Contract Drafting (Toedt - Fall 2018)

Updated Monday December 03, 2018 13:10 Houston time

TODAY'S CLASS: Mon. Nov. 26

1 Preface, quick links, key dates

Welcome. This Web page is the portal for Professor Toedt's fall 2018 Contract Drafting course. See the following quick links:

KEY DATES:


Wed. Aug. 29: Homework 1 due (peer review, pass-fail)


Mon. Sep. 03: NO CLASS — Labor Day holiday

Wed. Sep. 05: Homework 2 due (peer review, pass-fail)


Wed. Sep. 12: Quiz 1


Wed. Sep. 19: Assign Homework 3, due Wed. Sep. 26 (peer review, pass-fail)


Mon. Sep. 24: Reshuffle the groups (TBD)

Wed. Sep. 26: Homework 3 due (peer review, pass-fail)


Wed. Oct. 03: Quiz 2


Wed. Oct. 17: Homework 4 due (peer review, pass-fail)


Wed. Oct. 24: Quiz 3


Mon. Oct. 29: Homework 5 due (DCT grading, not pass-fail)

Mon. Oct. 29: Reshuffle the groups

Wed. Oct. 31: Homework 5 due (DCT grading, not pass-fail): [NEW:] Complete draft of Gigunda-Math Whizzes contract


Wed. Nov. 07: Homework 6 due (peer review, pass-fail) [NEW:] Redline of "the other side's" Gigunda-Math Whizzes contract draft


Mon. Nov. 12: Homework 7 due (DCT grading, not pass-fail): [NEW:] Each team's proposed final draft of the Gigunda-Math Whizzes contract. I want to see the following:

  1. what you've agreed to — for those points, accept the other side's redlines;
  2. where you've decided to hold the line — for those points, leave in the other side's redlines; and
  3. in Word comment bubbles, any explanations you care to offer about why you did what you did in #1 and 2 (not mandatory).

Wed. Nov. 14: [NEW:] No class – DCT on business travel


Mon. Nov. 19: Quiz #4 Last day of class if makeup day is not needed

Wed. Nov. 21: NO CLASS — Thanksgiving holiday


Mon. Nov. 26: Last day of class if makeup day is needed


Wed. Dec. 05: FINAL EXAM (6 p.m to 7 p.m., both sections, Room 111 TU II)

2 General course information

2.1 Course materials

The main reading material will be:

On Contract Drafting, still very much a work in progress (especially as we shift to doing more rewriting). 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. Students are encouraged to make suggestions and comments as the semester progresses;

• the Common Draft annotated catalog of contract terms, a side project of mine that I'm converting into a book; and

• a Supplement, consisting of several real-world contracts that I've annotated and printed to PDF. We'll study selected portions of these contracts.

2.2 This course's approach

2.2.1 Social proof: Past student comments

Following the sales-and-marketing principles of (i) using social proof, and (ii) "setting the hook," here are some representative student comments from official course evaluations in past semesters:

• "I liked the practical approach of the course – very effective teaching technique by using repetition and in class exercises."

• "You learn piece by piece the process throughout the semester to be able to effectively draft/redline contracts."

• "His course is different from the norm and his methods are re­freshing. … Professor Toedt's approach allows students to figure out the issue on their own but provides students with the tools necessary to reach an answer (which he then explains/corrects)."

• "… really enjoyed the approach to class and quizzes."

2.2.2 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.

2.2.3 A variation on Socratic method, with in‑class study groups

Don't assume that we will "cover the material" in class. Instead, we'll use a supposedly-new approach known as "flipping the classroom." This approach has become popular in educational circles, 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).

But flipping the classroom is really just the same thing that law schools have been doing for years: The concept 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).

2.2.4 More contract revising than drafting

In this course, we will practice good drafting skills by revising the work of others. Specifically:

  • Each week, in small groups during class, we will spend significant class time studying and rewriting selected "wall of words" contract provisions from publicly-available contracts.
  • As students do their rewriting, I will walk around and look over their shoulders, sometimes making (quiet) comments.
  • In some cases, you'll be asked to clean up your rewrites after class and submit them as (pass-fail) homework, which I'll mark up with comments.

The specific provisions that we rewrite will cover various substantive areas that are often encountered in contract drafting and -review.

This review-and-revise approach reflects what you're almost certain to see when you start out in practice: 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, whoever you're working for will almost always tell you to find a previous form of agreement and modify it, instead of starting from scratch with a blank screen. Our approach in this course reflects that fact as well.

Social proof: In a past semester, one student said:

At first, I was disappointed that the amount of writing was small. [That's no longer the case: We do a lot of REwriting.] 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.

2.2.5 Learning to spot and root out ambiguity

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

2.2.6 Repetition, repetition, repetition — and (some) jumping around

Some of the short exercises and quizzes will seem repetitive; they also will seem to jump around from topic to topic. This is a feature, not a bug, because:

  • 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).

This approach might strike a few students as disorganized. Over the years, though, most students seem to have come to appreciate the value of the approach.

Incidentally, you can do your own spaced-retrieval practice by using the online flashcards. The in-class quizzes and the non-essay portions of the final exam will be drawn very largely from these flashcard questions.

2.2.7 Subject to change

Portions of this syllabus are very likely to be revised in the course of the semester, because:

  • we will take advantage of recent news, court cases, etc. For example, when the Stormy Daniels story broke, I searched for and found her nondisclosure agreement with "David Dennison," and the class studied and critiqued it;
  • different class sections progress at different rates; and
  • sometimes I'll "call an audible" to try to get information across more effectively.

Occasionally a student won't like this, preferring that the course's content instead be set in stone for the semester. But in your law practice, you're highly unlikely to have your weeks or months set in stone, because clients, partners, and judges have a way of inconveniently barging in on your calendar. (The majority of students seem to be OK with the course's approach in this regard.)

2.2.8 Typical class session

Our typical class session will go generally as follows, with possible variations from time to time:

  1. Only on certain Mondays: a short Blackboard quiz;
  2. Sometimes, brief "in the news" discussions, to give students a sense of what kinds of situations they and their clients are likely to encounter;
  3. Sometimes, small-group and whole-class discussion of the reading;
  4. Review of the homework (if applicable);
  5. Two or three short exercises;
  6. One or more rewriting exercises and/or longer discussion exercises;
  7. Sometimes, a preview of upcoming exercises;
  8. Sometimes, group discussion of lessons learned.

2.3 Extra class time to avoid a makeup class

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, such as what was supposed to have been the first day of class in January 2018. (And on the evening of Game 7 of the 2017 World Series, we canceled the evening class.)

The ABA requires 700 minutes of instruction for each credit hour; that means we need 2,100 minutes of instruction for our three-hour course. I'm planning on 26 scheduled class meetings — in case the Astros get to the World Series again, because Game 7 is on Wednesday, October  31 — and so we must achieve the needed minutes of instruction by either:

  1. meeting for 80 minutes per class;
  2. meeting on one of our scheduled makeup days, which will all be on Fridays at the same time as the regular class period;* and/or
  3. as permitted by ABA rules: doing a few classes (up to one-third) by online discussion group — I haven't figured that out yet, so more details will come later.

* Makeup Fridays for missed Monday classes, in the same time slot as Monday, are Aug. 31; Sept. 28; and Oct. 26. For missed Wednesday classes, the makeup Fridays are Sept 14; Oct. 12; and Nov. 9.

Very few students want to come to a makeup class on a Friday afternoon or ‑evening. So as an alternative to makeup classes, and as recommended by the Law Center's administration:

  • we will end each class session at 5:20 p.m. and 7:20 p.m., respectively; and
  • we will do some "asynchronous" instruction, e.g., by email and/or Blackboard.

2.4 Last-day agenda

The last day of class will generally include:

  • Pizza for the section (4:00 p.m. or 6:00 p.m.) that has the highest average for the quizzes; and
  • An overview of the final exam plan;
  • A collaborative review of key concepts, using the virtual whiteboards to create a master outline for each group — the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section );
  • A group discussion of what would make the course and/or the materials more useful to next semester's students, and what didn't work so well, again using the virtual whiteboard;
  • Course evaluations, using the UH online system;
  • As one last review: a Jeopardy! game.

2.5 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 many of the in-class exercises. If this will be a problem, be sure to contact me well in advance.

(You might, however, want to rethink whether to use laptops in your other classes; see, e.g., this article by a professor at the University of Michigan about how classroom laptop users not only do worse than those who take notes by hand, they also interfere with the learning of non-laptop users around them.)

» 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.

2.6 Office hours

As an adjunct professor, I generally don't come to the school except to teach class. By appointment, I'm happy to meet with students:

  • in person before or after class;
  • by Skype or Zoom.us video; and/or
  • by phone.

I respond pretty quickly to email questions.

2.7 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.

2.8 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 (http://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. Go to http://www.uh.edu/caps/outreach/lets_talk.html for more information.

3 Small-group assignments

The first grouping is alphabetical. The groups will be reshuffled twice during the semester; the reshuffling will be more-or-less random, but with due regard for giving all students an opportunity to work with different people.

3.1 Starting Monday August 20

3.1.1 4:00 p.m. section

GROUP 1: Barham, Betancourt, Brook, Felton

GROUP 2: Francis, Gutierrez, Hays, Hynes

GROUP 3: Karim, Meltser, Mouer, Ortegon

3.1.2 6:00 p.m. section

GROUP 1: Amert, Baker, Bennett, Blackburn

GROUP 2: Fields, He, Hecht, Kuaiwa

GROUP 3: Pace, Rodriguez, Russell, Scott

3.2 Starting Monday Sept. 24

To be determined after adds and drops are complete.

3.3 Starting Monday Oct. 29

To be determined after adds and drops are complete.

4 Reading assignments

4.1 Flashcards as "reading assignments"

In addition to the reading assignments below, be sure to look through the flashcards to find the ones related to the reading assignment — because:

  • the midterm quizzes and part of the final exam will be based in large part on these and future flashcards; and
  • by having to scan through the flashcards, in search of the specific flashcards relating to the reading material, you'll get a preview of upcoming concepts and thus help you get yourself up to speed more quickly.

4.2 Reading for Week 1 (Mon. Aug. 20)

4.3 Reading for Week 2 (Mon. Aug. 27)

Ambiguity, the bane of contract drafter

Signature blocks

Serve the reader

Mnemonics

In the Supplement: "A Somewhat-Barebones Contract" — spend some time reading this, especially the notes, to start getting a feel for one possible contract format.

4.4 Reading for Week 3 (Mon. Sept. 3)

Getting paid

Key takeaways about reps and warranties

Differences between reps and warranties

Scan through the rest of the reps-and-warranties chapter

Look over, in the Verizon-Yahoo stock purchase agreement, just the following: Articles II and III (representations and warranties); section 8.16 (disclosure schedules). Note in particular how disclosure schedules tie in with reps and warranties.

Also in the Verizon-Yahoo stock purchase agreement, look over section 2.15, a set of reps and warranties about real estate; we'll rewrite that section in class next week.

4.5 Reading for Week 4 (Mon. Sept. 10)

Acknowledgments (not the notary-public kind)

Acknowledgements (yes, the notary-public kind)

Indemnities

Indemnity- and defense procedures (Common Draft provisions)

Standards — reasonable efforts, etc. Also: In this article, look over just (i) the part with the chart including "35 mph," and (ii) the paragraph immediately preceding the chart. Think about:

  • what might constitute "unreasonable" action such as, say, unreasonable withholding of consent to assignment of the agreement); and
  • how a drafter, representing a party that might seek consent, might try to negotiate a workable arrangement.

Stanford-Tesla lease: Scan through it in the Supplement, especially the annotations.

4.6 Reading for Week 5 (Mon. Sept. 17)

Assignment of agreement

Acknowledgements (the notary-public kind)

Conspicuousness

Discretion

Section 1.8 of Getting a Workable Contract to Signature Sooner, which lays out a methodical approach to scenario identification and planning.

4.7 Reading for Week 6 (Mon. Sept. 24)

Scan through Writing, Briefly, by Paul Graham, noted essayist and multi-millionnaire co-founder of famed tech startup accelerator Y Combinator in Silicon Valley. His short essay breaks several rules but is worth reading.

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).

4.8 Reading for Week 7 (Mon. Oct. 1)

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.

Ross Guberman, Five Ways to Write Like Justice Kagan (LegalWritingPro.com Mar. 20, 2018)

4.9 Reading for Week 8 (Mon. Oct. 8)

Independent contractors

Audits

Background checks

Sheryl Sandberg employment agreement: Scan through it in the Supplement, especially the annotations.

4.10 Reading for Week 9 (Mon. Oct. 15)

Insurance:

Honeywell insurance provisions:

10.1. [excerpt:] Title to any material, components, tooling, equipment, or technical data that Honeywell pays for or provides to Supplier or is responsible for providing to Supplier, including replacements ("Honeywell Property"), will remain or vest with Honeywell.

10.2 [excerpt:] Supplier will not include the cost of any insurance for Honeywell Property in the prices charged under this Purchase Order and, to the extent that any Goods contain any Honeywell Property, will not include in the price of any such Good any mark-up or fee with respect to such Honeywell Property.

 * * * 

24. Insurance

Supplier will maintain and carry liability insurance in an amount no less than the greater of

(a) the minimum amount required by applicable law, or

(b) the following coverages:

  • commercial general liability (including product liability and, for services to be performed, completed operations liability) in a sum no less than $5 million,
  • automobile liability in a sum no less than $5 million,
  • worker's compensation in an amount no less than the applicable statutory minimum requirement, and
  • employer's liability in an amount of no less than $5 million,

all with insurance carriers with an AM Bests rating of no less than A- or equivalent.

In addition, Supplier is responsible for maintaining an adequate level of insurance to cover any potential losses due to damage to Honeywell Property, as defined in Section 10.

All insurance required by this Section must cover Honeywell, its subsidiaries and affiliates, and their respective officers, directors, shareholders, employees and agents as additional insureds.

Before delivery of any Goods or commencement of any services under the Purchase Order, Supplier will provide to Honeywell evidence that Seller maintains the described insurance,

and that the coverage will not be changed without 30 days advance written notification to Honeywell from the carrier(s).

Except where prohibited by law, Supplier will require its insurers to waive all rights of recovery or subrogation against Honeywell, its subsidiaries and affiliated companies, and its and their respective officers, directors, shareholders, employees, and agents.

The amount of insurance carried in compliance with the above requirements is not to be construed as either a limitation on or satisfaction of the indemnification obligation in this Purchase Order.

 * * * 

40. Survival

All provisions of this Purchase Order which by their nature should apply beyond its term will remain in force after any termination or expiration of this Purchase Order including, but not limited to, those addressing the following subjects: Import/Customs Compliance, Drawback, Offset, Honeywell-Supplied Materials, Tooling, Equipment and Technical Data, Price, Price: Most Favored Customer and Meet or Release, Invoicing and Payment, Set Off, Warranty, Cessation of Production, General Indemnification, Intellectual Property Indemnification, Insurance, Lien Waivers; Confidentiality/Data Privacy and Intellectual Property, Audit, Relationship Between the Parties/Independent Contractor, Applicable Law and Forum, Publicity, Waiver, and Survival.

4.11 Reading for Week 10 (Mon. Oct. 22)

Governing law

Confidential information

Letters of intent

Master agreements

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.

4.12 Reading for Week 11 (Mon. Oct. 29)

4.13 Reading for Week 12 (Mon. Nov. 05)

5 Homework

Peer-reviewed, pass-fail homework ("PR"), finishing up exercises that we start in class, will be due as follows, along with :

Wed. Aug. 29: Stanford-Tesla lease triple-net lease (PR)
Wed. Sept. 05: Consulting-agreement warranties (PR)
Wed. Sept. 26: Indemnity-provision breakup (PR)
Wed. Oct. 17: TBA (PR)
Mon. Oct. 22: TBA (25 points, not pass-fail)
Wed. Nov. 7: TBA (PR)
Mon. Nov. 12: TBA (25 points, not pass-fail)

Each of these five short writing assignments will be done as follows:

  1. The assignment will be started in small-group discussions in class.
  2. Each student is to finish up the assignment individually on his- or her own.
  3. Each student is to bring a hard copy of the finished assignment to the next class with their names on the papers.
  4. In that (next) class, the small groups will exchange papers, so that (for example) Group  3 will critique Group 2's papers, Group 2 will critique Group 1's papers, and Group 1 will critique Group 3's papers. Reviewers are to write their names on the papers they review.
  5. Students will turn in their hard-copy papers with their names on them.
  6. I will glance over the papers but won't necessarily review in detail. I will be looking at the reviewers' comments as well as at the writing assignments.
  7. The only ways to lose points for the assignment are (i) not to turn in a paper at all, and (ii) not to make at least a good faith effort at both writing and reviewing.

6 Grading: Quizzes, final exam, etc.

6.1 School-required average: 3.0 to 3.4

As required by law school policy for a writing class, raw grades will be adjusted pro­por­tion­al­ly to the extent necessary to make the average of the final class grades fall within the range specified in the heading of this section. (My usual practice — but not a guaranteed one — is to "move the curve" up or down as necessary so that the average is as close as practicable to the high end of the required range.)

6.2 Final grade based on 500 total points earned

Your course grade will be based on how many points you earn out of 500 total possible points, as explained below.

6.3 Class attendance: 50 point "starting bonus" — which can be lost for non‑attendance

The class attendance policy arises from the fact that 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.*

* Notice how it’s a significant amount of discussion, versus a significant number of exercises, as explained in the Grammarist.com discussion.

Consequently, it's important for all students to attend each class, not just for their own benefit, but so that their teams won't be shorthanded.

ABA accreditation rules and school policy require attendance at 80% of the class meetings for each course. We will meet a total of 26 times; rounding to the nearest whole number of classes, a student therefore must attend at least 21 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
1 0
2 5
3 15
4 30
5 or more all 50

This means, of course, that students who miss more than one 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 up to two absences for illness — if you're ill, please don't come to class and infect the rest of us. Please email me if you'll be absent for illness; I'll take your word for it without a doctor's note.
  • Other absences, e.g., for job interviews, office visits, work trips, etc., will be counted as missed classes and will lose points as set forth above; please schedule accordingly.

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

For regular "classroom" sessions, I no longer let students attend remotely, because experience has shown that realistically, remote attenders don't participate in the class discussion.

6.4 Quizzes: Every third Wednesday; 200 points total

We will have an on-line quiz, administered via Blackboard, at the beginning of class on the following Wednesdays:

Wed. Sept. 12
Wed. Oct. 03
Wed. Oct. 24
Wed. Nov. 14

Each quiz will:

  • be timed for five- to ten minutes (people with accommodations can get extra time — ask Dean Tennessee to let me know if you're one of those people);
  • consist of up to 40 true-false, multiple-choice, fill-in-the-blank, and "micro-essay" (short answer) questions, and very likely more questions than most people can answer in the allotted time;
  • cover only the following:
    • the readings assigned up through and including the quiz date, whether or not we discuss any particular topic in class;
    • the associated online flashcards at https://goo.gl/o5gG5M; and
    • anything in the in-class and homework exercises that we have done to date — the quizzes themselves will thus serve as a reinforcing review that takes advantage of the testing effect;
  • be closed-book, closed-notes;
  • be graded largely anonymously:—
    • For "quizzes" in Blackboard, the Blackboard software shows me students' names. I can't do anything about that, but Blackboard also automatically grades the true-false, multiple-choice, and fill-in-the-blank ("FITB") questions.
    • In the Blackboard "quizzes," I review the fill-in-the-blank answers so that I can give credit for simple misspellings, which Blackboard can't always pick up. (I program the quizzes on Blackboard to accept as many misspellings as I can think of, but you'd be surprised how … creative students can be ….).
    • If a quiz includes any micro-essays, you'll submit it in the form of an "assignment" on Blackboard; I configure such assignments so that I don't see students' names until I've graded all of the assignments.

In past quizzes, a few students have gotten the right answer to every question on every quiz. In response, one student suggested that I should "[d]esign quizzes to have a wider score dis­tri­bu­tion." I continue to try to do so, but I'm far more interested in having as many students really learn as much as possible of what I regard as necessary material, than I am in sorting the students into a grade distribution; consequently, I'm not at all unhappy if lots of students get perfect scores on the quizzes.

6.5 Homework: 100 points

See here for the assignments and points

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 pass-fail homework assignments.

6.6 Final exam: 100 points

The final exam will be December 5, 2018, 6 to 7 p.m. (both course sections). The exam will:

  • be one hour in length;
  • consist in large part of what amounts to a mid-term quiz on steroids, namely true-false, multiple-choice, fill-in-the-blank, and "micro-essay" (short answer) questions, administered via Blackboard, drawn or adapted mainly from the online flashcards at https://goo.gl/o5gG5M (I will be adding to these flashcards as the semester progresses);
  • take place in the to-be-designated final-exam room; and
  • be closed-book, closed-notes open-everything — but you have to do your own work.

What's fair game for the final exam? Anything:—

  • in the reading materials;
  • in the homework, quizzes, and in-class exercises.

[NEW 12/3/18:] There will be at least a couple of questions where you'll be asked to issue-spot a contract provision from the perspective of a particular side of the table (e.g., as though you're representing a customer or a vendor). See the class plan at 10.3.2 and 10.3.3 for examples.

The honor code will of course apply.

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.

7 Detailed class plans: August

7.1 Class 1: Mon. Aug. 20

7.1.1 Small groups

See here

7.1.2 Ambiguity exercise: Lola, by The Kinks

From The Kinks' famous song Lola (YouTube):

Well I'm not the world's most masculine man
But I know what I am and I'm glad I'm a man
And so is Lohhh-lahhh
Lo lo lo lo Lohhh-lahhh. Lo lo lo lo Lohhh-lahhhh

(Emphasis added.)

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

EXERCISE: In your small groups, discuss how this could be clarified (don't worry about rhyme or meter).

7.1.3 Exercise: Streamlining sentences

In your small groups, discuss how to trim out the "fat" from the following sentence:—

Before:  
The team held a meeting to give consideration to the issue.

After: ???

7.1.4 Course startup

  1. Student introductions:
    • Name
    • 2L? 3L? LLM?
    • Career intentions
    • Undergraduate school & degree
    • Work experience
    • Previous contract experience
  2. Provide email addresses in the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section )
  3. First in-class exercise: Where did Professor Toedt go to law school, and what did he do between college and law school? Reason: 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.
  4. PSA requested by the University: Counseling is available.

7.1.5 Review questions about the course info

In your small groups, discuss the following — feel free to look up whatever you need to in the general course information.

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

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. [2]

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? [3]

4. 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 line.
D. Indent the first line. [4]

7.1.6 Thumbsucker questions: Goals, etc.

For discussion, in small groups:

  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 do you think is likely to be the worst bottleneck in getting a contract to signature?
  5. What kind of contract language do you think business lawyers should aspire to write?
  6. TRUE OR FALSE: A contract drafter should strive to anticipate and address all harms to the client that might occur in the course of the parties' relationship.

7.1.7 Preview question: Vagueness vs. ambiguituy

QUESTION: What is a "vague" term? What is an "ambiguous" term?

7.1.8 Exercise: Selling your laptop

FACTS: You are a new lawyer, licensed to practice in Texas. Here in Houston, "Alice"* is selling her 2012 Macbook Air laptop computer to "Bob" for USD $ 500. You represent Bob, who has asked you to draw up a  contract for the sale.

* In the tech world, communications protocols are often illustrated by using fictional characters Alice, Bob, Carol, Dave, Eve, Fred, etc.)

EXERCISE: In Microsoft Word, put together the simplest bare-bones contract you can think of for this transaction.

7.2 Class 2: Wed. Aug. 22

7.2.1 Exercise: Ten basic writing rules

INSTRUCTIONS:

  • Quickly review the ten basic writing rules (you've already looked them over once, right?)
  • In the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ), compile a list of what you regard as:
    • the two rules that, in your view, you're most likely to see others violate; and
    • the two rules that you think you're most likely to violate.

7.2.2 Short exercise: Drafting problems with a contract (1)

From a contract drafted by The Other Side of a deal (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").

QUESTIONS:

  1. Any drafting problems with this?
  2. Ignoring the substance, how might this be otherwise improved to make it more readable?

ANSWERS: (DCT to show his version)

7.2.3 Short exercise: Streamlining sentences (2)

How can this be streamlined?

Before:   We will make a distribution of shares.

After:  

7.2.4 Read-along lecture: Rewriting a wall of words

7.2.5 Rewriting exercise

On your own computer (i.e., not in your virtual whiteboard), break up the following, which is from a Collaborative Research and License Agreement between Pfizer and Rigel Pharmaceuticals:

EDITED 1/29/18: We'll take this one step at a time.

9.2.12 PATENTS AND TRADEMARKS. To the best of its knowledge (but without having conducted any special investigation), Rigel owns or possesses sufficient legal rights to all patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, and proprietary rights and processes (including technology currently licensed from Stanford University) necessary for its business as now conducted and as proposed to be conducted without any conflict with, or infringement of the rights of, others. Rigel currently licenses certain technology from Stanford University (the "Licensed Technology") on an "as is" basis, with no representation or warranty from Stanford University that such technology does not infringe the proprietary rights of others. To Rigel's knowledge, Rigel has not, as of the date hereof, received any claims from any third party alleging that the use of the Licensed Technology infringes the proprietary rights of such party. Except for agreements with its own employees or consultants and standard end-user license agreements, there are no outstanding options, licenses, or agreements of any kind relating to the foregoing, nor is Rigel bound by or a party to any options, licenses, or agreements of any kind with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, and proprietary rights and processes of any other person or entity, other than the license agreements with Janssen Pharmaceutica N.V., Stanford University, SUNY, and BASF. Rigel has not received any communications alleging that Rigel has violated or, by conducting its business as proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights, trade secrets, or other proprietary rights or processes of any other person or entity. Rigel is not aware that any of its employees is obligated under any contract (including licenses, covenants, or commitments of any nature) or other agreement, or subject to any judgment, decree, or order of any court or administrative agency, that would interfere with the use of such employee's best efforts to promote the interests of Rigel or that would conflict with Rigel's business as proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of Rigel's business by the employees of Rigel, nor the conduct of Rigel's business as proposed, will, to the best of Rigel's knowledge, conflict with or result in a breach of the terms, conditions, or provisions of, or constitute a default under, any contract, covenant, or instrument under which any of such employees is now obligated. Rigel is not aware of any violation by a third party of any of Rigel's patents, licenses, trademarks, service marks, tradenames, copyrights, trade secrets or other proprietary rights.

7.3 Class 3: Mon. Aug. 27

7.3.1 Short exercise: Streamlining sentences (3)

Consider the following sentence — each student is to rewrite the sentence in Microsoft Word; we'll then compare notes. [EDIT 8/27: Just discuss with your group; don't rewrite]

Before:   We will provide appropriate information to shareholders.

After:

7.3.2 Short 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.)

7.3.3 Continue last week's rewriting exercises (if necessary)

We'll continue the rewriting exercise that we started last Wednesday, one step at a time.

7.3.4 The Rigel wall of words: DCT's rewrite

Here's how I might rewrite the Rigel representations and warranties below, with selected revisions "redlined": [DCT to show on his computer]

Here it is again without the redlines: [DCT to show on his computer]

7.3.5 Ambiguity takeaways: A whiteboard exercise

Using the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ), compile a list of key takeaways from Ambiguity, the bane of contract drafter.

7.3.6 Ambiguity exercise: Success

From a Facebook posting: "A man's success has a lot to do with the kind of woman he chooses to have in his life. (Pass this on to all great women.)"

QUESTION: What's a different interpretation of this quote?

7.3.7 Ambiguity exercise: An elephant takes a selfie?

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

EXERCISE: Rewrite.

7.3.8 Ambiguity and traffic signs

See this sign.

7.3.9 Step by step simplification

Start on this exercise.

7.4 Class 4: Wed. Aug. 29

7.4.1 News: A CarMax warranty limitation

TEXT: In California, an automobile sales contract disclaimed implied warranties beyond the remedies set forth in an express warranty, which stated: “The dealer will pay 100% of the labor and 100% of the parts for the covered systems that fail during the [30-day] warranty period." The contract also limited the customer's remedies to those stated in the contract. Gutierrez v. CarMax Auto Superstores California LLC, No. F073215, slip op. at 12 (Cal. App. Jan. 30, 2018).

FACTS: Gutierrez bought the car on May 5, 2013. The car started having transmission problems, including making a grinding noise and having trouble accelerating in traffic. Gutierrez took the car to the dealer for warranty work on June 7. See id., slip op. at 5.

QUESTION 1: Was the transmission trouble covered by the warranty?

QUESTION 2: If CarMax engaged you to review the warranty provision, what if any advice might you give about its wording? (Hint: Consider the problems of proof.)

7.4.2 Exercise: Preamble questions (Rick's Cabaret)

The provision below, at https://goo.gl/DRbLRw (edgar.sec.gov), is from a 2008 real-estate purchase agreement involving the parent company of "gentleman's club" Rick's Cabaret:

THIS REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered into by and between WIRE WAY, LLC, a Texas limited liability company ("Seller"), and RCI HOLDINGS, INC., a Texas corporation ("Purchaser"), pursuant to the terms and conditions set forth herein.

QUESTION: What if any other information might you want to include in this preamble?

7.4.3 Discussion: Title and preamble (Stanford-Tesla lease)

COMMERCIAL LEASE

THIS LEASE is entered into as of July 25, 2007 (the “Effective Date”), by and between THE BOARD OF TRUSTEES OF THE LELAND STANFORD JUNIOR UNIVERSITY, a body having corporate powers under the laws of the State of California (“Landlord”), and TESLA MOTORS, INC., a Delaware corporation (“Tenant”).

1.  BASIC LEASE INFORMATION. The following is a summary of basic lease information. Each item in this Article 1 incorporates all of the terms set forth in this Lease pertaining to such item and to the extent there is any conflict between the provisions of this Article 1 and any other provisions of this Lease, the other provisions shall control. Any capitalized term not defined in this Lease shall have the meaning set forth in the Glossary that appears at the end of this Lease.

Address of Premises: 300 El Camino Real, Menlo Park, California

Term: Five (5) years

Scheduled Date for Delivery of Premises: August 1, 2007

Commencement Date: August 1, 2007

Expiration Date: July 31, 2012

Base Rent:

Year One: $60,000 ($5,000 per month)
Year Two: $90,000 ($7,500 per month)
Year Three: $120,000 ($10,000 per month)
Year Four: $165,000 ($13,750 per month)
Year Five: $165,000 ($13,750 per month

QUESTIONS FOR CLASS DISCUSSION:

  1. Is "Commercial Lease" the proper term, or should it be "Commercial Lease Agreement"? [5]
  2. Why state that the Lease is entered into "as of July 25, 2007"? [6]
  3. Why do you think the names of the parties are capitalized? [7]
  4. What might be some of the pros and cons of including this kind of "Basic Lease Information" at the beginning of the agreement document, instead of including it "in-line" in the appropriate section(s) of the agreement? [8]
  5. To what extent is the "Each item in this Article 1 incorporates …" worth including? [9]
  6. What could go wrong with the italicized portion, "to the extent there is any conflict …"? [10]
  7. Note the mention of the Glossary in the last sentence of the first paragraph — where are some other places to include definitions for defined terms? [11]
  8. Any comments about the way the "Term: Five (5) years" portion is stated? How about the way that the Base Rent amounts are stated? [12]

7.4.4 News: AAA accused of wage shorting

Source: L.M. Sixel, Tow driver says AAA shorts him and others on wages (HoustonChronicle.com Jan. 29, 2018)

Relevance: Just because a contract says, The parties are independent contractors, that doesn't mean a court will rule that way — especially if one of the parties claims to be an employee of the other.

Additional reading (optional for now): Here.

7.4.5 Exercise: Streamlining sentences (5)

How could the following be streamlined?

Before:   There is the possibility of prior Board approval of these investments.

After:

7.4.6 Grammar fail: Homosexuality and the Texas GOP's platform (2016)

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.

7.4.7 Exercise: Title and preamble (consulting agreement)

Read:

The provision below comes from an agreement form used by a company in the oil and gas business:

Consulting Services Agreement

This Consulting Services Contract (the "Agreement") dated [omitted] is entered into by and between [omitted], a Delaware corporation, and its affiliate companies (collectively "Company") and [omitted], a Texas corporation ("Consultant"), sometimes referred to herein individually as a "Party" or collectively as "Parties". This Agreement shall be effective on the earlier of the date that the services commence or the date that both Parties have executed the Agreement (the "Effective Date"). This agreement is entered into solely between the Company and Consultant, and no third party beneficiaries are created, except as expressly otherwise provided herein. [Emphasis added.]

QUESTIONS FOR CLASS DISCUSSION:

  1. What if any other information might you want to include in the preamble?
  2. Any thoughts about "and its affiliate companies"?
  3. At the end of the first sentence, is the period where it should be for U.S. usage?

7.4.8 Recitals (Rick's Cabaret)

The provision below, at https://goo.gl/DRbLRw (edgar.sec.gov), is from a 2008 real-estate purchase agreement involving the parent company of "gentleman's club" Rick's Cabaret:

You're to 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 we're studying now, Wire Way LLC would sell the land and building to RCI Holdings, Inc., which also was [and is] a subsidiary of Rick's.

IN-CLASS 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:

7.4.9 Start Homework #2 (peer review, pass-fail)

We'll get started on Consulting-agreement warranties.

8 Detailed class plans: September

8.1 Class 5: Wed. Sept. 5

8.1.1 Collect additional email addresses

If you didn't type your email address into the the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ), please email it to me at dc@toedt.com so I can add it to the class Google Group email list. If you're not on that email list, you'll miss important announcements.

8.1.2 Homework #2 markup (peer review)

First: DCT to show his markup (hidden):

Second: Exchange papers and discuss within your groups. (We won't be doing inter-group exchange, based on experience the first time.)

Third: Discuss:

  • any common errors; and
  • substantive issues.

8.1.3 Reps and warranties review: Differences (1)

In your groups, diagram the proof paths for misrepresentation claims involving the following representations:

  1. Consultant represents that, so far as Consultant is aware, Consultant's employees are skilled.
  2. Consultant represents that Consultant's employees are skilled.
  3. Consultant warrants that Consultant's employees are skilled.
  4. Consultant represents and warrants that Consultant's employees are skilled.

8.1.4 Exercise: Reps and warranties strategy

FACTS: You are selling a car to a stranger. You don't know of any mechanical problems.

QUESTION: If the stranger asks you to represent and warrant that the car has no problems, how might you respond?

8.1.5 Continue with Alice-Bob laptop sale contract

Now that you've had some exposure to representations and warranties, resume drafting the laptop-sale contract between Alice and Bob.

  • Remember that you're representing Bob, the buyer;
  • In asking for Alice to agree to provisions, consider the balance between:
    • protection against theoretical risks;
    • the harm that could result if one or more of those risks came to pass; and
    • Bob's (presumed) desire to get to signature quickly.

8.2 Class 6: Mon. Sept. 10

8.2.1 Dry-run quiz to test Blackboard (zero points)

Wednesday would not be the time to find out that you don't have access to this course on Blackboard ….

8.2.2 Reading review

In your groups, discuss:

  1. What are the two kinds of certificates that notaries public [cf. "attorneys general"] typically sign?
  2. What's a simpler term for "indemnify"?
  3. FACTS: A) Alice acknowledges that she had the opportunity to consult a lawyer before signing a contract with Bob. B) In a lawsuit against Bob under the contract, she claims that she wasn't able to consult a lawyer. QUESTION: What result (normally)?
  4. Suppose that Alice promises to indemnify Bob against third-party claims. Now suppose that Carol sues Bob. QUESTION: Must Alice pay for Bob's defense?
  5. FACTS: A) You represent Alice in negotiating a contract with Bob. B) Alice is unsure that she can actually perform one of her obligations, so Bob asks her to commit to making her "best efforts" to do so. QUESTION: What do you advise Alice, and why?
  6. Is there any significant difference between "reasonable efforts" and "commercially-reasonable efforts"?

8.2.3 Yahoo-Verizon real-estate reps and warranties

In class, we'll rewrite section 2.15 of the Verizon-Yahoo stock purchase agreement; this is a set of reps and warranties about real estate.

DCT's version follows. NOTE: I numbered the paragraphs as "(a1)" etc., for easier back-and-forth comparison with the original. A better way would have been (a), (b), etc. — or, perhaps even better still, as (1), (2), etc.

2.15 Real Property

(a1)     Except as provided below, the term "Lease" refers to a material lease (or a material sublease*) under which Seller —* to the extent related to the Business — or any of the Business Subsidiaries leases or subleases real property (the "Leased Real Property").

[Alternative: "Except as provided below, the term "Lease" refers to a material lease (or a material sublease*) under which real property (the "Leased Real Property") is leased or subleased* by Seller —* to the extent related to the Business — or any of the Business Subsidiaries."

(a2)     The term "Lease" does not include leases or subleases for data centers.

(a3)     The term "Default" refers to (i) a default under a contract or other obligation; and/or* (ii) the occurrence of one or more conditions or events that, after notice or the lapse of time or both, would constitute such a default.

(a4)     The "Material Default" refers to any Default other than one or more Defaults that, individually or in the aggregate, would not reasonably be expected to have a Business Material Adverse Effect.


(a5) Each Lease is in full force and effect.

(a6)     Seller or the applicable Business Subsidiary (each, a "Seller Tenant") has good and valid leasehold title in each parcel of the Leased Real Property pursuant to the relevant Lease or Leases.

(a7)     Each Seller Tenant's leasehold title* is free and clear of all Encumbrances other than Permitted Encumbrances, except in each case where such failure would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

(a8)     There are no Material Defaults by Seller, nor by any Business Subsidiary, under any Lease.

(a9)     To the Knowledge of Seller,* there are no Material Defaults, under any Lease,* by any other party to that Lease.


(b1)     Seller and/or* the Business Subsidiaries have good and marketable title to all of the real property owned in fee by Seller (to the extent related to the Business) or any of the Business Subsidiaries (the “Owned Real Property”).

(b2)     Each real-property title referred to in subdivision (b)(1) is free and clear of any Encumbrances other than Permitted Encumbrances.

(b3)     There are no leases, licenses or occupancy agreements pursuant to which any third party is granted the right to use the Owned Real Property.

(b4)     There are no outstanding options or rights of first refusal to purchase the Owned Real Property, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

(b5)     Neither Seller nor any of the Business Subsidiaries has received written notice of any default,* under any restrictive covenants affecting the Owned Real Property and the Leased Real Property, that remains uncured.

(b6)     No event has occurred that, after notice or the lapse of time or both, would constitute a default referred to in subdivision (b5), except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.


(c1)     Section 2.15(c) of the Disclosure Schedules contains a complete and correct list of[:] the (i) [the] Owned Real Property[;] and (ii) [the] Leases.

(c2)     Seller has made available to Purchaser a true, correct* and complete copy of each Lease with respect thereto* (including all material amendments, modifications and supplements thereto).

8.3 Class 7: Wed. Sept. 12

8.3.1 DCT markup of Verizon-Yahoo language

I've unhidden my rewrite; it's here.

8.3.2 Quiz 1

On Blackboard.

8.3.3 "And" — in the gospels (Greek manuscripts), and in contracts

DCT to discuss the use of "Something something something; and something else something else something else."

See the Gospel of Mark 10:33-34, in an almost-literal, word-for-word translation from the Greek "original":

Lo, we go up to Jerusalem and the Son of Man shall be delivered to the chief priests and to the scribes and they shall condemn him to death and shall deliver him to the nations and they shall mock him and scourge him and spit on him and kill him and the third day he shall rise again.

(Emphasis added.) Cf. the original of Verizon-Yahoo stock purchase agreement, section 2.15, which we worked on last time — "my kingdom for a period!"

(a) (i) Each material lease or sublease (a “Lease”) pursuant to which Seller (to the extent related to the Business) or any of the Business Subsidiaries leases or subleases real property (excluding all leases or subleases for data centers) (the “Leased Real Property”) is in full force and effect and Seller or the applicable Business Subsidiary has good and valid leasehold title in each parcel of the Leased Real Property pursuant to such Lease, free and clear of all Encumbrances other than Permitted Encumbrances, except in each case where such failure would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect and (ii) there are no defaults by Seller or a Business Subsidiary (or any conditions or events that, after notice or the lapse of time or both, would constitute a default by Seller or a Business Subsidiary) and to the Knowledge of Seller, there are no defaults by any other party to such Lease (or any conditions or events that, after notice or the lapse of time or both, would constitute a default by such other party) under such Lease, except where such defaults would not, individually or in the aggregate, reasonably be expected to have a Business Material Adverse Effect.

8.3.4 Exercise: Reps and warranties strategy

FACTS: You are selling a car to a stranger. You don't know of any mechanical problems.

QUESTION: If the stranger asks you to represent and warrant that the car has no problems, how might you respond?

8.3.5 Continue with Alice-Bob laptop sale contract

Now that you've had some exposure to representations and warranties, resume drafting the laptop-sale contract between Alice and Bob.

  • Remember that you're representing Bob, the buyer;
  • In asking for Alice to agree to provisions, consider the balance between:
    • protection against theoretical risks;
    • the harm that could result if one or more of those risks came to pass; and
    • Bob's (presumed) desire to get to signature quickly.

8.3.6 BLUF exercise: Doctor practice bylaws

EXERCISE: Break up the following provision — and put the bottom line up front (BLUF) — from Lynd v. Marshall County Pediatrics, P.C., No. 1160683, slip op. at 2-5 (Ala. Apr. 27, 2018):

If any shareholder of the corporation for any reason ceases to be duly licensed to practice medicine in the state of Alabama, accepts employment that, pursuant to law, places restrictions or limitations upon his continued rendering of professional services as a physician, or upon the death or adjudication of incompetency of a stockholder or upon the severance of a stockholder as an officer, agent, or employee of the corporation, or in the event any shareholder of the corporation, without first obtaining the written consent of all other shareholders of the corporation shall become a shareholder or an officer, director, agent or employee of another professional service corporation authorized to practice medicine in the State of Alabama, or if any shareholder makes an assignment for the benefit of creditors, or files a voluntary petition in bankruptcy or becomes the subject of an involuntary petition in bankruptcy, or attempts to sell, transfer, hypothecate, or pledge any shares of this corporation to any person or in any manner prohibited by law or by the By-Laws of the corporation or if any lien of any kind is imposed upon the shares of any shareholder and such lien is not removed within thirty days after its imposition, or upon the occurrence, with respect to a shareholder, of any other event hereafter provided for by amendment to the Certificates of Incorporation or these By-Laws, then and in any such event, the shares of this [c]orporation of such shareholder shall then and thereafter have no voting rights of any kind, and shall not be entitled to any dividend or rights to purchase shares of any kind which may be declared thereafter by the corporation and shall be forthwith transferred, sold, and purchased or redeemed pursuant to the agreement of the stockholders in [e]ffect at the time of such occurrence. The initial agreement of the stockholders is attached hereto and incorporated herein by reference[;] however, said agreement may from time to time be changed or amended by the stockholders without amendment of these By-Laws. The method provided in said agreement for the valuation of the shares of a deceased, retired or bankrupt stockholder shall be in lieu of the provisions of Title 10, Chapter 4, Section 228 of the Code of Alabama of 1975.

8.4 Class 8: Mon. Sept. 17

8.4.1 Ambiguity exercise: Plush carpets

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

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

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

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

8.4.2 In the news: Indemnity pays off, to the tune of $108.9 million

Jacobs Engineering Group Inc. v. ConAgra Foods,    N.W.2d   , 301 Neb. 28 (Sept. 14, 2018):

This case arises out of an explosion at a ConAgra Foods, Inc. (ConAgra), plant in Garner, North Carolina, which killed 3 ConAgra employees and injured more than 60 others.

When dozens of employees sued Jacobs Engineering Group Inc. (Jacobs) [which had essentially zero involvement], Jacobs sought contractual indemnification from ConAgra, but ConAgra declined, and Jacobs defended against and settled the claims.

Jacobs sued ConAgra for indemnification in the district court for Douglas County. Following a 4-week trial, the jury awarded Jacobs the full amount of the settlement payments, $108.9 million, and the court entered judgment on the verdict.

We affirm.

* * * 

Section 10 of the parties’ engineering agreement contained mutual indemnification provisions which provided that each party indemnify the other for “claims, losses, costs, penalties, damages and/or expenses” to the extent caused by the indemnifying party’s negligence or the negligence of others under that party’s control.

* * * 

The North Carolina Department of Labor conducted an investigation into the explosion and found multiple violations of North Carolina code. The department determined that ConAgra violated its duty to furnish conditions of employment “free from recognized hazards that were causing or likely to cause death or serious physical harm.” The department found multiple life-threatening conditions occurred in the presence of ConAgra management, including ConAgra’s failure to purge the 3-inch natural gasline used to supply gas to the vacuum pumproom and allowing the presence of numerous possible ignition sources while a natural gasline was being purged in an enclosed room.

In contrast, the North Carolina Department of Labor found Jacobs performed no work that could have contributed to the accident, did not have knowledge of the hazardous condition, and did not have a scope of work that would have permitted knowledge of the hazardous condition. ConAgra “accepted what the authorities determined” and did not conduct a separate investigation.

Thereafter, 67 individuals and ConAgra’s property insurers filed several lawsuits against Jacobs and Pottner; the total settlement demands exceeded $507 million. Shortly after the first suit was filed, Jacobs requested contractual indemnity from ConAgra and ConAgra denied that request and did not participate in the settlements.

(Extra paragraphing added.)

QUESTION (for small-group discussion): Why did the 67 ConAgra employees sue Jacobs and not ConAgra?

8.4.3 BLUF exercise: Doctor practice bylaws — DCT rewrite

EXERCISE (from last week): Break up the following provision — and put the bottom line up front (BLUF) — from Article VI, § 4, of the bylaws of a physicians' professional corporation, in Lynd v. Marshall County Pediatrics, P.C., No. 1160683, slip op. at 2-5 (Ala. Apr. 27, 2018):

DCT's first pass:

(a)     [DELETE: If] [ADD: This section will govern if] any shareholder [NOTE THE TERMINOLOGY] of the corporation[,] for any reason[,] ceases to be duly licensed to practice medicine in the state of Alabama[; VICE ,]

      or accepts employment that, pursuant to law, places restrictions or limitations upon his continued rendering of professional services as a physician[; , ]

      or upon the death or adjudication of incompetency of a stockholder

      or upon the severance [?] of a stockholder as an officer, agent, or employee of the corporation,

      or in the event any shareholder of the corporation, without first obtaining the written consent of all other shareholders of the corporation[,] shall become a shareholder or an officer, director, agent or employee of another professional service corporation authorized to practice medicine in the State of Alabama,

      or if any shareholder:

            makes an assignment for the benefit of creditors,

            or files a voluntary petition in bankruptcy

            or becomes the subject of an involuntary petition in bankruptcy,

            or attempts to sell, transfer, hypothecate, or pledge any shares of this corporation to any person or in any manner prohibited by law or by the By-Laws of the corporation

            or if any lien of any kind is imposed upon the shares of any shareholder and such lien is not removed within thirty days after its imposition,

            or upon the occurrence, with respect to a shareholder, of any other event hereafter provided for by amendment to the Certificates of Incorporation or these By-Laws,

(b)     [ADD: In any such event,] the shares of this [c]orporation of such shareholder:

      shall then and thereafter have no voting rights of any kind,

      and shall not be entitled to any dividend or rights to purchase shares of any kind which may be declared thereafter by the corporation

      and shall be forthwith transferred, sold, and purchased or redeemed pursuant to the agreement of the stockholders in [e]ffect at the time of such occurrence.

(c)     The initial agreement of the stockholders is attached hereto and incorporated herein by reference[;] however, said agreement may from time to time be changed or amended by the stockholders without amendment of these By-Laws. [DCT COMMENT: ???? Why is this provision buried here?]

(d)     The method provided in said agreement for the valuation of the shares of a deceased, retired or bankrupt stockholder shall be in lieu of the provisions of Title 10, Chapter 4, Section 228 of the Code of Alabama of 1975.

DCT's second pass:

(a)     A shareholder's relationship with the corporation will be terminated, as specified in more detail in subdivision (b), if any of the following Shareholder Termination Events occurs:

      (1) The shareholder, for any reason, ceases to be duly licensed to practice medicine in the state of Alabama.

      (2) The shareholder accepts employment that, pursuant to law, places restrictions or limitations upon his continued rendering of professional services as a physician.

      (3) The shareholder dies.

      (4) The shareholder is duly adjudged incompetent, by a court of competent jurisdiction, in a final judgment from which no further appeal is taken or possible.

      (5) The shareholder is severed [???] as an officer, agent, or employee of the corporation.

      (6) The shareholder, without first obtaining the written consent of all [???] other shareholders of the corporation[,] becomes a shareholder or an officer, director, agent or employee of another professional service corporation authorized to practice medicine in the State of Alabama.

      (7) The shareholder:

            (A) makes an assignment for the benefit of creditors;

            (B) files a voluntary petition in bankruptcy;

            (C) becomes the subject of an involuntary petition in bankruptcy;

            (D) attempts to sell, transfer, hypothecate, or pledge any shares of this corporation to any person or in any manner prohibited by law or by the By-Laws of the corporation;

      (8) Any lien, of any kind, is imposed upon the shareholder's shares and is not removed within thirty days after its imposition.

      (9) Any other event occurs, with respect to that shareholder, provided for by amendment to the Certificates [PLURAL?] of Incorporation or these By-Laws [???].


(b)     Immediately upon the occurence of any event described in subdivision (a), that shareholder's shares:

      (1) will have no voting rights of any kind [or perhaps "will have no voting rights"];

      (2) will not be entitled to any dividend or rights to purchase shares of any kind which may that might be declared thereafter by the corporation; and

      (3) will be forthwith transferred, sold, and purchased or redeemed pursuant to are to be transferred as provided in the agreement of the stockholders in [e]ffect at the time of such occurrence.


DELETE: The initial agreement of the stockholders is attached hereto and incorporated herein by reference[;] [WHY?] however, said agreement may from time to time be changed or amended by the stockholders without amendment of these By-Laws. [DCT COMMENT: WHY INCLUDE THIS IN THE BYLAWS???? ]

DELETE: The method provided in said agreement for the valuation of the shares of a deceased, retired or bankrupt stockholder shall be in lieu of the provisions of Title 10, Chapter 4, Section 228 of the Code of Alabama of 1975. [DITTO]

8.4.4 Ambiguity and 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: Rewrite.

8.4.5 Exercise: Indemnnity provision

FACTS: 1) You represent Seller, which is selling equipment to Buyer, which in turn is engaging Contractor to do some work (think: drilling an oil well) that is being financed by multiple Lenders. ¶ 2) Buyer wants Seller to sign a sales contract that contains the following indemnity language:

10.1. General Indemnity. Seller shall INDEMNIFY, DEFEND, RELEASE AND HOLD HARMLESS Buyer (and its affiliates, co-owners, co-venturers, and partners), its respective shareholders, officers, directors, administrators, managers, employees, servants and agents, successors and assigns, Contractor and Lenders (each, a “Buyer Indemnified Party”) from and against any and all damages (whether ordinary, direct, indirect, incidental, special, consequential, or exemplary), judgments, liabilities, fines, penalties, losses, obligations, settlements, claims, actions, demands, suits, costs and expenses (including, without limitation, reasonable attorneys’ fees, court, mediation and arbitration costs, and other costs of investigation or defense) (collectively, “Losses”) directly or indirectly arising from or relating to this Agreement (or any breach hereof by Seller), the Services (if any), or any Equipment or other personal property (whether rented, sold or incorporated) delivered or made available by Seller hereunder, including, without limitation, any such Losses arising from or relating to (a) the breach or violation of any applicable laws by Seller (or any of Seller’s subcontractors of any tier, or any of its or their employees, agents, consultants or representatives (“Seller’s Contractor Group”)), (b) any alleged infringement or violation of a third party’s patent, trade secret, copyright, trademark or intellectual property right, or (c) the negligence, willful misconduct or other breach or violation of this Agreement by Seller or any of Seller’s Contractor Group, REGARDLESS OF WHETHER ANY SUCH LOSSES ARE ATTRIBUTABLE (IN WHOLE OR IN PART) TO THE SOLE, JOINT OR CONCURRENT NEGLIGENCE (WHETHER ACTIVE, PASSIVE, SIMPLE OR GROSS NEGLIGENCE), STRICT LIABILITY OR ANY OTHER LEGAL FAULT OR RESPONSIBILITY OF BUYER, SELLER OR ANY OTHER PERSON, OR IMPERFECTION OF ANY MATERIALS; PROVIDED, HOWEVER, THAT SELLER SHALL NOT BE LIABLE FOR THE INDEMINFICATION OBLIGATIONS SET FORTH HEREIN FOR CLAIMS CAUSED BY THE SOLE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE BUYER INDEMNIFIED PARTY.

EXERCISE:

  1. Break up this provision.
  2. In your groups, discuss:
    1. what you might advise Seller about the possible risks of agreeing to this provision;
    2. what if any changes you might ask Buyer to agree to; and
    3. how Seller might arrange its business affairs to support this provision if "forced" to agree to it.

8.5 Class 9: Wed. Sept. 19

8.5.1 Rewriting exercise: Assignment provision, etc.

The provision below comes from an agreement form used by a company in the oil and gas business:

16. Consultant's Engagement Team - Consultant shall not, without the prior written consent of Company, engage any subcontractor for performance of the Services or assign any rights arising under this Agreement, including but not limited to assignment of monies payable under this Agreement. In the event Company consents to the assignment of this Agreement or Consultant's use of a subcontractor, Consultant shall continue to be responsible for all obligations and liabilities under this Agreement. For a period of one (1) year from the date that a Consultant employee or subcontractor stops providing services to the Company under this agreement, neither the Company nor its affiliates or subsidiaries shall hire or solicit said individual without paying to Consultant a fee equal to the annual salary or annualized subcontractor revenue of such individual. The restrictions on solicitation or hiring set forth in this Section will not apply to any employee or subcontractor whose Consultant employment is terminated prior to solicitation by the Company, its affiliates or subsidiaries.

EXERCISE: Break up this provision.

QUESTION: If you were representing Consultant, what portions of this section (if any) might concern you?

8.5.2 Review: Notarizing a document

  1. In the U.S., what are the two basic forms of "notarizing" a document? [13]
  2. TRUE | FALSE | MAYBE: An affidavit to be used in court will normally require an acknowledgement certificate signed by a notary public or other authorized officer.  [14]
  3. TRUE | FALSE | MAYBE: In Texas, for a document to be accepted for recording in (for example) the county deed records, the document must contain language substantially similar to the following: "Sworn and subscribed to before me, the undersigned authority, on [DATE]." [15]]
  4. TRUE | FALSE | MAYBE: A notary public ordinarily is allowed to "notarize" something for him- or herself. [16]
  5. TRUE | FALSE | MAYBE: A notary public ordinarily is allowed to "notarize" something for a family member. [17]

8.5.3 Conspicuousness

DISCUSSION QUESTION: Under Texas law, what are some ways that you could you make an indemnity obligation "conspicuous"?

FACTS:

  1. Alice's attorney drafts a contract that requires Bob to indemnify Alice against certain events, even if Alice was at fault.
  2. During the parties' page-turn conference call to negotiate the contract, Bob's attorney objects to the own-fault indemnification provision and tries to talk Alice's attorney out of it.
  3. After discussion of the issue among the parties and their counsel, Bob decides he's willing to take the associated risk and tells his attorney to withdraw his objection to the provision.
  4. After all other objections are ironed out, the parties sign the contract.
  5. Everything relevant is happening in Texas.

QUESTION: If Alice were to be at fault for one of the indemnified events, would she be able to enforce Bob's putative obligation to indemnify her? Why or why not?

8.5.4 Drafting exercise: Assignment provision

The following comes from a software-development agreement in a new arbitration case that I'll be hearing (as the arbitrator):

9.7 Assignment. No Party may sell, transfer, assign, assume or subcontract any right nor obligation set forth in this Agreement by contract, operation of law or otherwise, except as expressly provided herein, without the prior written consent of the other Party; provided, however, upon providing the other Party written notice, any Party may without the consent of the other Party: (a) (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates or (ii) designate one or more of its Affiliates to perform its obligations hereunder, in each case, so long as the assigning Party is not relieved of any liability hereunder and so long as any such Affiliate remains such Party's Affiliate; provided, however, that such Affiliate assignee(s) provide the other Party with written acknowledgement of and agreement to the assigning Party's obligations under the Agreement that were assigned to it; or (b) assign or transfer this Agreement as a whole to any Person that succeeds to all or substantially all of the business or assets of such Party related to the subject matter of this Agreement.

EXERCISE: Break this up into shorter, one-subject paragraphs.

8.5.5 Drafting exercise & HOMEWORK: Indemnity provision (continued)

Continue with the indemnity-provision breakup.

That provision will be due next Wednesday, Sept. 26, as one of the pass-fail / peer-review homeworks — bring a hard copy to class, with your name on it.

8.6 Class 10: Mon. Sept. 24

8.6.1 Change of group assignments

8.6.2 Ambiguity: Meow

Rewrite to eliminate the ambiguity: "He gave her cat food."

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

8.6.3 Amendments: Class discussion

QUESTIONS for group discussion:

  1. Who must sign an amendment — why?
  2. Will a court give effect to a contract provision requiring an amendment to be in writing? Why or why not?
  3. Under what circumstances might a unilateral-amendment provision get a party into trouble?

8.6.4 Grammar fail: Professor Goodenough's prospects

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?

8.6.5 Review: Backdating a contract at the end of the quarter

We're in the last week of the quarter, so:

FACTS:

  • It's the last week of March. Your client Big Public Software Company ("BPSC") has a calendar-year fiscal year, and its shares are traded on Nasdaq. That means it must file financial reports with the SEC within a certain number of days after each March 31, June 30, September 30, and December 31 (commonly referred to as Q1 through Q4 respectively, or sometimes 1Q through 4Q).
  • BPSC's sales people are working on a huge deal. If the deal closes, BPSC will "make the number," that is, its earnings will match analysts' expectations; if not, BPSC will "miss," and the price of its stock likely will nosedive.
  • The BPSC sales people stay late at the office on March 31, hoping to iron out the last negotiation points. But the parties don't actually come to agreement until April 3.

QUESTION 1. On April 3, BPSC's vice president of sales calls you with an urgent question: Can the parties backdate their signatures to March 31, so that BPSC can book the sale in Q1 so that it won't "miss"?

QUESTION 2: What personal motives might the VP of sales have for backdating the contract signatures? Consider, for example:

  • financial motivations
  • non-financial motivations

8.6.6 Exercise: Assignment of Mickey-Dee franchise agreement

FACTS:

  • You represent Smith, LLC, a family business that operates three Mickey-Dee franchised restaurants in Houston.
  • Smith, LLC owns the land and buildings of the restaurants, which are built to specifications developed by the global franchising firm Mickey-Dee Incorporated.
  • The restaurants all use trademarks owned by Mickey-Dee Incorporated, including the signage, logos, the name "Mickey-Dee," uniform styles etc.
  • The franchise agreement is silent about assignability of the agreement.
  • Smith, LLC wants to sell its three franchised restaurants to Jones, Inc., another family business.

QUESTIONS:

  1. What if anything could Mickey-Dee Incorporated do if your client Smith, LLC were to assign the franchise agreement to Jones, Inc.?
  2. What changes might you request in the franchise agreement?

8.6.7 Entire agreement clause: Stormy Daniels

From this contract:

2.0     RECITALS

      2.1       Prior to entering into this Agreement, PP came into possession of certain "Confidential Information" pertaining to DD, as more fully defined below, only some of which is in tangible form, which includes, but is not limited to information, certain still images and/or text messages which were authored by or relate to DD (collectively the "Property", each as more fully defined below but which all are included and attached hereto as Exhibit "1" to the Side Letter Agreement). [Exhibit 1 to the Side Letter Agreement was not included with the filed complaint.]

* * * 

      [3.1]   (c)       PP shall deliver to DD every existing copy of all tangible Property. PP sha!I completely divest herself of any and all artistic media, impressions, paintings, video images, still images, e-mail messages, text messages, Instagram message, facebook posting or any other type of creation by DD . PP shall transfer all physical, ownership and intellectual property rights to DD;

                ( 1) PP shall deliver to DD any and all non-privileged correspondence concerning or related to DD between PP and any 3rd party.

     (d)         PP shall not, at any time from the date of this Agreement forward, directly or indirectly disclose or disseminate any of the Property or any Confidential Information (including confirmation of the fact that it exists or ever existed, and/or confirming any rumors as to any such existence) to any third party, as more fully provided herein.

* * * 

          8.1           Entire Agreement. This Agreement constitutes the entire agreement and understanding concerning the Released Matters hereof between the Parties hereto and supersedes any and all prior negotiations and proposed agreement and/or agreements, written and/or oral, between the Parties. Each of the Parties hereto acknowledges that neither they, nor any other party, nor any agent or attorney of any other party has made any promise, representation, or warranty whatsoever, expressed or implied, written or oral, which is not contained herein, concerning the subject matter hereof, to induce it to execute this Agreement, and each of the Parties hereto acknowledges that she/he has not executed this Agreement in reliance on any promise, representation, and/or warranty not contained herein. This Agreement shall be binding on and inure to the benefit of the Parties, the Releasees, and each of their respective successors and assigns and designees.

QUESTION: Stylewise, what do you think of subdivision "(1)," located between 3.1(c) and (d)?

HYPOTHETICAL:

A.      Suppose that that DD or EC countersued PP for punitive damages for fraud, for allegedly implicitly asserting — e.g., by going on Jimmy Kimmel, and indeed by filing her lawsuit in the first place — that Donald Trump had an affair with her.

B.      "Stormy Daniels" moves to dismiss for failure to state a claim.

C.      Assume Texas law applies.

QUESTION: What action should the trial court take on the motion to dismiss?

8.7 Class 11: Wed. Sept. 26

8.7.1 Ambiguity in an obituary

From the obituary of Inez Neill Winton, who died at age 97, in the Houston Chronicle, Sept. 26, 2018, at B8.

In early 1942, when American's [sic] of Japanese ancestry were taken from their homes and relocated to internment camps, Inez went to the camp at Amache, Colorado to teach the children and open a library. She still received Christmas cards from several of the children she taught well into the 1960s including two who fought in the 442nd Infantry Regiment Brigade [sic].

QUESTION: What are two possible interpretations of the italicized portion? How could this be rewritten to clarify?

QUESTION: What is the ambiguity in the "From the obituary of …" sentence above? How could it be fixed?

8.7.2 Homework due (peer review, pass-fail)

You know the drill.

8.7.3 Ambiguity: Dear Abby and a name change [6 p.m. section only]

From Dear Abby, Sept. 24, 2018:

DEAR ABBY: My mom owns two successful women's clothing stores near my hometown that she's had for more than 10 years. The problem is, she named them after me, and I hate it! [Emphasis added.]

I've tried talking to her about it many times, but every time I bring it up she gets sarcastic, says things like, "This is a fun conversation," and doesn't let me get a word out. I have tried talking to the rest of my family about it, but they don't consider it a big deal and tell me I'm being ridiculous. I have run out of ideas about what to do, so if you could give me some advice, it would really help. – ANGRY DAUGHTER

DEAR ANGRY DAUGHTER: Many daughters would consider what your mother did to be a compliment. However, because it bothers you so much, consider going by your middle name. And, if that doesn't satisfy you, and you feel strongly enough about this, go to court and legally change your name to another one you like when you reach adulthood.

QUESTION: What, exactly, does Angry Daughter hate?

8.7.4 R.O.O.F. at the Oscars

See the gigantic lettering on "The Envelope" in this photo.

(After last year's screw-up, the PWC partners were booted off the account.)

8.7.5 Review: 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? [18]

QUESTION 2. How much does it matter whether the "roll-up" would take the form of (i) an asset purchase, or (ii) a merger? [19]

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, in the future, to the Saudi buy-out. [20]

QUESTION 4. In the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ), draft a provision that would protect Port Operations's ability to agree to the Saudi buy-out.

8.7.6 Ambiguity: Mortgage-backed securities

TEXT: From David Dayen, Trump’s Regulators Want to Kill a Key Financial Rule That Even Republicans Support, (newrepublic.com Jan. 23, 2018):

… the [banks' financial] assets are counted differently according to the risk they hold. This can prove disastrous if the “low-risk” assets are actually dangerous—as mortgage-backed securities were considered to be during the housing bubble.

QUESTION: What exactly were mortgage-backed securities considered to be during the housing bubble — were they considered dangerous, or were they considered low-risk?

QUESTION: How could this problem be fixed?

8.7.7 Review exercise: Indemnity 1 (Stanford-Tesla lease)

The provision below, at https://goo.gl/Qn2e9m (edgar.sec.gov), is from a 2007 real-estate lease in which Tesla Motors, Inc., leased a building from Stanford University:

12.5 Indemnity. Tenant shall indemnify, defend (by counsel reasonably acceptable to Landlord), protect and hold Landlord and Landlord’s trustees, directors, officers, agents and employees and their respective successors and assigns (collectively, “Landlord’s Agents”), free and harmless from and against any and all claims, liabilities, penalties, forfeitures, losses or expenses (including reasonable attorneys’ and consultants’ fees and oversight and response costs) to the extent arising from (a) Environmental Activity by Tenant or Tenant’s Agents; or (b) failure of Tenant or Tenant’s Agents to comply with any Environmental Law with respect to Tenant’s Environmental Activity; or (c) Tenant’s failure to remove Tenant’s Hazardous Materials as required in Section 12.4. Tenant’s obligations hereunder shall include, but not be limited to, the burden and expense of defending all claims, suits and administrative proceedings (with counsel reasonably approved by Landlord), even if such claims, suits or proceedings are groundless, false or fraudulent; conducting all negotiations of any description; and promptly paying and discharging when due any and all judgments, penalties, fines or other sums due against or from Landlord or the Premises. Prior to retaining counsel to defend such claims, suits or proceedings, Tenant shall obtain Landlord’s written approval of the identity of such counsel, which approval shall not be unreasonably withheld, conditioned or delayed. In the event Tenant’s failure to surrender the Premises at the expiration or earlier termination of this Lease free of Tenant’s Hazardous Materials prevents Landlord from reletting the Premises, or reduces the fair market and/or rental value of the Premises or any portion thereof, Tenant’s indemnity obligations shall include all losses to Landlord arising therefrom.

ASSIGNMENT: As the attorney for Tenant:

  1. Break up the provision.
  2. In your groups, consider

9 Detailed class plans: October

9.1 Class 12: Mon. Oct. 1

9.1.1 Ambiguity alert: Kellyanne Conway

From the Washington Post: "Tapper said that Conway’s boss, the president, has been the subject of numerous sexual assault allegations and has said that those women lied about them."

Q: Who, exactly, said "those women lied" — was it Tapper, or Conway's boss? How could this be clarified?

9.1.2 Termination-related questions

  1. What does it actually mean to "terminate" a contract?
  2. Is there any downside to sending a notice of termination for breach?
  3. Under U.S. law, is a termination-for-breach provision even necessary in a contract?
    • If yes: What law gives rise to the need to include a termination-for-breach provision in a contract?
    • If no: Why include a termination-for-breach provision?
  4. Alice sends Bob a notice terminating their contract for breach, but it turns out that she was mistaken: there was no breach. The contract also contains a different provision allowing Alice to terminate at will. QUESTION: What two things could Alice have done (at different points in time) to protect herself from an own-goal problem?
  5. You've been tasked with drafting a contract provision allowing your client to terminate the contract for breach. You draft language that gives the right to terminate to "the non-breaching party." QUESTION: What will (or should) your supervising attorney say about that?
  6. Cure periods: Discuss the pros and cons of having different cure periods for different breaches, versus one, one-size-fits-all cure period.

9.1.3 In-class exercise: Termination

This is a provision from an actual contract form provided by Customer.

x.x Termination. Customer may terminate the Agreement or any Statement of Work, in whole or in part, for convenience (i.e., for any reason or no reason) effective as of any date by giving Provider written notice of the termination. Except as provided in the last sentence of this Section, Customer’s failure to perform in accordance with the Agreement or otherwise comply with the terms of the Agreement will not be deemed to be grounds for termination by Provider, and Provider hereby expressly waives any such termination rights it may have. Provider acknowledges that Customer would not be willing to enter into the Agreement without assurance that the Agreement may not be terminated by Provider and that Provider will not have the right to suspend performance of the Services, in each case except, and only to the extent, expressly provided in the following sentence. If Customer fails to pay Provider when due any amount owed Provider hereunder, Provider will notify Customer of such default in writing, and if Customer has not cured such default within sixty (60) days after Customer’s receipt of such notice, then Provider may terminate the affected Statement of Work in whole upon at least ninety (90) days prior written notice to Customer.

ASSIGNMENT: As the attorney for Provider:

  1. Break up the provision.
  2. Build a list of issues to discuss with Provider and/or with Customer, as follows:
    • substantive issues — both legal- and business-related; and
    • "necessary" stylistic changes, e.g., for enhanced client readability and/or to R.O.O.F.

9.1.4 Survival clauses

DISCUSS: Which type of survival clause is better:

  • one that enumerates (lists) all surviving provisions; or
  • one that states simply, "all provisions that by the nature should survive, do survive …."

DISCUSS: Would a survival clause preserve particular provisions after expiration of the agreement, as opposed to after termination?

9.2 Class 13: Wed. Oct. 3

9.2.1 Quiz #2

You know what to do.

9.2.2 Ambiguity alert: The death of democracy in Europe?

From a Paul Krugman column, NY Times, Aug. 27, 2018:

What Freedom House calls illiberalism is on the rise across Eastern Europe. This includes Poland and Hungary, both still members of the European Union, in which democracy as we normally understand it is already dead.

QUESTION: Where is democracy supposedly already dead?

9.2.3 Walk-away rights after termination

FACTS:

  1. Alice and Bob have entered into a contract under which Alice will sell Bob her used MacBook computer.
  2. The contract states in part: "Bob need not buy the Computer if, at the Closing Time, the Grateful Dead decals that are currently affixed to the Computer have not been removed, along with all glue residue."
  3. Alice shows up at the designated time and place for the Closing, but the Dead stickers are still there.

QUESTION: Can Bob pull the plug and walk away from the transaction? Why or why not?

QUESTION: If Bob goes ahead anyway with the purchase, can he sue Alice for damages? Why or why not?

DIFFERENT FACTS:

  1. (alternative) The contract does not include the walkaway provision in the original facts above. Instead, the contract states in part: "Before the Closing, Alice will remove the Grateful Dead stickers and all glue residue."

Now answer the questions above. [Hint: Consider the "perfect tender rule" of UCC article 2.]

QUESTION: What if the contract hadn't said anything at all about the Dead stickers?

MORE FACTS:

  1. This is all taking place in a non-UCC jurisdiction;
  2. The contract includes the alternative "Before the Closing, Alice will remove the [stickers];"
  3. The contract does not include the original "Bob need not buy the Computer" escape clause; and
  4. Bob feels very strongly about not wanting the Dead stickers on the computer.

QUESTION: What could Bob have included in the contract — other than the escape clause — to allow him to walk away?

9.2.4 Lecture: Asset acquisition sequence

DCT to lecture on the time line for typical asset purchases, including:

  1. Preliminary discussions
  2. Letter of intent ("LOI") / memorandum of understanding ("MOU")
  3. Initial due diligence
  4. Contract signature, with obligations and conditions to closing
  5. Additional due diligence + any necessary deal clearances
  6. Closing

9.2.5 Stanford-Tesla termination provision

See the questions in the margin at https://toedtclassnotes.site44.com/Annotated-Contracts.pdf#page=21, lines 152 et seq.

9.2.6 Break-up exercise: Subcontracting (Duke Energy)

The provision below is from a services agreement form used by Duke Energy, at https://goo.gl/imaf3v (archive.org):

B.  Subcontracting. Upon prior written notice to and consent of Duke Energy (not to be unreasonably withheld), Contractor may have any portion of the Services performed by any Subcontractors of, including Persons related to or affiliated. with, Contractor. Contractor and any proposed Subcontractors must meet the specific safety criteria as defined in the Duke Energy Health and Safety Supplemental Requirements. If subcontracting is permitted by Duke Energy, Contractor will still continue to be responsible for the performance and completion of the Services. If requested by Duke Energy, Contractor must provide Duke Energy with copies of any contracts with third parties regarding the assignment of rights or delegation of duties hereunder. Contractor must obtain terms and conditions in its contracts with Subcontractors and suppliers which are consistent with the rights of Duke Energy and the duties of Contractors pursuant to this Agreement. Contractor will deliver to Duke Energy for Duke Energy's review a written list of the Subcontractors that the Contractor proposes to engage or use in the performance of the Services before the Contractor enters any contract with any Subcontractor, and Duke Energy will have the right to approve or reject each proposed Subcontractor. No contractual relationship will exist between Duke Energy and any Subcontractor with respect to the Services. Contractor will be fully responsible to Duke Energy and any applicable third party for all acts, omissions, failures, and faults of all Subcontractors as fully as if they were the acts, omissions, failures, and faults of Contractor.

ASSIGNMENT: As the attorney for Contractor:

  1. Break up the paragraph for easier review.
  2. What if any problems do you anticipate with the "not to be unreasonably withheld" provision in the first sentence — and what would you propose to do about them?
  3. Re-read the penultimate sentence, which begins: "No contractual relationship will exist between Duke Energy and any Subcontractor with respect to the Services." GROUP-DISCUSSION QUESTION: How enforceable do you think that is?
  4. What other issues (if any) do you think might be troublesome for Contractor — and what would you propose to do about them if, before the agreement was signed, you were negotiating it on behalf of the Contractor?

9.3 Class 14: Mon. Oct. 8

9.3.1 Open-mike about the reading

QUESTION: What aspects of the reading for this week do you think a client would have trouble understanding? And how would you explain it to them?

As a reminder, the reading assignments were about:

  • Independent contractors
  • Audits
  • Background checks

9.3.2 In the news (termination): Heiman v. Bimbo Foods

From Heiman v. Bimbo Foods Bakeries Distrib. Co., 902 F.3d 714 (7th Cir. 2018):

According to JTE's complaint, which we must accept as true for purposes of this appeal, Bimbo Foods began fabricating curable breaches in the spring of 2008 as part of a scheme to force JTE out as its distributor.

• Bimbo Foods employees filed false reports of poor customer service and out-of-stock products at stores in JTE's distribution area.

• Even more egregiously, Bimbo employees would sometimes remove JTE-delivered products from grocery store shelves, photograph the empty shelves as "proof" of a breach, and then return the products to their initial location.

• On one occasion, in 2008, a distributor caught a Bimbo Foods manager in the act of fabricating a photograph and reported him.

Bimbo assured JTE that this misconduct would never happen again. Nevertheless, unbeknownst to JTE, Bimbo Foods continued these scurrilous tactics.

[Bimbo's] goal was to force JTE to forfeit its distribution rights so that Bimbo Foods could install a new distributor that would take a smaller slice of the proceeds: 18 percent as compared to JTE's 22 percent.

When JTE refused to sell its distribution rights in January 2011, Bimbo Foods breached the distribution agreement and unilaterally terminated JTE's agreement, citing the fabricated breaches as cause.

Several months later, in September and October 2011, Bimbo Foods forced JTE to sell its rights to new distributors.

(Emphasis added.) (The Seventh Circuit affirmed the district court's dismissal of JTE's complaint on statute-of-limitation grounds.)

9.3.3 Planning for homework for Mon. Oct. 29 (not pass-fail)

FACTS:

  1. Half of each group is to represent Gigunda Energy, a global oil-and-gas company. The other half is to represent Math Whizzes LLC. (Each group is to decide who will represent whom.)
  2. Math Whizzes is headed by Alice, who is an expert in analyzing seismic data to predict where oil or natural gas deposits might be. Alice "came up" working for major oil companies, then struck out on her own. Her business has grown; she now employs several junior analysts and subcontracts with others (usually, longtime friends or colleagues of hers) to do specialized work.
  3. Gigunda Energy wants to hire Math Whizzes LLC to analyze a large body of seismic data from a potential oil field in Outer Mongolia, for a monthly fee of $100K.

EXERCISE: The partner for whom you work has asked you to prepare a draft contract. (Remember, some of you represent Gigunda Energy, others represent Math Whizzes.)

In your groups, brainstorm ideas for a "term sheet," namely:

  • a list of the types of provisions that you think will need to be included to protect your client's interests; and
  • a lists of the types of provisions that you are sure the other side will want.

Consider the SNITS acronym: What could happen — good or bad — during:

  • Startup of the relationship
  • Normal operations
  • Infrequent operations
  • Trouble
  • Shutdown of the relationship

If you don't know what your client will want as an outcome in a given situation, consider whether the parties can agree to a process for later determining what the outcome should be.

Feel free to use the the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ) and/or to compare notes with your counterparts in other groups.

After awhile we'll reconvene in committee of the whole to list ideas.

(We'll continue working on this project in future class periods, culminating in submitting a homework assignment on the scheduled date.)

9.3.4 Questions about independent-contractor status

For small-group discussion: What factors might influence a court to (i) honor, or (ii) disregard, a contract's statement that the parties were independent contractors?

9.3.5 Sheryl Sandberg employment agreement questions (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? [21]

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? [22]

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? [23]

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? [24]

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? [25]

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? [26]

9.3.6 In-class business planning exercise

[Didn't get to it]

FACTS: Your Houston client Doggie Days, Inc. ("DDI") wants to set up a network of independent dog walkers, along the lines of Uber and Lyft, to be used by customers in cities such as NYC, Los Angeles, Chicago, and San Francisco — and eventually in cities such as Paris, London, Berlin, etc.

EXERCISE 1: In your groups, use the the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ) to brainstorm recommendations for ways to structure the business relationship between dog walkers and DDI so that—

  • DDI gets maximum marketing bang for the buck;
  • DDI can attract intelligent, dependable dog walkers;
  • DDI can exercise reasonably tight "quality control" over the customer experience, so that customers will get a uniformly-good experience no matter who the dog walker is and no matter what the city; BUT
  • A court would likely hold that the DDI dog walkers are independent contractors and not employees.

Consider business factors such as:

  1. What should the dog walkers wear on the job;
  2. Must the dog walkers use Doggie Days-branded doggie leashes;
  3. Must the dog walkers buy Doggie Days-branded doggie treats (which DDI can acquire in bulk) to give to their dogs;
  4. Should DDI be able to prescribe the service hours for dog walkers;
  5. Should DDI provide a manual for its dog walkers, and if so, what should the manual say;
  6. Should DDI offer to provide its dog walkers with any kind of insurance;

and other things of that nature.

EXERCISE 2: Group 1 is a plaintiff's class-action firm; Group 2 is a defense firm; Group 3 is a federal judge and her law clerks. ASSIGNMENTS:

  • Group 1: Look at Group 2's business arrangements and figure out how you might argue — or seek discovery to prove — that under Group 2's business arrangements, the dog walkers are actually employees.

9.4 Class 15: Wed. Oct. 10

9.4.1 Exercise: Background check clause review & revision

This is a provision from an actual contract form provided by Customer. ASSIGNMENT: As the attorney for Provider, build a list of issues to discuss with Provider and/or with Customer, as follows:

  • substantive issues; and
  • "necessary" stylistic changes, e.g., for enhanced client readability and/or to R.O.O.F.

Provider warrants that it has with respect to all Provider’s Personnel who are expected to perform Services under this Agreement: (i) conducted background checks; (ii) conducted checks against relevant persons-wanted lists published by national or international law enforcement bodies, the Consolidated Screenings List compiled by the United States Departments of Commerce, State, and Treasury, and any comparable lists maintained by non-U.S. authorities that are applicable to the activities engaged in under this Agreement (collectively “Government Sanctions or Watch List”); (iii) verified all qualifications used as a condition of employment (e.g., education, licensing, certifications, references, previous employers, etc.); and (iv) conducted a credit history review if the position pertains to a position of substantial trust such as involving large sums of money or substantial assets of value where theft or similar financial improprieties could reasonably occur. At a minimum, background checks required in (i) above shall include the checking of criminal convictions for any offenses other than minor traffic violations for all geographic areas wherein such individual have resided during the past five (5) years. Should any member of Provider’s Personnel appear on a Government Sanctions or Watch List, or the background checks or verifications disclose inaccurate or false information, a criminal conviction record, credit history or factors that could bear upon the desirability of a particular individual performing Services under this Agreement, Provider will advise Customer of the result of the check.  Customer shall have the right to request that Provider remove from the Services or Customer’s or its Affiliate Companies’ premises, any such individual. Provider shall be responsible for complying with any notice requirements associated with such disqualification as may be established by Applicable Law. Provider warrants that it has, by operation of law or valid agreements with Provider’s Personnel, the right to obtain this information and to disclose it to Customer as required herein, to the extent reasonably practicable. Additionally, Customer shall have the right to conduct additional background checks on Provider’s Personnel who will be performing Services for Customer. Provider shall take all actions and execute all documents and shall cause Provider’s Personnel to take all actions and execute all documents as are necessary to assist Customer in this process.

9.4.2 Term sheet for upcoming homework — Math Whizzes, Gigunda Energy

In your teams (Math Whizzes teams, Gigunda teams):

  1. Using Microsoft Word — not the virtual whiteboard — each team is to rough out a "term sheet" outlining the terms that it wants to propose to "the other side." NO NEED TO DRAFT LANGUAGE just yet.
  2. Compare term sheets with the same-side teams in other groups.
  3. Make any desired revisions to your team's term sheet.

9.4.3 Homework 4 – due Wed. Oct. 17 (pass-fail, peer review)

Each team is to bring to class a hard copy of a complete rough draft of the Math Whizzes / Gigunda Energy agreement.

We'll allocate some class time on Monday Oct. 15 for the teams to work together on their drafts.

9.4.4 Homework 5 – due Mon. Oct. 29 (NOT pass-fail, DCT will grade)

On Mon. Oct. 29, each team is to bring to class a hard copy of its "final" first draft that it would propose to the other side.

We'll allocate some class time that day for the teams to negotiate with each other.

9.4.5 Sheryl Sandberg employment agreement questions (2)

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?

9.4.6 Exercise: Audit clause review & revision

This is a provision from an actual contract form provided by Customer. ASSIGNMENT: As the attorney for Provider, build a list of issues to discuss with Provider and/or with Customer, as follows:

  • substantive issues; and
  • "necessary" stylistic changes, e.g., for enhanced client readability and/or to R.O.O.F.

x.x Audits. Upon request, Provider and Provider Agents will provide Customer and internal and external auditors, inspectors, governmental authorities and other representatives that Customer may designate (collectively, “Customer Auditors”), with timely and unrestricted access to the Project Staff, the locations at which the Services are performed at or from, systems, records documenting the performance of the Services and the invoicing of the fees hereunder, and other pertinent data and information for the purpose of inspecting, examining and auditing the Services and the operations of Customer relating to the Services, including to verify (a) the fees invoiced and paid hereunder, (b) performance of the Services, (c) compliance with the Agreement, (d) the use of Customer property and (e) the integrity of those elements of Customer’s corporate control processes that are performed by Provider. If any such audit reveals an overcharge to Customer, then within thirty (30) days following the completion date of such audit, Provider will pay to Customer the amount of such overcharge, plus interest at JPMorgan Chase & Co.’s then current prime commercial lending rate, calculated from the date of receipt by Provider of the overcharged amount until the date of payment to Customer. In addition, if any such audit reveals an overcharge to Customer by an amount greater than five percent (5%) of the audited invoices, then Provider will reimburse Customer for the costs and expenses of such audit.

9.5 Class 16: Mon. Oct. 15

9.5.1 Exercise: Insurance

9.5.1.1 Facts
  • You represent ChemCo, which owns and operates a chemical refinery in Pasadena.
  • ChemCo has a periodic maintenance shutdown scheduled for some of its equipment scheduled for July. ChemCo is interested in engaging Provider to do some of the maintenance work. Provider's workers would be coming onto ChemCo's site for this purpose.
  • Provider has not only commercial general liability ("CGL") insurance coverage, but also professional-liability coverage, also knownn as errors-and-omissions ("E&O") coverage.
  • The ChemCo manager with whom you are working wants Provider to designate ChemCo as an "additional insured" on Provider's E&O policy. The manager reasons that this will give ChemCo an independent bucket of money against which it can make claims.
9.5.1.2 Questions
  1. What's the difference between a "named insured" and an "additional insured"?
  2. What is an "additional named insured"? (Careful — it's a trick question.)
  3. What types of insurance coverage should ChemCo ask Provider to carry for this purpose?
  4. Should ChemCo ask for Provider's policy to be an "occurrence" policy or a "claims-made" policy?
  5. Should ChemCo ask to be named as an "additional insured" on Provider's policy? Why?
  6. Would you expect Provider to push back in response to the additional-insured requirement? Why or why not?
  7. Would ChemCo actually be able to make claims against Provider's E&O policy?
  8. How would you advise the ChemCo manager about whether, and how, to proceed with his idea about making ChemCo an additional insured? [Discuss with your partner(s).]
  9. What might be the consequences if Provider agreed to provide insurance but then didn't do so?
9.5.1.3 Negotiation strategies

If you represent a seller, should your "standard" T&Cs include an insurance provision along the lines of what a customer might request? Why or why not? (Discuss)

9.5.1.4 Certificate

FACTS:

  • The contract draft requires Provider to maintain certain levels of insurance.
  • Before signing the contract, ChemCo asks Provider for a copy of its insurance certificate.
  • Provider's sales manager, Pat, notices that Provider's CGL and E&O insurance have expired. Pat is fairly sure that the Provider finance people are in the process of negotiating new policies with a new carrier. So Pat electronically changes the expiration date on the old certificate of insurance and emails it to his contact at ChemCo.
  • After the contract is signed, Provider's finance people put in place new CGL and E&O coverage with a new carrier.
  • Subsequently, Provider's workers accidentally injure a visitor to the ChemCo premises.

QUESTION: What are the parties' legal and practical positions?

9.5.2 Quickies: CPI increases in pricing

FACTS:

  1. You represent Buyer in negotiating a long-term master purchase agreement with Seller.
  2. You draft a price-increase clause that limits Seller's permissible price increases to no more than "the increase in CPI" (and no more than one price increase per year as well).
  3. A year later, Seller says it is increasing its price by the percentage stated in a particular CPI published by the U.S. Government for the specific industry in which Seller and Buyer operate. You hadn't known there even was such a thing.
  4. Your client Buyer angrily tells you that Seller's price increase must be limited to the (much-lower) increase in the "regular" CPI, namely CPI-U, US City Average, All Items, 1982–1984=100.

QUESTION: In this fact situation, to what does "CPI" refer?

Answer: The Consumer Price Index.

QUESTION: In the U.S., where does CPI data usually come from ?

Answer: The U.S. Bureau of Labor Statistics — see https://www.bls.gov/cpi/

QUESTION: On these facts, how might a court rule on Buyer's claim that Seller's price increases must be limited to the increase in CPI-U and not to the increase in the special CPI?

Answer: Chances are that the court would rule against your client Buyer, because you drafted the price-increase limitation.

9.5.3 Continue work on Math Whizzes / Gigunda Energy contract

9.6 Class 17: Wed. Oct. 17

9.6.1 Review

Discuss in your groups:

  1. What should a contract's title look like?
  2. What should a contract's preamble look like?
  3. What should a contract's recitals look like?
  4. How should a contract be dated?
  5. Where are three possible places to put a definitions section?
  6. How can you serve the reader if you have • some definitions in a defined-terms section, and • other definitions "in-line" in the clauses where they're used?
  7. What's an example of D.R.Y.?
  8. Is it appropriate for a contract to say: Alice represents that she will pay Bob [X DOLLARS] on [X DATE]?
  9. What should an organizational signature block look like?

9.6.2 Gigunda Energy-Math Whizzes LLC

Do a round-robin exchange of your complete rough drafts:

  • Group 1 Gigunda attorneys give your papers to the Group 2 Gigunda attorneys
  • Group 2 Gigunda attorneys give your papers to the Group 3 Gigunda attorneys
  • Group 3 Gigunda attorneys give your papers to the Group 1 Gigunda attorneys

Math Whizzes attorneys do the same, mutatis mutandis.

Compare notes. (Remember, at this stage of the course the idea is not to compete for the highest grade, it's to help each other learn — OK, I might be delusional on that point, but please humor me ….)

9.6.3 Clarity exercise: Closing obligations left unclear

CLAUSE: From Gingras v. Avery, 90 Conn. App. 585, 591, 878 A.2d 404, 408 (2005):

The closing shall take place on or before sixty (60) days after subdivision approval; but in no event later than March 15, 2003.

QUESTION: The phrase "The closing shall take place" is an example of what?

TRUE | FALSE | MAYBE: This clause properly states the number of days after subdivision approval.

FACTS:

  • To be entitled to close the purchase, the buyer was required to meet certain prerequisites.
  • The buyer failed to do so before the stated date.
  • In court, the buyer claimed that it was still implicitly entitled to close the purchase, in part because in real-estate agreements, time (allegedly) is not of the essence.

EXERCISE: Rewrite the quoted language above to be clear that the buyer's right to purchase turns into a pumpkin "on" (?) the stated date.

(Hat tip: Ken Adams.)

9.6.4 Pro tip: Using insurance to immunize you from liability even for gross negligence

An opinion by the New York Court of Appeals reminds drafters that, under the law of that state, a contract can be structured to absolve a service provider from liability even for its own negligence or gross negligence. The trick, according to the court, is to draft the contract so that:

  1. the customer agrees to buy insurance to cover any damage or other loss that might result from the service provider's negligence; and
  2. the customer also waives the service provider's liability, agrees to look solely to its insurer for recovery, and waives subrogation, so that the customer's insurance company can't come after the service provider for reimbursement of whatever the insurance company has to pay out for the damage.

This drafting approach worked for Diebold, Inc., an alarm-system company. Diebold provided backup alarm service for a bank. The bank was burglarized, allegedly because of Diebold's gross negligence in ignoring problems with the alarm system. Diebold's contract with the bank, though, included provisions like those enumerated above: The contract required the bank to buy insurance, and included a waiver of Diebold's liability. As the court described the provision:

Diebold's contract contained a clause entitled “Property Insurance and Waiver of Subrogation” where Abacus agreed to obtain insurance coverage to cover its losses in the event of a theft. The agreement between Diebold and Abacus provided that Abacus “shall look solely to its insurer for recovery of its loss and hereby waives any and all claims for such loss against Diebold” and that Abacus' insurance policy would contain a clause providing that such waiver would not invalidate the coverage.

Abacus Federal Savings Bank v. ADT Security Services, Inc., 18 N.Y.3d 675, 967 N.E.2d 666, 681, 944 N.Y.S.2d 443 (2012) (affirming most grounds of dismissal of bank's claim against alarm-system companies after burglary, but reversing as to breach-of-contract claim against one defendant) (citations, alteration marks, and internal quotation marks omitted).

The burglarized bank claimed that Diebold's alleged gross negligence in maintaining the alarm system invalidated the limitation of liability. The court, however, held that while the exculpatory provision could not relieve Diebold for liability for gross negligence, the insurance provision and waiver of subrogation would be enforced: “A distinction must be drawn between contractual provisions which seek to exempt a party from liability and contractual provisions which in effect simply require one of the parties to the contract to provide insurance for all of the parties.” Id., 967 N.E.2d at 684 (cleaned up). The court also explained that “gross negligence, when invoked to pierce an agreed-upon limitation of liability in a commercial contract must smack of intentional wrongdoing. It is conduct that evinces a reckless indifference to the rights of others.” Id. at 683 (cleaned up).

Incidentally, Diebold's co-defendant did not have a mandatory insurance requirement in its contract, but merely left it up to the bank to decide whether to purchase insurance, nor did it include a waiver of liability and of subrogation. The court held that the co-defendant's limitation of liability provisions could not withstand a claim (if proved) of gross negligence. Id. at 685.

Comment: A contract drafter wanting to use the Diebold approach might also want to include a choice of law provision specifying New York law as the governing law for the contract. (Of course, other states' law might be to the same effect.)

Comment: The court's reasoning seems to imply that it didn't matter which party buys the insurance — as long as the amount of the insurance wasn't unreasonable, then it was OK to require the customer (or whoever) to look solely to the insurer for recovery of any loss that might occur.

Comment: In the real world of sales negotiations, a happy medium might be for the contract to provide:

  • that the service provider's liability is limited to X dollars, or to some formula such as X times the amount paid by the customer in the previous 12 months; and
  • that the customer must purchase insurance (or self-insure) against losses in excess of the agreed limited amount, with the customer also waiving the service provider's liability in excess of that amount.

9.6.5 Real-world negotiation: Disputes over termination

This afternoon I spent time on the phone with The Other Side in negotiating a software license agreement.

  • I represent Service Provider, which wants to license complex computer software ("Software") from Developer, a small company in Silicon Valley.
  • Service Provider (my client) wants to use the software in providing on-line services ("Services") to Service Provider's customers.
  • Service Provider will pay Developer, as a royalty, a percentage of Service Provider's revenue from providing the Services.
  • Developer wants to be sure (among other things) that it gets paid, so it wants the right to terminate the license if Service Provider materially breaches the agreement (after notice and an opportunity to cure).
  • If Developer did terminate the license, then Service Provider would not be able to continue using the Software to provide services to Service Provider's customers — which might put Service Provider in breach of its contractual obligations to its customers.
  • I added the following (an edited version is below) to Developer's draft license agreement:

(f) Because of the significance of the Software License to the Service(s), a termination of the Software License for default by Service Provider will take effect only upon the entry of a final judgment or (if applicable) arbitration award, from which no further appeal is taken or possible, that termination is proper under subdivision (a).

  • Developer's attorney, from a name-brand law firm in Silicon Valley, said that my proposed addition was "unfair."

QUESTIONS: In your groups, discuss the following, then we'll discuss together:

  1. Why do you think Developer's attorney reacted the way he did?
  2. What do you think my response was?
  3. How do you think we compromised?

9.6.6 Pro tip: Lay readers prefer explanation over brevity

Two international surveys, conducted several years apart, suggest that when lay people must read detailed, technical language, they strongly prefer more explanation, even if it means they have to read somewhat more. For legal text, the two surveys used the identical question; while multiple questions would have been more satisfying, the results were nevertheless striking:

Question 21: Which would you prefer to read?

1.    21% (n=142) If you don’t respond, the court will issue a default judgment.

2.    79% (n=538) If you don’t respond, the court will issue a default judgment. That means you’ll lose, and the court will give the plaintiff what he is asking for.

Christopher R Trudeau and Christine Cawthorne, The Public Speaks, Again: An International Study of Legal Communication, 40 U. Ark. Little Rock L. Rev. 249, 278 (2017) (emphasis added). (Hat tip: 500 Words.)

The same had been true in the earlier survey as well:

In the first study, 78% of responders preferred a longer version that explained what default judgment meant over a shorter version that was very clear, yet did not explain that term.

In fact, that was the only choice-of-language question where the longer version prevailed, so we felt compelled to test this same question again—with more respondents from various English-speaking countries—to see if this result would be consistent. If so, this data would help to dispel a common misconception about plain language: that it means you must always shorten things.

While shortening text is usually a byproduct of plain language, the point is to clearly explain technical information to interested readers in ways they can understand—even if that does lengthen the text, at times.

Id. at 254-55 (cleaned up; emphasis and extra paragraphing added).

The article concludes:

First, and this is worth remembering, people frequently needed to use legal information to do their jobs. This is true no matter what sector they are in: in healthcare, in government, or in business. But what was surprising was how much workplace productivity is impacted by traditional legal language. To recap, not only did the vast majority of responders spend more than fifteen minutes interpreting legal information they had to use, but the ones who could not understand that information wasted even more time trying to find and interpret that information in a different way. What a waste of time.

Second, no matter the English-speaking country, people overwhelmingly prefer clear language to traditional legal language. In fact, the results show that the preference for plain language may be even stronger outside of the U.S. But, even in the U.S., more than 80% preferred plain language, which is a substantial majority by any measure.

Third, the preference for plain language increases with the person’s education level. We were pleasantly surprised to see that the results from this study were consistent with the results in the first study. This additional data helps further “debunk the argument that higher-educated people will not mind traditional legal language as much as other[s] do.”

Finally, if terms cannot be avoided, explain those terms. We were encouraged—and a little surprised—by the results from the two choice-of-language questions that tested preference for explaining technical terms (one medical term and one legal term). Notably, these were the only two choice-of-language questions where the longer version prevailed. These results are a good reminder that using plain language does not always mean shortening something. It means explaining technical concepts to a reader in ways that help them understand—even if that means adding more words.

In the end, the public has spoken, again, and from nearly every major English-speaking country. They know what they want—they want plain language.

Id. at 281-82 (emphasis added, footnote omitted).

9.6.7 A tweet from President Trump

From this tweet by the president:

"Federal Judge throws out Stormy Danials lawsuit versus Trump. Trump is entitled to full legal fees." @FoxNews Great, now I can go after Horseface and her 3rd rate lawyer in the Great State of Texas. She will confirm the letter she signed! She knows nothing about me, a total con!

And this response by a liberal-leaning columnist:

While we’re on the topic, can we talk about the comma in the very last sentence?

9.6.8 Ambiguity and a trademark license termination clause

From General Nutrition Investment Co. v. Holland & Barrett Int'l Ltd (Rev 1) [2017] EWHC 746 (Ch), ¶ 15:

5.2 The Licensor may terminate this Agreement [sic] immediately by notice in writing if:

     (a) The Licensee [i] materially breaches this Agreement or any other member with the H&B Group commits an act which would amount to a material breach of this Agreement or [ii] (without prejudice to the Licensor’s other rights to terminate under this Agreement) otherwise infringes the Licensor’s rights under the Trade Marks [iii] to an extent likely to cause material lost to the Licensor; or …

(Bracketed romanettes added; hat tip: IP Draughts.)

QUESTION 1: Does the materiality qualifier in clause iii apply to both clause i and clause ii or just to clause ii? EXERCISE: Rewrite to clarify.

QUESTION 2: Why does this quotation include "[sic]" after "terminate this Agreement"?

9.6.9 Ambiguity and progressive resistance to President Trump

TEXT: "The temptation for progressives to resist pushing their own concrete policy agenda is compelling, especially since doing so gives the other side ammunition for criticism …." (From Joel Berg, It's Policy, Stupid — Why progressives need real solutions to real problems, Washington Monthly, Apr. 10, 2017.) QUESTION: In the quotation, the bold-faced "doing so" refers to what, exactly — pushing a policy agenda, or resisting pushing an agenda? EXERCISE: Rewrite to clarify.

9.7 Class 18: Mon. Oct. 22

9.7.1 Quickie: You get what you INspect …

See this article: Tokyo 2020 Olympics venues linked to earthquake safety data scandal:

A major Japanese hydraulics company has admitted to doctoring earthquake safety data for buildings across the country, including some venues for the 2020 Tokyo Olympics.

 * * * 

The KYB scandal is only the latest example of corner cutting and data fudging by Japanese firms. Last year, industrial giant Kobe Steel admitted it falsified information on products sold to major brands including Boeing and Toyota, while care maker Nissan had to halt production after problems in its inspection process emerged.

Some experts say Japanese firms are too willing to sacrifice standards in order to grow market share and profits. That's a particular challenge in their domestic economy, which has struggled for decades with sputtering growth and falling prices.

9.7.2 Governing law: Different clauses, different laws?

Consider the UK Supreme Court's Rock Advertising case, which rejected the "Cardozo Rule" that amendments- and waivers-in-writing clauses were effectively unenforceable. (Blog post about it.)

QUESTION: Can you adopt a  choice-of-law provision that governs just the amendments-in-writing clause, and/or the waivers-in-writing clause? EXAMPLE:

The parties expressly agree that this provision [OPTIONAL: but no other] is to be interpreted and applied in accordance with English law as announced in Rock Ad­ver­t. Ltd v MWB Bus. Ex­ch. Ctrs. Ltd, [2018] UKSC 24.

9.7.3 Quickie: Tesla's supply-chain issues

Here are some dangers that a company can encounter: (1) Not getting paid; (2) not being able to build your product because your suppliers won't supply you with parts unless you pay cash on delivery (C.O.D.); (3) having a supplier go out of business because you didn't pay them. From a Bloomberg story:

… [A short-seller of Tesla stock] said her firm sees some suppliers to Tesla filing for bankruptcy, which poses particular risk to the carmaker because many of its components are single-sourced.  * * *

The Wall Street Journal reported in August on an Original Equipment Suppliers Association survey of executives that found most respondents believed Tesla posed a financial risk to their companies. Some small suppliers claimed in the previous several months that they failed to get paid, the newspaper reported, citing public records.

Gabrielle Coppola, Tesla Short Seller Warns of ‘Massive’ Supply-Chain Disruption, Bloomberg.com, Oct. 19, 2018

9.7.4 Governing law (Duke Energy)

The provision below is from a services agreement form used by Duke Energy, at https://goo.gl/imaf3v (archive.org):

L.  Governing Law. This Agreement will be governed by, and construed in accordance with, the laws of the State Contractor and Duke Energy agree to relinquish and waive their rights to a trial by jury in any action brought hereunder.

QUESTION: Any comment about the last portion?

9.7.5 Governing law: Always push for your own state's law?

FACTS: You represent Alpha LLC, in Texas, which is licensing its trade secret chemical-refining process to Bravo Corporation, which will use the process in Bravo's refinery in Oklahoma. ¶ Bravo insists that the license agreement be governed by Oklahoma law.

QUESTION: What would be some of the pros and cons of Alpha's agreeing to Oklahoma law?

9.7.6 Ambiguity: Julia Louis-Dreyfus's early career

From a NY Times piece about Julia Louis-Dreyfus's being awarded the Mark Twain Prize for American Humor:

When she was still in college, Louis-Dreyfus was cast on “Saturday Night Live,” where she played a televangelist with a raunchy retelling of the Nativity. She has said those years were grim — a young woman trying to prove herself in a male-heavy cast — and missing the camaraderie of her work in Chicago. And on Sunday, she said it was not appropriate for her work there to be honored in a celebration of comedy.

(Emphasis added.)

QUESTION: In the italicized portion, which exactly is the "her work there" to which Louis-Dreyfus was supposedly referring — was it her work at SNL, or her work in Chicago?

9.7.7 Governing law: How far does it extend?

FACTS: Your client Alpha LLC, in Houston, and Bravo Corporation, in Oklahoma, enter into a services agreement under which Alpha will perform services partly in Houston and partly on-site at Bravo's refinery near Tulsa. ¶ The agreement includes the following provision: This Agreement is to be interpreted in accordance with New York law. ¶ The services go badly, and Bravo sues Alpha, in federal court in Tulsa, (i) for breach of contract, and (ii) for fraudulent inducement for allegedly "overselling" Alpha's capabilities.

QUESTION: How would the court go about analyzing which state's law is to govern the fraudulent-inducement claim? What conclusion do you think the court would reach?

9.7.8 Governing law: Agree to some neutral state's law?

FACTS: Your client Alpha LLC, in Houston, is entering into an agreement with Bravo GmbH, in Germany. ¶ Neither party wants the other party's law to apply. ¶ Bravo's counsel proposes that the agreement specify that English law will govern. ¶ Neither the parties nor the subject matter of the agreement have any connection to England.

QUESTION: How likely is it that a U.S. court would enforce a choice of English law in the contract?

[This wasn't in the reading — it will be next semester — but is discussed in this Oct. 4 blog post]

9.7.9 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.

QUESTION: What's your answer to Alice — and why?

9.7.10 NDA "sunset" provisions (1)

MORE FACTS for the situation in 9.7.9:
(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.

9.7.11 NDA "sunset" provisions (2)

ALTERNATIVE FACTS for the situation in 9.7.10:
(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.

QUESTION: Is this likely to be OK?

9.7.12 Exercise: Confidentiality agreement

FACTS: You represent Seller, Inc., which is considering signing a confidentiality agreement ("NDA," or nondisclosure agreement) with a potential customer, Buyer, Inc.

MORE FACTS: The NDA says:

The Receiving Party acknowledges that the Confidential Information is proprietary to the Disclosing Party, has been developed and obtained through great efforts by the Disclosing Party and that Disclosing Party regards all of its Confidential Information as trade secrets.

QUESTION: Are you OK with this?

MORE FACTS: The NDA contains blanks to be filled in for who will be the "Disclosing Party" and who will be the "Recipient."

QUESTION: What should be filled in?

Should the NDA include a time limit for when disclosure can be made in confidence? Why or why not?

MORE FACTS:

The NDA includes a number of exclusions from the definition of Confidential Information. One of those exclusions is that information subject to a third-party subpoena is not considered Confidential Information.

QUESTIONS:

  1. Would you object to this? Why?
  2. What would be a better alternative?

MORE FACTS: The nondisclosure agreement states: "The Receiving Party acknowledges that any breach or threatened breach of this Agreement by the Receiving Party would result in irreparable harm to the Disclosing Party, entitling the Disclosing Party to temporary and permanent injunctive relief against the breach; the Receiving Party waives any requirement that the Disclosing Party post a bond." You remember seeing this sort of clause in a lot of NDAs.

QUESTION: From Seller's perspective, do you see any problem with this clause?

9.8 Class 19: Wed. Oct. 24

9.8.1 Quiz 3

You know the drill.

9.8.2 In the news: Gage Corp. v. Tamareed Co.

From Gage Corp., Int'l v. Tamareed Co., No. 2017AP881 (Wis. App. Oct. 4, 2018) (per curiam) (affirming judgment on jury verdict):

¶4 We supplement the following summary of undisputed facts as necessary in the discussion section below.

Tamareed markets and sells architectural products and services in Saudi Arabia on behalf of non-Saudi manufacturers. Sparta-based Gage and La Crosse-based Mid-City are both manufacturers.

¶5 Tamareed became aware of plans for a construction project in Saudi Arabia and worked to secure a related construction contract for Gage/Mid-City. Specifically, Gage/Mid-City was to design and produce exterior building coverings or panels (called cladding), to be installed by a Saudi contractor. Tamareed acted as a sales representative and consultant for Gage/Mid-City.

In defining their contractual relationship, Tamareed and Gage/Mid-City did not enter into a formal, single-document commission agreement. Instead the parties exchanged a series of letters and emails between February 2009 and January 2012 addressing aspects of the project and their respective obligations.

¶6 As to the Saudi project itself, Gage/Mid-City struck an agreement with a Saudi building contractor, under which Gage/Mid-City would design and supply cladding, at a price exceeding $20 million. The parties call this the "supply agreement."

At some point after Gage/Mid-City entered into the supply agreement, Gage/Mid-City discovered that the building contractor who was supposed to purchase and install the cladding had stolen Mid-City Steel's design and was producing "counterfeit" cladding. Gage/Mid-City commenced litigation against the building contractor in Saudi Arabia.

¶7 Gage/Mid-City and the Saudi building contractor subsequently mediated and settled their dispute for just over $3 million.

Gage/Mid-City offered Tamareed a commission of approximately $65,000 out of the settlement proceeds. Tamareed rejected the offer.

¶8 Gage/Mid-City sued for a declaratory judgment in the Monroe County Circuit Court. Specifically, Gage/Mid-City asked the court to declare that Gage/Mid-City owed Tamareed no commission because the deal embodied by the supply agreement had fallen through.

Tamareed counter-claimed, seeking what it refers to as its "full contract commission of $1,172,000.00."

The parties filed cross motions for summary judgment.

¶9 The court determined that the parties' communications had formed a contract, but that this contract was ambiguous regarding how Tamareed would become entitled to a commission.

The matter was tried to a jury, which found that Tamareed was not entitled to a commission at either of two specified times, the only times at issue: when Gage/Mid-City entered into the supply agreement, and when Gage/Mid-City received the settlement from the Saudi building contractor.

The court entered judgment on the verdict, and denied Tamareed's post-verdict motions. Tamareed appeals. [The appellate court affirmed.]

Id. (emphasis and extra paragraphing added).

LESSONS / REMINDERS:

  1. Letters and emails can form binding contracts.
  2. "Roadblock" clauses can come in handy — for example, in this case an integrated contract might have explicitly stated that Tamareed would not be entitled to any commission except for actual, paid-for sales of products.

9.8.3 In the news: Jacobs Engineering sells division

From the Houston Chronicle, Oct. 23: "Jacobs sells energy engineering business for $3.3B":

Jacobs Engineering Group is selling its Houston energy and chemicals business to Australian construction and engineering firm WorleyParsons Ltd. in a cash-and-stock deal valued at $3.3 billion.

The unit employs more than 2,000 Houston-area workers.

The deal represents a major shift in the energy engineering and construction sector with Jacobs essentially leaving oil and gas and WorleyParsons becoming a much bigger force in U.S. energy industry. …

As required by SEC regulations, Jacobs filed a Form 8-K that includes the complete Stock and Asset Purchase Agreement. Some of the major sections are:

Article I: Definitions

Article II: Purchase and Sale — note especially Sections 2.09 through 2.12, concerning the Closing, the payment of the preliminary purchase price, and the provision for post-Closing adjustment of the purchase price.

Article III: Representations and Warranties of Seller, which refers to the Seller Disclosure Schedule as carve-outs from the reps and warranties. Then Section 3.26, at the end of Article III, disclaims other reps and warranties by Seller (a "roadblock" clause).

Article IV: Representations and Warranties of Buyer — in particular, Section 4.08 Available Funds warrants that "Buyer has, or at the Closing will have available to it after giving effect to the Financing, all funds necessary to pay the Cash Consideration and all other amounts required to be paid by it in connection with the consummation of the transactions contemplated hereby on the Closing Date." Then Section 4.19, at the end of the article, disclaims other reps and warranties by Buyer (another "roadblock" clause).

9.8.4 Discussion: Letters of intent

QUESTIONS:

  1. What are some reasons business people often like letters of intent?
  2. What could go wrong with signing a letter of intent, and how could a drafter try to put up guard rails?

9.8.5 Lecture / discussion: Master agreements

QUESTIONS:

  1. What are some reasons parties use master agreements?
  2. How can a master purchase agreement be drafted to allow affiliates of the buyer to order "under" the master agreement?

9.8.6 Review: Choice of law (Rick's)

The provision below, at https://goo.gl/DRbLRw (edgar.sec.gov), is from a 2008 real-estate purchase agreement involving the parent company of "gentleman's club" Rick's Cabaret:

Section 10.15. Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to principles of conflict of laws. In any action between or among any of the parties, whether arising out of this Agreement or otherwise, each of the parties irrevocably consents to the exclusive jurisdiction and venue of the federal and state courts located in Dallas County, Texas.

HYPOTHETICAL FACTS: Suppose (i) that one of the parties is a New York corporation; (ii) the agreement is negotiated and signed in New York City; and (iii) that party sues one of the other parties for fraud in the inducement but not for breach of contract.

QUESTION: On the hypothetical facts above, what effect, if any, would this provision have on the choice of law?

QUESTION: If you were reviewing this provision, what might your reaction be about the location of the last sentence of this provision?

9.8.7 Injunctive relief in an NDA (1)

MORE FACTS for the situation in 9.7.9:
(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.

QUESTION: Is this a good idea for Alice?

9.8.8 Injunctive relief (2)

MORE FACTS for the situation in 9.8.7:
(vii) The injunctive-relief provision in Bob's draft NDA also states that Alice waives any requirement that Bob post a bond.

QUESTION: Is this a good idea for Alice?

9.9 Class 20: Mon. Oct. 29

9.9.1 Announcement: No class Wed. Nov. 14

I'll be traveling on business.

9.9.2 Announcement: Bring hard copies of Gigunda-Math Whizzes drafts on Wednesday

As an experiment, we'll be starting a simulated negotiation using each group's drafts.

9.9.3 In the news: Business lawyer and his business partner 'stiff' a photographer they'd hired

Thomas Grady Photography, Inc. v. Amazing Vapor, Ltd., No. S-17-818 (Neb. Oct. 26, 2018): A business lawyer and his business partner started a "vaping" wholesale busi­ness. The lawyer orally hired a photographer at $800 per day to take pictures of e-cigarette hardware, supplies, and liquids — but then the vaping company didn't pay the photographer's $2,400 invoice; instead, the partners asked the photographer to reduce his price in return for the promise of more work in the future. (The photographer declined their offer.) The state supreme court upheld a judgment that the lawyer was personally liable for the $2,400, on grounds that the lawyer hadn't disclosed that he was acting as agent for his company. 

Possible drafting lessons:

  • Some parties will try to retrade a deal (that's putting it politely); it's not uncommon for first-time customers or -clients to try the gambit, "I know we agreed to pay you $X, but if you'll reduce the price now, we'll give you more business in the future."
  • The photographer might have helped his case if he'd sent the customer even a bare-bones advance email confirmation that set forth: (i) what the photographer was going to do, and (ii) what the cost would be.
  • It's interesting that the lawyer-vaping partner, faced with personal liability, elected to take the case to trial and then all the way to the state supreme court. The supreme court's opinion doesn't shed any light on why the lawyer didn't just pay the photographer's $2,400 invoice.

9.9.4 Discussion: Services provisions

In your groups, discuss the following:

  1. In a master services agreement, which should take precedence: a statement of work, or the master agreement? Why?
  2. In a master services agreement, should each new statement of work: (A) be considered an addition to the master agreement, or (B) be a separate contract that incorporates the master agreement by reference? Why?
  3. When might it make sense for a customer to "pull the permits" for services work, instead of the service provider?
  4. What exactly does "workmanlike performance" mean?
  5. What are the "classic three" remedies for defects in services?
  6. Why do customers typically want a services agreement to state that the provider will control the means and manner of the work? Wouldn't customers want to keep that flexibility?
  7. Extra: When drafting a services agreement for a customer, what sorts of things should you plan for if the customer wants to "pull the plug" before the job is done?

9.9.5 In the news: Business buyer tries to walk a deal by claiming that essential terms hadn't been agreed

Mussulam v. Ali, No. 17-0762 (Tex. Oct. 26, 2018):

Musa “Moses” Musallam and Amar Ali entered into a written agreement relating to the sale of Musallam’s business to Ali. Musallam refused to close, maintaining that the agreement lacked essential elements of a binding contract and was thus only an agreement to agree. … The jury found that they had agreed. …

The trial court denied Musallam’s motion and rendered judgment for Ali. Musallam appealed, in part, challenging the jury’s finding that he agreed to sell the business to Ali. …

 * * *

Musallam owns Fanci Candy, Inc., a wholesale distributer of candy and tobacco products. At times relevant to this matter, Fanci Candy had contracts to buy tobacco products directly from Altria Group Distribution Company (the owner of Philip Morris and U.S. Tobacco) and Lorillard Tobacco Company.

In April 2012, Musallam approached Ali, the vice president of convenience store distribution business A to Z Wholesalers, Inc., about purchasing Fanci Candy. A to Z Wholesalers did not have a direct contract with either Altria or Lorillard, thus it bought those companies’ tobacco products through middlemen and paid higher prices for them than did Fanci Candy.

Because Altria and Lorillard ordinarily would not enter into new contracts to sell directly to wholesalers, businesses that wanted to buy directly from them usually sought to do so by buying companies that had direct contracts.

But the Altria and Lorillard direct-purchase contracts would not necessarily transfer if Fanci Candy was sold: both Altria and Lorillard reserved the right to discontinue direct sales to Fanci Candy absent their approval of its purchaser.

 * * *

The Stock Transfer Agreement provided that the sales price for the furniture, fixtures, and equipment such as stamping and packing machines would be their value “as mutually agreed upon by the parties prior to the Closing Date,” and the price of the land and building would be the value set by an appraisal to be accomplished before the closing date.

 * * *

On June 28, 2013, Lorillard notified Ali that it would not approve the change in ownership.

 * * *

… Musallam asserted that when an agreement leaves material terms open for future adjustment it is not binding but constitutes merely an agreement to agree. He argued that whether the price for furniture, fixtures, equipment, and other open issues were material terms was a fact question for the jury that must be determined before the court could decide the legal question of whether the Stock Transfer Agreement was a binding contract or merely an agreement to agree.

Id. at 1, 2, 3, 4 (extra paragraphing added).

9.9.6 Homework review (10 min.)

In your drafting groups, take ten minutes to:

  • compare notes about my annotations; and
  • plan any final changes.

9.9.7 Ambiguity exercise and the Red Sox World Series title

From a piece by Ronald Blum, Associated Press October 29, 2018: “[The Red Sox] trailed 4-0 in the seventh inning of Game 4 when ace Chris Sale rose from the dugout bench for a fiery, profane, motivational rant and woke up for a 9-6 win.”

QUESTION: Who "woke up," exactly? How could this be fixed?

(Note: The above version was in the Houston Chronicle, Oct. 29, 2018, but the error was fixed in the online version.)

9.9.8 Exercise: Jury trial waiver

FACTS:

You are a lawyer at a law firm in Houston. A law school classmate, who moved to Atlanta after graduation, has referred one of her Atlanta corporate clients to you. (That's a good reason to get to know, and be on good terms with, the people you meet in school ….)

Your classmate's Atlanta client is hiring a Houston company to perform certain services. The client has agreed to your classmate's advice that a Texas lawyer should be involved in the negotiation. The Houston service provider's contract form says that:

  • both sides waive the right to a jury trial
  • Texas law applies
  • litigation will be Houston
  • any action to enforce the contract must be brought within one year after the cause of action accrues.

Your classmate says that your mutual client would like to:

  • preserve its right to a jury trial; and
  • get a longer limitation period.

QUESTIONS:

  1. Your classmate asks if the jury-trial waiver would be enforceable in a Texas court. What do you tell her?
  2. You ask your classmate whether the jury-trial waiver would be enforceable in a Georgia court. What will her answer be?
  3. Your classmate asks whether the one-year limitation period is enforceable in Texas. What do you tell her?
  4. Would your answer on the limitation period be any different if the contract were for the sale of goods?
  5. You ask your classmate whether the one-year limitation period is enforceable in Georgia. What will her answer be?
  6. As a practical matter, who is more likely to file a breach-of-contract suit in the future — the Houston services company, or the Atlanta customer? What does that suggest about which of the contract provisions in question is, or are, likely to be most important to the Atlanta customer?
  7. Name up to three changes that you could ask for in the contract to preserve the Atlanta company's right to a jury trial. (Hint: See the suggested reading — and consider what trade-offs you might be making. Also, one possible change could be to delete existing language.)
  8. If any new language is necessary to implement your proposed changes, draft it.
  9. Could you use a two-step strategy to try to get at least some of what your client wants? That is, propose Change A, and if you can't get the Houston services company to agree, then propose Change B as a fallback position? What might those two changes be?

SUGGESTED READING:

9.9.9 In the news: $706M judgment for breach of NDA provisions

From Patrick Danner, Judge upholds record $706M Bexar jury verdict, [San Antonio] ExpressNews.com, Oct. 25, 2018:

State District Judge David A. Canales on Thursday entered a final judgment in favor of San Francisco-based HouseCanary Inc., a real estate analytics firm that had accused a Detroit company affiliated with mortgage lender Quicken Loans of stealing trade secrets and breach of contract.

 * * *

Canales’ ruling comes more than seven months after a 12-person jury found Amrock misappropriated HouseCanary’s technology for real estate valuation and appraisal analytics and had breached confidentiality agreements. The trial took seven weeks.

Jurors awarded HouseCanary more than $235 million in actual damages and $470.8 million in punitive damages. Canales affirmed the jury’s award and added almost $29 million in prejudgment interest.

The judge also awarded about $4.5  million in attorneys’ fees to HouseCanary. …

[A defense lawyer] also said, “This is the kind of damage award that annihilates companies. It just destroys them.” [Defendant] Amrock has 1,200 Michigan employees “who are wondering if they’re going to lose their jobs because of this” verdict.

9.9.10 "Sole and exclusive" – what does it mean?

9.9.11 "Sole cost and expense" – what does it mean?

Accountants apparently distinguish between cost and expense:

A cost might be an expense or it might be an asset. An expense is a cost that has expired or was necessary in order to earn revenues. We hope the following three examples will illustrate the difference between a cost and an expense. …

What is the difference between cost and expense?, AccountingCoach.com

And:

#+BEGINQUOTE An expense is a cost that occurs as part of a company's operating activities during a specified accounting period. A retailer will likely incur the following expenses: the cost of goods sold, commissions earned by the sales staff, rent for the retail space, the cost of the electricity used, advertising that took place, wages and salaries that were incurred, etc. #+ENDQUOT

What is an expense?, AccountingCoach.com

9.9.12 Feedback clauses in nondisclosure agreements

One of my blog readers, a paralegal for a USD $13B (revenue) multinational corporation, asked me my thoughts about the following clauses, which she said her customers were increasingly asking her company to agree to in confidentiality agreements.

Clause 1 (extra paragraphing, paragraph numbering, and bullets added):

1.1 Feedback: Vendor may (but is not obligated to) provide feedback or input to Company based on Confidential Information.

1.2 Any and all such feedback (including any and all test results, error data, reports or other information) shall be the exclusive property of Company, and/or are hereby assigned to Company by Vendor at no cost to Company.

1.3 Company may use such feedback in any manner and for any purpose, without limitation, liability or obligation to Company and its successors and assigns.

1.4 Vendor warrants and represents[:]

  • that it owns an intellectual property rights in and to the Feedback and
  • that the Feedback does not infringe upon the intellectual property rights of any other third party.

Clause 2:

2.1 Feedback Clause. Any ideas, suggestions, guidance, or other information disclosed by Vendor regarding the design of Company’s components, including design and design for manufacturability feedback, and all intellectual property rights therein and thereto, shall be collectively deemed “Feedback.”

2.2 Notwithstanding [another section], Company shall own all Feedback and all such Feedback shall be deemed to be the Confidential Information of Company and not Vendor.

2.3 Accordingly, Vendor hereby assigns to Company all of its right, title, and interest in and to such Feedback.

2.4 To the extent that the foregoing assignment is ineffective for whatever reason, Vendor agrees to grant and hereby grants to Company a non-exclusive, perpetual, irrevocable, royalty-free, worldwide license (with the right to grant and authorize sublicenses) to make, have made, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Feedback without restriction.

EXERCISE: As counsel for Vendor, how might you respond to these various proposed provisions?

EST

9.9.13 Ambiguity: Why hyphens can be important

From Stanford law professor Mark Lemley (used with his permission):

Paradise-Time-Travel-Bookstore-Lemley.png

And in the same vein, from a then-student in this course (spring 2016): Mice Breeding Chinese Scientists Say Making Babies in Space Is Possible (Inverse.com). The student's comment: "TL;DR: Hyphens are important, yo."

9.9.14 Poor word choice: "Loanee"

From Katie Stancombe, COA affirms breach, fraud, unjust enrichment claims brought by bank, TheIndianaLawyer.com Oct. 26, 2018:

A bank that brought breach of contract, fraud and unjust enrichment claims against its loanee won each of those claims on appeal, but failed to state a claim that the loanee violated the “usual and customary practices” laid out in its participation agreement, according to a Friday opinion from the Indiana Court of Appeals.

(Emphasis added.)

QUESTION: "Loanee" ?????

9.10 Class 21: Wed. Oct. 31

9.10.1 Announcement: "Take-home quiz" on Blackboard (for review)

By the start of class on Monday November 5, I'll have posted an additional, 50-point "quiz" on Blackboard for additional spaced-retrieval practice. This quiz will be:

  • due Monday Nov. 19 at 4:00 p.m.;
  • untimed except for the due date;
  • open-everything, but you must do your own work; and
  • available for up to three attempts; I'll grade only the last attempt.

The questions will be drawn from:

  • the existing quiz questions;
  • the flashcard questions;
  • final-exam questions that I've used in the past;
  • questions that we've covered in class.

It's likely that the final-exam questions will look suspiciously familiar once you've done this review quiz (but the final exam will be timed and closed-everything).

9.10.2 Gigunda-Math Whizzes: Start of simulated negotiation

  1. Each team is to trade hard-copy drafts with its counterpart team (from the "old" groups from last week), i.e., the Gigunda team from last week's Group 1 will trade hard-copy drafts with the Math Whizzes team from last week's Group 1.
  2. Each team is to email, to its counterpart team, the Word document of its draft contract.
  3. Each team is to do a quick skim of its counterpart's draft and discuss, within the team, what if any changes it might want.
  4. On Monday Nov. 5, each pair of teams (a Gigunda team and its counterpart Math Whizzes team) will pick five issues to negotiate.
  5. See the (revised) key dates for the final homework assignments, which will be for each team to redline the draft of its counterparty team.

10 Detailed class plans: November

10.1 Class 22: Mon. Nov. 5

10.1.1 Take-home quiz is up

See the Blackboard instructions.

10.1.2 Exercise: Ambiguity and short-term trading

From a Hacker News discussion:

First commenter: "You should only short term trade with your 401k."

Responder: "You're saying, 'if you're going to short-term trade, you should use your 401k to do it in preference to any other funds source', [sic] right? Because there's a way to read this where you're saying 'the only way you should trade with your 401 is short-term'. [sic]"

First commenter: "Lol. The first."

QUESTION: How can the above sentence be clarified by simply moving words around? (As noted above, there are two possible meanings.)

QUESTION: Why did I write "[sic]" where I did?

10.1.3 Exercise: Illusory contract follow-up (reprised)

The following is from Henderson v. A & D Interests, Inc., No. 3:17-CV-096 (S.D. Tex. Mar. 9, 2018) (granting defendant's motion to dismiss in favor of mandatory arbitration):

[Defendant] Heartbreakers operate [sic] an adult entertainment club in Dickinson, Texas. Plaintiffs Frankie Henderson (“Henderson”) and Kaitlyn Jersey (“Jersey”) worked as exotic dancers at Heartbreakers. They signed and executed the Independent Contractor/License Agreement Between A&D Interests, Inc. d/b/a Heartbreakers and Independent Contractor (“License Agreement”). The License Agreement contains an arbitration provision. …

Henderson and Jersey argue the License Agreement is unenforceable because it is illusory. The Court disagrees. The Fifth Circuit has held that an arbitration agreement is illusory “[w]here one party has the unrestrained unilateral authority to terminate its obligation to arbitrate.” Nelson v. Watch House Int’l, L.L.C., 815 F.3d 190, 193 (5th Cir. 2016) (quoting Lizalde v. Vista Quality Markets, 746 F.3d 222, 225 (5th Cir. 2014)).

Here, the License Agreement does not give such unilateral authority to either party. Section 8 of the License Agreement gives both the Licensor and Licensee the power to “terminate the agreement at any time with or without notice.” As both parties were provided termination rights, the Court finds that the License Agreement is not illusory.

Id., slip op. at 1, 3 (emphasis and extra paragraphing added).

QUESTION: If either party had "terminated" the Agreement, would the arbitration provision have died with the Agreement?

[DCT to discuss New England case]

QUESTION: If a drafter didn't want arbitration to die upon termination, what could that drafter do during drafting / negotiation?

Answer: The drafter could state that the arbitration provision would survive any termination or expiration of the Agreement.

QUESTION: Which of these drafting approaches is better In Professor Toedt's view?

A.    Allow for termination of the Agreement but state that specified provisions survive.

B.    Allow for termination of specific rights and obligations but not of the Agreement.

C.    Neither is better; either will work OK.

D.    Do what your supervising partner prefers.

Answer: D: In Professor Toedt's view, B is the better choice, but when you're starting out, do it the way your supervising partner wants.

10.1.4 Exercise: Warranties – who can sue?

FACTS:

  • You represent ABC Corporation, which is negotiating a master purchase agreement under which ABC and its various affiliates can issue purchase orders to buy widgets from XYZ Inc. You've been asked to review a draft of the master agreement, prepared by XYZ's lawyers.
  • One provision of the draft states that "XYZ warrants to ABC that the widgets, as delivered, will be free from defects in materials and workmanship."

HYPOTHETICAL: Suppose that one of ABC's affiliate corporations were to order widgets under this master agreement, and it turned out that those widgets did have defects.

QUESTION 1: Would the affiliated corporation be able to sue XYZ for breach of warranty? [27]

QUESTION 2: As ABC's lawyer, how could you improve the warranty provision on this point? [28]

10.1.5 Exercise: Indemnities

1. What is the difference between an indemnity and a warranty? [29]

2. IF FALSE, EXPLAIN WHY: IF: Alice agrees to indemnify Bob against damage arising from occurrence of Event X; THEN: This reduces the risk to the parties associated with the (possible) occurrence of Event X. (CAUTION: Read this carefully.) [30]

3. IF FALSE, EXPLAIN WHY: An indemnity obligation allocates at least some of the financial risk of Event X. [31]

4. IF FALSE, EXPLAIN WHY: The following is an acceptable conventional phrasing: Alice hereby indemnifies Bob against any damage Bob might incur if it rains tomorrow. [32]

10.1.6 Exercise: Atari indemnification provision

From section 11 of an Atari consulting contract at https://goo.gl/TvfYKa (onecle.com via archive.org):

Consultant agrees to indemnify and hereby does indemnify, defend and hold harmless Atari, its affiliates, and their respective officers, directors, employees, distributors, agents, customers and licensees from and against any liability, damage or expenses (including without limitation attorneys' fees) based on the untruth or breach of any representation, warranty or covenant contained in this agreement.

QUESTIONS:

  1. Given the meaning of indemnify, what does the phrase, "and hereby does indemnify" literally mean, and does that make business sense?
  2. The end of this provision refers to the "untruth" of any "covenant"; any thoughts about that?
  3. Does Atari gain anything by asking for this indemnity obligation, as opposed to relying on straightforward breach-of-contract remedies?
  4. If you were representing Consultant, what might you say about the list of beneficiaries of this indemnity obligation?
  5. If you were representing Consultant, how might you try to negotiate less-onerous terms for this provision?

10.1.7 Gigunda-Math Whizzes: Simulated negotiation

  1. Each pair of teams (a Gigunda team and its counterpart Math Whizzes team) is to pick five issues to negotiate.
  2. See the (revised) key dates for the final homework assignment, which will be for each team to redline the draft of its counterparty team.

10.2 Class 23: Wed. Nov. 7

10.2.1 Ambiguity exercise: Prime rate plus 2%

TEXT (from a dispute that I arbitrated): A contract states that payments remaining past due more than 30 days after the due date will bear interest at “a rate per annum equal to the prime rate published by the Wall Street Journal on the business day before the date on which such interest begins to accrue, changing with each change in such published rate, plus two percent (2%)."

FACTS: On the relevant date, the Journal's published U.S. prime rate was 4.00%.

QUESTION: On its face, from a drafting style perspective, what's wrong with this interest-rate provision?

QUESTION: What interest rate should be applied to the late payment — 6%, or 4.08%?

QUESTON: How could the interest-rate language be clarified?

10.2.2 Ambiguity: Separate interviews

From an arbitration award I was writing (and caught myself): "Ms. Doe and her coworker Jane Roe were separately interviewed by Human Resources manager John Doe and Becky Bow."

QUESTION: How many people were interviewed by how many people?

10.2.3 Drafting fail: "Each male grandson …."

From this article:

… when I was 13 I was bequeathed a shotgun after my grandfather died. Each male grandson was given one.

QUESTION: What are two ways of improving this passage?

10.2.4 Exercise: Payments based on net revenue

From a contract drafted by The Other Side of a deal (sanitized):

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?

10.2.5 Rewriting exercise: Termination

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.

EXERCISE: Rewrite to clarify — don't mess with the substance.

10.2.6 Gigunda-Math Whizzes: Continue simulated negotiation

Each pair of teams (a Gigunda team and its counterpart Math Whizzes team) is to continue negotiating the (ten) issues chosen previously.

10.3 Class 24: Mon. Nov. 12

10.3.1 Gigunda-Math Whizzes homework due

Each Gigunda-MathWhizzes team is to email me its final redline of its "opponent" team's draft, reflecting whatever final agreements were made:

  • Indicate in comment bubbles whether the changes were agreed to.
  • If you and The Other Side didn't reach agreement about some of the changes you requested, leave in your redlining for those changes.
  • If you did reach agreement about particular changes that you requested, feel free to accept the revisions (i.e., clear the redlining); I'd still like to see the comments explaining what you agreed to.

10.3.2 Exercise: Relationship of the parties

From a confidentiality agreement that I'm negotiating for a small client, which will be exchanging confidential information with another relatively-small company (that is, each company is likely to disclose some of its confidential information to the other):

7.      Relationship of Parties. The Receiving Party understands that nothing herein: (a) requires the disclosure of any Confidential Information of the Disclosing Party, which information may be disclosed, if at all, solely in the option of the Disclosing Party; (b) requires the Disclosing Party to proceed with any proposed transaction or business relationship in connection with which Confidential Information may be disclosed; or (c) is deemed to create any principal/agent relationship, joint venture[,] or other business relationship between the parties hereto.

EXERCISE: Imagine that you're a very-new lawyer who has been asked by a partner to review this paragraph for the client. The partner has asked that you come up with an exhaustive list of every issue — both substantive and stylistic — that you can think of in this paragraph. (Do this in your groups.)

10.3.3 Exercise: Care of confidential information

From a confidentiality agreement that I'm negotiating for a (different) small client, which will be receiving confidential information from a global company:

4.1       The Receiving Party shall exercise all due care in ensuring the proper and secure storage of the Confidential Information.

 * * *

4.3       As soon as practicable after a demand in writing from the Disclosing Party all original copies of the Confidential Information shall be retrieved and returned by the Receiving Party to the Disclosing Party and the Receiving Party shall, on request, notify the Disclosing Party in writing that it has:

(i)       destroyed all other copies of the Confidential Information in its possession; and

(ii)       taken all reasonably practicable steps to permanently erase all Confidential Information from computer media; and

(iii)       procured that all persons to whom the Receiving Party has disclosed any Confidential Information comply with this Article 4 .

QUESTION: If you're representing the receiving party, do you have any thoughts about this language?

10.3.4 Exercise: The weather

Suppose that today, right now, Alice and Bob are in our classroom and are about to sign a contract. For some reason, the contract states that Alice represents that it's sunny outside at the time and place of signature.

QUESTION: How would you advise Bob?

10.3.5 Ambiguity (or vagueness?): Readiness to die

One Friday night my wife and I were sitting on the couch watching a DVR recording of a Grey's Anatomy episode. In the episode, an on-screen patient dies unexpectedly in surgery.

My wife paused the recording and said she'd heard a piece on the radio that day, something about the desirability of a quick death.

(I'll tell the rest of the story in class.)

10.3.6 Ambiguity: Long hours in BigLaw

From Erin Johnston, Not All at Once, And Not All Alone, ABA Journal, Nov. 2018, at 14:

My success [as a Kirkland & Ellis litigation partner] has not been the result of a perfectly-executed master plan. But I can say that I have unapologetically asked for what I needed and was pleasantly surprised by the responses I received. No one above me assumed they knew what I wanted, or that what I wanted would always be the same.

At times I turned down opportunities to avoid travel or to focus on my family; other times I chose to take that trip or work long hours. …

(Emphasis and extra paragraphing added.)

QUESTIONS:

  1. What are two possible meanings of the italicized portion?
  2. How could the italicized portion be clarified?

10.3.7 Exercise: Shipping cost recovery

FACTS:

1.  Alice and Bob sign a contract for Alice to deliver 100,000 widgets to Bob at a price of $1.00 each plus ground shipping.

2. The contract requires all amendments and waivers to be in writing.

3.  Bob calls up Alice on the phone and says "I need the widgets right away — ship them by overnight air." Alice does so.

4.  Alice bills Bob for $100,000 plus the extra cost of overnight-air shipping. Bob refuses to pay, pointing out that he didn't agree in writing to modify the contract terms.

QUESTION 1: Can Alice recover her extra cost for overnight-air shipping, or must she "eat" that cost? (LOOK-UP: UCC § 2-104; UCC § 2-209; UCC § 2-201(1) & (2).)

Answer: It depends in part on whether Alice is a "merchant" in widgets, i.e., someone who deals regularly in widgets. If so, then under UCC § 2-209, the amendments-in-writing provision is enforceable against her — UNLESS Bob orally waived the amendments-in-writing requirement with his phone call.

QUESTION 2: What if anything could Alice have done to make sure she could recover the extra cost?

Answer: Alice could have sent Bob a quick confirmation email, or text message, confirming their oral agreement that it was OK for Alice to ship by overnight air and bill Bob for the cost.

MORE FACTS:

5.  The contract states that amendments must be in writing and signed by the party sought to be bound.

QUESTION: What if anything could Alice have done to make sure she could recover the extra cost?

Answer: Alice could have sent Bob a quick confirmation email, or text message, confirming their oral agreement that it was OK for Alice to ship by overnight air and bill Bob for the cost, and asking Bob to confirm his agreement by return email or text message.

MORE FACTS:

6. The contract between Alice and Bob is on Bob's standard purchase-order form. It states that Bob has the right to amend the terms unilaterally whenever he wants.

7.  The contract includes a forum-selection provision requiring any litigation to take place in Bob's home county.

QUESTION: If Alice were to sue Bob for the additional cost of air shipment of the widgets, must she sue in Bob's home county?

Answer: Very likely not — the unilateral-amendment provision might well make the entire contract illusory.

10.4 NO CLASS Wed. Nov. 14 (DCT out of town)

10.5 Class 25: Mon. Nov. 19

10.5.1 Quiz 4 (closed book)

You know the drill.

10.5.2 Ambiguity: Will HRC run again?

From Bradley Honan and Arick Wierson, Please, Hillary, don't do it (CNN.com Nov. 15, 2018):

In 2018, we saw the progressive, Bernie Sanders wing of the Democratic party and the more centrist factions, previously marshaled by Hillary Clinton, temporarily band-aid over their differences that were on full display in 2016 for the common good.

QUESTION: What, exactly, was it that was supposedly "for the common good" —

  • differences on full display; or
  • band-aiding over those differences?

QUESTION: How could the above sentence be rewritten to make it clear which one the writer intended?

10.5.3 In the news: A condition is not a promise

See Allen v. SWEPI, LP, No.  4:18-CV-01179 (M.D. Pa. Nov. 8, 2018): The court held that an agreement between a landowner and an oil-and-gas exploration company did not require the exploration company to drill and produce oil from the property — the contract was only an option agreement that gave the exploration company the right, but not the obligation, to do so.

10.5.4 Ambiguity: Job-hunting in Japan

From this article:

… This is most likely a result of the Japanese university system, whereby your major and your future job often have little correlation. Typically one year before graduation, you apply for jobs and run around the city in a suit trying to convince a company that does virtually anything to hire you. If you’re lucky, you get in, and in the best of cases, you get training before starting whatever job you now find yourself in.

QUESTION 1: What are two possible meanings of the italicized portion?

QUESTION 2: How could the italicized portion be improved?

10.5.5 Exercise: Stanford-Tesla lease: Landlord consent terms

From the Stanford-Tesla lease:

6.1 Permitted Use. Tenant may use and occupy the Premises during the Term solely for the uses specified and permitted in Article 1 and for no other purpose without the prior written consent of Landlord, such consent to be granted or withheld in Landlord’s sole and unfettered discretion. …

6.2 Prohibited Uses. … No loudspeaker or other device, system or apparatus shall be used at the Premises without the prior written consent of Landlord. No explosives or firearms shall be brought onto the Premises without the prior written consent of Landlord, which Landlord may withhold in its sole and absolute discretion.

QUESTION: What difference is there — if any — between the italicized language in the consent in 6.1 and at the end of 6.2, versus in the first of the two consents in 6.2?

QUESTION: How might a court interpret the "No loudspeaker or other device, system or apparatus" language? What did the parties likely intend? EXERCISE: In your groups, discuss how to rewrite this sentence.

10.5.6 Exercise: Tenant audit rights (for in-class exercise)

In your small groups:

  1. Rewrite the following, from this real-estate lease, to make it as user-friendly as possible. (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.

10.5.7 Rewriting exercise: Confidential information (Atari agreement)

Rewrite the following to make it more readable; it's from an Atari consulting agreement, at https://goo.gl/ukMKTr (onecle.com via archive.org), between an individual and Atari:

7.    Confidentiality and Security.

Consultant recognizes and agrees that in the course of performing services hereunder Consultant will generate or otherwise become privy to written or orally conveyed information that is proprietary or confidential to Atari, its affiliates, or their customers and/or to other parties to whom they may have confidentiality obligations. This information may include, without limitation, plans to introduce new products or services (including in this regard the existence of the Project), methods of doing business, planned transactions, market information, pricing information, supply sources, license and contract terms, information pertaining to customers' businesses, non-public financial data and operating results, system and component designs, specifications, computer software and technical information. Consultant understands that Atari and/or such affiliates, customers and other parties regard such information as trade secrets, and Consultant will employ Consultant's best efforts to assure the continued confidentiality thereof. Consultant will not disclose such information to anyone or use it for any purpose other than the performance of Consultant's services hereunder. Consultant will take all reasonable measures to prevent any unauthorized person from gaining access to such information and to prevent such information from being accessed, disclosed or used in any unauthorized manner, including complying strictly at all times with all applicable physical and computer system security procedures. Consultant will not break or attempt to break any of Atari's (or such affiliates’, customers' or other persons’) security systems, or obtain, or attempt to obtain access to any program or data other than those to which Consultant has been given access in writing. Upon any termination, cancellation or expiration of this agreement or at Atari's request at any other time, Consultant will deliver to Atari all materials in tangible form containing any of the information referred to in this Section 7, shall purge any and all copies thereof from all files and storage media retained by Consultant, and shall retain no archival or other copies thereof whatsoever. Further in such event, Consultant shall return any keys, security passes, equipment or other items or property supplied to Consultant by Atari or by any such affiliate, customer or other person.

QUESTION 1: If you're representing Consultant, why should the phrases "best efforts" and "all reasonable measures" cause you some concern?

QUESTION 2: How is Consultant supposed to know just what Atari information is subject to the confidentiality restriction?

QUESTION 3: Why should the penultimate sentence be of concern to Consultant?

10.6 NO CLASS Wed. Nov. 21 (Thanksgiving)

10.7 Class 26: Mon. Nov. 26 (partial draft)

10.7.1 Pizza for section with highest quiz average

I might be a couple of minutes late, picking up the pizza at Pink's.

10.7.2 Ambiguity: Melania and opioids

Melania-opioids.png

10.7.3 Ambiguity exercise: Redistricting court fight

From the Houston Chronicle:

Throughout the litigation, [MALC chairman and State Rep. Rafael] Anchia noted that the lower courts have made 10 findings of intentional discrimination against the State of Texas by both Republican and Democratic-appointed judges.

QUESTION: Where are the two ambiguities in this sentence? How can they be fixed?

10.7.4 Collaborative outline

In the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ), collaborate with your groups to outline what you think are some of the key themes and takeaways from the course — what do you think a new associate should keep in mind?.

10.7.5 DCT's survey

Also in the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ), let me know (anonymously) what you liked about the course and what you think could use improvement.

Possible areas of interest:

  • Small-group discussion of questions before one student is called on
  • Ambiguity exercises
  • Breaking up walls of words
  • Spaced-retrieval practice, a.k.a. quizzes
  • Drafting & markups in small teams
  • Common Draft contract provisions and commentary

10.7.6 Course evals

We'll take a few minutes to do the school's course evaluation:

  1. The comments are especially important — many students look at those.
  2. If you have negative feedback, for selfish reasons I'd prefer that you wrote it in the the virtual whiteboard ( 4:00 p.m. section | 6:00 p.m. section ); it's up to you whether to include negative feedback in the official course evaluation.

10.7.7 Jeopardy!

11 "Gouge": Things to know (a very rough work in progress)

  1. "Sole cost and expense" — what does that mean?
  2. "Sole and exclusive" —
  3. The term "romanettes" refers to lower-case roman numerals in parentheses, i.e., (i), (ii), (iii), etc.

    Romanettes are an eye-catching way of breaking up a list of items in a sentence.

    Example: "Each invoice is to include the following: (i) total hours billed by each Consultant employee; (ii) expenses for which reimbursement is requested, and (iii) the name of the Customer contact."

    (Ignore the substance of the above example..)

  4. Will be: Consider the following in a consulting agreement: "All services performed under this Agreement will be performed in Houston, Texas."
    • Is this a mandate? If so, consider using "must be performed in Houston, Texas" or "are to be performed …" instead of "will be performed …."
    • Or is it a statement of intention? If so, then consider rephrasing as "Consultant anticipates that all services performed under this Agreement will be performed in Houston, Texas."
  5. Arbitration: If the (U.S.) Federal Arbitration Act governs an arbitration, one of the few grounds upon which the arbitration award can be overturned is "evident partiality" such as an undisclosed relationship between the arbitrator and a party or its counsel.
  6. Arbitration: The American Arbitration Association has several sets of arbitration rules.

    For purely-domestic contracts, the principal AAA rules of interest will usually be the Commercial Arbitration Rules.

    (The AAA also has rules for construction arbitration and employment arbitration.)

  7. Arbitration: It's generally thought that a panel of three arbitrators will usually be more than three times as expensive as a single arbitrator.
  8. Bankruptcy: Termination-upon-bankruptcy clauses are unenforceable under U.S. law.

12 Rules (a very rough work in progress)

Some of these rules are style points, some are substantive.

  1. DON'T: Use all-caps for more than a few words at a time.

    DON'T: THE RESULTS STATED AND THE CONCLUSIONS DRAWN FROM ALL REPORTS FURNISHED BY ANALYST TO COMPANY HEREUNDER SHALL REPRESENT THE BEST OPINION, EFFORTS AND JUDGMENT OF THE ANALYST ….

    DO: The results stated and the conclusions drawn from all reports furnished by Analyst to company hereunder shall represent THE BEST OPINION, EFFORTS AND JUDGMENT of the Analyst …

    [The above sentence has other problems, too.]

  2. DON’T: Use “provided, however” to signal an exception.

    DO: If you’re going to make an exception, do it in a separate sentence or even a separate paragraph.

  3. DON'T: Payment is due within sixty (30) days.

    DO: Payment is due within 30 days.

    (Violating this rule once cost a lender $693,000. [LINK NEEDED])

  4. DON'T: Use high-school outline numbering for contract section numbering (e.g., I, II, etc., for the top level, then A, B, etc., for the second level, then 1, 2, etc., for the third level).

    DO: Use 1, then 1.1, then (a) [or possibly 1.1.1].

  5. DON'T: Bob shall not be required to [do something].

    DO: Bob need not [do something].

  6. DON'T: Use (for example) both Client and the Client.

    DO: Stick to one or the other: Client or the Client.

  7. DO: Know the difference between which and that: See https://www.grammarly.com/blog/which-vs-that/.
  8. DO: Be very careful about creating blanks for people to initial or otherwise fill in — R.O.O.F.
  9. DON'T: Customer agrees to pay Vendor $1 million.

    DON'T: Customer represents that it will pay Vendor $1 million.

    DON'T: Customer warrants that it will pay Vendor $1 million.

    DO: Customer will pay Vendor $1 million.

  10. DO: Include a running footer with the page number.
  11. DO include a hand-typed running header that states the date and time of the draft.

    DON'T: Use an automatic date code in the running header, because Word might automatically update the date code — that would mess up the parties’ being able to refer to the date and time over the phone.

  12. DON'T: This Agreement is dated this October 31, 20xx.

    DO: This Agreement is effective the last date signed as written in the signature blocks.

  13. DO: Be careful about using the term "consisting of A, B, and C," which might be interpreted as "consisting exclusively of A, B, and C." (That's the meaning of the term in patent law.)

    DO: Consider instead, "including without limitation A, B, and C," or perhaps "comprising A, B, and C."

  14. DON'T (usually): Consultant will also perform any other services agreed to by the parties.

    DO (usually): Consultant will also perform any other services agreed to in writing by the parties.

    (Using the term agreed to in writing in some places might imply that the shorter term agreed to, by itself, includes both written- and non-written agreements.)

  15. DON'T: The term of this Agreement (the "Term") will begin on the date of this Agreement.

    DO: The term of this Agreement (the "Term") will begin on the effective date of this Agreement.

    [Or, possibly, on the Effective Date, if that capitalized term has been or is being defined.]

  16. DO: Be careful about using "until Event X occurs" — it might imply that Event X is expected, as opposed to being merely a possibility.

    DO: Consider using "unless Event X occurs."

  17. DO: Use a written statement of work in a services agreement:
    • to spell out what the customer should expect (i) to get, and (ii) to have to pay; and
    • (possibly) to put fences around the service provider's commitments.
  18. DON'T: If a party breaches this Agreement and fails to cure it within X days, then the non-breaching party may terminate this Agreement by written notice.

    (There’s case law that says: If Alice breaches and doesn’t cure, but Bob is also in breach, then Bob is not a “non-breaching party” and therefore may not terminate for Alice’s breach.) [LINK NEEDED]

    DO: If a party breaches this Agreement and fails to cure it within X days, then the other party may terminate this Agreement by written notice.

  19. DO: Use alphabetical order to arrange defined terms in a Definitions section (along with cross-references to defined terms whose definitions are elsewhere).
  20. DON'T: "… said defect …."

    DO: "… the defect …."

  21. DO: In a notices clause, include an "Attention: [position]" line. EXAMPLE: "Attention: Senior vice president of marketing"

    DON'T: Use an "Attention: [Individual's name]" — the individual might move on, and as a result, the notice might get lost in the mail room.

Footnotes:

[1]
Peer-critique homework is worth 50 points.
[2]
You could still pass the course, but you'd have to make up the missing points.
[3]
Mutual consultation on homework is encouraged, but (1) each student must do his or her own work, and (2) you should indicate in your homework whom you collaborated with.
[4]
B. Format the style of the paragraph.
[5]
"Commercial Lease" is appropriate — a lease is a contract that creates a leasehold interest. See Black's Law Dictionary, 10th ed.
[6]
A contract can state that it is effective as of an earlier- or later date if that's what the parties want. CAUTION: Signers should never backdate their signatures to make it appear that the contract was signed earlier- or later than it was; doing so sent a number of senior executives to prison.
[7]
Party names are sometimes capitalized in a preamble so as to make them easy for a skimming reader to spot.
[8]
Defining key "business" terms (e.g., "Base Rent") at the beginning of an agreement — and then consistently using those defined terms elsewhere in the agreement — makes it convenient for reviewers and safer for revisers, who need only revised the definitions.
[9]
Including "Each item in this Article 1 incorporates …" is probably unnecessary.
[10]
Including the italicized portion, "to the extent there is any conflict …" is dangerous because it could lead to inconsistencies during revision of the draft during negotiation.
[11]
Defined terms and their definitions are typically set forth (i) in a separate section at the beginning of the agreement; (ii) in a separate section at the end of the agreement; and/or (iii) "in-line" at the place in the agreement that the defined term is principally used.
[12]
Both "Term: Five (5) years" and "Year One: $60,000 ($5,000 per month)" violate the "[BROKEN LINK: DRY]" (Don't Repeat Yourself) rule, which can cause major problems if the words are changed but not the numerals, or vice versa; the linked section tells the sad tale of a bank that lost $693,000 because of such a drafting screw-up.
[13]
An acknowledgement and a jurat.
[14]
False — an affidavit would normally require a jurat\, not an acknowledgement.
[15]
False — the quoted language in the text would be for a jurat\, whereas recordation of the document will normally require an acknowledgment.
[16]
False.
[17]
Maybe — it will depend on whether the notary public has an interest in the thing being notarized.
[18]
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.
[19]
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.
[20]
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.
[21]
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.
[22]
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.
[23]
Is this a representation by Sandberg? Or is it a commitment by Facebook?
[24]
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.)
[25]
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.
[26]
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.
[27]
Possibly not, because the warranty is to ABC. In any case, that's a conversation you don't want to have.
[28]
One possibility, with two steps: (1) Define a term such as Buyer (or perhaps Purchaser) as, whichever entity is making purchases under the master agreement; and (2) Rewrite the warranty provision to read, "XYZ warrants to Buyer" instead of "XYZ warrants to ABC …."
[29]
A warranty implicitly includes an indemnity obligation.
[30]
False: This doesn't reduce the risk, it merely allocates it.
[31]
True.
[32]
False: The proper phrasing would be "Alice will indemnify Bob," that is, reimburse him (or, make him whole).