Contract Drafting Class Notes – D. C. Toedt III

Please see the table of contents at the top right.

1 Preface

Updated Wed. Sep. 21, 2016   19:10 CST

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

2 September

2.1 Mon. Sep. 12, 2016

2.1.2 Homework

2.1.3 Class plan

2.2 Wed. Sep. 14, 2016

2.2.1 Reading

2.2.2 Homework: None

2.2.3 Class plan

2.3 Mon. Sep. 19, 2016

2.3.1 Homework due today (5 points total)

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

2.3.2 Reading

2.4 Wed. Sep. 21, 2016

2.4.1 Reading

• Sheryl Sandberg employment agreement (annotated)

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

2.4.3 Class plan

QUESTION 1: What are some ways of amending a contract

1. Pen and ink with initials and dates (not recommended)

2. An amendment document, with the title including (i) the title of the amended document, and (ii) the date of the amendment

3. Have the parties sign a complete, "amended and restated" document to replace the earlier document.

Dating each such document is important, especially if there are multiple amendments.

QUESTION 2: What is the difference between an offer letter and an employment agreement?

There might be no difference. An offer letter would normally disclaim any intent to be an "employment agreement" and would expressly state that employment is "at will" and not for a fixed term. BUT: Absent such language, in some jurisdictions an offer letter might be deemed an agreement for indefinite employment absent "cause" for firing.

QUESTION 3: Could an offer letter form a binding contract even if the employee didn't countersign it?

Yes – recall that an offer can be accepted by performance (those are referred to as "unilateral contracts.")

QUESTION 4: Why do you think Sandberg's employment agreement specifies where she will be based?

It has to do with whether she can get a golden parachute if the company moves to a different location — see lines 261-65 of the agreement.

QUESTION 5: Why does the Sandberg agreement state that she will report to Mark Zuckerberg?

If Sandberg were to be required to report to someone "below" Zuckerberg, that might be evidence of a material diminution in her responsibilities, which can be significant for golden-parachute purposes.

[MORE TO COME]

2.5 Mon. Sep. 26, 2016

2.5.1 Reading

2.5.3 Class plan

2.6 Wed. Sep. 28, 2016

2.6.1 Reading

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

2.6.2 Homework

No homework due today - quiz day.

2.7 Mon. Sep. 05, 2016

NO CLASS – LABOR DAY HOLIDAY

2.8 Wed. Sep. 07, 2016

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

2.8.2 Reading: Reps and warranties

Read the following Common Draft provisions and their commentary:

2.8.3 Class plan

3 October

3.1 Mon. Oct. 03, 2016

[To be announced]

3.2 Wed. Oct. 05, 2016

3.2.1 Reading

[To be announced]

3.2.2 Homework

None - quiz day.

3.2.3 Quiz

This will be done on Blackboard.

3.2.4 Exercise

[To be announced]

3.3 Mon. Oct. 10, 2016

3.3.1 Reading

[To be announced]

3.3.2 Homework

None - quiz day.

3.3.3 Exercise

[To be announced]

3.4 Wed. Oct. 12, 2016

3.4.1 Reading

[To be announced]

3.4.2 Homework

[To be announced]

3.4.3 Exercise

[To be announced]

3.5 Mon. Oct. 17, 2016

3.5.1 Reading

[To be announced]

3.5.2 Homework

[To be announced]

3.5.3 Exercise

[To be announced]

3.6 Wed. Oct. 19, 2016

3.6.1 Reading

[To be announced]

3.6.2 Homework

[To be announced]

3.6.3 Exercise

[To be announced]

3.7 Mon. Oct. 24, 2016

3.7.1 Reading

[To be announced]

3.7.2 Homework

[To be announced]

3.7.3 Exercise

[To be announced]

3.8 Wed. Oct. 26, 2016

3.8.1 Reading

[To be announced]

3.8.2 Homework

None - quiz day.

3.8.3 Quiz

This will be done on Blackboard.

3.8.4 Exercise

[To be announced]

3.9 Mon. Oct. 31, 2016

3.9.1 Reading

[To be announced]

3.9.2 Homework

[To be announced]

3.9.3 Exercise

[To be announced]

4 August

4.1 Mon. Aug. 22, 2016

4.1.1 Before class

Reading assignment: None.

Homework: None.

4.1.2 Housekeeping

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

4.1.4 Questions for discussion

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

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

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

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

4.1.6 Questions for small-group discussions

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

4.2 Wed. Aug. 24, 2016

4.2.1 Reading (yes) & homework (none)

Read:

Preamble of agreement (including the comments)

Signatures (including the comments and additional notes)

Ambiguity and vagueness

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

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

Homework: None.

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

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

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

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

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

4.2.4 Contract-reviewer etiquette (2): Formatting

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

QuESTION: How do you respond?

See WallOfTextReformat.

4.3 Mon. Aug. 29, 2016

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

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

4.3.2 Homework due today

4.3.3 Reading assignment and questions: A Somewhat-Barebones Contract

The reading assignment is here

4.4 Wed. Aug. 31, 2016

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

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

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

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

4.4.2 Reading: Payment terms

Read the following Common Draft sections and commentary:

4.1 (payment terms) through 4.5 (deposits)

4.8 (interest) and 4.9 (usury savings)

4.4.3 Class plan

• Exercise: Payment Terms 1

• Exercise: Grammar awkwardness – Safes

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

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

• Show: Signing the Wrong Line on The Japanese Surrender

5 Course information

5.1 Contact information; computer use; email addresses

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

5.2 Course goals, materials, assignments, etc.

5.2.1 Course goals

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

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

5.2.2 Course materials

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

5.2.3 Course approach

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

Homework assignments will be due on specified dates.

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

5.2.4 Homework

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

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

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

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

5.2.5 Collaboration

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

5.2.6 Deadlines

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

5.3 Grading: 1,000 points

5.3.1 Required average

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

5.3.2 Final exam: 400 points

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

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

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

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

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

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

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

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

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

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

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

5.3.4 Homework (pass-fail): 100 points total

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

5.3.5 Class attendance: 100 points

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

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

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

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

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

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

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

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

5.3.6 Class participation bump-up

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

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

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

5.4 Office hours

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

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

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

5.5 Recording my lectures

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