguity?

This question comes from a discussion in the LinkedIn group "Drafting Contracts" — there's no need to read the discussion, but you should consider joining the group.

The question that kicked off the discussion was this:

When you review a contract and discover that a certain clause is portly [sic] drafted, do you leave it as it is with the confidence that it probably will be construed against the other side or do you amend it, trying to make it mutual with the risk of bringing attention to the clause which could then be discovered by the other side. What would you do?

3.5.4 In-class exercise: Reps and warranties

QUESTION 1: Does a representation normally relate to:
(A) a past fact?
(B) a present fact?
(C) a future fact?
(D) all of the above?
(E) none of the above?

A and B. In rare circumstances, courts will treat C, a representation of a future fact, as a covenant or warranty (in essence, bailing out the incompetent drafter), e.g., I represent that I will pay you Tuesday for a hamburger today. NOTE: For drafting purposes, treat A and B as the only correct answers.

QUESTION 2: What are the basic elements that a plaintiff generally must establish to succeed in a claim for misrepresentation?

(Each small group should collaborate to answer this question in writing in its Workflowy whiteboard.)

A: Here's a general "proof checklist" for an action for misrepresentation?

(a) A statement, made by the defendant;

(b) The statement was false or misleading when made;

(c) (With variations:) The defendant knew, or should have known, that the statement was false or misleading;

(d) (With variations:) The defendant knew, or should have known, that the plaintiff would rely on the statement;

(e) The plaintiff did in fact rely on the statement;

(f) The plaintiff's reliance was reasonable; and

(g) The plaintiff suffered damage attributable to the statement.

QUESTION 3: Should factual representations normally be included in an agreement's recitals? Why or why not?

A: This is a matter of convention – like It's not customary to include factual representations in the recitals. It might also be dangerous to do so: If memory serves, in some jurisdictions the courts might not treat the recitals as part of the contract.

The safer thing to do would be to rework the recitals as a "1. Background" section and have the parties make whatever initial representations they're willing to make.

3.5.5 In-class exercise: Warranty disclaimer

In your small group's Workflowy whiteboard, brainstorm and draft a warranty disclaimer for the computer that Sarah Seller wants to sell. Each student should do his- or her own writing, but feel free to consult your classmates.

3.5.6 In-class exercise: Preamble questions about the computer sale

1. FACTS: Billy Buyer wants the computer-sale contract to recite, not his name, but his business name, "Bravo Builders" (just that – no Inc. or LLC or anything like that).

QUESTION: Any problem with that?

2. FACTS: It turns out that Billy Buyer is 15 years old.

QUESTION: Any issues there?

Yes — as a minor, Billy probably does not have the legal capacity to enter into a contract.

3. ALTERNATE FACTS: Billy is 28 years old, a successful Internet entrepreneur who is worth $300 million. Billy wants the contract with Sarah Seller to be in the name of his new business venture, Beta-Beta Research LLC. BBR will be renting from Sarah (not buying) a custom-built supercomputer for one year, for an annual rent of $1 million.

QUESTION: Any financial issues here? How might those issues be addressed?

Yes – does Beta-Beta Research actually have the financial wherewithal to pay $1 million per year? Any concerns in this area could be addressed with, for example:

  • a personal guaranty from Billy
  • standby letter of credit from a bank or other financial institution
  • a hefty deposit, coupled with the ability to terminate and repossess the computer for failure to pay rent.

EXERCISE: As Sarah's lawyer, in your small group's Workflowy whiteboard, brainstorm and draft whatever provisions you think would be appropriate to address Sarah's financial concerns. Each student should do his- or her own writing, but feel free to consult your classmates.

3.5.7 In the news / SPP: SCA Promotions v. Yahoo!

SCA Promotions, Inc. v. Yahoo!, Inc., No. 15-11254 (5th Cir. Aug. 21, 2017):

  • Yahoo sponsors an NCAA perfect-bracket contest with a $1 billion prize [note how "billion" is spelled out] to any contestant who has a perfect bracket.
  • Yahoo contracts with SCA to pay the $1 billion if necessary and to obtain underwriting coverage for the fee (presumably from reinsurers).
  • Under the contract, Yahoo is to pay SCA a fee of $11 million.
  • The policy establishes target dates for Yahoo to cancel the contract, with stated penalty amounts:

Cancellation fees: Upon notice to SCA to be provided no later than fifteen (15) minutes to Tip-Off of the initial game, Yahoo may cancel the contract. In the event the contract is cancelled, Yahoo will be entitled to a refund of all amounts paid to SCA subject to the cancellation fees set forth in this paragraph. The parties hereto stipulate that the contract shall be signed on or before December 31, 2013. Should the signed contract be cancelled after that time and before January 15, 2014 a cancellation penalty of 25% of the fee will be paid to SCA. Should the signed contract be cancelled between January 16, 2014 and February 15, 2014, a cancellation penalty of 50% of the fee will be paid to SCA by Sponsor. Should the signed contract be cancelled after February 16, 2014, a cancellation penalty of 75% of the fee will be paid to SCA by Sponsor. [Slip op. at 3, emphasis added.]

And rewritten for easier reading:

[a] Cancellation fees: Upon notice to SCA to be provided no later than fifteen (15) minutes to Tip-Off of the initial game, Yahoo may cancel the contract.

[b] In the event the contract is cancelled, Yahoo will be entitled to a refund of all amounts paid to SCA subject to the cancellation fees set forth in this paragraph.

[c] The parties hereto stipulate that the contract shall be signed on or before December 31, 2013.

[d] Should the signed contract be cancelled after that time and before January 15, 2014 a cancellation penalty of 25% of the fee will be paid to SCA.

[e] Should the signed contract be cancelled between January 16, 2014 and February 15, 2014, a cancellation penalty of 50% of the fee will be paid to SCA by Sponsor.

[f] Should the signed contract be cancelled after February 16, 2014, a cancellation penalty of 75% of the fee will be paid to SCA by Sponsor.

  • Yahoo paid an initial $1.1 million deposit (10% of the agreed $11 million fee) on January 13, 2014.
  • On January 21, 2014, Quicken Loans Inc. reveals that it is sponsoring a similar $1 billion perfect bracket contest with Warren Buffett and Berkshire Hathaway.
  • Yahoo ditches its own contest — Yahoo and Quicken agree that Yahoo would become another co-sponsor of the Quicken contest.
  • On January 27, 2014, Yahoo cancels the SCA contract and demands repayment of the entire $1.1 million initial deposit, with no cancellation penalty.
  • SCA sues for $4.4 million, i.e., $5.5 million (50% of the $11 million fee per paragraph [e] above) less the $1.1 million deposit already paid.
  • Yahoo claims that "the fee" in paragraphs [d] through [f] refer to the $1.1 million deposit and not the $11 million fee.

The district court granted summary judgment for Yahoo and ordered a refund of $550,000 (half the $1.1 million deposit).

The Fifth Circuit reversed and rendered in favor of SCA.

EXERCISE: In your small group's Workflowy whiteboard, redraft paragraph [e] above to try to avoid the controversy in the last bullet point above about the meaning of "the fee."

QUESTION: Does paragraph [c] above make sense? What would be another way to approach the subject?

3.6 Class plan: Mon. Sept. 18

3.6.1 Reading for this week

In On Contract Drafting, read section 8.1 (indemnities).

In the Supplement, look through the Sheryl Sandberg employment agreement (starting at page 101), including the annotations.

Glance at this example of D.R.Y. (Don't Repeat Yourself) from Bryan Garner's Twitter feed

Read the background section of an exercise we'll do on Wednesday.

I encourage you to email me (dc@toedt.com) with any questions you might have about anything you found confusing or difficult in the reading.

3.6.2 In-class exercise: Reps and warranties strategy

FACTS: You've passed a bar (exam) and are a licensed attorney. As a favor to a friend, you're helping the friend sell a car to a stranger. The friend says that s/he doesn't know of any mechanical problems with the car.

MORE FACTS: The buyer asks the seller to represent and warrant that the car has no problems.

QUESTION: how might you respond?

A: Perhaps by having the seller say simply, "so far as I'm aware, the car has no significant problems, but I'm not a mechanic and haven't had a mechanic check it out."

QUESTION: T/F: It's acceptable for the seller to phrase the statement as, "to my personal knowledge the vehicle has no problems"? [Note where the question mark is, i.e., outside the quotation mark.]

A: That'd be a bad idea — phrased that way, the statement is likely to be taken as a definitive statement that indeed there are no problems.

EXERCISE: In the small-group Workflowy whiteboards, each student is to draft a provision to propose to the buyer.

3.6.3 In-class exercise: NFL idiots?

From a comment about Tom Brady: "NFL teams passed on Brady 198 times in the 2000 draft. … They didn’t overlook him because every NFL team is run by idiots. There was no readily available reason to want him. He was scrawny, he couldn’t throw much of a deep ball and he ran like a gawky teenager." (From Adam Kilgore at WashingtonPost.com; emphasis added.)

PART 1: Each student is to rewrite the italicized part to clarify it. Use your Workflowy group whiteboards and compare notes.

PART 2: Try clarifying by changing the punctuation between the italicized sentence and the immediately-following one (if you didn't do it that way the first time).

3.6.4 SPP: K-Mart store lease termination

tl;dr: Contract says Landlord's exclusive remedy for Tenant breach is to terminate the lease; Landlord sues for money damages anyway — and gets poured out. Davenport Chester, LLC v. Abrams Properties, Inc., No. 16-3228 (8th Cir. Sept. 5, 2017) (affirming summary judgment in favor of Tenant).

3.6.5 Grammar awkwardness: Safes

From this Web page about "safes," an increasingly-used legal instrument for early-stage investment: "At the company’s discretion, you will either receive $5,000 in cash or stock." (Emphasis added.)

QUESTION: What's wrong with this? (Hint: To get an idea, try breaking up the sentence by adding romanettes.)

EXERCISE: In your group's Workflowy whiteboard, each student is to draft a revised sentence.

3.6.6 Clarity exercise: Gerrymandering and the wrong choice of words

EXCERPT: From a Vox.com article: "… gerrymandering forces the losing party to "waste" votes by placing all its voters into a small number of districts where the party gets a landslide, rather than spreading those voters out so they can have more impact."

QUESTIONS: Is it the losing party that's "placing all of its voters into a small number of districts"? Or is it gerrymandering that does so?

3.6.7 In-class study groups: Indemnities

Concerning On Contract Drafting, section 8.1 (indemnities):

  • What if anything was unclear or confusing about the reading material?
  • What would you want a newbie lawyer to know?

We'll then work our way through (most of) the questions in section 8.1.

3.7 Class plan: Wed. Sept. 20

3.7.1 Homework review

Please exchange papers.

3.7.2 In-class study group: Indemnities (continued)

Concerning On Contract Drafting, section 8.1 (indemnities), we'll pick up where we left off.

3.8 Class plan: Mon. Sept. 25

3.8.1 Reading for this week

Be prepared to discuss the questions in:

  • § 3.8.2 (for discussion today)
  • [BROKEN LINK: StanfordTeslaWSOne][BROKEN LINK: StanfordTeslaWSOne] (for discussion Wednesday)

3.8.2 In-class exercise: Sheryl Sandberg employment agreement (1)

These questions relate to the Sheryl Sandberg employment agreement in the Supplement, starting at page 101.

For purposes of the following questions, assume that you represent Facebook in negotiating this agreement (unless stated otherwise below).

1. When might a drafter want to do an amended and restated agreement instead of just amending the agreement?

A: Two reasons come to mind:

  1. An amended and restated agreement is compact, with everything in one document instead of having an original document and then one or more separate amendment documents.
  2. SEC regulations required Facebook to publicly file Sandberg's employment agreement. If the parties had merely done an amendment document, then Facebook would have had to file both the amendment document and the original agreement that was being amended — and one or both parties might have wanted to keep the original agreement confidential.

2. What are some other ways of amending an agreement?

3. Sandberg's lawyer asks that you change all the instances of the second person ("you") to third person ("the Executive"). How do you advise Facebook about the pros and cons of her request?

A: Fine, but it's not something Sandberg's lawyer would likely have requested — it takes time; it creates the risk of overlooking a change; and it doesn't add a lot of value.

4. Lines 30-40: The letter goes into great detail about Sandberg's duties. Facebook's HR vice president wants to know if you can eliminate all that, because from the title "Chief Operating Officer" it should be obvious what Sandberg's duties will be. QUESTION: What do you advise the HR VP about the possible concerns here — for Sandberg and FB? (Hint: See lines 174-80 (vesting acceleration) and lines 273-75 (definition of Involuntary Termination — material adverse change in responsibilities).)

5. Lines 72-73 ("your Employment will not infringe the rights of any other person"): From a drafting-technique perspective, what's wrong with this provision?

A: Is this a representation by Sandberg? Or is it a commitment by Facebook?

6. Lines 74-78 (return of prior employers' confidential information): Facebooks' HR VP wants to know why this provision has Sandberg both representing and warranting these things. What do you say?

A: Because the beneficiary of a rep or warranty will always want to ask for both a rep and a warranty. (Whether the beneficiary will insist on both is another matter.)

7. Lines 81-82 (salary): The provision refers to Sandberg's salary as the "gross annual rate" of $300K per year (emphasis added). Sandberg's lawyer wants Facebook to change the provision to "an annual salary of $300,000 per year." What do you advise Facebook, and why?

A: Salary numbers should be expressed as an annual rate to be clear that, if the employee gets fired partway through the year, the employee is not entitled to be paid for the rest of the year. If Facebook were to make the change requested by Sandberg's lawyer, then that change would give Sandberg ammunition to argue the opposite, namely that she was entitled to be paid for the rest of the year.

8. Lines 83-84 (salary per company's standard payroll procedures): If Sandberg wanted to lock in her pay periods at, say, weekly, how would you advise Facebook to respond?

A: Facebook would probably respond that it did not want to have to separately manage the mechanics of paying Sandberg, which would be at least modestly burdensome to the company's payroll department.

3.8.3 Lesson learned from arbitration case (DCT commentary)

3.8.4 In-class drafting exercise: Preamble of Rick's Cabaret – redraft

Please redraft the "Whereas" clauses below (from an actual contract). First, some background about the transaction and the contract:

  • Wire Way LLC owned land and a building, in Dallas, that was home to an "adult entertainment club" (that is to say, a strip club) known as "Platinum Club II."
  • The club was apparently operated by another company, North by East Entertainment, Ltd.; it's not clear what relationship existed between North by East and Wire Way LLC, the owner of the land and building.
  • Rick's Cabaret wanted to buy out the club; under the agreement, it would do so with a semi-complicated transaction:
    • In a related transaction, North by East (the operator of the club) would sell the assets of the club business to RCI Entertainment (Northwest Highway) Inc. ("RCI Entertainment"), which was [and is] a subsidiary of Rick's Cabaret International ("Rick's") [now named RCI Hospitality Holdings Inc.];
    • In another related transaction, Wire Way LLC would lease the land and building to RCI Entertainment; and
    • In the agreement of interest now, Wire Way LLC would sell the land and building to RCI Holdings, Inc., which also was [and is] a subsidiary of Rick's.

ASSIGNMENT: Rewrite the "Whereas" provisions below as a "Background" section in plain English. Tell the story — not too informally, but not in a stilted, legalesey manner either.

WHEREAS, Seller is the owner of a certain real property consisting of approximately 4.637± acres of land, together with all rights, (excepting for mineral rights as set forth below), title and interests of Seller in and to any and all improvements and appurtenances exclusively belonging or pertaining thereto (the "Property") located at 10557 Wire Way, Dallas (the "City"), Dallas County, Texas, which Property is more particularly described on Exhibit A attached hereto and incorporated herein by reference; and

WHEREAS, contemporaneously with the execution of this Agreement, North by East Entertainment, Ltd., a Texas limited partnership ("North by East"), is entering into an agreement with RCI Entertainment (Northwest Highway), Inc., a Texas corporation ("RCI Entertainment"), a wholly owned subsidiary of Rick's Cabaret International, Inc., a Texas corporation ("Rick's") for the sale and purchase of the assets of the business more commonly known as "Platinum Club II" that operates from and at the Property ("Asset Purchase Agreement"); and

WHEREAS, subject to and simultaneously with the closing of the Asset Purchase Agreement, Seller will enter into a lease with RCI Entertainment, as Tenant, for the Property, dated to be effective as of the closing date, as defined in the Asset Purchase Agreement (the "Lease") attached hereto as Exhibit B and incorporated herein by reference; and

WHEREAS, subject to the closing of the Asset Purchase Agreement, the execution and acceptance by Seller of the Lease, and pursuant to the terms and provisions contained herein, Seller desires to sell and convey to Purchaser and Purchaser desires to purchase the Property.

NOW, THEREFORE, for and in consideration of the premises and mutual covenants and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

DCT REDRAFT:

1. BACKGROUND

1.1 The Property: Wire Way LLC ("Seller") owns the following:

(1) approximately 4.637± acres of land (without mineral rights) known as 10557 Wire Way, Dallas (the "City"), Dallas County, Texas; and

(2) certain improvements and other property on the land.

Together, items (1) and (2) above are referred to as the "Property," which is described more fully in Exhibit A, which is attached to this Agreement and is incorporated into it by reference.

1.2 Related transaction: Sale of business assets to RCI Entertainment:

(a) A business, known as "Platinum Club II," is operated at the Property by North by East Entertainment, Ltd., a Texas limited partnership ("North by East"). [DCT COMMENT: I'm not wild about the passive voice here but it seems to "flow" the best.]

(b) At substantially the same time as this Agreement is being signed, North by East is entering into an "Asset Purchase Agreement" with RCI Entertainment (Northwest Highway), Inc., a Texas corporation ("RCI Entertainment"), which is a wholly owned subsidiary of Rick's Cabaret International, Inc., a Texas corporation ("Rick's"), for the sale and purchase of the assets of that business.

1.3 Related transaction: Lease of the Property to RCI Entertainment: The parties anticipate that:

(i) subject to and simultaneously with the closing of the Asset Purchase Agreement, Seller, as Landlord, will enter into a "Lease Agreement" for the Property with RCI Entertainment as Tenant; and

(ii) the Lease Agreement will be in substantially the form attached to this Agreement as Exhibit B [NOT "incorporated herein by reference"] and will be dated to be effective as of the date of that closing.

1.4 This Agreement: Sale of the Property to RCI Holdings: Under this Agreement, Seller will sell the Property to RCI Holdings, Inc., a Texas corporation ("Purchaser," which is also a subsidary of Rick's), and Purchaser will buy the Property.

The parties agree as follows:

3.9 Class plan: Wed. Sept. 27

3.9.1 In-class clarity exercise: A family of persecutors

FACTS: This is adapted 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 their grandmother Jane Doe
In honor of all Christians,
Especially those persecuted
By the Doe family

EXERCISE: Discuss in your small groups how to fix this.
(Hint: How could this be fixed with just one additional character?)

3.9.2 Homework review

3.9.3 In-class exercise: Rewriting the Rick's Cabaret "Whereas" clauses

We'll pick up where we left off.

3.9.4 In-class exercise: Sandberg employment agreement (continued)

These questions relate to the Sheryl Sandberg employment agreement in the Supplement, which starts at page 101.

For purposes of the following questions, assume that you represent Facebook in negotiating this agreement (unless stated otherwise below).

  1. Lines 130-35 (no other rights upon termination): Sandberg's lawyer would like to delete this provision. What is your recommendation, and why?
  2. Lines 141-43 (general release): Facebook's HR VP wonders why you're drafting a form of general release to include as an exhibit — it seems like an unnecessary expenditure of legal fees when a release might never be necessary. How do you advise the HR VP?
  3. Lines 141-43 (general release): Is there any way you could recommend to the HR VP to defer having to draft a general release at this juncture?
  4. The FB HR VP wants to know why Sandberg's employment agreement specifies that she'll work out of Facebook's Menlo Park office. What do you tell her? (Hint: See lines 174-80 (vesting acceleration) and 261-62 (definition of Involuntary Termination) of the agreement.)
  5. Lines 294-98 (confidentiality agreement): The FB HR VP wonders why this provision doesn't incorporate the confidentiality agreement of Exhibit B by reference. How do you respond? (Hint: See lines 494-95.)
  6. Lines 100-01 (vacation time, etc.): This provision states that Sandberg will get vacation time and PTO "at the rate equal to other similarly situated executives." Sandberg's lawyer would like to lock in that she will get at least 20 business days per year. How do you advise the HR VP?
  7. Lines 110-16 (expense reimbursement): This provision requires Sandberg to provide supporting documentation for any requested expense reimbursements. Her lawyer says this would be too burdensome. How do you advise the HR VP?

3.9.5 (New:) In-class exercise: A sweeping indemnity provision

FACTS: You represent a supplier that wants to sell components to Lockheed Martin to use in C-130 transport aircraft. In Lockheed's standard purchase-order terms and conditions ("T&Cs"), you see the following (this is true):

  1. INDEMNITY

SELLER shall defend, indemnify, and hold harmless LOCKHEED MARTIN, its officers, directors, employees, consultants, agents, affiliates, successors, permitted assigns and customers from and against all losses, costs, claims, causes of action, damages, liabilities, and expenses, including attorney’s fees, all expenses of litigation and/or settlement, and court costs, arising from any act or omission of SELLER, its officers, employees, agents, suppliers, or subcontractors at any tier, in the performance of any of its obligations under this Contract.

Lockheed mistakenly orders the wrong components. Supplier timely fills the order. Lockheed's people correctly install the components into airplanes, not noticing that the components are the wrong ones. One of the planes crashes, allegedly because the components were the wrong ones; people are killed and their survivors sue Lockheed.

QUESTIONS

  1. Would Supplier's indemnity obligation apply?
  2. What factors might affect Supplier's overall legal expenses here?
  3. What are (at least) two ways that the above indemnity language might be revised to make the business risk more acceptable to Supplier?
  4. MORE FACTS: Supplier's business people decide that they're going to sign the contract even with the indemnity provision as originally written. QUESTION: What would you advise them to do?

3.9.6 (New:) In the news: Gates Foundation sues software development co. for fraud

DCT to talk about this lawsuit.

3.10 Class plan: Mon. Oct. 2

3.10.1 Reading for this week

In On Contract Drafting, read Chapter 13 (assignment of agreement).

Review again the Sandberg employment agreement and the Stanford-Tesla lease agreement in the Supplement, especially the annotations. We will continue working through them and examining some of the doctrinal background and drafting issues presented.

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. You don't need to read the full text.

3.10.2 Homework: Additional comments

  1. "Founder" isn't necessarily useful as a title.
  2. A corporation won't have "L.P." or "L.L.C." in its legal name.
  3. If Buyer's contract drafter is putting out a traditional draft, then (A) the draft contract will have Seller rep and warrant that the computer is in good condition, not merely that Seller doesn't know of any problems; and (B) the draft contract also won't propose limits on Seller's liability. ¶ On the other hand, if Buyer's contract drafter is trying to get to signature sooner, then the draft contract might have Seller-friendly provisions — but not too Seller-friendly.

3.10.3 In-class discussion / preview lecture

• From a client contract I recently helped to negotiate (sanitized): "Within thirty (60) days of the close of previous quarter term, ABC shall provide XYZ with a revenue report that provides a total amount of Data Revenue and Software Revenue obtained by ABC during the referenced quarter term, minus any associated costs or expenses and customer returns or refunds ('Revenue Report')." QUESTION: Any drafting problem with this? (This should be really obvious.)

• From the same client contract: "Subject to the terms and conditions of this Agreement, ABC shall pay, on a quarterly basis, to XYZ twenty percent (20%) of Data Revenue (net of all associated costs and expenses) for Licensed Transactions for the Term of this Agreement …." QUESTION: Should XYZ have any business concerns about the "net of all associated costs and expenses" term? (Hint: Ever heard of "Hollywood accounting"?)

• From the same client contract: "XYZ represents and warrants that XYZ's software and its use will not infringe any patent, copyright, or trade secret of any third party." QUESTION: Which of "patent, copyright, or trade secret" might XYZ want to represent and not warrant? (Students with no IP background probably can't answer this one; it requires some basic substantive knowledge but is still a useful exercise.)

3.10.4 In-class exercise: A Somewhat-Barebones Contract (part 3)

This exercise relates (again) to "A Somewhat-Barebones Contract" in the Supplement (at page 1). The question numbering below continues the previous sequence.

26. Section 5: If Seller fails to remove the Grateful Dead decals: Would Seller be in breach? Would Buyer be able to walk away?

A: Seller has no obligation to remove the Grateful Dead decals, and thus won't be in breach of contract if the decals aren't removed. BUT: Buyer can walk away from the deal if the decals are left on the computer.

27. Section 6: (i) Why use the phrase, “so far as he knows, without any particular investigation”? (ii) Why not simply say "to Seller's knowledge"? [Note how in this paragraph the question marks are outside the quotation marks because the question marks aren't part of the text that's being quoted.]

A: "To Seller's knowledge" is ambiguous: It could mean:

  • Seller knows for a fact; or
  • Seller doesn't have any knowledge one way or another.

Under contra proferentem, if Seller drafted the agreement (which will usually be the case for a small transaction like this), other things being equal, the ambiguity would be construed against Seller.

28. Section 7: What options does Buyer have if Seller doesn’t allow Buyer to inspect the Computer before Closing?

A: Buyer can walk away from the deal, without being in breach of contract.

29. Section 7: Why use the term “commercially reasonable” in this section?

A: To "kick the can down the road" in lieu of drafting a more-specific standard of performance. (Note how "more-specific" is hyphenated.)

30. Section 8.1: Why not use active voice here?

A: Because we care more about whether the action gets done (Seller gets paid) than about who, exactly, is performing the action.

(In some circumstances, though, we might care greatly about just who is performing the action.)

31. Section 8.1: This provision uses “must be paid” for emphasis — what are some other possibilities for phrasing this term?

A: "Is to be paid" could work.

32. Section 8.1: Any dangers in payment by cashier’s check? What are some possible alternative forms of payment?

A: A cashier's check could be counterfeit, in which case the bank would have no obligation to honor the check.

33. Section 9: This section uses the term "notarized." Does that likely refer to an acknowledgement, or to a jurat?

A: An acknowledgement.

34. Signature blocks: Is there any danger in having the signature blocks on a separate page for easier signing and FAXing of just the signature pages instead of the whole agreement?

A:

  1. The other side might add text to the bottom of the page just before the signature page. QUESTION: How could this concern be addressed?
  2. A question might arise as to whether the individual who signed the signature page was using the signature page from (let's say Draft #10 of the contract or Draft #11. QUESTION: How could this concern be addressed?

35. Signature blocks: Why does the date line say "Date signed" instead of just "Date"?

A: To make it clear when the contract is actually being signed — this is important in transactions involving public companies, which must report their earnings quarterly, because the date of actual signature is important for determining when earnings (or expenses) are permitted to be "recognized" under generally-accepted accounting principles. See generally the discussion of the dangers of backdating for deceptive purposes in [BROKEN LINK: CABackdating][BROKEN LINK: CABackdating] of On Contract Drafting.

3.11 Class plan: Wed. Oct. 4

3.11.1 New small-group assignments

4:00 p.m. section:

Binford Niedzwiedz Kepadia Santa
Fisher Caberto Sullivan  
Jin Herrera Dryden  
Montes Kellam Hively  

7:30 p.m. section:

Clawson Thal Oliver  
Li del Villar Waterwall  
McKnight Mathews Harrall Pucillo
Pohl Nguyen McCormick Garay

3.11.2 Quiz today (30 points)

The second first in-class online quiz is today. You're responsible for all flashcard questions whose general subjects we've covered so far in:

  • the reading material — both the "read" portions and the "look through" portions; and
  • the in-class exercises and discussions in this syllabus.

3.11.3 Quiz review

3.11.4 Homework review

[DCT COMMENT: Here's what I'd do:]

4.3 Extension Option.

(a) This section applies if Landlord determines — in its sole discretion: [DCT COMMENT: Discuss "sole discretion"; also discuss using "This section applies …."]

       (1) that Landlord does not intend (i) to redevelop the Premises, nor (ii) to use it for Landlord’s own purposes after the Termination Date; and

       (2) the Premises will therefore be available for lease. [DCT QUESTION: Does (2) necessarily follow from (1)?]

(b) Landlord will provide give Tenant with written notice of its determination under subdivision (a); the notice is to set forth the period of time that Landlord has determined the Premises will remain available for lease by Tenant (the “Extension Period”).

(c)  Tenant may extend the Term for the Extension Period by delivering written notice to Landlord within 30 days after receipt of Landlord’s notice. Tenant's right to extend is referred to as the "Extension Option"; Tenant's period for extending the Term is referred to as the "Extension Option Period."

(d) [NEW:] IF: Landlord does not give Tenant the notice under subdivision (b) by [DATE]; THEN:

       (1) Tenant may, in its sole discretion, send Landlord a reminder notice, quoting this section; and

       (2) IF: Landlord does not notify Tenant, on or before X days after receipt of Tenant's reminder notice, that the Extension Option will not made be available; THEN: The Extension Option Period will begin automatically as of the end of that X-day period.

(e) The Extension Option (if any) will be void if an Event of Default by Tenant exists, either (i) at the time of exercise or (ii) when the Extension Term wouild otherwise begin.

(f) The terms of this Lease [sic; Lease Agreement] during the Extension Period shall be the same terms and conditions as during the original Term, except that the Base Rent applicable to during the Extension Period shall be equal to will be the Prevailing Market Rent as of the commencement start of the Extension Period, as determined pursuant to under Exhibit D.

(g) The Extension Option is personal to Tenant and shall will be inapplicable and null and void:—

       (1) if Tenant assigns its interest under this Lease, or

       (2) if either party exercises its termination right under Section 4.4. #+ENDQUOTE

(h) The Extension Option, if not previously exercised, will expire as of the Termination Date. [DCT: Good use of a sunset provision — normally everything should have a sunset.]

3.11.5 In-class exercises

3.12 Class plan: Mon. Oct. 9

3.12.1 Reading for this week

Standards: Reasonable efforts, etc.: Read Chapter 9. Think about what might constitute "unreasonable" withholding of consent (e.g., consent to assignment) and how a drafter, representing a party that might seek consent, might try to negotiate a workable arrangement.

Services: Read Common Draft §§ 14.1 through 14.4.4; look through §§ 14.4.5 through 14.4.11 as well as §§ 14.8 and 14.9.

[Already done:] Assignment of agreement: Read chapter 13.

Be sure to read the in-class exercises for today.

3.12.2 Additional comments on Homework 6

  1. "Material breach" might not be helpful — try to have a Plan B (in case the other side flakes out) that doesn't require going to court, e.g., automatic extension.
  2. Plan B should try to minimize costs for all concerned — "Landlord will pay Tenant's additional costs of moving" would get pushback.
  3. Tesla would want the opportunity to talk to LL before LL makes a decision, not after.
  4. Instead of saying that LL will give notice "within 60 days of the Termination Date," you want to say "no later than 60 days before the Termination Date"
  5. Some students left "Option will be void if there's a default" as the second sentence of a paragraph that talked about the option itself. It'd be better to have the former as its own paragraph for easier spotting by reviewers.

3.12.3 In-class exercise: Assignment of port operating agreement

FACTS:

(A) You represent Port Operations, Inc., which operates the Port of Bayou City under a contract with Harris County.

(B) The contract states that the contract may not be assigned without the County's prior written consent.

(C) Port Operations receives a buy-out offer from a Saudi shipping magnate who wants to do a "roll-up" of port-operating companies throughout the world.

(D) The County demands a $10 million fee in return for its consent to assignment of the contract.

QUESTION 1. If the contract didn't have an assignment-consent requirement, would the County's consent be required?

A: That might be a litigatable question — the County might take the position that the contracted-for services were sufficiently unique that consent was required for any assignment by Port Operations.

Also, a given state might have a statute like that of New York, which prohibits contracts with state agencies from being assigned.

QUESTION 2. How much does it matter whether the "roll-up" would take the form of (i) an asset purchase, or (ii) a merger?

A: That might depend on the applicable state law — in many jurisdictions, a merger is deemed to cause a transfer of assets to the surviving company, which would trigger the consent requirement.

QUESTION 3. Name at least two ways in which, during the contract negotiation with the County, Port Operations could have protected its ability to agree to the Saudi buy-out.

A: In negotiating the contract, Port Operations might have asked:

  1. for the assignment-consent provision to be deleted;
  2. for an exception in the case of an all-asset transfer;
  3. for a requirement that the County's consent not be unreasonably withheld, together with a fast-track arbitration provision.

QUESTION 4. In your Workflowy whiteboards, draft a provision that would protect Port Operations's ability to agree to the Saudi buy-out.

3.12.4 In-class exercise: Defense against indemnified claims

(Much of this should seem quite familiar.)

3.12.4.1 Facts

(A) Alice's contract with Bob obligates her to reimburse Bob for his attorney fees and expenses in defending against certain third-party claims.

(B) A third party, Carol, brings such a claim against Bob — who hires Skadden Arps (a top NYC firm) to defend him against Carol's claim.

(C) Alice has plenty of money to pay legal bills.

3.12.4.2 Questions

Work in your small groups to answer these questions, but each student is to handwrite answers on his or her own piece of paper. (We'll exchange papers among groups.)

1. Handwrite a list of what incentives might motivate Skadden to do things, or not do things, when it conducts Bob's defense.

2. Handwrite a list of two ways that Alice, during negotiation of her contract with Bob, could have limited her financial exposure to Bob's cost of defending against Carol's claim.

3.12.4.3 More facts

(D) Alice's contract with Bob also requires her to indemnify Bob against any monetary awards resulting from such third-party claims.

(E) Bob neglects to mention to either Alice or Skadden that Carol had filed her third-party claim weeks before, and that when Bob failed to file a timely answer, Carol moved for and obtained a default judgment for a large amount of money.

3.12.4.4 Another question

Handwrite a list of two ways that Alice, during negotiation of her contract with Bob, could have limited her exposure to Bob's screw-up.

3.12.4.5 Alternate facts

(F) Alice's contract with Bob requires her to provide Bob with a defense, as opposed to reimbursing Bob for his defense expenses.

(G) Alice engages her regular lawyer, Andy, to conduct Bob's defense against Carol's claim.

(H) Bob finds that he and Andy don't get along so well.

3.12.4.6 Question

During negotiation of the contract, what sort of clause could Bob have asked to be included in the contract to protect him against this uncomfortable situation?

3.12.4.7 More alternative facts

(I) It turns out that Alice can't afford to pay Bob's legal bills for defending against Carol's claim.

3.12.4.8 Another question

What if anything might Bob have done during contract negotiation to mitigate this problem?

3.12.5 In-class ambiguity exercise: Olivia Pope

TEXT: "Wait for me to do what I do best." (Spoken by Kerry Washington as Olivia Pope in an episode of Scandal aired April 7, 2016.)

QUESTION: What are the two possible meanings of this sentence?

EXERCISE: Rewrite the line of dialogue to be clear which version you think Olivia meant — and try to make it sound "natural" and not lawyer-like.

3.12.6 Writing exercise: Verizon-Yahoo warranty of authority

Working individually in your group Workflowy page, rewrite section 2.02(b) of the Verizon-Yahoo acquisition agreement, reproduced below, to make that section more readable. Shorter sentences and multiple paragraphs!

Seller has all necessary corporate power and authority to enter into, execute, deliver and, subject to obtaining the Seller Stockholder Approval, perform its obligations under this Agreement, the Reorganization Agreement and the License Agreement. The execution, delivery and, subject to obtaining the Seller Stockholder Approval, performance of this Agreement, the Reorganization Agreement and the License Agreement by Seller have been duly authorized by all requisite action on the part of Seller. This Agreement has been duly executed and delivered by Seller and, assuming due authorization, execution and delivery of this Agreement by Purchaser, this Agreement is a legal, valid and binding obligation of Seller, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, general equity principles, other similar Laws of general application affecting enforcement of creditors’ rights generally and rules of Law governing specific performance, injunctive relief and other equitable remedies (the “Enforceability Limitations”). The Reorganization Agreement and the License Agreement have been duly executed and delivered by Seller and are legal, valid and binding obligations of Seller, enforceable against it in accordance with their terms, except as such enforceability may be limited by the Enforceability Limitations.

3.12.7 In-class ambiguity exercise: The gift to the married couple

TEXT: I will give you and your husband $1 million.

QUESTION: How much total will the married couple get — $1 million, or $2 million?

EXERCISE: Handwrite a revision to clarify.

3.12.8 In-class ambiguity exercise: The electric chair

TEXT: The judge sentenced the killer to die in the electric chair for the second time.

EXERCISE: Handwrite a revision to clarify.

  1. Takeaways review: Assignments of the Agreement (first: diagram differences between assignment and subcontract)

3.12.9 Lecture: Lessons from 2017 Academy Awards "Best Picture"

  1. R.O.O.F.: "Simply put the name of the category in large letters on each envelope: Best Movie, Best Actress, Best Cinematography, etc." (WSJ.com commenter Felix Kapron)
  2. You get what you inspect, not what you expect; having someone else second-check things — even tiny details — can pay off.
  3. Warren Beatty could have put the brakes on, if he hadn't been a deer in the headlights.
  4. It took two full minutes for the CPAs and telecast producers to step in to fix the problem. (Did they train for that problem?)
  5. Note the energetic, classy response by La La Land's executive producer Jordan Horowitz: Acknowledge, accept, enjoy, act.

3.13 Class plan: Wed. Oct. 11

3.13.1 Question: Slack?

For next semester's classes, I'm considering setting up a "team" on Slack.com, with "channels" for groups, assignments, etc. How do you think that would work?

3.13.2 Homework review

Exchange and mark up each other's papers.

DCT's version: (Hidden)

Some questions to consider asking:

  1. Consider 5W+H$: Who; What; When; Where; Why; How; and $
  2. Who chooses the tester? Any constraints on that choice? What if any input will the non-choosing party have?
  3. What limitations on the kinds of testing?
  4. What report(s) will be generated about the testing?
  5. Any limitations on the content of the report(s)?
  6. Who will get the report(s)?
  7. What time limitations for the testing: Start time? Duration? End time?
  8. Where is the testing to take place?
  9. Physically, how will the computer get to the tester? How will it get back to Seller afterwards?
  10. Who pays for the testing — how, and when?

At least X days before the Closing, Seller will take the Computer to a reputable independent computer service facility (the "Test Facility").

Seller will allow the Test Facility to perform commercially-reasonable testing on the Computer to determine whether the Computer has any defects. [Any limitations on the kind of testing? Must Seller leave the Computer there? If so, for how long?]

The Test Facility may report its findings to Buyer. [Any limitations on just what information the Test Facility's report can include?]

Buyer may designate the Test Facility in consultation with Seller. [Any limitations on the Test Facility: Location? Size? Qualifications?]

Seller need not take the Computer to any Test Facility to which Seller reasonably objects in writing within two business days after receiving Buyer's designation in writing.

3.13.3 Services Q&A

  1. What kind of review — if any — should an attorney do of a Statement of Work? Explain.
  2. What are some pros and cons of having each Statement of Work be a separate agreement?
  3. Which should take precedence: A master agreement, or a Statement of Work entered into under the master agreement?
  4. From a "what makes good business sense" perspective: Who should own any new intellectual property developed by a service provider pursuant to a Statement of Work? Explain.

3.13.4 Rewriting exercise: Yahoo-Verizon financing commitment

Copy and paste the following into a Word document and simplify it to make it more readable (see the suggested steps below); feel free to work collaboratively.

4.13 Financing Cooperation. (a) Prior to the Closing, Seller shall provide, shall cause the Business Subsidiaries to provide, and shall use commercially reasonable efforts to cause its and their respective Representatives to provide such cooperation as is reasonably required and customary in connection with the arrangement of the Financing. Notwithstanding anything in this Agreement to the contrary, (A) none of Seller (at any time) or any of the Business Subsidiaries (prior to the Closing) shall be required to pay any commitment or other similar fee, incur or reimburse any costs or expenses (other than those fees, costs and expenses promptly reimbursed by Purchaser) or incur any other liability or obligation of any kind in connection with the Financing, (B) none of Seller (at any time) or any of the Business Subsidiaries (prior to the Closing) shall be required to execute, enter into or perform any binding agreement or commitment, or adopt any resolution or otherwise take any corporate or similar action or deliver any certificate, in connection with the Financing (other than delivery of customary authorization letters with respect to the Seller and customary representation letters with respect to the Business Subsidiaries, in each case, in connection with any Financing consisting of a syndicated credit facility), (C) nothing shall obligate Seller or any Business Subsidiary to provide, or cause to be provided, any legal opinion or to provide, or cause to be provided, any information or take, or cause to be taken, any action to the extent doing so could reasonably be expected to result in (x) a violation of applicable Law or Seller’s or any Business Subsidiary’s organizational documents or any Contract binding on Seller or any of its Subsidiaries or any confidentiality obligations binding on Seller or any of its Subsidiaries or (y) the loss of any attorney-client privilege and (D) nothing shall obligate Seller or any Business Subsidiary to provide carve-out financial statements or other carve-out financial information, in each case whether audited or unaudited, in respect of the Business or the Business Subsidiaries. The cooperation of Seller and the Business Subsidiaries shall not unreasonably interfere with ongoing operations of Seller or any of its Subsidiaries or otherwise materially impair the ability of any Representative of Seller or any of the Business Subsidiaries to carry out its duties to Seller or any of its Subsidiaries. Purchaser shall promptly, upon request by Seller, reimburse Seller for all reasonable out-of-pocket costs incurred by Seller or any of the Business Subsidiaries in connection with the cooperation of Seller, the Business Subsidiaries and their respective Representatives contemplated by this Section 4.13 and shall indemnify and hold harmless Seller, the Business Subsidiaries and their respective Representatives from and against any and all losses, damages, claims, costs or expenses suffered or incurred by any of them in connection with (i) the Financing, (ii) any information used in connection with the Financing (except with respect to written information provided by Seller or any of the Business Subsidiaries specifically for inclusion in offering materials relating to the Financing), and (iii) any action taken by any of them at the request of Purchaser pursuant to this Section 4.13, except, in the case of clauses (i) and (iii), to the extent such losses, damages, claims, costs or expenses arose from the gross negligence or willful misconduct of Seller or any of the Business Subsidiaries, as determined in a final, non-appealable judgment of a court of competent jurisdiction.

Suggested steps:

  1. First, break up the paragraph into single-sentence paragraphs.
  2. Then, break up multi-part sentences into multiple sentences, as though you were explaining things orally to an audience.
  3. One possibility: If a sentence includes a long laundry list of things — e.g., "losses, damages, claims, costs, or expenses" — consider (a) "spinning off" the laundry list into a separate paragraph as the definition of a defined term; then (b) in the "main" sentence, using the defined term in lieu of the laundry list.

DCT version: (Hidden)

4.13 Financing Cooperation.

(a) For purposes of this section:

(1) Seller and the Business Subsidiaries are referred to collectively as the "Seller Group."

(2) "Loss" refers to any loss, damage, claim, cost, or expense.


(b) Before the Closing, Seller is do the following:

(1) cooperate as is reasonably required and customary in connection with the arrangement of the Financing ("Cooperate in the Financing");

(2) cause the Business Subsidiaries to Cooperate in the Financing; and

(3) use commercially reasonable efforts to cause the respective Representatives of Seller and the Business Subsidiaries to Cooperate in the Financing.


(c) The remainder of this section:

(1) applies solely in connection with the Financing;

(2) applies to Seller at all times;

(3) applies to the Business Subsidiaries solely before the Closing; and

(4) takes precedence over any contrary or inconsistent provision in this Agreement.


(d) Except as otherwise provided below, no member of the Seller Group need do any of the following:

(1) pay any commitment or other similar fee, nor

(2) incur or reimburse any costs or expenses (other than those fees, costs and expenses promptly reimbursed by Purchaser); nor

(3) incur any other liability or obligation of any kind;

(4) enter into or perform any binding agreement or commitment;

(5) adopt any resolution or otherwise take any corporate or similar action;

(6) deliver any certificate , in connection with the Financing

(7) provide, or cause to be provided, any legal opinion;

(8) provide, or cause to be provided, any information;

(9) take, or cause to be taken, any action to the extent doing so could reasonably be expected to result in:

(A) violating applicable Law;

(B) contravening Seller’s or any Business Subsidiary’s organizational documents;

(C) breaching any Contract binding on Seller or any of its Subsidiaries;

(D) violating any confidentiality obligation binding on Seller or any of its Subsidiaries; or

(E) the loss of any attorney-client privilege.


(e) Nothing in this Agreement requires any member of the Seller Group to provide carve-out financial statements or other carve-out financial information, in each case whether audited or unaudited, in respect of the Business or the Business Subsidiaries.


(f) No member of the Seller Group need Cooperate in the Financing to the extent that such cooperation would:

(1) unreasonably interfere with ongoing operations of Seller or any of its Subsidiaries; or

(2) otherwise materially impair the ability of any Representative of Seller or any of the Business Subsidiaries to carry out its duties to Seller or any of its Subsidiaries.


(g) Upon written request by Seller, Purchaser will promptly reimburse Seller for all reasonable out-of-pocket costs incurred by Seller or any of the Business Subsidiaries in connection with Cooperating in the Financing.


(h) Except as provided below, upon written request by Seller, Purchaser will indemnify and hold harmless each member of the Seller Group and that member's Representatives from and against any and all Losses suffered or incurred by any of them in connection with:

(1) the Financing;

(2) any information used in connection with the Financing (except with respect to written information provided by Seller or any of the Business Subsidiaries specifically for inclusion in offering materials relating to the Financing); and

(3) any action taken by any of them at the request of Purchaser pursuant to this Section 4.13.


(i) ["eye"] Exception: Purchaser's obligation under subdivision (h) does not apply to the extent that a Loss arises from the gross negligence or willful misconduct of Seller or any of the Business Subsidiaries, as determined in a final judgment of a court of competent jurisdiction from which no further appeal is taken or possible.


(j) Exception: If any portion of the Financing consisting of a syndicated credit facility, then, upon request by Purchaser, each member of the Seller Group will deliver any customary authorization letters (with respect to the Seller) and/or customary representation letters (with respect to the Business Subsidiaries) for that portion of the Financing.

3.13.5 In-class ambiguity exercise: The bid deadline

TEXT: Bids may be submitted until March 1.

FACTS: A bidder submits a bid at 4:59 p.m. on March 1. QUESTION: Is the bid timely?

3.13.6 In-class ambiguity exercise: The midnight hour

TEXT: "Tenant will vacate the Premises no later than 12 midnight on December 15, 2020; Tenant's failure to do so will be a material breach of this Agreement."

FACTS: At 10:00 a.m. on December 15, Tenant is still occupying the Premises.

QUESTION: Is Tenant in material breach?

EXERCISE: On a piece of paper, handwrite how could this provision could be clarified.

3.13.7 In-class ambiguity exercise: Ambiguity and early retirement

TEXT: From this headline: "Houston Technology Center CEO To Retire Early Next Year" (He retired Feb. 1, 2017 after serving for ten years.)

QUESTION: Was the CEO to retire, and the retirement was to take place early in 2017? Or was he to retire in 2017, but his retirement was to be earlier than had been expected?

EXERCISE: On a piece of paper, handwrite how could this provision could be clarified.

3.14 Class plan: Mon. Oct. 16

3.14.1 Reading for the week of Mon. Oct. 16

Conspicuousness: Read section 14.22.

Discretion: Read section 14.27.

Termination of agreement: Read:

And look through:

Walkaway rights (i.e., conditions to closing): Read Section 5.02(a) of the Verizon-Yahoo stock purchase agreement (conditions to Purchaser's obligation to close). We will use that as a vehicle for discussing some typical issues that can come up in M&A work.

Be sure to read the in-class exercises for today.

3.14.2 Quickie in-class editing exercise: The Atlantic quote

See the italicized sentence in this piece in The Atlantic:

The first sign that this new system had some kinks came with “Upworthy-style” headlines. (And you’ll never guess what happened next!) Things didn’t just go kind of viral, they went ViralNova, a site which, like Upworthy itself, Facebook eventually smacked down. Many of the new sites had, like Upworthy, which was cofounded by Pariser, a progressive bent.

(Emphasis added.) QUESTION: How could the last, italicized sentence be rewritten so that it "flows" better and thus is more readable?

3.14.3 In the news: Harvey Weinstein's employment agreement

According to TMZ.com, Weinstein's employment agreement supposedly:

  • requires Weinstein to reimburse the company for any settlements that the company pays to settle cases arising from Weinstein's violation of the company's code of conduct;
  • requires Weinstein to pay the company liquidated damages — in escalating amounts — for repeat offenses;
  • sets out specific "cause" for which the board of directors can fire Weinstein;
  • requires mediation, then arbitration, before the board can fire Weinstein.

According to Inc.com, this is the reverse of the usual "morals clause."

QUESTION: How would this have been handled under Sheryl Sandberg's employment agreement? See line 118 et seq. and lines 212-55. For discussion:

  • At-will employment
  • Different consequences of being fired "for Cause" as opposed to not for cause
  • Liquidated damages in Weinstein employment agreement

3.14.4 In the news: Kobe Steel quality problems

I added this article to my SPP file; it's apropos of "you get what you INspect, not what you EXpect": https://www.nytimes.com/2017/10/10/business/kobe-steel-japan.html

… Kobe Steel has acknowledged falsifying data about the quality of aluminum and copper it sold, setting off a scandal that is reverberating through the global supply chain and casting a new shadow over the country’s reputation for precision manufacturing.

The fallout has the potential to spread to hundreds of companies. Big multinationals, including automakers like Toyota Motor, General Motors and Ford, as well as aircraft manufacturers like Boeing and Mitsubishi Heavy Industries, are investigating.

Toshiaki Oguchi, director of Governance for Owners Japan, a corporate watchdog, said that Japanese companies were generally diligent about quality, but that when cheating occurred — because of competitive pressure or other factors — it could too easily go unchecked. Japanese companies, he said, tend to discourage thorough examination or criticism, either from employees or from independent outsiders.

Kobe Steel said on Sunday that employees at four of its factories had altered inspection certificates on aluminum and copper products from September 2016 to August this year. The changes, it said, made it look as if the products met manufacturing specifications required by custom­ers — including for vital qualities like tensile strength, a measure of material’s ability to withstand a load without breaking when being stretched — when they did not.

(Emphasis added.)

To be sure, contract drafters normally can't do that much to change corporate cultures. But building "nudges" into agreements can sometimes be useful; see generally the book Nudge, by Nobel economics laureate Richard Thaler and Harvard law professor Cass Sunstein.

3.14.5 In-class discussion: Verizon-Yahoo reps and warranties

See the Verizon-Yahoo stock purchase agreement.

SMH: Take a look at the original formatting of the Verizon-Yahoo's definition of Business Material Adverse Effect (the link takes you to the definitions section, which includes a link to the definition).

Then compare that formatting with that of the broken-up definition in the course materials (also scroll down again).

QUESTION 1: What representation and/or warranty might Yahoo have breached in connection with the "hacks" that were revealed to have occurred?

A: See, e.g., § 2.08, No Undisclosed Liabilities; § 2.09, Disclosure Controls and Procedures; §2.10, Litigation.

QUESTION 2: What right would Verizon have had to walk away from the transaction?

A: See § 5.02, Conditions to the Obligations of Purchaser, especially subdivision (c) (officer's certificate).

QUESTION 3: Suppose that Verizon went ahead with the closing despite the hack problem. Could Verizon sue for breach of warranty, as happened in CBS v. Ziff-Davis?

A: No, for two reasons, one legal, one practical:

1. Section 8.01 states that reps and warranties won't survive the closing; and

2. With as many stockholders as Yahoo has, it would be impracticable to try to sue them for rescission or damages.

FACTS: Suppose that the North Koreans were to launch a nuclear missile at the U.S., with the warhead exploding harmlessly in the Pacific Ocean 100 miles west of Yahoo's headquarters in Sunnyvale, California.

QUESTION 5: Would this constitute a Business Material Adverse Effect?

A: For discussion – be sure to read the last few paragraphs of the definition.

QUESTION 6: Whose knowledge qualifies as the Knowledge of Seller?

A: For discussion.

3.14.6 In-class rewriting exercise: Yahoo-Verizon defense provision

Rewrite the following in a Word document:

  • One major concept per paragraph
  • Break up sentences into paragraphs if necessary
  • Omit needless words (but be sure they're really needless).
  • Consider spinning off exceptions, "applicability" conditions into their own paragraphs

4.14 Transaction Litigation. Seller shall control the defense of any Action brought by stockholders of Seller against Seller and/or its directors relating to the Transactions; provided, however, that Seller (i) shall promptly provide Purchaser with copies of all proceedings and correspondence relating to such Action, (ii) shall give Purchaser the opportunity to consult with Seller regarding the defense or settlement of any such Action and (iii) shall not compromise, settle, come to an arrangement regarding or agree to compromise, settle or come to an arrangement regarding any Action arising or resulting from the Transactions (other than any settlement that would not affect Purchaser or the Business in any material respect following the Closing, including any settlement solely for monetary damages to be paid by Seller or entirely from proceeds of Seller’s insurance, except for any applicable deductible which shall be paid by Seller) without the prior written consent of Purchaser (which consent shall not be unreasonably withheld, conditioned or delayed).

3.15 Class plan: Wed. Oct. 18

3.15.1 Homework review

3.15.1.1 IF: …; THEN: ….

For complicated prerequisites, I like to use IF: …; THEN: …. EXAMPLE:

IF: Landlord determines, in its sole discretion, that after the Termination Date Landlord does not intend (i) to redevelop the Premises, nor (ii) to use the Premises for Landlord's own purposes; THEN: Landlord will give Tenant written notice of its determination ….

Note that:

  • the IF: and THEN: are each:
    • in all-caps, and
    • followed by a colon; and
  • the end of the IF: clause is followed by a semicolon just before the THEN: clause.

CONSIDER, THOUGH:

(a) This section applies if Landlord determines, in its sole discretion, that after the Termination Date Landlord does not intend (i) to redevelop the Premises, nor (ii) to use the Premises for Landlord's own purposes.

(b) In the situation described in subdivision (a), Landlord will give Tenant written notice of its determination ….

3.15.1.2 Include advance concessions (and label them as such)?

If you want to get to signature sooner, consider voluntarily adding things that you know the other side will ask for — AND maybe put in a comment to the effect that you're making this as an advance concession to speed things up.

EXAMPLE: In HW 7, Buyer's lawyer could state that the inspection of the computer will be done by an outside professional, instead of leaving it open that maybe Buyer himself could do it.

3.15.2

3.15.3 Quick in-class exercise: Merle Haggard's wives

3.15.4 Quick in-class exercise: Contract reviewer etiquette

3.15.5 Quick in-class exercise: Carbolic acid and Queen Victoria

From this NPR piece:

[Joseph] Lister was the closest surgeon to [Queen Victoria's] residence in Scotland, Fitzharris says, so she directed Lister to come drain a large abscess growing under her armpit. Before the surgery, Lister's assistant sprayed carbolic acid with a machine Lister invented called the donkey engine all over the operation area, sterilizing it but also accidentally spraying the queen in the face.

QUESTION: How could the italicized text be rewritten to "flow" better? (Hint: Consider rewriting it so that it would sound more-natural if read aloud — which isn't bad advice for any writing.)

3.15.6 In-class rewriting exercise: A termination provision

From this license agreement:

12. TERMINATION

If the royalties due hereunder have not been paid within the time allowed by this Licence Agreement or if either party shall breach of any of the representations, warranties, covenants, promises or undertakings herein contained and on its part to be performed or observed and shall not have remedied such breach within thirty (30) days after notice is given to the breaching party by the non-breaching party requiring such remedy or if either party shall have an Examiner appointed over the whole or any part of its assets or an order is made or a resolution passed for winding up of such party unless such order is part of a scheme for reconstruction or amalgamation of such party then the other party may forthwith terminate this Licence Agreement without being required to give any or any further notice in advance of such termination but such termination shall be without prejudice to the remedy of such party to sue for and recover any royalties then due and to pursue any remedy in respect of any previous breach of any of the covenants or agreements contained in this Licence Agreement.

3.16 Class plan: Mon. Oct. 23

3.16.1 Reading for this week

[New:] Writing, Briefly, by Paul Graham, noted essayist and multi-millionnaire co-founder of famed tech startup accelerator Y Combinator in Silicon Valley. This short essay breaks several rules but is worth close study.

Amendments / waivers must be in writing: Read Common Draft § 24.1.1 (amendments) and § 24.17 (waivers). What do you think is the most-important takeaway? What if anything can a drafter do about it?

Amendments by one party: Read Common Draft § 24.16 (unilateral amendments).

Entire agreement: Read Common Draft § 24.1.4 (entire agreement) and § 24.13 (reliance disclaimer).

Forum selection: Read Common Draft § 24.1.5.

Governing law: Read Common Draft § 24.1.6.

Independent contractors: Look over Common Draft § 24.1.6: What do you think is the most-important takeaway?

Be sure to read the in-class exercises for today.

3.16.2 Homework review

  1. In Blackboard, please review my comments on your homework nos. 8 and 9. Make notes of any comments I made that you think other students should know about, even if you think they’re embarrassing. Err on the side of inclusion: What you think is a "nothing" comment might be enlightening to someone else.
  2. The students in each group are to compare notes and create a consolidated group Workflowy list of noteworthy comments. (Feel free to get started early if you want.)
  3. We’ll review and, as appropriate, discuss each group’s Workflowy list of noteworthy comments.

3.16.3 Reading review

We'll address the questions set forth above.

3.16.4 Most-favored-customer

3.16.5 Drafting fail: How much did Grandpa leave in his will?

A student from fall 2017 forwarded a (redacted) codicil to a will with the following drafting fail (slightly edited):

4.1(b) I give $ AMOUNT A each to STEP-GRANDSON and STEP-GRANDDAUGHTER …

4.1(c) I give to GRANDSON #1 and GRANDSON #2 a cash bequest of $ AMOUNT B ….

The student summarized the drafting fail as follows:

The drafting law firm was careless and left out the word “each” in §4.1(c), despite using it in §4.1(b). [DCT COMMENT: Remember the interpretation principle of 'inclusio unius est exclusio alterius.'] It has the effect of halving the specific bequest to each of the grandsons when the stated (verbal) intent of the testator was that it should be “each.”

The good news is that this is being remedied by a family settlement agreement. Regardless of what the testator meant (be it “each” or “split in two”) there was a better way to draft this.

Thought I’d pass it along since it was a real life example… and unfortunately may not be uncommon either.

(Emphasis added.)

3.16.6 In-class exercise — grammar fail: Professor Goodenough's prospects

1. Grammar fail: Professor Goodenough (1)

From the Houston Chronicle:

Feeling behind in school wasn't new for Goodenough when he started his physics Ph.D. at the University of Chicago. As a child, his dyslexia went undiagnosed. But it still stung when, after serving in World War II, an administrator told him he wouldn't make it as a physicist because he had started too late. He was in his 20s.

QUESTION (discuss in your groups): What's wrong with the italicized portion?

3.16.7 In-class exercise — grammar fail: The sheer amount of internet domains

From the Washington Monthly:

But, legislative proposals for increasing the diversity of ideological points of view aren’t without their own limitations. “Must-carry” policies, for example, which were originally designed to ensure that television broadcasters would promote education and attention to public issues, would never work online. The sheer amount of internet domains would not only make it impossible to regulate speech, but attempting to do so would also be unconstitutional.

QUESTION (discuss in your groups): What's wrong with the italicized portion?

1.  Ambiguity and the $10-million [missing] comma

2.  Grammar fail: Steve Bannon's ex-wife

3.  Grammar fail: Afghan "ghost troops"

3.16.8 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.

QUESTIONS:

(1) T/F: Texas law will likely apply.

A: On these facts, English law will probably apply.

(2) T/F: 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).

(3) T/F: 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 a disclaimer of implied conditions and (probably) terms of quality as well.

(4) QUESTION: Could Seller's disclaimer language be improved? How?

3.16.9 In-class rewriting exercise: A termination provision (evening section only)

As an experiment, please use the following step-by-step process (which I'm refining as the semester progresses) to rewrite the shaded text below:

  1. Break up the paragraph so that each complete sentence is in its own separate paragraph. (Short sentences concerning a single topic might be left in a single paragraph.) NOTE: Don't bother numbering the separate paragraphs yet.
  2. If any paragraph addresses multiple topics, then further separate each topic into its own paragraph and as a complete sentence, together with any needed transitional language.
  3. If, by its terms, the entire section applies only if certain conditions exist, then turn those conditions into the first subdivision: "Applicability: This section applies if …."
  4. If there are any "laundry list" terms [not applicable in the example below], then:
    • For each such list, create a defined term for each such list as a separate paragraph, e.g., "'Project Cost' refers to Property Taxes, insurance premiums and deductibles, …."
    • Move that new defined-term paragraph to be (part of?) a Definitions subdivision within the section that's being revised; that Definitions subdivision should following the Applicability subdivision referred to in item 4 above. EXAMPLE: "Definitions: For purposes of this section: [then include each defined term as a separate paragraph]."
    • Finally, in the originating sentence, substitute the defined term (in this case, "Project Cost") for the laundry list. [NOTE: It's "substitute A for B" or "replace B with A" but NOT "substitute A with B" nor "substitute B with A."]
  5. If any part of the section is subject to a lengthy exception, then spin off that exception into its own subdivision, e.g.: "Exception: Subdivision X does not apply if …."
  6. If there are any if-then statements, then:
    • Be sure that the word "then" is included as a visual guide at the beginning of the "then" portion. (See, e.g., the preamble of this item 6 and its predecessors.) This isn't a hard and fast rule, but it's a useful rule of thumb.
    • If any of the if-then sentences are long and can't be broken up, then consider writing the if-then labels as "IF: …; THEN: …."
    • If any of the if-then provisions are multi-part, such as "if Alice sells her computer to Bob for cash or if Bob offers a credit card in payment …," then

Here's the text, from this license agreement:

12. TERMINATION

If the royalties due hereunder have not been paid within the time allowed by this Licence Agreement or if either party shall breach of any of the representations, warranties, covenants, promises or undertakings herein contained and on its part to be performed or observed and shall not have remedied such breach within thirty (30) days after notice is given to the breaching party by the non-breaching party requiring such remedy or if either party shall have an Examiner appointed over the whole or any part of its assets or an order is made or a resolution passed for winding up of such party unless such order is part of a scheme for reconstruction or amalgamation of such party then the other party may forthwith terminate this Licence Agreement without being required to give any or any further notice in advance of such termination but such termination shall be without prejudice to the remedy of such party to sue for and recover any royalties then due and to pursue any remedy in respect of any previous breach of any of the covenants or agreements contained in this Licence Agreement.

3.17 Class plan: Wed. Oct. 25

3.17.1 New small-group assignments

4:00 p.m. section:

1 Jin Caberto Kepadia  
2 Fisher Niedzwiedz Hively  
3 Binford Herrera Kellam Santa
4 Montes Sullivan Dryden  

7:30 p.m. section:

1 Pohl Thal Li Pucillo
2 McKnight Nguyen Waterwall  
3 Clawson Harrall del Villar Garay
4 McCormick Mathews Oliver  

3.17.2 Quiz today (30 points)

The third second in-class online quiz is today. You're responsible for all flashcard questions whose general subjects we've covered so far in:

  • the reading material — both the "read" portions and the "look through" portions; and
  • the in-class exercises and discussions in this syllabus.

3.17.3 Homework review

Exchange papers, etc.

3.17.4 In-class reading: A step-by-step contract simplification procedure

3.17.4.1 Split up multiple-sentence paragraphs

Break each sentence into a separate paragraph. (EXCEPTION: Short sentences concerning a single topic might be left in a single paragraph.)

NOTE: You might not want to bother numbering the new separate paragraphs just yet, although the AFTER examples below are generally numbered for convenient reference.

BEFORE:

The Premises as furnished by Landlord consist of the improvements as they exist as of the Effective Date and Landlord shall have no obligation for construction work or improvements on or to any portion of the Premises. Prior to entering into this Lease, Tenant has made a thorough and independent examination of the Premises and all matters related to Tenant’s decision to enter into this Lease. Tenant is thoroughly familiar with all aspects of the Premises and is satisfied that it is in an acceptable condition and meet Tenant’s needs. Tenant does not rely on, and Landlord does not make, any express or implied representations or warranties as to any matters including, without limitation, (a) the physical condition of the Premises including without limitation the structural components of any improvements or any building systems within or serving the improvements (including without limitation indoor air quality), (b) the existence, quality, adequacy or availability of utilities serving the Premises or any portion thereof, (c) the use, habitability, merchantability, fitness or suitability of the Premises for Tenant’s intended use, (d) the likelihood of deriving business from Tenant’s location or the economic feasibility of Tenant’s business, (e) Hazardous Materials on, in, under or around the Premises, (f) zoning, entitlements or any laws, ordinances or regulations which may apply to Tenant’s use of the Premises or business operations, or (g) any other matter whatsoever. Tenant has satisfied itself as to such suitability and other pertinent matters by Tenant’s own inquiries and tests into all matters relevant in determining whether to enter into this Lease. Tenant accepts the Premises in their existing “AS-IS”, “WHERE-IS” condition, and “WITH ALL FAULTS”. Tenant shall, by entering into and occupying the Premises, be deemed to have accepted the Premises and to have acknowledged that the same are in good order, condition and repair in all respects. Upon the Commencement Date, tenant shall execute and deliver to Landlord the Acceptance Form attached hereto as Exhibit C.

AFTER:

(a) The Premises as furnished by Landlord consist of the improvements as they exist as of the Effective Date ….

(b) Prior to entering into this Lease, ….

(c) Tenant is thoroughly familiar ….

(d) Tenant does not rely on ….

[The remainder of the original paragraph is omitted]

ALTERNATIVE: (adding pilcrows [¶] for easier reading):

The Premises as furnished by Landlord consist of the improvements as they exist as of the Effective Date and Landlord shall have no obligation for construction work or improvements on or to any portion of the Premises. [¶] Prior to entering into this Lease, Tenant has made a thorough and independent examination of the Premises and all matters related to Tenant’s decision to enter into this Lease. [¶] Tenant is thoroughly familiar with all aspects of the Premises and is satisfied that it is in an acceptable condition and meet Tenant’s needs. …

3.17.4.2 Next: Split up multiple-topic paragraphs

When a paragraph covers multiple topics, even if closely related: Consider breaking up those topics into separate paragraphs each as a complete sentence. (You might have to add transitional language to "help lead the reader by the hand along the path.")

BEFORE:

The Premises as furnished by Landlord consist of the improvements as they exist as of the Effective Date and Landlord shall have no obligation for construction work or improvements on or to any portion of the Premises.

AFTER:

(a) The Premises as furnished by Landlord consist of the improvements as they exist as of the Effective Date and.

(b) Landlord shall have no obligation for construction work or improvements on[,] or to any portion of[,] the Premises.

3.17.4.3 Watch out for parentheticals addressing separate topics

BEFORE:

The number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be equal to the product (rounded up to the nearest whole share unless otherwise agreed by Seller and Purchaser) of (A) the number of shares of Seller Common Stock subject to the cor­res­p­ond­ing Seller RSU Award immediately prior to the Closing and (B) the Purchaser Ratio ….

AFTER:

(a) The number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be equal to the product of (A) ….

(b) The number of shares computed in accordance with subdivision (a) is to be rounded up ….

ALTERNATIVE (with em-dashes in lieu of parentheses for greater visibility):

The number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be equal to the product — rounded up to the nearest whole share unless otherwise agreed by Seller and Purchaser — of (A) the number of shares ….

3.17.4.4 Judiciously add punctuation to help guide the reader's eye

Make a long sentence easier to grasp by judiciously inserting commas; semi-colons; parentheses; and em-dashes.

BEFORE:

Landlord shall have no obligation for construction work or improvements on or to any portion of the Premises.

AFTER:

Landlord shall have no obligation for construction work or improvements on[,] or to any portion of[,] the Premises.

See also the alternative of selectively replacing parentheses with em-dashes.

3.17.4.5 Next: Spin off "provided that …." language

Seriously consider breaking off "provided that" language into its own paragraph — possibly using terms such as "except as otherwise provided below …" or comparable language, as shown in the example below.

BEFORE:

The number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be equal to the product … of (A) the number of shares of Seller Common Stock subject to the corresponding Seller RSU Award immediately prior to the Closing and (B) the Purchaser Ratio; provided that, with respect to any Seller RSU Award that is subject to performance-based vesting (A) with respect to any performance year that includes the Closing Date, the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be based on target-level performance, and such Purchaser RSU Awards shall not be subject to performance-based vesting criteria for such performance year, and (B) with respect to any performance year that commences after the Closing Date, Purchaser or its Affiliates shall establish the applicable performance goals following the Closing.

AFTER:

(a) Except as provided in subdivision (b) below, the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be equal to the product …

(b) With respect to any Seller RSU Award that is subject to performance-based vesting ….

3.17.4.6 Not everything needs to be a list

BEFORE:

[W]ith respect to any Seller RSU Award that is subject to performance-based vesting (A) with respect to any performance year that includes the Closing Date, the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be based on target-level performance, and such Purchaser RSU Awards shall not be subject to performance-based vesting criteria for such performance year, and (B) with respect to any performance year that commences after the Closing Date, Purchaser or its Affiliates shall establish the applicable performance goals following the Closing.

AFTER:

(a) [W]ith respect to any Seller RSU Award that is subject to performance-based vesting with respect to any performance year that includes the Closing Date, the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be based ….

(b) [W]ith respect to any Seller RSU Award that is subject to performance-based vesting with respect to any performance year that commences after the Closing Date, ….

3.17.4.7 Consider using a more-oral narrative style to break up long sentences

BEFORE:

[W]ith respect to any Seller RSU Award that is subject to performance-based vesting (A) with respect to any performance year that includes the Closing Date, the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall be based on target-level performance, and such Purchaser RSU Awards shall not be subject to performance-based vesting criteria for such performance year, and (B) with respect to any performance year that commences after the Closing Date, Purchaser or its Affiliates shall establish the applicable performance goals following the Closing.

AFTER:

(a) Some Seller RSU Awards might be subject to performance-based vesting for which the relevant performance year includes the Closing Date. For those awards:

(1) the number of shares of Purchaser Common Stock subject to each Purchaser RSU Award shall is to be based on target-level performance; and

(2) such those Purchaser RSU Awards shall are not to be subject to performance-based vesting criteria for such performance year.

(b) Other Seller RSU Awards might be subject to performance-based vesting for which the relevant performance year commences begins after the Closing Date. For those awards, Purchaser or its Affiliates shall will establish the applicable performance goals following the Closing.

3.17.4.8 When the section applies only if certain prerequisites are met

Consider turning those conditions into the first subdivision of the section.

15.5 Landlord’s Right to Cure. If Tenant shall fail or neglect to do or perform any covenant or condition required under this Lease and such failure shall not be cured within any applicable grace period, Landlord may, on five (5) business days written notice to Tenant, but shall not be required to, make any payment payable by Tenant hereunder, discharge any lien, take out, pay for and maintain any insurance required hereunder, or do or perform or cause to be done or performed any such other act or thing (entering upon the Premises for such purposes, if Landlord shall so elect), and Landlord shall not be or be held liable or in any way responsible for any loss, disturbance, inconvenience, annoyance or damage resulting to Tenant on account thereof.

AFTER:

15.5 Landlord’s Right to Cure.

(a) This section applies if Tenant fails to do anything required by this Agreement and does not cure the failure within the applicable grace period, if any.

(b) Landlord may, for example:

  1. make any payment payable by Tenant under this Agreement:
  2. discharge any lien;
  3. take out, pay for[,] and maintain any insurance required under this Agreement; and/or
  4. take (or cause to be taken) any other necessary or appropriate action.

(c) Landlord must give Tenant five business days' written notice to Tenant before taking any action under subdivision (b).

(d) This Agreement does not require Landlord to take any action under subdivision (b).

(e) Tenant will not attempt to hold Landlord responsible or liable for any loss, disturbance, inconvenience, annoyance or damage that might result to Tenant arising from any action by Landlord under subdivision (b).

3.17.4.9 When any paragraph contains a "laundry list"

Spin off the laundry list into separate subdivisions — possibly as a defined term.

BEFORE:

Tenant does not rely on, and Landlord does not make, any express or implied representations or warranties as to any matters including, without limitation, (a) the physical condition of the Premises including without limitation the structural components of any improvements or any building systems within or serving the improvements (including without limitation indoor air quality), (b) the existence, quality, adequacy or availability of utilities serving the Premises or any portion thereof, (c) the use, habitability, merchantability, fitness or suitability of the Premises for Tenant’s intended use, (d) the likelihood of deriving business from Tenant’s location or the economic feasibility of Tenant’s business, (e) Hazardous Materials on, in, under or around the Premises, (f) zoning, entitlements or any laws, ordinances or regulations which may apply to Tenant’s use of the Premises or business operations, or (g) any other matter whatsoever.

AFTER:

Tenant does not rely on, and Landlord does not make, any express or implied representations or warranties as to any matters including, without limitation, the following:

  1. the structural components of any improvements or any building systems within or serving the improvements (including without limitation indoor air quality);
  2. any other aspect of the physical condition of the Premises;
  3. the existence, quality, adequacy or availability of utilities serving the Premises or any portion thereof,
  4. the use, habitability, merchantability, fitness or suitability of the Premises for Tenant’s intended use,
  5. the likelihood of deriving business from Tenant’s location or the economic feasibility of Tenant’s business,
  6. Hazardous Materials on, in, under or around the Premises, or
  7. zoning, entitlements or any laws, ordinances or regulations which may apply to Tenant’s use of the Premises or business operations.

PRO TIP: If the above list will be used more than once, turn it into a defined term as a subdivision of the section, (or alternatively in the main Definitions article if appropriate):

(a) Tenant does not rely on, and Landlord does not make, any express or implied representations or warranties as to any matters including, without limitation, the Premises Condition (defined below).

(b) "Premises Condition" refers to one or more of the following:

  1. the physical condition of the Premises including without limitation the structural components of any improvements or any building systems within or serving the improvements (including without limitation indoor air quality),
  2. the existence, quality, adequacy or availability of utilities serving the Premises or any portion thereof,
  3. the use, habitability, merchantability, fitness or suitability of the Premises for Tenant’s intended use,
  4. the likelihood of deriving business from Tenant’s location or the economic feasibility of Tenant’s business,
  5. Hazardous Materials on, in, under or around the Premises, and
  6. zoning, entitlements or any laws, ordinances or regulations which may apply to Tenant’s use of the Premises or business operations.
3.17.4.10 When a sentence includes an "if … then …" statement

Be sure that the word "then" is included as a visual guide at the beginning of the "then" portion. This isn't a hard and fast rule, but it's a useful rule of thumb.

BEFORE:

15.5 Landlord’s Right to Cure. If Tenant shall fail or neglect to do or perform any covenant or condition required under this Lease and such failure shall not be cured within any applicable grace period, Landlord may, on five (5) business days written notice to Tenant, but shall not be required to, make any payment payable by Tenant hereunder, discharge any lien, take out, pay for and maintain any insurance required hereunder, or do or perform or cause to be done or performed any such other act or thing (entering upon the Premises for such purposes, if Landlord shall so elect), and Landlord shall not be or be held liable or in any way responsible for any loss, disturbance, inconvenience, annoyance or damage resulting to Tenant on account thereof.

AFTER:

15.5 Landlord’s Right to Cure. If Tenant shall fail or neglect to do or perform any covenant or condition required under this Lease and such failure shall not be cured within any applicable grace period, then Landlord may ….

3.17.4.11 Use all-caps "IF:" and "THEN:" for long conditional statements

If an if-then sentence is long and/or complicated, then consider writing the if-then labels as follows: "IF: …; AND: …; THEN: …."

BEFORE:

15.5 Landlord’s Right to Cure. If Tenant shall fail or neglect to do or perform any covenant or condition required under this Lease and such failure shall not be cured within any applicable grace period, Landlord may, on five (5) business days written notice to Tenant, but shall not be required to, make any payment payable by Tenant hereunder, discharge any lien, take out, pay for and maintain any insurance required hereunder, or do or perform or cause to be done or performed any such other act or thing (entering upon the Premises for such purposes, if Landlord shall so elect), and Landlord shall not be or be held liable or in any way responsible for any loss, disturbance, inconvenience, annoyance or damage resulting to Tenant on account thereof.

AFTER:

15.5 Landlord’s Right to Cure. IF: Tenant shall fail or neglect to do or perform any covenant or condition required under this Lease; AND: Such failure shall not be is not cured within any applicable grace period; THEN: Landlord may, on five (5) five business days written notice to Tenant, ….

3.17.4.12 Or: Spin off a long if-then statement into an "Applicability: …" paragraph

If an if-then sentence is long or complicated, then consider spinning off the "if" part into a separate paragraph that begins with the italicized word and colon, "Applicability: …"

BEFORE:

15.5 Landlord’s Right to Cure. If Tenant shall fail or neglect to do or perform any covenant or condition required under this Lease and such failure shall not be cured within any applicable grace period, Landlord may, on five (5) business days written notice to Tenant, but shall not be required to, make any payment payable by Tenant hereunder, discharge any lien, take out, pay for and maintain any insurance required hereunder, or do or perform or cause to be done or performed any such other act or thing (entering upon the Premises for such purposes, if Landlord shall so elect), and Landlord shall not be or be held liable or in any way responsible for any loss, disturbance, inconvenience, annoyance or damage resulting to Tenant on account thereof.

AFTER:

15.5 Landlord’s Right to Cure.

(a) This section applies if Tenant: (1) fails to comply with any provision of this Agreement; and (2) AND: does not cure the failure within any applicable grace period.

(b) Landlord may, on five (5) five business days written notice to Tenant, ….

3.17.4.13 Spin off lengthy exceptions into separate paragraphs

Time-pressured drafters sometimes keep stuffing verbiage into a paragraph as though it were a sausage; that can make life difficult for reviewers and other readers.

A better approach is to

BEFORE:

15.1 Event of Default. The occurrence of any of the following shall be an “Event of Default” on the part of Tenant: …

*  *  * 

(2) Failure to perform any other covenant, condition or requirement of this Lease when such failure shall continue for a period of thirty (30) days after written notice thereof from Landlord to Tenant; provided that if the nature of the default is such that more than thirty (30) days are reasonably required for its cure, then an Event of Default shall not be deemed to have occurred if Tenant shall commence such cure within said thirty (30) day period and thereafter diligently and continuously prosecute such cure to completion. …

AFTER:

15.1 Event of Default. The occurrence of any of the following shall will be an “Event of Default” on the part of Tenant: …

*  *  * 

(2) Except as provided in subdivision (b) below, failure to perform any other covenant, condition[,] or requirement of this Lease [Agreement] when such if the failure shall continue continues for a period of thirty (30) 30 days after written notice thereof of the failure from Landlord to Tenant (the "Cure Period");

(c) Exception: IF: The nature of the default is such that more than 30 days are reasonably required to cure it; THEN: An Event of Default will not be deemed to have occurred if Tenant shall commence begins to cure the default ….

3.17.4.14 Another example

BEFORE:

15.6 Landlord’s Default. Landlord shall be in default under this Lease if Landlord fails to perform obligations required of Landlord within thirty (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have heretofore been furnished to Tenant in writing, specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord’s obligations is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion. Tenant shall be entitled to actual (but not consequential) damages in the event of an uncured default by Landlord, but the provisions of Article 17 shall apply to any Landlord default and Tenant shall not have the right to terminate this Lease as a result of a Landlord default.

AFTER:

15.6 Landlord’s Default.

(a) Except as provided in subdivision (c), Landlord will be in default under this Lease Agreement if Landlord fails to perform its obligations within 30 days after written notice by Tenant to Landlord.

(b) Any notice under subdivision (a) must provide reasonable detail about Landlord's failure to perform .

(c) If the nature of Landlord’s relevant obligation(s) is such that more than 30 days are required for performance, then Landlord will not be in default if Landlord begins performance within that 30-day period and thereafter diligently prosecutes the same to completion.

(d) Tenant shall be entitled to actual (but not consequential) damages in the event of an uncured default by Landlord, but the provisions of Article 17 shall apply to any Landlord default and Tenant shall not have the right to terminate this Lease as a result of a Landlord default.

(b) IF: Landlord has provided Tenant with the name and address of the holder of a first mortgage or deed of covering the Premises; THEN: Tenant must send, to that holder, a copy of any notice under subdivision (a).

3.17.5 In-class revision exercise: Project cost responsibility

Simplify the text below by using the following step-by-step procedure (the formulation of which is evolving as I see how students actually tackle these mini-assignments). Feel free to consult the other students in your group. I'll be happy to answer questions or look at your work.

Here's the text to edit, from the Stanford-Tesla lease agreement. NOTE: There are three and perhaps four laundry lists to be spun off as defined terms, including the one already defined as "Project Costs":

7.3 Project Costs. In addition to Minimum Rent, Tenant shall pay or fund when due all Property Taxes, insurance premiums and deductibles, debt service, permit and license fees, costs of utilities and services, maintenance, repair, replacement, rebuilding, restoration, management, marketing and leasing services, operations and other costs of any type whatsoever accruing at any time during the Term in connection with the ownership, marketing, leasing, operation, management, maintenance, repair, replacement, restoration, use, occupancy or enjoyment of the Premises (collectively, “Project Costs”). Tenant shall pay all Project Costs directly, and shall contract directly for all required services, utilities (including without limitation water, gas, electricity, sewer service, waste pick-up, telephone and other electronic telecommunication services) and other items described herein; provided, however, that Landlord shall have the right to contract for any such services, utilities or other items if Tenant has failed to do so, or has failed to make any payment of Project Costs which is due and owing. Tenant shall provide Landlord, upon written request, with copies of invoices, receipts, canceled checks and/or other documentation reasonably substantiating Tenant’s payment of all Project Costs.

3.17.7 In-class exercise: PayPal contract change

From a recently-announced amendment to PayPal's user agreement:

In representations to your customers or in public communications, you agree not to mischaracterize PayPal as a payment method.

At all of your points of sale (in whatever form), you agree not to try to dissuade or inhibit your customers from using PayPal;

and, if you enable your customers to pay you with PayPal, you agree to treat PayPal’s payment mark at least at par with other payment methods offered.

[Extra paragraphing added.]

QUESTION: What if a PayPal user doesn't want to agree to these changes — does the user have any recourse?

A: Basically, the user must terminate his or her PayPal account: "We may amend this user agreement at any time by posting a revised version on our website. The revised version will be effective at the time we post it. If we change the user agreement in a way that reduces your rights or increases your responsibilities, we will provide you with 30 days’ prior notice by posting notice on the Policy Updates page of our website."

The amendment to the arbitration provision states in part: "If you do not agree to these amended terms [of arbitration], you may close your PayPal account within the 30-day period and you will not be bound by the amended terms."

3.18 Class plan: Mon. Oct. 30

3.18.1 Reading for the week of Mon. Oct. 30

Notices: Read Common Draft § 24.1.8 (notices) and § 24.2.2 (optional notice provisions).

Settlements & releases: TBA.

Employment: In the Supplement:

  • Review the Common Draft Model Employment Agreement Provisions (starting at page 145; yellow-highlighted & footnoted)
  • Look through the Sheryl Sandberg employment agreement (starting at page 101), including the annotations.

Review: Stanford-Tesla real-estate lease agreement, lines 164-77 (relating to early termination): Can you think of a better way to present the information? Why might that be useful someday? (Hint: Consider who the future readers might be.)  

Be sure to read the in-class exercises for today.

3.18.2 Minor drafting fail: Phonograph needles

Look at the italicized portion of this passage from Ian Bogost, Why Computers Should Be Hidden (TheAtlantic.com Oct. 25, 2017):

A vinyl record, for example, records a continuous stream of sound as grooves on the surface of a disk. The vibrations that produced those grooves are later traced by the turntable’s needle, which amplifies them for playback.

QUESTION 1: Is it really the vibrations that produced the groove — singular, not plural — that are traced by the turntable's needle? A: No — as the record is rotated under the needle, the needle traces the groove itself and thereby creates new vibrations, which are detected and amplified by other means.

QUESTION 2 (for discussion): Under what circumstances might it have been worth the author's time to get this right?

3.18.3 In-class exercises (subject to change)

1. Notetaking ideas, such as:

  • Retention is far better for handwritten notes (vs. laptop notes)
  • Drawing your notes improves retention (cf. mind-mapping).

2.  Exercise: Termination vs. expiration

3.  Honeywell termination procedures

4.  Escalation of disputes

5.  Injunctive-relief provisions

6. Discussion: "Best" litigation / ADR provisions:

  • Dispute escalation
  • Mini-trial to senior management
  • Service of process
  • Baseball-style determinations (with opt-out)
  • Settlement rejection consequences

7. Discussion: Termination considerations — use the Stanford-Tesla real-estate lease agreement as a hypothetical

  • Termination at will
  • Termination for "financial" events
  • Termination for breach

3.19 Class plan: Wed. Nov. 1

3.19.1 Homework review

3.19.2 In-class exercises (subject to change)

1.  Ambiguity and Vladimir Putin

2.  Ambiguity: Less and Less People

3.  Honeywell termination procedures

4.  Escalation of disputes

5.  Injunctive-relief provisions

6. Discussion: "Best" litigation / ADR provisions:

  • Dispute escalation
  • Mini-trial to senior management
  • Service of process
  • Baseball-style determinations (with opt-out)
  • Settlement rejection consequences

7. Discussion: Termination considerations — use the Stanford-Tesla real-estate lease agreement as a hypothetical

  • Termination at will
  • Termination for "financial" events
  • Termination for breach

8.  Exercise: Terms from an actual contract [1]

9. Homework 7 review (if time permits)

3.20 Class plan: Mon. Nov. 6

3.20.1 Reading for this week

3.21 Class plan: Wed. Nov. 8

3.21.1 Flashcards for next week's quiz

I'll be adding to the flashcards (in a separate section of new material for easier study). I won't add anything after 5 p.m. this coming Sunday, Nov. 12, so that next week's quiz will be based entirely on material that's in the flashcards by that time.

3.21.2 Homework review

Today we'll review the homeworks due both Nov. 1 and Nov. 8.

3.21.3 In-class exercises (subject to change)

3.22 Class plan: Mon. Nov. 13

3.22.1 Reading for this week

Review the flashcards

3.22.2 Survey question: Which flashcard screen presentation style?

Show of hands: For flashcards, do you prefer to be able to see the answer to a question:

1. by clicking on your choice, as with the existing flashcard set; or

2. by waving your mouse cursor, such as …

with this paragraph?

My hunch is that students will prefer the latter; if I'm correct, for next semester I hope to convert the existing flashcards to that format.

3.22.3 Discussion: Not getting necessary information

(DCT to tell an arbitration story)

3.22.4 Discussion: United Airlines overbooking fiasco (doctor dragged screaming off the plane)

  • A comment: "United could and probably should have offered more, even if they wound up paying more than the federally mandated payment for involuntarily bumping, to avoid creating a PR nightmare."
  • United's new club seating plan
  • Lessons for contract drafters:
    • Perspective on the real business needs (e.g., dispute-escalation provision)
    • Make it about money

3.22.5 In-class exercise: Legal language usage "quiz" (not for grade)

DCT to pull up on the screen

3.22.6 In-class rewriting exercise: Tenant audit rights

In your small groups:

  1. Rewrite the following, from this real-estate lease agreement, to make it as user-friendly as possible, following the step-by-step simplification guidelines we previously discussed. (Don't worry about fixing the substance of the provision.) Pay special attention to the last sentence.
  2. Consider what changes you might want to make if you were representing Landlord.

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.

3.22.7 In-class exercise: Ambiguity from the President

In your groups, discuss how you might rewrite this presidential tweet of April 3, 2017: "Such amazing reporting on unmasking and the crooked scheme against us by @foxandfriends. …" (Hat tip: Chris Richardson.)

3.22.8 In-class exercise: Confidential information

3.22.9 In-class exercise: Employment agreements

  1. REVIEW QUESTION: Under Texas law, what two basic requirements must a post-employment noncompetition provision meet?
  2. FACTS: An employment agreement for use in Texas contains a choice-of-law provision stating that New York law will apply. QUESTION: How likely is it that a U.S. court would give effect to that choice of law provision?
  3. QUESTION: Same question, but for a choice of forum provision stating that all litigation must be in New York.
  4. QUESTION: What if the choice-of-law provision stated that California law would apply?
  5. QUESTION: What is a "no-moonlighting" provision in an employment agreement? How does it differ from a non-competition provision?
  6. QUESTION: What is a "no-solicitation" provision in an employment agreement? How does it differ from a non-competition provision?
  7. QUESTION: Should an employment agreement form specify the frequency of the employee's pay periods (e.g., twice a month, every two weeks, or whatever)?
  8. QUESTION: Why might an employment agreement obligate the employee to abide by the confidentiality obligations that the employee owes to former employers?
  9. FACTS: An employer's "policy manual" includes a binding arbitration provision with a class-action prohibition. QUESTION: What if any legal effect might that provision have on the employee's right to join in a class action against the employer, e.g., for discrimination?
  10. QUESTION: If an employee resigns with two weeks' notice, must the employer allow the employee to work out (and get paid for) the notice period?

3.22.10 In-class exercise: Internal clause numbering / good faith and fair dealing

3.23 Class plan: Wed. Nov. 15

3.23.1 Quiz today (30 points)

The fourth third in-class online quiz is today. You're responsible for all flashcard questions whose general subjects we've covered so far in:

  • the reading material — both the "read" portions and the "look through" portions; and
  • the in-class exercises and discussions in this syllabus.

3.23.2 Roy Moore's lawyer's letter to press

DCT to pull up on his screen

3.23.3 Homework review

Exchange papers and do the usual

3.23.4 Grammar fail: Homosexuality and the Texas GOP's 2016 platform

From the Texas GOP platform of 2016: "Homosexuality is a chosen behavior that is contrary to the fundamental unchanging truths that has been ordained by God in the Bible, recognized by our nations founders, and shared by the majority of Texans." See, e.g., the NPR story.

3.23.5 In-class rewriting exercise: Release language

Take a stab at rewriting the release language below, with a view to the following guidelines:

  • First, do the usual to make the provision more readable.
  • Next, see if you can streamline the terms — for example, do you really need to say "… remise, release, acquit, satisfy and discharge …"?

Each of Provider and Customer, for itself and on behalf of their respective parent, subsidiaries, related companies, affiliates, licensees, distributors, agents, present and former employees, directors, members, officers, associated individuals, shareholders, partners, administrators, attorneys, domestic or legal representatives, successors and assigns (all of the foregoing being collectively referred to as the “Releasors”), hereby, with full and final effect, irrevocably and unconditionally, remise, release, acquit, satisfy and discharge the other Party and its respective parents, subsidiaries, related companies, affiliates, licensees, distributors, agents, present and former employees, directors, members, officers, associated individuals, shareholders, partners, attorneys, domestic or legal representatives, successors and assigns (all of the foregoing being collectively referred to as the “Releasees”) of and from any and all past, present or future claims, manner of action and actions, cause and causes of action, suits, debts, dues, sums of money, attorneys’ fees and costs, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands or liabilities whatsoever, regardless of whether at law or in equity or under foreign, state or federal law, whether known or unknown, whether asserted or unasserted, which each Party’s Releasors ever had, or now has, or may have against the other Parties’ Releasees for, arising from, relating to, and/or resulting from the Consulting Agreement, Provider’s work delivered to or performed for Customer under the Consulting Agreement (the “Work”), the Invoices and any claims and demands alleged in the Correspondence on or prior to the Effective Date of this Agreement. Without limiting the foregoing, (A) Company A acknowledges that this release extends (without limitation by the principle of ejusdem generis or otherwise) to any warranty and other claims arising out of or relating to the Work and/or any alleged inadequacy in the Work, and regardless of whether any such claim is currently known, unknown or unknowable by any of Customer’s Releasees, and (B) Customer acknowledges that that this release extends (without limitation by the principal of ejusdem generis or otherwise) to any liens, payment obligations (including without limitation the Invoices), and other claims arising out of or relating to the Work and/or any alleged non-payment therefor by Customer, and regardless of whether any such claim is currently known, unknown or unknowable by any of Provider's Releasees. Nothing in the foregoing release shall release the Parties from obligations set forth in this Agreement.

3.24 Class plan: Mon. Nov. 20

3.24.1 Reading for the week of Mon. Nov. 20

Confidential information: Read:

3.24.2 Nondisclosure agreements (preview)

3.24.2.1 Two-way vs. one-way NDAs

FACTS:
(i) Your client Alice has been asked to sign a confidentiality agreement ("NDA") that was prepared by Bob ("The Other Side").
(ii) Neither Alice nor you have any past history with Bob.
(iii) The NDA's terms apply equally to the confidential information of both Alice and Bob, not just to the confidential information of only one party or the other.
(iv) Alice is in a hurry and asks if it's OK to just sign the NDA, given point (iii) above. DISCUSS.

3.24.2.2 NDA "sunset" provisions (1)

MORE FACTS for the situation in 3.24.2.1:
(iv) Alice is the party that would be disclosing her confidential information to Bob.
(v) Bob's draft NDA provides that Bob's confidentiality obligations will expire one year from the effective date of the NDA — EXCEPT THAT for any information that Alice can show is a "trade secret" (as defined in the applicable law), Bob's confidentiality obligations will not expire until the information comes within the scope of one or more of five exclusion categories listed in the NDA, e.g., information that has been published, information that the receiving party gets from another source, etc. DISCUSS.

3.24.2.3 NDA "sunset" provisions (2)

ALTERNATIVE FACTS for the situation in 3.24.2.2:
(v) Bob's draft states that Bob's confidentiality obligations will expire one year from the effective date of the NDA — period. Alice wants to know if she can agree to that. DISCUSS.

3.24.2.4 Injunctive relief (1)

MORE FACTS for the situation in 3.24.2.1:
(vi) Bob's draft NDA includes a injunctive-relief provision that states that, if Alice breaches the NDA, then Bob will be irreparably harmed and will be entitled to injunctive relief. DISCUSS.

3.24.2.5 Injunctive relief (2)

MORE FACTS for the situation in 3.24.2.4:
(vii) The injunctive-relief provision in Bob's draft NDA also states that Alice waives any requirement that Bob post a bond. DISCUSS.

3.24.3 Review

1. In the news: Home Improvement "Hollywood accounting" lawsuit vs. Walt Disney Products

  • Incontestability clause — shortened statute of limitations, waiver of discovery rule
  • Summary judgment for Walt Disney
  • Appeals court reverses: Fact issue re oral waiver of contractually-shortened limitation period (recall Cardozo opinion)
  • See the opinion and a law firm summary

2. In the news: Medicare fraud charges

3. In the news: Italian company's U.S. subsidiary stiffs contractors for ~$100 million

4.  Ambiguity and IRS Form 1099

5.  Clarity exercise: A family of persecutors

6.  Ambiguity and Jewish grandmothers

7.  Background-check clause review and markup

8.  Insurance lecture & discussion

3.25 Class plan: Mon. Nov. 27

  1. Homework deadline reminder
  2. Discussion of final exam plan
  3. Collaborative review of key concepts, using a Google Doc document (4 p.m. section) (7:30 p.m. section) as a master "outline" — this is an experiment based on how meetings apparently are run at Google, I just learned.
  4. Group discussion at the end of the "review" Google Doc: What would make the course, or the materials, more useful to next semester's students? What didn't work so well? FOR THE 7:30 P.M. SECTION: Here are my responses to some of the points made by the 4:00 p.m. section:
    • "Work on more assignments where we edit a contract text from one big MEGO paragraph to small bullet points." " It would be better to receive such assignments ahead of time." DCT RESPONSE: That's definitely in the plan for next semester; I'll be selecting wall-of-text contract provisions to be edited, and assigning them for reading in advance, in conjunction with the substantive areas that we cover in the course, e.g., payment terms, representations, warranties, etc.
    • "Workflowy isn’t that great in general." DCT RESPONSE: Agreed! I didn't realize that Google Docs can be edited anonymously, so next semester we'll be using Google Docs instead of Workflowy.
    • "Create a set syllabus so we can print - changes every week are not good for this!" DCT RESPONSE: That's a tough one, because I really like being able to change things up based on current events and on how the course is progressing. One thing I can do is to consolidate the weekly lists of assigned reading into a single list that can be printed out if desired.
    • "Consolidate all the materials so it’s easier to access/download." DCT RESPONSE: Working on it!
    • "Design quizzes to have a wider score distribution." DCT RESPONSE: I tried! Seriously, though: I'm not at all unhappy that many students aced the quizzes. I'm far more interested in having as many students learn as much of the material as possible, than I am in sorting them into a grade distribution.
  5. Course evaluation (use the UH system)
  6. Jeopardy! game.

4 Homework assignments

See the Word document containing homework assignments and instructions; the assignments are due on the following dates:

Wed. Sept. 6
Wed. Sept. 13
Wed. Sept. 20
Wed. Sept. 27
Wed. Oct. 4
Wed. Oct. 11
Wed. Oct. 18
Wed. Oct. 25
Wed. Nov. 1
Wed. Nov. 8
Wed. Nov. 15

We will go over each homework assignment in class, usually on the due date.

[Updated post-Harvey:] For the entire semester, homework may be turned in up to one month late (or, if sooner, December 4, i.e., the date of the final exam) without penalty, no questions asked. Please do try to keep up with the homework, though, because the spacing of the homework is important for helping you to absorb the course material.

Homework assignments submitted after the due date after that will be docked 20% of the possible points. This will help to discourage gaming the system by submitting an assignment after we've already reviewed the assignment in class.

For some homework assignments I will not necessarily mark up each student's assignment individually, because we will be discussing the correct answer(s) in class.

See also § 5.6.5 below for more information.

5 General course information

5.1 This course's approach

5.1.1 An analogy: Baseball spring training

In spring training, while baseball teams do play a few actual games, they spend most of their time practicing basic skills and rehearsing game tactics and strategies — over, and over, and over. In this course, we will do much the same things: We will spend most of our time working on:

  • drafting and/or reviewing lots of specific contract provisions, as opposed to lots of complete contracts;
  • exploring recurring themes such as how to be sure your client gets paid (or gets what it paid for); verifying that the other side is telling the truth; and the like;
  • discussing various points of law and business and how they fit into different negotiation strategies; and
  • occasionally doing short mock negotiations.

One student summarized his or her view of this approach in the course feedback from spring 2017, quoted verbatim below:

At first, I was disappointed that the amount of writing was small. I took the course to learn how to write a contract.

What I could not see at the time, I was learning the fundamental building blocks individually. By the end of the course, all that was left was to put it together and step back. Outstanding professor and methodology.

(Extra paragraphing added.)

5.1.2 Rooting out ambiguity

We will do a lot of short practice exercises in spotting and fixing ambiguities. This is because ambiguity might well be the #1 source of contract disputes. Many of these exercises will be drawn from non-legal sources.

5.1.3 Repetition, repetition, repetition — and jumping around

Let's continue the spring-training analogy: Some of the short exercises and quizzes will seem repetitive, and also that they will seem to jump around from topic to topic. This is a feature, not a bug: It mirrors what you'll almost certainly see in practice, and pedagogically it's been shown to be more effective at promoting long-term memory than lecture and repetitive reading. See generally Spaced retrieval (Wikipedia: https://goo.gl/4PRZTy).

Some students might well hate this approach, because it will strike them as disorganized or even chaotic. Over the years, though, most students seemed to have appreciated the value; please try to "go with it."

You can do your own spaced-retrieval practice by using the online flashcards, to which I will be adding on a regular basis. The mid-term quizzes and final exam will be drawn very largely from these flashcard questions.

5.1.4 A variation on Socratic method, with in-class study groups

We will do a lot of in-class exercises that presuppose that each student has already done the reading. This approach (known as "flipping the classroom") is all the rage in educational circles, but it's no more than a combination of (i) casebook reading, (ii) Socratic method, and (iii) in-class study groups.

NOTE: In a flipped classroom:

  • before class, students watch lecture videos or read written materials, the latter of which should ring a bell;
  • class time is used, not for lecture, but for homework-style problem solving, often in small groups; class discussion; debates; and the like.

Flipping the classroom is gaining popularity in non-law disciplines because it has been shown to be more effective than the traditional lecture format. See, e.g., Cyn­thia J. Brame, Flipping the Classroom (Vanderbilt.edu 2013: https://goo.gl/trS6e4).

The flipped classroom was pioneered by Harvard physics professor Eric Mazur, but he himself cites the law-school case study method as "one of the first implementations of the flipped classroom." The flipped classroom will redefine the role of educators (an interview with Eric Mazur) (Harvard.edu 2013: https://goo.gl/bSdh55).

5.1.5 Real-world practice: More contract reviewing than contract drafting

We can extend the baseball analogy even further: In actual baseball games, players spends far less time batting than in fielding. Apart from the pitcher and catcher, baseball players spend most of their time waiting for, and then dealing with, the other team's grounders, fly balls, and foul balls.

Likewise, in the real world, contract drafters spend far less time drafting contracts than they do in reviewing and revising others' drafts. Even when you're the one who must prepare the first draft, you'll almost always find a previous form (when in doubt, ask your partner or another associate) and modify it, instead of starting from scratch with a blank screen. Our approach in this course reflects that fact as well.

5.1.6 (Experimental:) Handwritten Socratic method

It's been documented that students learn more by handwriting their notes than by typing them.* With that in mind, we will experiment with having students answer some in-class questions by handwriting their answers on paper, then exchanging papers for review.

* It's thought that the act of handwriting causes the brain to process and digest the information more effectively than typing, which can often devolve into mere transcription without comprehension.

5.2 Course materials

5.2.1 On Contract Drafting (on the Web)

By student request, this online document consolidates many of my past writings that I've assigned as readings in past semesters. The working title is On Contract Drafting (sometimes OCD for short; you may read into that what you will). I intend to keep making it available at no charge; I'm trying to set it up to print out nicely for those who prefer hard copy.

On Contract Drafting is still a work in progress. I had hoped to finish consolidating the previous materials during this past summer (2017), but compiling and editing it has required a lot more work than I had anticipated. Students are encouraged to make suggestions and comments as the semester progresses.

To help those who want to print out a hard copy: As I complete a chapter, I will lock it down for the semester and mark it as such. If I feel the need to revise part of a locked-down chapter during the semester:

  • I'll create each revision as a dated, "pocket part" section of the course book that can be separately printed out if desired; and
  • in the online version, I'll put a link to the pocket part.

Then for next semester I'll consolidate the revisions into the main document.

5.2.2 The Supplement: Annotated real-world contracts

The Supplement to the On Contract Drafting document consists of several real-world contracts that I've annotated and printed to PDF. We'll study selected portions of these contracts.

5.3 Extra class time (for possible makeup-class use)

I'm a practicing attorney and arbitrator; I normally don't have to miss class, but it has been known to happen, e.g., when I've had out-of-town commitments. There have also been times when class has been canceled due to weather, usually flooding after heavy rainfall.

Our official makeup days for missed classes are all on Fridays at the same time as the regular class period:

  • For Monday missed classes, the available makeup days are Friday September 1, September 29, and October 27.
  • For Wednesday missed classes, the available makeup dates are Friday Septem­ber 15, October 13, and November 10.

Few students want to come to a makeup class late on a Friday afternoon or on Friday evening. So, as recommended by the Law Center's administration, we will end each class session at 5:20 p.m. and 8:50 p.m., respectively. Between that and the "asynchronous" instruction we will do (e.g., by email), that will let us accummulate one extra class session's worth of time. If it turns out that we don't have to cancel any classes, then we'll just skip the last class meeting. (In the previous sentence, notice how I used the word "then" to help break up the sentence into shorter chunks.)

5.4 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; doing secret side letters; violating antitrust laws; 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.

5.5 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.

5.6 Grading

5.6.1 Final grade based on 400 total points

Your course grade will be based on how many points you earn out of 400 total possible points, as explained below.

5.6.2 School-required average

As required by law school policy for a writing class, grades will be adjusted pro­por­tion­al­ly to the extent necessary to make the average of the final class grades fall between 3.0 and 3.4.

5.6.3 Final exam: 110 points, Mon. Dec. 4, 6:00 to 7:00 p.m. (both sections)

[Updated post-Harvey:] This semester, the final exam will be worth 110 points vice 100 points, due to the cancellation of the first mid-term quiz.

The final exam will:

  • consist mainly of true-false and multiple-choice questions, administered by Scantron sheet Blackboard, drawn from the online flashcards at https://goo.gl/o5gG5M (I will be adding to these flashcards as the semester progresses) and from the wave-your-mouse-cursor questions in the course materials;
  • include a few short-answer questions, such as "Explain if false," to be administered by blue book (electronic or hard copy) made available at the exam time at, and to be uploaded to, the Blackboard system in the same way as the homework assignments;
  • be one hour in length;
  • take place in the designated final-exam room; and
  • be closed-book, closed-notes.

What's fair game? Anything:

  • in the assigned sections of On Contract Drafting and the Supplement (both the "read" and "look through" assignments); and
  • in the homework, quizzes, and in-class exercises.

The honor code will of course apply.

5.6.4 Three midterm quizzes: 90 points total (30 points per quiz)

We will have four three, in-class, mid-term quizzes, all on Wednesdays: Sept. 6; Sept. 27 Oct. 4; Oct. 18; and Nov. 8 Nov. 15.

Notice how the previous sentence uses commas to separate the interchangeable adjectival phrases, namely "four, in-class, midterm quizzes." See Comma Rule 2 at GrammarBook.com.

Each mid-term quiz will:

  • be timed, probably for ten minutes;
  • be closed-book, closed-notes; and
  • contain more questions than most people can answer in the allotted time.

The questions in the mid-term quizzes will be drawn from the online flashcards at https://goo.gl/o5gG5M corresponding to the material we cover in the reading and in class. (I will be adding to these flashcards as the semester progresses.)

That way, the quizzes themselves will serve as a reinforcing review that takes advantage of the testing effect.

Bonus 1: The section that gets the higher average score on the second quiz won't need to turn in the homework due Nov. 8; we'll just do that one in class.

Bonus 2: The section that gets the higher average score on the fourth third quiz will get pizza at the next (Monday) class period.

5.6.5 Homework: 150 points

See § 4. WARNING: In one past semester, a student failed the course — even though the student had received a (very-low) passing grade on the final exam — and therefore didn't graduate that semester as planned, because the student had turned in almost none of the homework assignments.

5.6.6 Class attendance: 50 point "starting bonus" (which can also be lost for non-attendance)

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.

* Notice how it’s a significant amount of discussion (because “discussion” is an uncountable noun) versus a significant number of exercises (because “exercises” is a countable noun); see the Grammarist.com discussion.

[The following discussion has been updated post-Hurricane Harvey.]

ABA accreditation rules and school policy require attendance at 80% of the class meetings for each course. Because of Hurricane Harvey, we have 24 scheduled class meetings (not counting the makeup day on the last official class-meeting day of the semester, if needed). Rounding to the nearest whole number of classes, a student therefore must attend at least 19 class periods to comply with the 80% rule.

Every student starts out with 50 "freebie" points for class attendance, but can lose points for missing class, as follows:

TOTAL CLASSES MISSED TOTAL POINTS LOST
2 0
3 5
4 15
5 or more all 50

This means, of course, that students who miss more than two class will have to do that much better on the final, the quizzes, and homework in order to keep up with their classmates on the school-required average.

Attendance exceptions:

  • I don't count absences for "official" law school travel, e.g., for moot-court competitions, etc., as long as I'm informed in advance.
  • I also don't count a reasonable number of absences for illness. Please email me if this will be the case; I'll take your word for it without a doctor's note. (If you're ill, please don't come to class and infect the rest of us.)
  • Absences for job interviews, office visits, work trips, etc., will be counted as missed classes and will lose points as set forth above.
  • [Updated post-Harvey:] I will consider factors of Harvey-related good cause if a student must miss more classes than the two freebies. If you can't attend class in person, we can make arrangements for students to participate remotely via Zoom.us, but please do keep trying to attend as many classes in person as possible, because the small-group discussion is a crucial aspect of the course.

If I see that one or more students are missing, I will circulate an attendance sign-in sheet (but if I see that everyone is present, I normally won't bother).

5.6.7 Class participation bump-up

As permitted by law-school policy, I reserve the right:

  • to award discretionary increases in student grades by one-third of a grade level for excellent 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; and
  • to reduce grades for sub-standard class participation. In the past I said I would not do that; in recent semesters, though, I've had a couple of students for whom it was like pulling teeth to get them to participate even minimally.

5.6.8 Office hours

I'm happy to do office hours by appointment by Skype or Zoom.us video or by phone. I’m also very responsive to email questions.

Before: If I think your email 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.

In the "Before" version above, notice how I used parentheses and commas for clarity in the last part of the previous sentence — but also notice how long the sentence is.

After: I might conclude that your email question is likely to be of general interest to the class. If so, I probably won't respond to you — instead, I'll email the question (without your name, of course), along with my response, to the whole class and possibly to both sections of the course.

In the "After" version, notice how this version has two shorter sentences, and the second sentence is broken up by an em-dash; I also substituted "along with" as a mid-sentence guide phrase to help the reader navigate the wording.

5.6.9 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.

5.7 Counseling available

Counseling and Psychological Services (CAPS) can help students who are having difficulties managing stress, adjusting to the demands of a professional program, or feeling sad and hopeless. You can reach CAPS ([BROKEN LINK: www.uh.edu/caps]) by calling 713-743-5454 during and after business hours for routine appointments or if you or someone you know is in crisis. No appointment is necessary for the “Let's Talk” program, a drop-in consultation service at convenient locations and hours around campus. http://www.uh.edu/caps/outreach/lets_talk.html

5.8 Microsoft Word: Crucial things to know

1. The safest way to format a paragraph without corrupting the document and crashing the Word program is to format the style of the paragraph, not the individual paragraph itself. See generally, e.g., The Styles advantage in Word (support.microsoft.com: https://goo.gl/v8Jbej); Item 3 in the 2013 list of tips to avoid crashing Word, by John McGhie (answers.microsoft.com: https://goo.gl/VxqJKs). NOTE: McGhie's tip no. 2 is to avoid Track Changes, but I've never had a problem with it — at least so far as I know.

2. To create a heading, use Heading styles: Heading 1, Heading 2, etc.

The following apply mainly to the formatting of styles, but can be used with caution to format individual paragraphs:

3. On rare occasions, to adjust the line spacing within a specific paragraph, use the menu sequence: Format | Paragraph | Indents and Spacing | Spacing (almost smack in the middle of the dialog box on a Mac).

4. To adjust the spacing between paragraphs, use the menu sequence: Format | Paragraph | Indents and Spacing menu. Don’t use a blank line to separate paragraphs — adjust the spacing instead.) See generally Practical Typography: Spacing Between Paragraphs (PracticalTypography.com: https://goo.gl/vNjeKF).

5. To keep one paragraph on the same page with the following paragraph (which is sometimes useful), use the menu sequence Format | Paragraph | Line and Page Breaks | Keep with Next.

Here are some other tips:

6. A table of contents can be useful in a long contract. To create a table of contents, in the References tab, use the Table of Contents dropdown box and select Custom Table of Contents.

7. Tables can sometimes be useful in contracts. To remove the borders from a table (the way Word normally creates them), first use the menu sequence: Table | Select | Table. Then use the menu sequence: Format | Borders & Shading | Borders | None.

8. To copy and paste a short snippet from a Web page into a Microsoft Word document without messing up the formatting of the paragraph into which you’re pasting the snippet, use the menu sequence: Edit | Paste Special | Unformatted text. (Alternatively: Edit | Paste and Match Formatting.)

5.9 Potential quiz questions

1. QUESTION: How many points on your final grade can you earn for turning in all homework?

A: 150 points.

2. QUESTION: According to the syllabus, what could happen if you didn’t turn in any homework?
(a) You could still pass the course, but you'd have to make up the missing points.
(b) Your grade will be dropped by one letter, e.g., A- to B- etc.
(c) No adverse consequences, other than not getting the benefit of the work.
(d) You will not be able to accumulate enough points to pass the course.

A: A.

3. QUESTION: According to the syllabus, to what extent are you allowed to collaborate with classmates in doing homework, and what are you supposed to do if you do collaborate? Mutual consultation on homework is encouraged, but each student must do his or her own work.

A: Mutual consultation on homework is encouraged, but each student must do his or her own work.

4. QUESTION: Which is worth the most to your final grade:
(a) The homework.
(b) The mid-term quizzes, collectively.
(c) The final exam.
(d) Attendance.

A: A.

5. QUESTION: In Microsoft Word, what's the best way to put space between paragraphs for improved readability?
(a) Format the individual paragraph.
(b) Format the style of the paragraph.
(c) Include an extra blank paragraph.
(d) Indent the first line.

A: B.