Contract Drafting (Toedt - Fall 2017)

You needn't read the first day's materials in advance, but do read them soon.

General course information

Introduction: The role of the contract drafter

Vagueness and other forms of ambiguity

Contra proferentem rule

Agreements to agree or to negotiate in good faith

A Somewhat Barebones Contract (including annotations)

Preambles including annotations (that will be the case for all Common Draft readings)

Signatures — especially the signers' personal representations.

How to Sign a Contract

Acknowledgements in contracts

Review questions for A Somewhat-Barebones Contract

Common Draft §§ 4.1 (payment terms) through 4.5 (deposits) (and their annotations, of course)

Common Draft §§ 4.8 (interest) and 4.9 (usury savings)

Implied-Warranty Disclaimer

Representation Definition

Misrepresentation Definition

Warranty Definition

Honeywell warranties provision (reading only for now; homework will be due later)

Contra proferentem exercise

Warranty-of-quality comparison: Honeywell v. Honeywell (Part 1 only) – be prepared to discuss.

Letter of intent

Services

Payment terms worksheet

Who can sue on a warranty?

Backdating a contract at the end of the quarter

Indemnity definition

Indemnity research notes

Indemnity procedures

Sheryl Sandberg employment agreement (annotated)

Reps and warranties strategy exercise

Common Draft definitions preamble and its commentary

Stanford-Tesla lease agreement worksheet 1 – be prepared to discuss the questions in class.

Assignment of an agreement

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

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

Defense against indemnified claim exercise

Assignment of port operating agreement exercise

Verizon-Yahoo stock purchase agreement – just the following:

Article II: Representations and warranties of seller

Article III: Representations and warranties of purchaser

Section 8.16 (disclosure schedules)

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

The Common Draft General Provisions Baseline Terms and their commentary.

Warranty disclaimers in England

Common Draft litigation provisions and commentary

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

Common Draft Termination provisions and commentary

Verizon-Yahoo stock purchase agreement Article VI (termination)

Common Draft Standards; Inspections; Restrictions and their annotations

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

Common Draft Guaranty provisions and associated annotations

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

Common Draft confidentiality provisions and their annotations

Confidential Information exercises

Most-favored-customer provisions

Q1. (5 points) Worksheet: Microsoft Word basics

Q2. (5 points) For Selling a used computer : Draft a simple preamble and "background" section for a contract. If the hypothetical facts don't provide details that you'd want to include, make something up. Explain (very briefly): • why you included what you did, and • if you decided to leave anything out: what, and why.

For each of the below: Explain (very briefly): • why you included what you did, and • if you decided to leave anything out: what, and why.

Q3. (5 points) As if you were representing the seller: Draft the signature blocks for the selling a used computer exercise if the seller were Sarah's Computer Sales, Inc., which is a Texas corporation; Sarah is the founder and CEO. (Careful: Does a company's founder necessarily have signature authority for the company?)

Q4. (5 points) Same as above, except that the seller is Sarah's Computer Sales L.P., which is a limited partnership that was set up in Delaware; Sarah is a celebrity who is a limited partner in the company (i.e., an investor), and she is letting the company use her name, but she has no other role in the company.

Q5. (10 points) Clarity: Effective Time of United Airlines & Continental Airlines merger (part 1 only)

Q6. (5 points) Returning to the computer-sale transaction : Today's date is January 20, 2017. For reasons not explained to you, the seller's principal has asked you to be sure that the date-signed fields in the signature blocks will read "January 2, 2017." The seller's principal is going through a divorce. QUESTION: Is it OK, or not, to go along with the principal's request about the January 2 date? Explain.

Q7. (5 points) You represent Buyer in the computer-sale transaction . List the reps and warranties that you would want Seller to make about the computer. (Think about what the remedies should be in case a warranted fact proves untrue, and consider including those remedies in the rep-and-warranty provisions.)

Q8. (5 points) Now you represent Seller in the computer-sale transaction . (For class discussion only: Could that happen in real life?)

• For each of the reps and warranties in the list you made for Q7, indicate whether Seller should make • a representation, or • a warranty.
• For one of the items in the list, revise Seller's language to make it a representation only.

Q9. (5 points) Clarity – Stanford-Tesla lease agreement § 4.3

Q10. (10 points) Indemnity for the spontaneously-combusting widgets

First take-home quiz

Q11. (5 points) For the selling a used computer facts:

• As Buyer's lawyer, draft a provision that allows Buyer to have a computer-savvy person inspect and test the computer before the closing.
• As Seller's lawyer, think about what precautions might be appropriate during the inspection to reduce the risk* of bad things happening for which Seller might want to blame Buyer. * Notice that I didn't say "to ensure that bad things won't happen."

Explain (very briefly): • why you included what you did, and • if you decided to leave anything out: what, and why.

Q12. (5 points) Draft a set of "closing" provisions stating what is to happen at the closing; include both:

• provisions that Seller would want; and
• provisions that Buyer would want.

Explain (very briefly): • why you included what you did, and • if you decided to leave anything out: what, and why.

Q13. (5 points) For the selling a used computer facts, as Seller's lawyer, draft a payment provision that you think will provide Seller with an acceptable risk of non-payment.

Q14. (10 points) Do the Financial questions about the computer sale exercise.

Second take-home quiz is due this Thursday (April 6) at 2:30 p.m.

Q15. (5 points) Switched-out pages? .

Q16. (10 points) Contract-review mechanics

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

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

Students will:

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

UPDATE: In response to student requests, I'm curating and consolidating the online course materials described below into a free e-book that you can print out, three-hole punch, and put into a three-ring binder. I will update this syllabus when that's finished. In the meantime, please see last semester's syllabus and class plan, in this document, for an idea what to expect.

• the Common Draft deskbook of contract terms, which is a side project of mine;
• the worksheets and exercises at this Web site;
• various actual agreements “in the wild” online — some extensively annotated — such as:
  • Honeywell's standard terms of sale and its purchase-order terms ;
  • Sheryl Sandberg's Facebook employment agreement
  • The Continental-United merger agreement and the Verizon-Yahoo acquisition agreement
  • A Rick's Cabaret real-estate purchase agreement

We will take up various worksheets, exercises, and homework assignments; I'm in the process of revising the order based on experience in past semesters.

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

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. To avoid having to use an official Friday-afternoon or -evening makeup day, and as recommended by the Law Center's administration, each class session will last 81 minutes, ending at 5:21 p.m. and 8:51 p.m., respectively.

This arrangement is driven by the ABA accreditation requirement of 700 instructional minutes per credit hour, i.e., 2,100 minutes for a three-hour course:

• By doing 81-minute classes, we get 2,106 minutes of class time in 26 class meetings instead of the usual 27 meetings.
• That gives us one extra regular class day, which we can use as a makeup day if necessary — or, if we don't have to cancel any classes (and thus don't have to use the makeup day), then* we can just end the semester one class meeting early.

* Notice how I used the word "then" to demarcate that part of the longish conditional sentence.

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

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

The final exam:

• will consist mainly of short-answer questions, along with some true-false and multiple-choice questions, to test (i) your recall of specific contract-drafting principles and (ii) your ability to apply those principles to specific short factual scenarios;
• will be administered via Blackboard — you can take the exam from anywhere you like as long as you can log into Blackboard, but you must do it during the scheduled final-exam period;
• will consist mainly of short-answer questions, along with some true-false and multiple-choice questions — a set of "flashcards" with sample questions is available here;
• will be open-book, open-notes, but it will be timed; you can take it any time you like during the scheduled examination period, but once you start it, you must complete the exam within 30 minutes after you start it.
• will be drawn very largely from the problems addressed during the course (with some variations mixed in).

The honor code will of course apply.

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

(Notice how I used commas to separate the interchangeable adjectival phrases, namely "four, in-class, midterm." See Comma Rule 2 at GrammarBook.com.)

The quizzes will be open-book and open-notes, but the time allotted will be short enough (probably 10 to 15 minutes per quiz) that you won't have much time to look things up.

The mid-term quiz questions will be based pretty much entirely on the homework- and in-class assignments covered from the beginning of the semester to date (possibly with some curve balls thrown in). That way, that the quizzes themselves serve as a reinforcing review that takes advantage of the testing effect.

A set of "flashcards" with sample questions is available here.

There will be a series of homework assignments.

• In the early part of the semester, homework assignments will be mainly pass-fail; students who make a decent effort will get full credit.
• Homework assignments are to be uploaded to Blackboard unless I say otherwise. This will enable anonymous grading, although I'll see your names after I finish grading all submissions for a particular assignment.
• Many homework assignments will involve writing and/or editing; others will be more doctrinal.
• We will go over each homework assignment during a class period after the due date. (Usually but not always, we will review homework during the class period after the due date — the spaced-out timing is intentional.)
• Homework assignments can be submitted after the due date, but any homework assignment that I receive more than 24 hours after the due date will be docked 20% of the possible points. This will help to discourage gaming the system by submitting an assignment after we've already reviewed the assignment in class.
• So that everyone can benefit from everyone else's feedback, I will very often post my feedback to an online master comments list (without identifying specific students), which we will go over in class.

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

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

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

ABA accreditation rules and school policy require attendance at 80% of the class meetings for each course. We have 26 scheduled class meetings, not counting the regular-day makeup day at the end of the semester (if needed). 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:

This means, of course, that students who miss more than two classes 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 grading curve.

Attendance exceptions:

• I don't count absences for "official" law-school team travel, e.g., for moot-court competitions, etc., as long as I'm informed in advance.
• I also don't count a reasonable number of absences for illness; I'll take your word for it without a doctor's note. If you're ill, please don't come to class and infect the rest of us.

I will normally circulate an attendance sign-in sheet so that I can document who’s missing (unless I see that everyone is present).

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.

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

If I think your email question might be of general interest, I'm very likely not to respond directly to you, but instead to email the question (without your name), and my response, to the whole class. (Notice how I used parentheses and commas for clarity in the last part of the previous sentence — notice also how long the sentence is.)

REWRITTEN: I might conclude that your email question is likely to be of general interest to the class. If so, I probably won't respond to you; instead, I'll email the question (without your name, of course), along with my response, to the whole class. (Notice how this version has two shorter sentences; I also substituted "along with" as a mid-sentence guide phrase to help the reader navigate the wording.)

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.