Contract Drafting Fall 2020

By D. C. Toedt III
Attorney & arbitrator — tech contracts & IP
Adjunct professor, University of Houston Law Center

Updated Wednesday October 21, 2020 17:42 Houston time

1 Welcome & key links

Course book: The Tango Terms (revised Sept. 16) — a work in progress and likely to be revised again this semester, so I'd strongly suggest that you not print it out just yet.

First version for this course

Whiteboards for each section: virtual whiteboard ( 6:00 p.m. section | 7:30 p.m. section )

The breakout rooms have the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5

Reading assignments: Here (§ 3) (DCT to complete).

The Syllabus (which might be updated as the pandemic progresses)

2 Class plans

2.1 Class plan - Day 17 (Wed. Oct. 21)

2.1.1 Homework #3 due Sunday 10/25 at 9 p.m.

(This is later than previously announced.)

2.1.2 Ambiguity alert - "don't let worries kill you"

See here

2.1.3 In the news: Goldman Sachs corruption settlement

The syllabus this semester doesn't include discussion of the U.S. Foreign Corrupt Practices Act — which can lead to prison time — but here's a quick note about a report in the NY Times:

An Asian subsidiary of Goldman Sachs will plead guilty to charges in the United States to resolve a foreign corruption and bribery case over the looting of billions of dollars from a Malaysian sovereign wealth fund, according to a person familiar with the agreement.

The Wall Street bank’s parent company will admit mistakes, the person said, but will not itself have to enter a guilty plea [which could have serious, serious repercussions for dealing with other banks and governments] as part of the deal with federal prosecutors.

The bank will also avoid the appointment of an outside monitor to review its compliance procedures. [Companies generally hate having outside monitors.]

The settlement, which also requires the bank to pay more than $2 billion in penalties to the Justice Department and U.S. securities and banking regulators, is scheduled to be formally announced on Thursday morning, according to two people briefed on the plans.

The agreement — negotiated over nearly two years with federal prosecutors in Brooklyn and the kleptocracy division of the Justice Department — ends an investigation into one of the worst scandals in the bank’s long history.

But it is a black eye for Goldman, which has never before had to plead guilty in a federal investigation.

And a statement of facts to be released with the settlement will put the bank in a poor light, according to two people familiar with the document.

(Emphasis and extra paragraphing added.)

2.1.4 In the news: Berkshire Hathaway and export controls

Here's an in-the-news piece from CNN that's relevant to the upcoming reading about export-controls laws:

New York (CNN Business) A foreign subsidiary of Berkshire Hathaway appears to have violated US sanctions on Iran, the Treasury Department said Tuesday.

Berkshire (BRKA), the conglomerate run by the legendary investor Warren Buffett, voluntarily disclosed the conduct and agreed to pay $4.1 million to settle its potential civil liability over the matter.

The Treasury Department said that between late 2012 and early 2016, Iscar Turkey, the Berkshire subsidiary, "knowingly engaged" in transactions with people subject to US sanctions on Iran, calling it an "egregious case."

Senior management at the Turkish subsidiary "sought out business" in Iran with the "express purpose of building a foothold" in the market when it was prohibited from doing so, Treasury said.

To hide its dealings with Iran, Iscar Turkey allegedly accepted payments in Euro-denominated cash, instructed employees to use private email accounts, employed "false invoices" and even used a "fake name" for a "non-existent company" to mask the ultimate buyers.

Iscar Turkey appears to have hid its conduct from Omaha, Nebraska,-based Berkshire Hathaway, Treasury said.

The alleged actions would go against US sanctions that prohibited entities owned or controlled by Americans from doing business directly or indirectly with the government of Iran or people subject to the jurisdiction of the government of Iran. The sanctions were designed to pressure Iran to give up its nuclear ambitions.

(Emphasis added.)

This one goes in my SPP ("S[tuff] People Pull") file.

2.1.5 Exercise: Responding to a most-favored-customer demand

FACTS: Your client, Seller, has asked you to review a purchase order from Buyer. The PO includes two pricing clauses that appear to have been copied essentially verbatim from the Honeywell terms of purchase in the reading, which are quoted below:

12. Price: Most Favored Customer and Meet or Release

[a] Supplier warrants that

  • the prices charged
  • for the Goods delivered under this Purchase Order
  • are the lowest prices charged by Supplier
  • to any of its external customers
  • for similar volumes of similar [sic] Goods.

[b] If Supplier charges any external customer a lower price for a similar volume of similar Goods, Supplier must

  • notify Honeywell
  • and apply that price to all Goods ordered under this Purchase Order.

[Comment: The above language does not limit the price-reduction obligation to goods ordered in the future; Honeywell could try to argue that the obligation applied retroactively as well, requiring refunds for past orders. A court, however, might interpret the language as limited to future orders, under the contra proferentem principle.]

[c] If at any time before full performance of this Purchase Order

  • Honeywell notifies Supplier in writing
  • that Honeywell has received a written offer from another supplier
  • for Goods similar [sic] to those to be provided under this Purchase Order
  • at a price lower than the price set forth in this Purchase Order,
  • Supplier must immediately meet the lower price for any undelivered Goods.

If Supplier fails to meet the lower price Honeywell, at its option, may terminate the balance of the Purchase Order without liability.

QUESTION: What concerns should your client Seller have? How might Seller try to response to this demand?

2.1.6 Ambiguity: Ivanka Trump in South Korea

TEXT: From the president: "My daughter, Ivanka, just arrived in South Korea. We cannot have a better, or smarter, person representing our country." From Jonathan Chait: "That second sentence can really be read a couple ways." [DCT comment: It'd be better to say "a couple of ways."] From Gary Schroeder: "Also, the use of commas implies that she is his only daughter."

QUESTION: How could the president's second sentence be clarified?

2.1.7 Planning exercises: Warranty duration

FACTS: Consider a contract for the purchase of 1,000 small electric motors, which Buyer intends to use in manufacturing small, battery-powered nose-hair trimmers. (Yes, there is such a thing.) All parties are in Texas. The contract, drafted by Seller, states in part as follows:

Seller warrants to Buyer, for 30 days after delivery, that the motors will have a service life of at least one hundred (100) hours.

QUESTION 1: What if anything is wrong with this provision?

MORE FACTS: A summer associate is reviewing and redlining Seller's draft contract for you on behalf of your client Buyer. The summer associate notices that there is no disclaimer of implied warranties in the draft. After looking up the the Common Draft implied-warranty disclaimer language, the summer associate inserts the following text into the draft (with redlining, of course):

Seller DISCLAIMS all other warranties, express or implied.

QUESTION 2: What if anything is wrong with this provision?

2.1.8 Exercise: Breaking up a confidentiality clause

Using the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, break up the following provision 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, what concern should you have (if any) about the phrases "best efforts" and "all reasonable measures"? How might you propose to revise this language?

QUESTION 2: How do you think a court would interpret the term "best efforts" if the parties' contract didn't define the term?

QUESTION 3: How is Consultant supposed to know just what Atari information is subject to the confidentiality restriction?

QUESTION 4: Why should the penultimate (i.e., next-to-last) sentence be of concern to Consultant?

2.1.9 Drafting quirks: Reps and warranties for services (cont'd)

For breakout-room discussion — in the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, make a list of what catches your eye in the following examples of services-related representations and warranties drafted by students.

1.  "Unless otherwise provided below, the representations and warranties herein are made only after the representing party has personal knowledge, or has inquired, researched, or otherwise confirmed that the items represented are true."

  • HINT: Is this too much of a sweeping generalization? How could it be improved?

2.  [Somewhat duplicative of Monday:] "MathWhiz represents and warrants it will exercise commercially reasonable efforts, and follow industry standards when analyzing Gigunda’s data."

  • How do you think Gigunda's lawyer will react to this?
  • How would a jury (or judge) go about determining what "industry standards" are?

3.  "MathWhiz warrants that all of Gigunda’s seismic data relating to the Mongolian Field and all related work product, as well as any other proprietary information shared by Gigunda, will not be shared with any third party unless expressly instructed in writing by Gigunda."

  • QUESTION: Is the verb "warrants" the best choice here? How could this be rewritten?

4.  "Gigunda represents and warrants that all seismic data from the Mongolian Field was lawfully obtained and that Gigunda has the legal power to share the data with MathWhiz."

5.  "Math-Whiz LLC represents to Gigunda that, so far as it is aware, the following assertions are true: …" (emphasis in original).

6.  "Math-Whiz represents and warrants to Gigunda Energy that: … (iv) that its products do not infringe on any third party’s patent."

  • QUESTION: Any concern about the duplicate use of the word "that"?
  • QUESTION: What exactly are MathWhiz's products? QUESTION: Is the warranty of clause iv "safe" for MathWhiz to make?

7.  "Seller warrants that it will make a good faith effort to remain in compliance with applicable laws throughout the term of the Agreement."

  • QUESTION: Is "warrants" the mot juste ("the fitting word")?
  • QUESTION: What might Gigunda's lawyer ask for instead of this?
  • QUESTION: How might MathWhiz counter such a request?

8.  Gigunda's lawyer asks for the following language: "MathWhiz represents and warrants that it has the experience and personnel necessary to perform its obligations under this Agreement in a commercially reasonable manner." QUESTION: Did Gigunda's lawyer screw up? Hint: Consider the last phrase of the sentence.

9.  QUESTION: If you're drafting reps and warranties as MathWhiz's lawyer, should you include any reps and warranties about (i) performance of the work, and/or (ii) the risk of infringing third parties' intellectual-property rights? Why or why not?

2.2 Class plan - Day 16 (Mon. Oct. 19)

2.2.1 Homework #3 due Sunday 12 noon

Same game plan as before.

2.2.2 Reading review: Termination

1.  What surprised you, or might surprise someone else?

2.  What confused you, or might confuse someone else?

3.  What do think is the most important point for a client or new lawyer to know?

2.2.3 Review exercise: Oracle's most-favored-customer problem

QUESTIONS:

  1. What happened to Oracle when it breached its most-favored-customer clause with the U.S. Government (in its GSA contract)?
  2. What specifically did Oracle do that brought down the government's wrath on it?
  3. How much money did the whistleblower get for his trouble?

2.2.4 Pricing discussion: Controlling resale price

TRUE or FALSE: In the United States, it's per se illegal for a manufacturer to enter into an agreement with a reseller in which the reseller is not allowed to discount the manufacturer's products below a certain price.

2.2.5 Drafting quirks: Reps and warranties for services (cont'd)

For breakout-room discussion — in the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, make a list of what catches your eye in the following examples of services-related representations and warranties drafted by students.

1.  "MathWhiz warrants that there are no copyright infringement or trade secret violations in the work that MathWhiz will provide to Gigunda."

  • HINT: Is the wording, "there are no copyright infringement or trade secret violations" the best phrasing for a future deliverable?
  • HINT: Is there a better phrasing for "the work that MathWhiz will provide to Gigunda"?
  • QUESTION: As written, does this warranty cover MathWhiz's work product as modified by Gigunda?

2.  "MathWhiz warrants that the work will be performed in a professional manner that is serviceable (“Work-Man Like Manner”)."

  • HINT: How many different standards do we have here? Are they consistent with each other?
  • HINT: Is "Work-Man Like Manner" the way it's usually written? If not, what is the usual manner?

3.  "So far as MathWhiz knows, MathWhiz will use only standard industry practices to analyze such Data in completing the Deliverables and will not rely on unproven techniques or methods without Gigunda’s expressed consent."

  • HINT: How would Gigunda's lawyer likely respond to this?

4.  "MathWhiz warrants that MathWhiz employs several junior associates and subcontracts with others to do specialized tasks to determine where oil and gas natural deposits may be."

  • HINT: Is this something that MathWhiz would warrant, or is it something that MathWhiz might want Gigunda to acknowledge? If the latter, why so?

2.2.6 Ambiguity exercise: Making babies

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

2.3 Class plan - Day 15 (Wed. Oct. 14)

2.3.1 Ambiguity and getting older ….

Me to my wife, one recent morning: Where's the … [struggles to think of word] … yogurt? Damn, I hate this brain lag in thinking of words! [It's a very-common phenomenon of aging, incidentally.]

Her: That's what I'm here for. [As in, we fill in gaps for each other — my wife and I sometimes joke that between us we have one functioning brain.]

Me (still thinking of my previous comment): Just kill me now ….

Her: Excuse me?

2.3.2 Efforts clauses: Reading review

In the breakout rooms, do the usual: Discuss:

  • what surprised you;
  • what you think it's important for a client to know;
  • what you think it's important for a new lawyer to know.

2.3.3 Confidential Information — discussion and exercise

In the breakout rooms, consider the following:

1.  If a confidentiality provision is written to protect each party's confidential information, does that pretty much guarantee that the provision will be "fair and balanced"?

2.  FACTS: You represent MathWhiz. Gigunda wants access to MathWhiz's proprietary algorithms (data-processing methods) so that Gigunda can decide whether to pay MathWhiz to crunch Gigunda's Mongolia data. Gigunda is willing to sign an "NDA," but its draft NDA states that the term of the NDA will be two years. QUESTION: Any issues here for MathWhiz?

3.  Now suppose you represent Gigunda: What if it turns out that MathWhiz's proprietary algorithms are just a collection of known techniques?

4.  DRAFTING EXERCISE: In your groups, come up with a minimal confidential-information provision (maybe three or four sentences?) to protect MathWhiz's confidential information. Then paste into the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5; we'll discuss.

2.3.4 Pricing: Reading review

In the breakout rooms, do the usual: Discuss:

  • what surprised you;
  • what you think it's important for a client to know;
  • what you think it's important for a new lawyer to know.

2.4 Class plan - Day 14 (Mon. Oct. 12)

2.4.1 Marathon stairwell collapse case

From the Houston Chronicle:

Brian Kilpatrick, a partner with Wilson Cribbs & Goren in Houston, said the families of the dead will presumably bring wrongful death claims. They may name the general contractor, subcontractors, the building’s owner and possible others in a lawsuit. One person was injured.

Kilpatrick cited a case from several years ago involving a high-rise on Kirby Drive where the windows began falling from the tower’s upper floors, damaging cars and property on the ground.

“There were dozens of parties named — all the way from the owner to the contractor to subcontractors to insurers, you name it,” he said. “That’s what I think is going to happen here.”

* * * 

The construction contracts will help determine liability.

The case becomes more complex with possible indemnity policies and subrogation claims, which is when an insurer seeks financial relief from another party that may have been to blame.

General contractors and some large subcontractors have so-called commercial general liability policies, Kilpatrick said. A party found liable could be faced with having to pay out of pocket if its insurance policy is lower than the amount it is liable for. But if an insurer fights an offer to settle within the policy amount and then a greater amount is awarded in court, the insurance company would be responsible for the full amount.

(Emphasis added.)

2.4.2 Ambiguity exercise: Nobel laureates

TEXT: From this morning's WaPo story about the latest Nobel laureates in economics: "The two men will receive a cash award of 10 million Swedish krona, worth a bit more than $1.1 million."

QUESTION: How much will each man receive?

[Note also the standard way in which the monetary amounts are written, which is the way such amounts should (normally) be written in contracts.]

2.4.3 Confidential information quiz game (an experiment)

1.  In each breakout room, come up with three questions from the Confidential Information reading.

2.  When we return to the main room, Group 1 will ask Group 2 a question, and so on in a round-robin. (Group 4 will ask Group 1 a question).

3.  I'll be the scorekeeper and the judge of whether an answer is correct.

2.4.4 Exercise: Term sheet for recordkeeping & audits

FACTS: Same as § 2.8.7 that we did two weeks ago. You represent MathWhiz.

EXERCISE: In your small groups, develop a term sheet indicating what recordkeeping and audit obligations you would put in a draft of a contract to send to Gigunda.

Whiteboard: the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5

(Try to put yourself in the shoes of Gigunda's counsel: What will she likely be looking for, and how can you provide it in a way that you think MathWhiz can support?)

When finished, come back to the main Zoom meeting (no need to wait for me to close the breakout rooms.)

2.4.5 Signatures review exercise: The Addams family in Hawai'i

FACTS:

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

QUESTION 1: How should the contract signature block for Adams Investments, L.P., be written? INSTRUCTIONS: Develop a consensus, then post your version on the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5.

QUESTION 2: Why might the Widgets sales rep be so eager to get the contract signed on December 31? (Hint: It has to do with the fact that Widgets, Inc. is a newly-public company.)

QUESTION 3: What about just signing it on January 1 when the family gets back to Houston?

QUESTION 4: Is it physically possible for you to "make it happen" for the contract to be signed and delivered to Widgets, Inc. today, December 31? If so, how might you go about it?

QUESTION 5: If Wednesday Addams asks you to sign it as the company's lawyer, how should you respond — and why?

2.5 Class plan - Day 13 (Wed. Oct. 07)

2.5.1 Learning by copying: American painter Edward Hopper

From the NY Times: "… before the advent of modern art and its freedoms, artists almost always got their start by copying."

(When I read this piece, it evoked part of our approach in this course: We work on developing good drafting presentation technique by revising badly-drafted "wall of words" provisions.)

2.5.2 (Re)drafting exercises

Consider the following in the breakout rooms:

FACTS: You represent MathWhiz — for each of the following, vote YES or NO as to whether it makes sense to include the text in the MathWhiz / Gigunda contract. CONSIDER ALSO how the language might be rephrased if necessary.

1.  TEXT: "Service Provider represents and warrants that Service Provider’s business includes analyzing seismic data."

2.  TEXT: "Service Provider warrants that Service Provider is headed by Mary."

3.  TEXT: "So far as Service Provider is aware, some individuals have called Mary an 'expert' in analyzing seismic data to determine where oil and gas natural deposits may be."

4.  TEXT: "Client represents and warrants that all seismic data from the Mongolian Field was lawfully obtained and that Client has the legal power to share the data with Contractor."

2.5.3 Exercise: Tenant audit rights (part 2)

In your small groups, the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5:

Part 2: Consider what changes to the Tenant Audit Rights provision below (which we marked up last week) that you might want to make if you were representing Landlord. (It's from this real-estate lease.)

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.

Come back to the Zoom room when done.

2.5.4 Services - topics for discussion (2)

In your breakout rooms, prepare to discuss the following — any student should be prepared to answer any question:

1.  What's a sensible "default" payment schedule for services?

2.  Why might Customer want to specify that failing to start the services on time is a material breach? (What makes a material breach special?)

3.  More generally: Why list specific events of material breach?

4.  Should Customer have the right to terminate a statement of work "at will" (synonym: "for convenience")? What factors would go into that analysis?

5.  Should Customer own the IP rights in deliverables created by Provider under the statement of work?

2.6 Class plan - Day 12 (Mon. Oct. 05)

2.6.1 Housekeeping: Reading for next week

See here (§ 3).

NOTE: The reading schedule for the rest of the semester is up.

2.6.2 Word order: A papal encyclical

TEXT from Pope Francis's third encyclical: "Things that until a few years ago could not be said by anyone without risking the loss of universal respect can now be said with impunity, and in the crudest of terms, even by some political figures." (Emphasis added.)

QUESTION: How serious would "the loss of universal respect" be — would it be more, or less, severe than "the universal loss of respect"?

2.6.3 Reading review

In your breakout rooms, prepare to discuss the following — any student should be prepared to answer any question:

1.  What surprised your group?

2.  What did your group think was especially important for (i) clients, and/or (ii) new lawyers, to know?

Come back to the Zoom main room when done.

2.6.4 Exercise: Order submission & fulfillment

See Tango Terms § 5.1.7.1, questions 1-4. In your breakout rooms, prepare to discuss the following — any student should be prepared to answer any question.

Come back to the Zoom room when ready.

2.7 Class plan - Day 11 (Wed. Sept. 30)

2.7.1 In the news: Pepsi terminates a Peruvian bottler

Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Co., No. 11-5458 (2d Cir. Sept. 29, 2020) (affirming summary judgment in favor of PepsiCo):

  • "Under New York law, it is well settled that a contract of indefinite duration is terminable at will unless the contract states expressly and unequivocally that the parties intend to be perpetually bound. … If it appears that no termination date was within the contemplation of the parties, or that their intention with respect thereto cannot be ascertained, the contract will be held to be terminable within a reasonable time or revocable at will . . . . Contracts of exclusive agency and distributorship are terminable at will in the absence of an express provision of duration." Slip op. at 16-17 (cleaned up, citations omitted).
  • "In some circumstances, New York law imposes a reasonable-duration requirement on exclusive distribution agreements that are otherwise terminable at will. Such a requirement may arise in circumstances such as these where a distributor must invest in equipment, materials, and other assets to perform its obligations under the contract." Id. at 16 (citations omitted).

2.7.2 Reading review: Services (Tango Terms ch. 4)

Working together in your breakout rooms:

1.  List one point from this reading that you're glad you knew before doing the reading about chapter 4 (services) — or that you're glad you learned from doing it.

2.  List three points in this reading that you would want MathWhiz to be sure to know if you were representing that company.

3.  Same as #2, but this time as if you were representing Gigunda.

2.7.3 Service agreements – discussion questions (1)

  1. How much time should a lawyer spend reviewing the statement of work for a client?
  2. Should Provider agree to obtain all permits and licenses needed related to the performance of services? (Careful: Think broadly about what permits and/or licenses might be needed "related to" the services.)
  3. What could happen if Provider failed to get required occupational licenses, e.g., construction-contractor licenses?
  4. FACTS: A home builder finishes a new house and turns the keys over to a young couple, who move in with their new baby (and the wife's in-laws, visiting from out of town). BUT: The builder failed to get the final city inspection done, so the city orders the family to move out, and they have to spend three days in a hotel. QUESTION: Who pays the hotel bills?
  5. Why would a customer/client want to require a contractor to use people who are "competent and suitably trained for the task"? (Think: Litigation proof.)
  6. What does "workmanlike performance" mean? Why is that typically used as a standard of performance for services?
  7. Why might a customer want to state that the service provider is responsible for determining the "means and manner" of the work?
  8. What are "the Three Rs" for defects in deliverables?

2.7.4 Follow-up: "Gross-up" revision

On Monday, Group 4 of the 7:30 p.m. section had a nice "take" on the gross-up provision that we edited; I've reproduced it below with some minor tweaks:

Gross Up Provision

(a) Guarantor’s payments to Lender may could be subject to tax liabilities, as defined in subdivision (d), that must be paid by Lender.

(b) Except as provided in subdivision (c), in any situation described in subdivision (a), Guarantor will pay Lender amounts necessary to cover the tax liabilities owed by Lender so that Lender receives the net amount due in the Guaranty that it would have received absent the tax liabilities.

(c) Exception: Subdivision 2 does not apply to [LENDER’S INCOME TAXES].

(d) For this purpose, the term “tax liability” refers to all taxes, levies, imposts, duties, charges, fees, deductions or withholdings of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other authority therein.

COMMENT: Use the "nickname" defined terms consistently — for example, use either "Guarantor" OR "the Guarantor" but not both.

2.7.5 Exercise: Tenant audit rights

In your small groups, the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5:

Part 1: Rewrite the following, from this real-estate lease:

  • to be more reader-friendly, as though you were talking to a lay jury; and
  • to correct any drafting-type "issues" that you see.

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

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

Part 2: Consider what changes you might want to make if you were representing Landlord.

When finished, come back to the main Zoom meeting (no need to wait for me to close the breakout rooms.)

2.8 Class plan - Day 10 (Mon. Sept. 28)

2.8.1 Housekeeping

(Reminder for DCT: Record the 6 p.m class.)

2.8.2 Housekeeping: Reading for next week

Tango Terms: Chapter 5, Sales (direct and "channel")

2.8.3 Housekeeping: Taking attendance announcement

FYI, when I see that not everyone is "present" in class, I take a screenshot of the Zoom "Brady Bunch" window and compare it with the class roster.

Keep in mind that each student received a "signing bonus" of points on the final grade but can lose those points for missing class, as stated in the syllabus.

(If you've opted for Pass-Fail status — which isn't disclosed to the faculty — then you won't care, but participation is important not just for you but to help your classmates.)

2.8.4 Housekeeping: Calling on individual students

[Re-upped from last week:] I'm going to try an experiment: Instead of having breakout groups choose a spokesperson, I'm going to call on people "randomly" — so in each breakout-room session, each student should prepare to answer each of the discussion questions posed.

2.8.5 Ambiguity: Bingo

Spotted in a Facebook group: "My eight year old just asked me if Bingo is the name of the farmer or the dog. And now I am questioning everything I thought I knew about life." (Credit: @whitneyhemsath.)

2.8.6 Housekeeping: Homework #2 announcement

This quiz-style homework (50 points) will be posted on Canvas on Wednesday Sept. 30 at 9:00 p.m. It'll be due Sunday Oct. 4 at 12:00 noon.

This will be pretty much the same as Homework #1, BUT I'll be deducting two points from submissions after 12:00 noon.

2.8.7 Reading review: Recordkeeping and audits (§§ 3.4 through 3.7)

FACTS: MathWhiz and Gigunda are agreeing to a variation of their basic data-analysis deal: Instead of a flat monthly rate, MathWhiz will charge Gigunda hourly rates plus out-of-pocket expenses.

Working together in your breakout rooms:

1.  List one point from this reading that you're glad you knew before doing the reading — or that you're glad you learned from doing it.

2.  List three points in this reading that you would want MathWhiz to be sure to know if you were representing that company.

3.  Same as #2, but this time as if you were representing Gigunda.

2.8.8 Guaranties: A wall-of-words example

2.8.9 Drafting style: "True and correct"

(In the main Zoom meeting, not the breakout rooms)

QUESTION: What do you think about

2.8.10 Rewriting exercise: "Gross up"

TEXT: From this guaranty:

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

EXERCISE: In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, rewrite the italicized portion to be more reader-friendly, as though you were talking to a lay jury.

When finished, come back to the main Zoom meeting (no need to wait for me to close the breakout rooms.)

2.9 Class plan - Day 9 (Wed. Sept. 23)

2.9.1 Housekeeping

Reading for next week in the Tango Terms:

•  Chapter 3

•  Chapter 4

Calling on individual students

I'm going to try an experiment: Instead of having breakout groups choose a spokesperson, I'm going to call on people "randomly" — so each student should be ready to answer each breakout-room question.

2.9.2 Tales from the Practice: Contract "signed" by email

2.9.3 Tango Terms retitling?

QUESTION: How do you think business people would react to the Tango Terms being retitled as (something like) "A Contract Cookbook — Tested Recipes for Everyday Business Dealings"?

Use the Zoom voting:

  • Yes: Business people would think the book is likely to be accessible and easy to use
  • No: Business people would think it's an unserious book and not worth using

2.9.4 Exercise: Late payment

From a contract clause: "(4) Penalty for late payments: Late payments are subject to a penalty of 5%."

EXERCISE: Spot the issues.

(Be careful — as stated, the facts give rise to some hidden issues!)

2.9.5 Ambiguity exercises

Do all of these in one breakout-room session.

An obituary: Going to heaven surrounded by family

From an obituary: "Pamela went to heaven surrounded by family whom she loved …." QUESTION: What possibilities does this line evoke in your minds?

Ambiguity and a suspected pedophile

From this tweet by ABC Channel 13 (Houston): "Suspected Houston-area pedophile accused of assaulting 16-year-old arrested in Canada"

QUESTION: What are some possible interpretations of this tweet? How could it be clarified?

Ambiguity rewrite: Swearing to defend the Constitution 11 times

Here's a tweet I saw retweeted: "I’ve sworn to defend and uphold our Constitution 11 times."

QUESTION: What exactly does "11 times" refer to — defending and upholding the Constitution 11 times, or swearing to do so?

EXERCISE: Rewrite to clarify.

2.9.6 Exercise: Reps and warranties strategy (1)

FACTS: Your Aunt Jean is selling her used car to a stranger. She says she doesn't know of any mechanical problems.

QUESTION: If the stranger asks Aunt Jean to represent and warrant in writing that the car has no problems, how might she respond?

2.9.7 Exercise: Reps and warranties strategy (2)

MORE FACTS: You're now in an alternative universe where you don't know Aunt Jean, but you represent her prospective buyer, and her "used car" is a 1962 Ferrari 250 GTO, which she acquired for $48.4 million [note how this number is written] in a 2018 Sotheby's auction (link).

NOTE: DCT to provide here a brief overview of how major asset purchases generally proceed:

  1. A contract is signed, with —
    • reps and warranties by each party, establishing a written platonic ideal of what the purchased asset would be;
    • a disclosure schedule that lists the ways that the purchased asset differs from the platonic ideal;
    • a "due diligence" period in which the buyer gets to "kick the tires" more;
    • a go / no-go date by which the buyer has to decide: Am I going to close the deal, or not?;
    • a date, time, and place (often remote) for the "closing," at which the formal exchange is to take place; and
    • each party's obligations during between signature and closing — e.g., the seller mustn't do anything that would impair the value of the asset.
  2. The buyer does due diligence and decides whether to go forward.
  3. At the closing, money changes hands and ownership is conveyed.

EXERCISE: In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, make a simple list — don't worry about legalese — of the following:

  • the representations and/or warranties that you might want — think about things such as:
    • who actually owns the car;
    • whether anyone else has any claims to the car;
    • what condition the car is in;
    • what's the car's history;
  • what due diligence you might want to require Aunt Jean to allow your client to conduct after the contract is signed but before the closing;
  • what obligations your client would want Aunt Jean to honor between signing and closing;
  • how the closing will work mechanically —
    • how is money to change hands;
    • what must be done at the closing to satisfy your client that "we're done here" (the deal is complete, there's nothing left to do).

2.9.8 Exercise: Interest rate

FACTS: A partner in your firm sends you the following email: "Hey [your name], I'm heads-down on another matter — attached is a draft of a consulting-services agreement that I'm helping one of my clients negotiate; it has an interest clause in it, quoted below. Please make a recommendation about what I should say to the client about it." The interest clause is the following:

Past-due amounts will bear interest at 5% per month, compounded monthly, beginning on the day after the due date until paid.

QUESTION (for breakout rooms): What are you going to recommend to the partner as far as what the partner should say to the client?

2.9.9 Rewriting exercise: Earn-out computations

In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, simplify the following provision:

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

2.9.10 Exercise: Authority to expand warranties

TEXT: "No person except an officer of Client at the vice-president level or higher is authorized to agree to any other Implied Warranty on behalf of Client."

QUESTION: Does this make any sense? (Read it carefully!)

2.9.11 Payment terms: Early payment

From a contract clause: "10.1 Invoiced payments are due net 30 days from the date that the Buyer receives a correctly stated invoice. 10.2. Invoice payments are due 2% 10 days, net 30 days."

QUESTION: Any issues here?

2.10 Class plan - Day 8 (Mon. Sept. 21)

2.10.1 Correction: Representation definition

The Tango Terms definition of representation is inconsistent: In one place it says that a representation is a statement of past or present fact (which is correct), but then it says it's a statement of past, present, or future fact (which is incorrect).

2.10.2 Housekeeping: Reading for next week

Tango Terms:

•  Chapter 3

•  Chapter 4

2.10.3 Tales from law practice: A contract review

For a client, I reviewed and revised a non-disclosure agreement form ("NDA") provided by an agency of the State of West Virginia, substantially identical to this one.

Screen shot of markup:

QUESTION (for breakout rooms): What do you notice about this excerpt from the redline?

2.10.4 Ambiguity exercises

Discuss the following in breakout rooms.

Ambiguity exercise: 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?

Ambiguity exercise: Masks and signs on cars

From a tweet encouraging attendance at an anti-lockdown protest in Maine: "[T]here will be a caravan around the Capitol … Monday. … Remain in your vehicles but masks, bandanas, flags and signs on cars are encouraged."

QUESTION: In your view, why are caravaners being encouraged to put masks and bandanas on cars?

QUESTION: How could this be rewritten to clarify?

2.10.5 Reading review

We'll do this in breakout rooms.

Appoint a spokesperson (rotate the job)

QUESTIONS TO DISCUSS:

  1. What surprised you?
  2. In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, make a list — in order — of the things in Chapter 2 that you think are the most likely to help your clients.

2.10.6 Discussion: Reps and warranties

We'll do this in breakout rooms.

Appoint a spokesperson (rotate the job)

  1. A warranty is much like a type of everyday business- and consumer "product" that's advertised on TV and is typically sold through agents — which one?
  2. In court, how is the Hill of Proof different for a representation as distinct from a warranty?
  3. In the U.S., can a drafter disclaim a warranty? If so, how?
  4. In the U.S., can a drafter disclaim a representation? If so, how? (Careful: The answer might be different in different states.)
  5. If you're a buyer, will you generally want your seller to make a representation, or a warranty? (Careful: This is a trick question.)
  6. Same question as #5, but now you're a seller.
  7. From a student-drafted contract: "Each Party may revoke this [warranty] disclaimer, in whole, or in part as provided below." QUESTION: Does this make sense from a business perspective?

2.11 Class plan - Day 7 (Wed. Sept. 16)

2.11.1 Housekeeping: Next week's reading

For next week: • Chapter 2 (representations and warranties) (from Tango Terms as revised 9/16/20)

2.11.2 Ambiguity exercises

In the breakout rooms, discuss BOTH of the following ambiguity exercises (Jewish grandmothers and "was clearly executed").

2.11.3 Ambiguity and Jewish grandmothers

In honor of Rosh Hashana Friday night, from Joshua Rothman in The New Yorker: "My grandmother is ninety-three and, to my knowledge, has never kept kosher."

QUESTION: Is there any way the bold-faced part could be misinterpreted (perhaps intentionally, by an adversary)?

QUESTION: How could this be rewritten to clarify?

2.11.4 Ambiguity: "… was clearly executed"

I received a series of four emails from the American Arbitration Association (AAA) about a form that the AAA asks each of its arbitrators to sign electronically every year. I've paraphrased the emails below. Email 4 is the one we'll be discussing.

EMAIL 1: "Please sign the Standards and Responsibilities form …." (So I did as requested.)

EMAIL 2: "Thank you for signing the Standards and Responsibilities form …."

EMAIL 3 (several days later): "According to our records, you haven't signed the Standards & Responsibilities form …." (So I forwarded Email 2 to them.)

EMAIL 4 (apologizing for Email 3, several days later): "We generated a list of who had and had not signed the Standards & Responsibilities form. For some reason, the list failed to include your entry, even though your form was clearly executed." (Emphasis added.)

QUESTION: What are the two possible meanings for the italicized part of Email 4?

QUESTION: How could the italicized part of Email 4 be clarified?

2.11.5 Exercise: Revisiting last week's termination clause

Recall what you did in the virtual whiteboard ( 6:00 p.m. section | 7:30 p.m. section ) to streamline a termination clause:
see Tango Terms 2020C § 9.7.4

This is the original language:

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.

Here's one possible rewrite — which still has problems:

12.    TERMINATION.

(a)       A party may terminate this Agreement:

            (1) if the royalties due hereunder have not been paid within the time allowed by this Licence Agreement; or

            (2) if either party shall breach of breaches any of the its representations, warranties, covenants, or promises or undertakings +herein contained and on its part to be performed or observed in this License Agreement and shall not have has not remedied such breach within thirty (30) 30 days after notice is given to the breaching party by the non-breaching party the other party gives notice of breach to the breaching party; or

            (3)  either party shall have has 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.

(b)       The other party need not give any further advance notice of termination.

(c)       Termination will not affect any right the terminating party has:

            (1)  to recover any royalties then due; and

            (2)  to pursue any remedy in respect of any previous breach of any of the covenants or agreements contained in this Licence Agreement.

EXERCISE: In your breakout rooms, analyze what changes were made — and why. If you wish, use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5 to make notes. Pay particular attention to:

  • How is (a)(3) different from (a)(1) and (a)(2), and does it matter? (Hint: Try reading (a) as though (1) and (2) weren't even there: Does the language make sense?)
  • In (a)(3): If Party A breaches the agreement, does that allow Party A to terminate the agreement?
  • Is the terminology consistent?
  • In (b), does "the other party" fit?

2.11.6 Exercise: MathWhiz-Gigunda payment

FACTS:

1.  In the MathWhiz-Gigunda deal, Gigunda has informed MathWhiz that, for tax reasons, Gigunda wants the actual contract to be between MathWhiz and Gigunda's newly-formed Mongolian subsidiary, Gigunda Asia LLC, based out of Ulaanbaatar; the LLC's office is at Peace Avenue, Ulaanbaatar 21121 Mongolia.

2.  MathWhiz is a bit concerned that with this new arrangement it might not get paid, or might not get paid on time.

EXERCISE: In your breakout rooms:

(a) Brainstorm some ideas to give MathWhiz some additional comfort. Feel free to "think outside the box."

(b) In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, draft: (1) a preamble for the contract, and (2) "term sheet" summary terms for whatever payment-related arrangements you think would help the parties. CONSIDER: Could your proposals be quickly agreed to and implemented by the parties? Or would your proposals require time-consuming internal reviews and approvals, and/or involve getting third parties involved (at a cost)?

2.12 Class plan - Day 6 (Mon. Sept. 14)

2.12.1 Housekeeping: Quiz-style homework 1

Any thoughts?

2.12.2 Reading review

In groups (3- to 4 people per group)

Appoint a spokesperson (rotate the job)

QUESTIONS TO DISCUSS:

CHAPTER 11 (getting to signature sooner):

  1. What surprised you?
  2. What do you think about playing "hardball" in negotiation (or "The Art of the Deal")?
  3. Based on your own personal experience so far:
    • What part of chapter 11 do you think is the most likely to help your (eventual) clients?
    • What part of chapter 11 do you think is "meh …" ?

CHAPTER 13 (getting paid)

  1. What surprised you?
  2. Is there anything about Chapter 13 that you think would be particularly useful for clients to know?
  3. Clause 13.3 (expense reimbursement): What do you think clients would think about the Q&A format? (We'll do substantive questions in a litte bit.)
    • Vote "Yes": Clients would prefer Q&A format
    • Vote "No": Clients would prefer conventional subheadings
  4. What do you think clients would think if this and other Protocols were instead labeled "Rules," e.g., "Expense Reimbursement Rule," for incorporation by reference in short-form contracts? Analogy: Robert's Rules of Order (a manual of parliamentary procedure).
    • Vote "Yes": Clients would prefer "Protocol" (why?)
    • Vote "No": Clients would prefer "Rule" (why?)

2.12.3 Discussion exercise: Expense reimbursement

FACTS:

  1. You represent MathWhiz and are negotiating the services agreement with Gigunda.
  2. The "economics" of the deal involve Gigunda's reimbursing MathWhiz for various out-of-pocket expenses (e.g., travel and lodging to the Mongolian oil fields).
  3. Gigunda wants the services agreement to state that MathWhiz is to comply with Gigunda's standard travel-expense policies.

QUESTION: As MathWhiz's lawyer —

  • What do you recommend to MathWhiz?
  • If MathWhiz decides to agree to this Gigunda request, is there anything you'd want the contract to be sure to say, to help protect MathWhiz?

2.12.4 Quickie ambiguity exercises

Ambiguity exercise: A black hole … in Chile?

For any astronomy buffs in the class, see the following from Nsikan Akpan, Here is the first photo of a black hole (PBS.org):

Scientists at eight radio telescopes observatories … captured images of one black hole in our Milky Way — known as Sagittarius A* — and one in a nearby galaxy called M87, over the course of a week in April 2017. (The PBS NewsHour visited one in Chile when the project was still under discussion).

QUESTION: What are the two possibilities for the "one" that PBS visited?

EXERCISE: In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, rewrite to clarify.

Ambiguity exercise: Nestle and Starbucks

From this BBC.com article: "Nestle has announced that it will pay Starbucks $7.1bn (£5.2bn) to sell the company's coffee products."

QUESTION: Which company will sell which company's coffee —

  • Will Nestle sell Starbucks coffee? or
  • Will Starbucks sell Nestle coffee?

(Which do you think is more likely?)

EXERCISE: In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4       •  Group 5, rewrite twice — once for each possible interpretation.

2.12.5 Discussion: Interest clauses

QUESTIONS for small groups:

  1. What sort of things might not count as "interest"?
  2. Will a usury savings clause do any good?

2.13 Class plan - Day 5 (Wed. Sept. 09)

2.13.1 Housekeeping: Homework quiz #1

Homework quiz #1 is up on Canvas – available 9:00 p.m. tonight, due Sunday Sept. 13 at 12:00 noon.

There are 14 questions for a total of 20 points. The questions are mostly true-false and multiple-choice. When you finish, you should be able to see the correct answers and my explanation.

You get two attempts; the latest one will count.

It's untimed and open-everything, but NO working together. (There's a zero-point Honor Code question at the end, per a suggestion from the UHLC administration.)

2.13.2 Housekeeping: More reading assignments

See the reading list.

2.13.3 "Consumer survey" for Tango Terms "framing"

DCT to screen-share to show a possible new framing: "Operations plans" vice "contracts"

Please use the Yes and No buttons to vote on the following

QUESTION 1: Which of these do you think business people would prefer:
(Yes button:) "Contracts" with imperative language
(No button:) "Operating plans" with present-tense language

QUESTION 1: Which of these do you think business people would prefer:
(Yes button:) "Operating plans"
(No button:) "Operating protocols"

2.13.4 Ambiguity exercise: Successful men

2.13.5 Exercises: Chapters 7, 8, 9

See Tango Terms § 7.8

Breaking up a wall of words:
see Tango Terms § 9.7.3

Streamlining a termination clause:
see Tango Terms § 9.7.4

QUESTION: Is this "study-group revision" approach helpful? (Use the Yes / No buttons.)

2.14 Class plan - Day 4 (Wed. Sept. 02)

2.14.1 Housekeeping

No class Labor Day

2.14.2 Exercises: Chapter 4

See the questions in Tango Terms § 4.8 (in Zoom breakout rooms).

2.14.3 Exercises: Chapter 5

See the questions in Tango Terms § 5.10 (in Zoom breakout rooms).

2.14.4 Exercises: Chapter 6

See the questions in Tango Terms § 6.11 (in Zoom breakout rooms).

2.15 Class plan - Day 3 (Mon. Aug. 31)

2.15.1 Welcome newcomers?

Be sure to read the Syllabus, and catch up with the reading so far.

2.15.2 Housekeeping: Quiz-type homework due Sept. 13

See here (§ 3)

2.15.3 Housekeeping: New syllabus items

The Associate Dean's office has provided two inserts that are to be included in course syllabi; see the following:

• Recording of classes (not really applicable here)

• Syllabus changes possibility due to pandemic

2.15.4 Breakout groups: Surprises in reading?

In the Zoom breakout rooms:

1.  Compare notes about the reading:

  • What surprised you?
  • What are you not sure you agree with? (It's fine — I want to hear your opinions, especially based on any work experience you've had.)

You might want to use the virtual whiteboard ( 6:00 p.m. section | 7:30 p.m. section ) for notes, choosing one person as a "scribe" to take notes.

2.  Designate a spokesperson to "report out" when we reassemble in the main Zoom meeting room.

2.15.5 Ambiguity: Rodney Dangerfield

Here's the "Quotation of the day" from the NY Times morning-briefing email of August 2, 2017:

“His mother convinced him to open a savings account one summer so he could save up for a football uniform. Then she stole his money.”
Joan Dangerfield, the widow of the comedian Rodney Dangerfield, who was honored with a plaque in Kew Gardens, Queens, 13 years after his death. His childhood in the neighborhood prepared him for a lifetime of getting no respect.

QUESTION: Who was honored — Joan Dangerfield, or Rodney?

EXERCISE (in Zoom breakout rooms): Rewrite the first italicized sentence, which begins, "Joan Dangerfield" to clarify it. Pick a scribe to use Zoom chat to show your group's rewrite (when we return to the main Zoom meeting room).

2.15.6 Exercise: Stanford-Tesla lease intro

See the questions in Tango Terms § 2.6.4 (in Zoom breakout rooms).

2.15.7 Exercise: Gigunda-MathWhiz signature blocks

See Tango Terms § 3.6.1 (in Zoom breakout rooms, in the virtual whiteboard ( 6:00 p.m. section | 7:30 p.m. section ))

2.15.8 Discussion: Backdating

See the questions in Tango Terms § 3.6.2 (in Zoom breakout rooms).

2.16 Class plan - Day 2 (Wed. Aug. 26)

2.16.1 Newcomers?

Please email me (at dc@toedt.com) the email address you want me to use for the class Google Groups email list.

2.16.2 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 — DO IN CHAT BUT WAIT:

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

2.16.3 Read-along lecture

Chapters 2 and 3

2.16.4 Exercises

The exercises from chapters 2 and 3.

2.17 Class plan - Day 1 (Mon. Aug. 24)

2.17.1 Course startup

1.  Student introductions — VIA ZOOM CHAT:

  • Name
  • 2L? 3L? LLM?
  • Career intentions
  • Undergraduate school & degree
  • Work experience
  • Previous contract experience

2.  First in-class exercise:* Where did I go to 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.

* Do this in Zoom chat, BUT wait till I say "go" to click "Send" so that everyone's answers will be launched simultaneously.

  1. For the Google Groups email list: If you'd like your email address on Google Groups to be something different than your UH.edu address, please email your preferred address to dc@toedt.com.
  2. Read-along lecture: Course info (in this document)
  3. My email address is dc@toedt.com — my UH.edu address doesn't always forward as it should.
  4. PSA requested by the University: Counseling is available ([BROKEN LINK: caps]).
  5. Set up Canvas and Perusall accounts

2.17.2 Thumbsucker questions: Goals, etc.

For discussion in small-group breakout rooms:

  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?

2.17.3 Skim-along preview lecture & exercises

Reading for this week in the Tango Terms:

2.17.4 Large group poll

  1. 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.

3 Reading & quiz-type homework schedule

3.1 Week 01 (Aug. 24)

Reading:

• This Syllabus

• Tango Terms chapters 1-3

3.2 Week 02 (Aug. 31)

Reading: Tango Terms chapters 4-6

3.3 Week 03 (Wed. Sept. 9)

No class on Labor Day

Reading: Tango Terms chapters 7-9

QUIZ-TYPE HOMEWORK 1: Due Sunday Sept. 13 at 12:00 noon.

3.4 Week 04 (Sept. 14)

Reading: Tango Terms (including associated commentary):

• Chapter 11 (getting to signature sooner) (for general info)

• Chapter 13 (payments)

3.5 Week 05 (Sept. 21)

Reading: Tango Terms (including associated commentary):

• Chapter 2 (representations and warranties) (from Tango Terms as revised 9/16/20)

3.6 Week 06 (Sept. 28)

Reading: Tango Terms (including associated commentary):

• Chapter 3 (Due diligence & oversight) (from Tango Terms as revised 9/16/20)

• Chapter 4 (Services) (from Tango Terms as revised 9/16/20)

3.7 Week 07 (Oct. 05)

Tango Terms: Chapter 5, Sales (direct and "channel")

3.8 Week 08 (Oct. 12)

3.10 Week 10 (Oct. 26)