Day-by-Day Class Plans: Contract Drafting Fall 2024

Group 1 sits to my left, other groups in order after that.

This grouping is alphabetical by first name; only first names are used here for privacy.

NOTE: I will reshuffle the groups twice during the semester.

Contents:

Please tell us a little bit about yourself:

• Name (if you prefer a nickname on your name tent, please mark it up)
• Class year (3L, 2L, LLM)
• Undergrad school and major
• Work experience?
• Contract-related experience?
• Something boring about yourself?

Here's how I usually do Socratic-method questioning:

• I pose a question — usually pre-positioned on this Web page, see this example from today's class plan — and ask you to discuss the question for a minute or two in your small groups.
• Then, for that question, I spin a wheel to call on a student by number — see your assigned number below.
• After each spin, I remove the number that came up, so that students won't be repeatedly cold-called in any one class session until everyone else has been called on.

That way:

• Neither the students nor I know who will be cold-called to answer a question.
• Each student must be ready to answer each question — but gets to discuss the question with his/her group before I cold-call on anyone.

This is a form of what pedagogy researchers call "active learning," which research has shown to be something of a mixed blessing from students' perspective:

Comparing passive lectures with active learning using a randomized experimental approach and identical course materials, we find that students in the active classroom learn more, but they feel like they learn less. We show that this negative correlation is caused in part by the increased cognitive effort required during active learning.

(Emphasis added.)

But at the end of the day, students in our course seem to come around, as indicated by course feedback:

•  From in-class "group whiteboard" comments on the last day of the semester (with me out of the room): "We liked [written questions for small-group discussion in class]. Makes it less stressful than cold calling and its [sic; it's] like the real world to ask for help. Get to benefit from smart teammates! :)"

•  "Throughout undergraduate and graduate school I have never enjoyed group work during lecture but in this course it really was beneficial. Talking with my peers during each course made me feel confident and less worried about whether someone else was 'smarter than me.' The group dynamic Professor Toedt facilitated puts all students on the same level and not only forces us to teach each other and learn together but also helped me create better

•  "Definitely facilitated group discussion." "Allowed us to work together and share ideas."

•  "The discussion-based class format combined with spaced repitition [sic] and the homework quizzes helped make the material more concrete."

Please tell us a little bit about yourself:

• Name (if you prefer a nickname on your name tent, please mark it up)
• Class year (3L, 2L, LLM)
• Undergrad school and major
• Work experience?
• Contract-related experience?
• Something boring about yourself?

[From a PowerPoint slide deck]

Please tell us a little bit about yourself:

• Name (if you prefer a nickname on your name tent, please mark it up)
• Class year (3L, 2L, LLM)
• Undergrad school and major
• Work experience?
• Contract-related experience?
• Something boring about yourself?

From Twitter: "Elon Musk predicts he will rocket people to Mars in less than 10 years" – does that mean people will depart for Mars in less than ten years, or that it'll take them less than ten years go get there?

QUESTION: How could this be rewritten to clarify?

Canvas setup: Be sure you're enrolled; this course is LAW 6364 16412 (6 p.m.) and 16413 (7:30 p.m.)

Please tell us a little bit about yourself:

• Name (if you prefer a nickname on your name tent, please mark it up)
• Class year (3L, 2L, LLM)
• Undergrad school and major
• Work experience?
• Contract-related experience?
• Something boring about yourself?

DCT to talk through the syllabus and the introductory parts of the Notes on Contract Drafting (a work-in-progress of mine). BE SURE TO READ these materials.

See this tweet thread

See this blog entry.

I'll bring them to class; that way, you won't forget them ….

See Bryan Garner's piece. TL;DR:

From a Facebook post shared by one of my former law partners: "I made it through the day without needing an AR-15 again!"

QUESTION: Does "again" relate:

• to "made it through the day"? or
• to "needing an AR-15"?

QUESTION: How could we fix this?

Reference: Chapter 1: Introduction

QUESTION: Most contract preambles identify the parties as, e.g., "ABC Corporation, a Texas corporation."

• How would we identify MathWhiz?
• How would we identify Gigunda Energy?

Perdue Farms (Ind. 2024): A truck driver, making a chemical delivery to a Perdue Farms poultry-processing plant, told the plant's gate guards (who worked for a security company) that he was delivering bleach. But the driver was seriously mistaken: The bill of lading said, correctly, that the delivery was of aluminum chloride, a corrosive hazardous. The gate guards told the driver to put the "bleach" in the bleach tank; the resulting chemical reaction caused significant damage to the facility.

Perdue sued the trucking company; the security company; and the driver and three gate guards personally. Perdue apparently did so to try to escape a forum-selection clause in the security-company's contract with Perdue, which designated the federal district court in Maryland — where Perdue was incorporated and had its headquarters — as the exclusive forum for any disputes relating to that contract.

The Indiana supreme court would have none of it:

[W]e reject [Perdue's] strategic pleading to avoid the forum-selection clause by suing the [security-contractor] defendant's Indiana-based employees individually.

Second, we decline to apply the forum-selection clause to the plaintiff's claims against the individual employees. These employees (unlike their employer) are not parties to the forum-selection clause, and they are not in privity with their employer.

Perdue Farms, Inc. v. L&B Transport, LLC, No. 24S-PL-40 (Ind. Aug. 13, 2024) (extra paragraphing added).

Do Exercises 1 through 5 of Chapter 2 — you can use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 if you think it'd be helpful, but you might want to just make private notes. I'll spin the wheel to call on people.

Here's a tweet from the @TexasDemocrats Twitter account: "PRESS RELEASE: Chairman @HinojosaTX Releases Statement on Federal Judge in Texas Siding with AG Paxton, Against Texas Women"

QUESTIONS:

1.  Suppose you didn't know Texas politics, and you also didn't know that this tweet came from the Texas Democratic Party — might you be confused about who was siding with whom?

2.  How could this be clarified?

Let's try again: "PRESS RELEASE: Chairman @HinojosaTX Releases Statement on about Texas Federal Judge in Texas Judge's Siding with AG Paxton, Against Texas Women"

See the Rules.

In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4, DCT to show how to rewrite the following, from this real-estate lease:

• to break up the "spaghetti clause"
• to be more reader-friendly, as though you were talking to a lay jury; and
• to correct drafting-type "issues" such as:
  • passive voice;
  • D.R.Y. issues;
  • run-on sentences,

following the Rules.

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.

Do Exercises 7 through 11 of Chapter 2 — you can use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 if you think it'd be helpful, but you might want to just make private notes.

From this article: "Anti-vaccination sentiment was once more evenly distributed between parties and ideologies …." (Emphasis added.)

QUESTION: What are TWO ways this could be clarified, to have two different respective meanings?

From CNN (since changed): "New US dietary guidelines include babies and toddlers for first time"

A friend posted a screen grab on Facebook with the comment, "Thanks for the offer, but I’m vegan."

In this exercise:

• Groups 1 and 3 represent MathWhiz
• Groups 2 and 4 represent Gigunda.

Use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 — in groups: Draft a short letter of intent between MathWhiz and Gigunda, including the following:

1. Title
2. Preamble
3. Statement that the parties are negotiating for MathWhiz and Gigunda to enter into a ten-year (!) consulting agreement but haven't agreed on all the terms yet.
4. A brief statement in abbreviated bullet points of:
   • what part of the LOI is binding
   • what's not binding but the parties are going in that direction — feel free to be creative from your client's point of view
   • what it would take for the final agreement to be binding
5. Include a list of items that the parties expect to discuss but that aren't yet agreed to.

Go ahead and make up legal names, entity types, and jurisdictions as needed.

Optional: Skim through the subheadings of the LOI discussion in the course material to get ideas.

Just for grins, here's what ChatGPT came up with (but DON'T assume that's enough):

Here's an archive.org "Wayback Machine" link. (It'll take a few seconds to load.)

QUESTION: From Chapter 2:

• What surprised you (if anything)?
• What struck you as important for summer associates and new lawyers to know?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

Long story short:

1. A Czech company enters into a contract with a Minnesota company.
2. The MN company allegedly breaches the contract.
3. A few months before the statute of limitation is about to expire for the breach, the Czech company's Kansas-based U.S. subsidiary files suit for breach, in Kansas, against the MN company.
4. Problem:
   • The Czech company's U.S. subsidiary isn't a party to the contract, nor is it an intended third-party beneficiary.
   • So, the Czech company's U.S. subsidiary has no Article III standing to sue the MN company.
   • Thus, the Kansas district court has no subject-matter jurisdiction over the case.
5. It gets weirder: In the Kansas lawsuit, the Czech parent company files a motion:
   • to amend the complaint to substitute itself in as the sole plaintiff; and
   • to transfer the case to MN — because without the Czech company's U.S. subsidiary, there was neither personal jurisdiction nor venue in Kansas.
6. The Kansas court dismisses the Czech parent company's lawsuit on standing grounds.
7. The Czech parent company re-files in MN — where the MN company moves to dismiss on limitation grounds.
8. The MN court — which is in the 8th Circuit — stays the motion pending the outcome of the 10th Circuit appeal.
9. The 10th Circuit affirms the Kansas district court's dismissal:

We affirm.

As a non-party, CZ Czech could not amend CZ USA’s complaint. Only a party may amend its complaint under Rule 15.

And because the only party—CZ USA—lacked an injury under the contract, it lacked standing to sue.

Accordingly, the district court lacked subject-matter jurisdiction and correctly dismissed the lawsuit.

Česká Zbrojovka Defence SE ("CZ") v. Vista Outdoor, Inc., 79 F.4th 1255, 1257 (10th Cir. 2023) (extra paragraphing added).

Lesson for contract drafters: When dealing with corporate "families," consider thinking ahead to which member of the "family" you might want to be a party to related litigation — and where the lawsuit might be desired.

Here's the Houston Chronicle headline for an op-ed by former Secretary of Labor Robert Reich: "Private investments are destroying things we do out of love and passion" (emphasis added).

So: Private equity's destructiveness is a result of the private-equity owners' love and passion?

Five minutes tops: Negotiate the basic terms of the LOI —

• Group 1 with Group 2
• Group 3 with Group 4

1. As noted in my announcement this morning, in migrating the homework assignment to Canvas, the title and instructions for the Preamble and Signature Block assignments got switched.
2. Many students prefaced their signature blocks with "The parties below agree to the terms and conditions following their signatures." That'd be appropriate only if the signature blocks were at the beginning of the agreement (which I like to do).
3. MathWhiz is a limited liability company ("LLC"), not a corporation.
4. We don't know Gigunda's legal name — "Gigunda Energy" could be a trade name of some kind, the way the corporate name of KFC (and Taco Bell and Pizza Hut) is Yum! Brands.
5. Nor do we know Gigunda's type of organization (corporation? LLC?)
6. We don't know that MathWhiz and Gigunda are organized in Texas and California, respectively — one or both of them could be organized somewhere such as Delaware.
7. When you say "MathWhiz LLC, a [STATE] Limited Liability Company" (which is the correct way to do it when you don't know which state), you wouldn't capitalize "limited liability company" — in that particular context, the words are used as a common-noun phrase, so they wouldn't be capitalized.
8. If we know that Mary Marvel will be signing for MathWhiz, we could include her name and title in a two-blank-line signature block (Signature and Date signed).
9. If you don't know who Gigunda's signer will be, then you want to use the four-blank-line signature block, not the two-blank-line version.
10. If you're using a conventional preamble, and you've identified MathWhiz there as a limited liability company, then you wouldn't want to repeat "a limited liability company" in the signature block. (That's an example of the D.R.Y. Principle: You don't want to risk changing it in one place, but not in another place, during negotiation.)

See this Piled Higher and Deeper comic.

See this post.

Contents:

Now for a variation on our Uncle Ed hypothetical:

FACTS:

• Mary Marvel (CEO of MathWhiz) emails you to say that she wants to buy a barely-used, top-of-the-line laptop computer from Jane Jones, who lives in River Oaks (i.e., in the Harris County part of Houston) and is "a friend of a friend" of Mary, but Mary doesn't know her.
• Jane bought the laptop a few weeks ago but decided she didn't like the feel of the keyboard, so she wants to sell it and get a different one. (She's gone past the no-questions-asked return period from where she bought it.)
• The purchase price will be $3,000.
• Jane's address for notice is at 1600 River Oaks Blvd, Houston, TX 77019.

EXERCISE: In your groups — and you might want to divide up the work — in the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4:

1. Put together a skeleton for a contract, with a title, preamble, and signature blocks (don't worry about formatting the signature blocks, just put the necessary information in).
2. Draft a simple background section (a.k.a. recitals).
3. Put together a series of short, simple paragraphs with just the "mechanics" of getting the sale done: Pricing, delivery — the bare-bones requirements to make a contract. (Make up whatever information you think you need that isn't provided.)
4. Then add whatever "representations and warranties" you think might be useful — but remember, one of your goals is to get Jane to sign the agreement quickly.

Afterwards, I'll do one in real time.

"Are you not entertained?"

QUESTION 1: From the Invoicing reading assignment:

• What if anything was new to you or surprised you?
• What struck you as important for summer associates and new lawyers to know?

Feel free to use the the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

QUESTION 2: From the Expense reimbursement reading assignment: What if anything was new to you or surprised you?

Lots of consolidation going on in "the oil patch." We'll look through the Agreement and Plan of Merger, at the SEC.gov Website, by which Permian Resources agreed to acquire Earthstone. (The merger was completed in November 2023.)

Some points to note from a 10,000-foot view:

1. This was an all-stock deal.
2. The contract's definitions are both "inline" and in Annex A at the back, with Article I, "Definitions" being an index.
3. There's a Section 2.4, "Effect of the Mergers," but also an Article III, "Effect of the Mergers; Exchange," addressing what happens to various stock- and equity classes — so the heading of Article III could have been better chosen.
4. Sections 2.1 and 2.4: The initial merger seem to be planned as what's known as a reverse triangular merger, which is generally done for tax reasons.
5. Section 2.3 sets out how the "Closing" is to take place:
   • All "conditions" to closing (i.e., walkaway prerequisites) must have been either satisfied or waived (see Article VII)
   • Closing was to happen electronically by PDF document exchange — that's almost uniformly how it's done.
   • The involved companies file "certificates" with the Secretary of State of Delaware.
   • All assets of the involved companies — inclucing any existing contracts — automatically "vest" in the "surviving" company; that might or might not result in an "assignment" of the assets of the other company.
6. Article IV sets out the "reps and warranties": "Except as set forth in the disclosure letter dated as of the date of this Agreement and delivered …."
7. Section 4.29 and 5.31 – "No Additional Representations": These are "roadblock" clauses.
8. Article VI - "Covenants and Agreements" [sic]
   • Section 6.1 Conduct of the Company Business Pending the Mergers
   • Section 6.3 No Solicitation by the Company — a "no-shop clause" (with "fiduciary out")
   • Breakup fees of $87.5 million (if Earthstone terminates) or $175 million (if Permian terminates).
9. Article VII: Conditions to Closing — these include:
   • shareholder approvals
   • regulatory approvals
   • no "Material Adverse Effect" (that would allow termination)
   • "bringdown certificates" about reps and warranties
10. Section 9.2, Survival: "Except as otherwise provided in this Agreement, none of the representations, warranties, agreements and covenants contained in this Agreement will survive the Closing; …" (but with a lot of exceptions).
11. Section 9.3, Notices: Includes names and addresses of outside counsel (Kirkland, V&E), thus making the representations a matter of public record (normally that'd be client confidential information that the lawyers aren't supposed to talk about without client consent).
12. Section 9.7, Governing Law, etc.: Multi-topic "spaghetti clauses" in all-caps.
13. Section 9.13, Non-Recourse — no right of action against officers, directors, employees, etc.
14. Section 9.14, Debt Financing Sources: Another spaghetti clause.
15. Exhibit D-1: "PERMIAN RESOURCES OPERATING, LLC || SEVENTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT || Dated as of [•]"

Of general interest: ChatGPT produced an interesting list of most-negotiated terms in a merger agreement.

(Try this link as well.)

A corporate-lawyer colleague once said that the only things really negotiated are:

• the price;
• the amount of the breakup fee; and
• what constitutes a "material adverse effect" or "material adverse change" A.K.A. the MAC Clause, that would allow the buyer (or seller) to walk away.

Do Exercise 12 of Chapter 2 — you can use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 if you think it'd be helpful, but you might want to just make private notes.

DCT to recount a "MathWhiz" client episode: A "Gigunda" customer sent two, 100-page master services agreement forms, purportedly "95% identical," for two "rush" projects in the Middle East and East Africa.

QUESTION: What to do without spending a ton of MathWhiz's money?

Ambiguous: See this sign.

More clear: This sign

Here are (sanitized) first pages of an NDA I once marked up for my real-life "MathWhiz" client.

Note how the original is a bunch of "spaghetti clauses" that look as though the drafter just vomited verbiage onto the page — in my markup, note the first comment tactfully addressing that problem.

Original (first page only)

Markup (first two pages only)

In the markup, you'll see two different colors of revision marks. That's because the original Word document was "Protected" to remove the identity of revisers when the document was saved. I noticed this after making the first couple of changes, and removed the protection so that there'd be a paper trail of who'd made what revisions.

Product Solutions Int'l, Inc.. Aldez Containers, LLC, 46 F.4th 454 (6th Cir. 2022):

• Small company ("Orgo") designs a custom cosmetics travel bag.
• Orgo contracts out the design and manufacturer to a middleman supplier.
• Middleman supplier places a big order for the cosmetics bag with a Chinese manufacturer.
• Orgo (the small company) discovers that the cosmetics bags it designed aren't selling; it stops accepting shipments from the middleman supplier.
• The supplier ends up "eating" > $500K in payments to its Chinese manufacturer for the bags that the supplier ordered for Orgo.
• The supplier sues not just Orgo, but its executives, and the shipping company (think: FedEx).
• The supplier's case against the executives gets poured out — see Product Solutions Int'l, Inc. v. PB Products, LLC, No. 19-CV-12790 (E.D. Mich. Jun. 12, 2020) (granting in part, denying in part, defendants' motion to dismiss).
• Later the supplier's case against the shipping company gets poured out again.

LESSONS:

1.  Litigation counsel can get really aggressive — in part this is because judges seldom punish bad behavior.

2.  The middleman supplier should have been more careful about making sure that Orgo (the designer that ordered the bags) had funding available — and backup funding? — before making a big financial commitment to the Chinese manufacturer on behalf of Orgo.

From a Washington Monthly piece about what ordinary people might have to do to reverse the effects of climate change: "Which might mean giving up meat or traveling by air. "

QUESTION: Is the author urging us to give up one thing, or two?

QUESTION: How could this be fixed?

From a Facebook post by Stanford law professor Mark Lemley:

Things I appear to like more than my Facebook friends:

1. Pants

EXERCISE: What are the two possible meanings here?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

Don't forget: You have two chances — for this quiz, but not for all of the others† — so if you get less than a perfect score the first time, you might want to review the answers before taking the quiz a second time.

† Is "not for all the others" ambiguous?

Contracts can have different formats; here are a few examples, more or less at random, from an advertisement-supported Web site that harvests contracts from the SEC's EDGAR Website.

In your groups, take a look at the following things and note anything interesting and/or that raises questions.

If desired, use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4.

• Titles of the agreements
• Preambles
• Recitals ("whereas" clauses), if any
• Numbering styles for sections / paragraphs

Here are the examples:

• Hewlett-Packard agreement to acquire Palm (as in, Palm Pilot)
• WeWork employment agreement - note the title of the agreement
• Zillow executive employment agreement – notice any difference in the drafting style between this agreement and the WeWork agreement above?
• Green Mountain Coffee "transition agreement" (basically, firing the president of the company):
  • See § 2.a.1: "Base Salary. During the Employment Period, the Company will continue to pay you a base salary at the gross annual rate of $406,000 ("Base Salary"). The Base Salary shall be paid in accordance with the Company's normal payroll practices." (Emphasis added.) QUESTION: Why use the bold-faced language?

I'll recount a Teams call I had this morning with a longtime client who reached out to me yesterday afternoon about a matter.

This is an experiment.

In your groups, compile a list of "gouge"† — things that a new lawyer should know — about the following. the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

(I'll be "erasing the whiteboards" in between classes, so be sure to copy them to a Word doc if you want.)

1. Best Efforts Definition — why might agreeing to this be dangerous?
2. Entire agreement — in Texas, will an entire-agreement clause successfully keep a "fraudulent inducement" claim at bay (as in, a defendant could get rid of such a claim by filing a 12(b)(6) motion to dismiss)? (What IS a 12(b)(6) motion?) If not, what would be needed?
3. Independent contractors — why do parties say this in contracts, and is it worth the pixels?
4. Notices — what are the "Three Rs of Notice"?
5. Redlining representation — why include this?

† "Gouge" is a U.S. Navy term for key information, things you need to know to get the job done and/or stay out of trouble. The Perplexity GPT includes this explanation (excerpt):

In the U.S. Navy, the term "gouge" refers to critical information, tips, or insider knowledge that is shared informally among personnel. It is often considered essential for understanding the nuances of Navy life and operations. The gouge can include anything from practical advice on how to handle specific tasks or situations to the unofficial but crucial details that help sailors navigate their careers more effectively.

A quote from a retired Australian army general: "'He [Ukrainian President Volodymyr Zelenskyy] saw that only one actor can change the status quo,' said Mick Ryan, a military strategist and retired major general in the Australian Army. 'It’s risky but audacious.'

QUESTION: What are the two possible meanings of the bold-faced passage?

BEFORE: 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: Do the following in the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4: Play around with breaking up and simplifying just the second sentence, quoted again here: "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."

• Consider breaking the sentence into two, or even three, paragraphs.
• Think about creating one or more defined terms in their own paragraphs.
• Think about spinning off the concluding exception into its own paragraph, then forward-referencing it in the "main" paragraph(s).
• Don't number your paragraphs yet.
• QUESTION: Given the bold-faced heading of the "BEFORE" version, does the first sentence really belong in this provision?

DCT REWRITE: [to be shown in class]

FACTS:

• Your client MathWhiz asks you to review a draft contract sent by a potential customer of MathWhiz.

• You notice that the draft spells out all kinds of numbers, e.g., "twenty thousand dollars."

• The draft doesn't also include the corresponding numerals in parentheses, i.e., it doesn't say "twenty thousand dollars ($20,000.00)."

OPEN MIKE:

QUESTION 1: When reviewing and revising the draft contract, do you change "twenty thousand dollars" to "$20,000.00"? Why or why not?

QUESTION 2: What if you change (and redline) the actual number from $20K to, say, $25K — how do you do phrase that?
a. The same way, i.e., "twenty-five thousand dollars"?
b.  "$25,000.00"?
c.  "$25,000"?
d.  "$25 thousand"?

From a student last night:

As Wednesday Addams is unavailable to sign the agreement on March 31st and because the assignment states to draft the signature block for Addams Investments, LP, are we only drafting their signature block? Or should we also draft Widget, Inc.'s signature block on the next page?

My response:

You’ll want to:

1.  Read the assignment carefully.

2.  Try to anticipate what your supervising partner would want next and take a stab at doing it — as long as it wouldn’t involve a lot of billable time — give the partner something to look at and maybe prompt him or her to think of something that s/he might otherwise have forgotten. (Label it appropriately.)

Good job checking.

Not "ripped from the headlines," but it could be — from The New Yorker: Listening to Taylor Swift in Prison

See this WSJ story (free link). Some points of interest:

• Banks cut off BB&B's lines of credit
• Banks delivered notice of default to BB&B — which kicks up BB&B's interest rate by two percentage points
• JPMC "called the loan" (demanded immediate repayment), but BB&B doesn't have the cash
• BB&B has had trouble stocking its stores because it fell behind in payments to suppliers

From this CDC Web page:

BA.2.86 [an emerging COVID-19 variant] may be more capable of causing infection in people who have previously had COVID-19 or who have received COVID-19 vaccines.

QUESTION: Does this mean —

1.  that if you've had a prior COVID vaccination, or if you've previously had COVID, then you're more susceptible to catching the new BA.2.86 variant than those who've neither been vaccinated nor contracted COVID?

Or:

2.  that even if you've been vaccinated or previously had COVID, you could still catch the new BA.2.86 variant, more so than the "old" variants?

Question: What did you find useful to you–

• in class today
• in the reading for this week?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

BEFORE: "The board held a meeting to give consideration to the issue." AFTER: "The board considered the issue." QUESTION: Is this "streamlining" safe? If not, why not?

EXERCISE: From part 1, rewrite just the italicized portion above (quoted below) to be much more reader-friendly — as though you were talking to a lay jury. (Hint: BLUF.)

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

Here's the italicized portion: "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."

DCT REWRITE: [to be shown in class]

From the joint press release:

Verizon Communications Inc. (NYSE, NASDAQ: VZ) and Frontier Communications Parent, Inc. (NASDAQ: FYBR) today announced they have entered into a definitive agreement for Verizon to acquire Frontier in an all-cash transaction valued at $20 billion.

This strategic acquisition of the largest pure-play fiber internet provider in the U.S. will significantly expand Verizon’s fiber footprint across the nation, accelerating the company’s delivery of premium mobility and broadband services to current and new customers.

It will also expand Verizon’s intelligent edge network for digital innovations like AI and IoT.

(Extra paragraphing added.)

See the Agreement & Plan of Merger; notice the following:

• General format:
  • "ARTICLE II," etc. — all-caps "ARTICLE," Roman numerals
  • "SECTION 2.01" etc. — two-digit subsection numbers.
  • Paragraph indentation
  • Underlining of subheadings

Question: What did you find useful, or interesting, or surprising, in the reading for this week?

We'll go around the room (in groups) twice.

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

SUGGESTION: Add notes to your personal "gouge."

Here's another version of the real-time rewriting demo I did a few days ago:

6.5 Tenant’s Audit Rights.

6.5.1 [or, "(a)"] Landlord shall keep reasonably detailed records of all Operating Expenses and Real Estate Taxes for a period of at least two (2) years.

6.5.2 Not more frequently than once in every 12-month period, Tenant together with any representative of Tenant shall be permitted to may audit the records of the Operating Expenses and Real Estate Taxes.

6.5.3 Tenant must give Landlord at least twenty (20) 20 days’ prior written notice to Landlord of any audit under section 6.5.2.

6.5.4 Tenant shall must conduct any inspection audit at a reasonable time and in a manner so as not to unduly disrupt the conduct of Landlord’s business.

6.5.5 Any such inspection audit by Tenant shall must be limited to the sole purpose of verifying the Operating Expenses and/or Real Estate Taxes.

6.5.6 Tenant shall must hold any information obtained during any such inspection in confidence, except that Tenant shall be permitted to may disclose such information to its attorneys and advisors, provided but only if Tenant:

        (1) informs such parties of the confidential nature of such information, and

        (2) uses good faith and diligent efforts to cause such parties to maintain such information as confidential.

6.5.7 Any shortfall or excess revealed and verified by Tenant’s audit shall must [or, is to] be paid to the applicable party by the relevant party within thirty (30) 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.

6.5.8 Landlord must reimburse Tenant for Tenant's reasonable, third party costs of the audit, up to an amount not to exceed $5,000 ["up to" and "not to exceed" are redundant], if all of the following are true:

        (1) The audit 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%) [DISCUSSION REQUIRED];

        (2) Tenant in fact paid such overage the overcharge; and

        (3) such overage the overcharge was not otherwise adjusted pursuant to the terms of this Lease, ….

Some discussion points:

1. Some students numbered the paragraphs 6.5.1, 6.5.2, etc., which is useful — alternatively, some partners might prefer the paragraphs to be "numbered" with (a), (b), etc.
2. For anything that's likely to be a negotiation point, consider making it a separate paragraph for easier discussion (and, if necessary, revision). Remember: Speed to signature (of agreed, workable terms) is a primary goal. Examples of separate issues:
   • Recordkeeping requirement
   • Audit right
   • Advance notice period
   • Confidentiality (but the additional confidentiality-related sentences can stay with the paragraph)
   • True-up
   • Expense-shifting (but probably OK to keep with the true-up provision)
3. Reminder: D.R.Y. for numbers — "two (2) days"
4. Reminder: The convention is:
   • spell out numbers from one to ten
   • use digits from 11 on up — "twenty (20) 20 days" (another D.R.Y. example as well)

Consider the following provision (from a real contract — this is one sentence):

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.

In the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4, take a stab at rewriting this provision to make it more readable and conform to the drafting style rules we've been reading about and discussing — especially:

• breaking up "spaghetti clauses" a.k.a. "walls of words"
• BLUF
• D.R.Y.

(Don't try to "retrade the deal" by altering the substantive terms.)

I'll show my own rewrite in a few minutes.

FACTS: You're a new associate at a law firm. One of the partners wants you to draft a contract for one of her clients. She says that the deal is basically like one that another firm client just signed.

QUESTION 1: How much work should you put into preparing the draft — and why? Should you:

• just change the names and deal details?
• start from scratch, using the other client's signed deal as a source of ideas?
• something in between?

QUESTION 2: On these facts alone, what don't you know that might be relevant?

FACTS: You represent a supplier, ABC Corporation, whose customer, XYZ Inc., wants XYZ's "affiliates" to be listed in the preamble as parties to a master purchasing agreement with the following language: "This Master Purchasing Agreement is between ABC Corporation ('Supplier') and XYZ Inc. and its affiliates ('Customer')."

QUESTION 1: As ABC's lawyer:

• Do you think this is OK?
• If not, what do you think XYZ really wants?

QUESTION 2: As ABC's lawyer, how might you structure the contract to accommodate Customer's likely desires — and to protect Supplier?

See the comic.

From the Houston Chronicle:

Houston adjusted its contract with the controversial ShotSpotter program, a technology designed to detect gunshot sounds, on Wednesday to correct a clerical error and pay an overdue $700,000 bill to the company.

City Council voted unanimously to correct the issue from January 2022. The contract was meant to be for five years at a cost of $3.5 million, but a staff error meant council voted to authorize only $700,000. The true cost was listed for council members at the time, but it did not make it into the actual ordinance they passed.

The Houston Police Department went to renew its subscription for another year in December and realized there was no money to pay for it, according to the request for council action. The $700,000 invoice to ShotSpotter now is past due.

(Emphasis added.)

Note how the numbers "$3.5 million" and "$700,000" are written above.

Vermillion State Bank v. Tennis Sanitation, LLC:

Facts:

1. A bank loaned money to a trash-collection company (the "borrower").
2. The borrower's business failed; the borrower filed for bankruptcy protection.
3. The bank sought bidders for its borrower's business assets (garbage trucks, etc.).
4. The bank itself bought its borrower's business assets.
5. The bank entered into an oral "flip" agreement with another buyer, under which the other buyer would acquire the business assets from the bank for $6 million.
6. The other buyer backed out of the oral agreement.
7. The bank sold the business assets to another buyer, at a significantly lower price.

Trial: A jury found that the other borrower breached an oral agreement and awarded the bank $1.9 million in damages.

Appeal: Affirmed. The "predominant purpose" of the parties' "hybrid" oral contract (involving both goods and intangible assets) was not for the sale of goods — "most witnesses testified to the primary value being the customer routes" (id. at 623) — and so the Statute of Frauds in UCC article 2 didn't apply.

Oral contracts can bite: Farm-machinery manufacturer's termination of oral exclusive reseller agreement results in $5.8M award against mfr. for breach of contract and violation of state good-cause dealership termination statute; 8th Cir. affirms. See S&H Farm Supply, Inc. v. Bad Boy, Inc., 25 F.4th 54 (8th Cir. 2021).

Question: What did you find useful to you in class today?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

1. QUESTION: When "redlining" another party's contract draft, what could (should!) you do, in the Word document's file name and in the running header, to: (A) avoid "version confusion," and (B) make it easier to create a timeline later — e.g., in litigation?
2. EXPLAIN IF FALSE: If parties disagree about the meaning of a term in a contract, that's enough to require that the finder of fact (the jury, in a jury case), not the trial judge or appeals court, must determine the meaning of the term.

Question: What did you find useful to you–

• in class today
• in the reading for this week?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

Contents:

(This time we'll do just Question 2.)

FACTS: You're a new associate at a law firm. One of the partners wants you to draft a contract for one of her clients. She says that the deal is basically like one that another firm client just signed.

QUESTION 1: How much work should you put into preparing the draft — and why? Should you:

• just change the names and deal details?
• start from scratch, using the other client's signed deal as a source of ideas?
• something in between?

QUESTION 2: On these facts alone, what don't you know that might be relevant?

As mentioned at the start of the semester: So that students will get a chance to work with others, next Wednesday we'll reshuffle the groups; I'll post the reshuffled group memberships on Monday.

(We'll do one more reshuffling during the semester in late-ish October.)

I'll spin the wheel to pick people; don't forget your numbers.

1. QUESTION: What do you think about including tables, charts, drawings, etc., in a contract?
2. QUESTION: Did Conan O'Brien's lawyers screw up when negotiating his NBC contract? Why or why not?
3. QUESTION: What are the "Three Rs of Notice"?
4. QUESTION: Should the "Mailbox Rule" be used for notices in a "B2B" (business-to-business) contract? Why or why not?
5. QUESTION: If Gigunda wants its MathWhiz contract to require compliance with Gigunda's expense-reimbursement policy, should MathWhiz push back? (From Week 2 reading.)
6. QUESTION: What's better: To say that a contract was signed, or that it was executed? Why?
7. QUESTION: If Gigunda's contract form asks MathWhiz to "acknowledge" that MathWhiz has offices in Gigunda's headquarters city in California (even though that's not the case), is that safe for MathWhiz to agree to? Why or why not?
8. QUESTION: What's one clause to consider including in a contract that could help the parties stay out of court?
9. QUESTION: If a contract says that the contract can only be amended by a signed writing, will a court enforce that requirement?

1. For Addams, you'd usually say "by: Addams Operations, Inc." — see the limited-partnership signature block example at § 3.7.5 of the reading.
2. Saying that Addams Investment L.P. is "a family limited partnership" doesn't do anything useful here.
3. Problem: We don't know that Wednesday Addams is president of Addams Investments L.P.
4. Saying that Addams Operations is the sole general partner of Addams Investments doesn't do anything especially useful here.
5. Likewise: Saying that Widgets is "a Texas Company" doesn't do anything that's especially useful here — moreover, in other circumstances it might be a bit counterproductive if it turns out that Widgets Inc.'s major operations are all in other states / countries and it has just a small satellite operation in Texas.
6. When writing "Date signed," you generally wouldn't capitalized "signed" — same with "Printed name."

I'll spin the wheel to call on people.

FACTS: You have graduated and are working as an associate for the law firm representing MathWhiz; you've just taken the bar exam. You've been asked to review a MathWhiz contract draft that has been prepared by a rising-2L summer associate.

The draft says: "Gigunda represents that it shall arrange to pay MathWhiz a deposit in the sum-total amount of $10 thousand dollars ($10,000.00) no later than 10 days after this Agreement has been executed." (Emphasis added as "helper language.")

• QUESTION 1: Could the wording of this provision be improved? How?

FACTS: An apartment lease states (in part): "The apartment shall be regularly serviced by a professional pest-control service."

• QUESTION 2: This is an example of what? (Two words — and the words are not "passive voice," although it is indeed an example of passive voice; I'm looking for two other words.)
• QUESTION 3: Is this an example of acceptable drafting? Why or why not?

FACTS: Same as the previous question.

• QUESTION 4: Are there any circumstances in which the above-quoted apartment lease provision might be sort-of acceptable, in the sense of "hold your nose and go along with it"? (Hint: Consider the role that context plays in interpreting contract language.)

FACTS: Mary Marvel asks you to add, in the background of the MathWhiz agreement with Gigunda, the following sentence: "Gigunda acknowledges that MathWhiz's data-processing algorithms are unique and MathWhiz's extremely-valuable trade secret."

• QUESTION 5: What's your response to Mary, and why?

Here's a simpler rewrite, written in procedural form:

12.    TERMINATION.

(a)       Either party may terminate this Agreement if all of the following are true:

            (1)  the other party [EDIT: probably want to add "materially"] breaches this Agreement;

            (2)  the terminating party gives the breaching party notice of the breach;

            (3)  the breaching party does not cure the breach (if curable) within 30 days after the effective date of the notice of breach; and

            (4)  the terminating party then gives notice of termination to the breaching party.

(b)       In case of doubt: No cure period is required if the breach in question is not curable.

(c)       Termination will take effect as soon as the notice of termination is effective. [DCT TO DISCUSS — HAVE ANY KIND OF WIND-DOWN PERIOD? ]

(d)       In addition, either party may terminate this Agreement:

            (1)  if the other party has an Examiner appointed over the whole or any part of its assets; or

            (2)  if an order is made or a resolution passed for winding up of such that party, UNLESS such the order is part of a scheme an arrangement for reconstruction or amalgamation of such that party. [DCT comment: This doesn't necessarily fit with bankruptcy law.]

(e)       In case of doubt: No termination under this section 12 will affect any right that the terminating party has:

            (1)  to recover any royalties then due from the breaching party; or

            (2)  to pursue any remedy in respect of any pre-termination breach of this Agreement.

(To be shown in class as a "spaced repetition" example.)

EXAMPLE 1: What's wrong with the MathWhiz signature block?

Here are preambles drafted by prior-semester students (anonymous, of course); see my [bracketed, numbered notes] below each:

EXAMPLE 2:

Notes:

[0] "Retainer Agreement" is an unconventional title for this type of agreement — and "Retainer" is a head-scratcher abbreviation for Gigunda. (Try "Client" or "Customer.")

[1] Need Gigunda's full legal name.

[2] You wouldn't say "global oil and gas company" in the preamble — in the Background, sure, but not in the preamble.

[3] The principal place of business is usually just the city and state — the initial address for notice might be different.

[4] At this spot in the preamble, you'd say "This Agreement" (capitalized), not "This agreement" (Ken Adams thinks otherwise), but in the other side's draft it's probably not worth fixing.

EXAMPLE 3:

Notes:

[0] Good title.

[1] "Buyer" and "Seller" should probably be "Customer" and "Service Provider" (or perhaps "Contractor").

[2] What's the comment here?

See this guaranty:

1.  Guaranty. [START FRAG 1:] The Guarantor hereby absolutely and unconditionally guarantees, as a guaranty of payment and performance and not merely as a guaranty of collection, prompt payment when due, whether at stated maturity, by required prepayment, upon acceleration, demand or otherwise, and at all times thereafter, of any and all existing and future indebtedness and liabilities of every kind, nature and character, direct or indirect, absolute or contingent, liquidated or unliquidated, voluntary or involuntary and whether for principal, interest, premiums, fees indemnities, damages, costs, expenses or otherwise, of the Borrower to the Lender, which [sic; that] arise from or are in connection with that certain Credit Agreement dated as of March 24, 2009, among the Borrower, Heald Capital, LLC and the Lender (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; capitalized terms used herein and not defined herein shall have the meanings ascribed such terms in the Credit Agreement) and/or the other Loans Documents (including, without limitation, any Secured Hedge Agreement), whether associated with any credit or other financial accommodation made to or for the benefit of the Borrower by the Lender or otherwise and whenever created, arising, evidenced or acquired (including all renewals, extensions, amendments, refinancings and other modifications thereof and all out-of-pocket costs, reasonable attorneys’ fees and expenses incurred by the Lender in connection with the collection or enforcement thereof), and whether recovery upon such indebtedness and liabilities under the Credit Agreement and the other Loan Documents may be or hereafter become unenforceable or shall be an allowed or disallowed claim under any proceeding or case commenced by or against the Guarantor or the Borrower under the Bankruptcy Code (Title 11, United States Code), any successor statute or any other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally (collectively, “Debtor Relief Laws”), and including interest that accrues after the commencement by or against the Borrower of any proceeding under any Debtor Relief Laws (collectively, the “Guaranteed Obligations”). [END FRAG 1] The Lender’s books and records showing the amount of the Guaranteed Obligations shall be admissible in evidence in any action or proceeding, and shall be binding upon the Guarantor and conclusive, absent manifest error, for the purpose of establishing the amount of the Guaranteed Obligations. [START FRAG 2:] This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Guaranteed Obligations or any instrument or agreement evidencing any Guaranteed Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Guaranteed Obligations which might otherwise constitute a defense to the obligations of the Guarantor under this Guaranty, and the Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing (other than the defense of final payment in full in cash and performance in full of the Guaranteed Obligations, except for contingent indemnification obligations for which no claim has been asserted). [END FRAG₂] Anything contained herein to the contrary notwithstanding, the obligations of the Guarantor hereunder at any time shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance as a fraudulent transfer or conveyance under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any comparable provisions of any similar federal or state law

EXERCISE 1: Break up just Fragment 1 — use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4. (Fragment 1 is one sentence!)

I'll show my rewrite in a few minutes.

From this article:

• Buyer agrees to buy business from Seller.
• The supposedly-agreed purchase price was 1 x Seller's 2013 revenue ($513K) minus fixed payment of $275K, capped at $730K = $238K
• But the contract says the purchase price is 1 x Seller's 2013 revenue ($513K) plus fixed payment of $275K, again capped at $730K.
• Buyer pays lower price. Seller sues for difference.
• Buyer — egged on by lawyer — claims "mutual mistake" and "ambiguity," litigates the matter, and rejects a Seller settlement offer.
• Buyer's law firm's internal emails about Buyer's position are … bad
• Court grants summary judgment for Seller (as in, Buyer must pay Seller the difference).
• Buyer sues its lawyer and his firm for malpractice
• Online search didn't reveal whether Buyer's malpractice suit was ever settled. Buyer's lawyer is still with his firm.

QUESTION (discuss in small groups): How might Buyer's lawyer have reduced the chances of such a "misunderstanding" between him and Buyer?

See the BC comic for Feb. 2, 2024.

In interpreting contracts, courts sometimes use the doctrine of expressio unius est exclusio alterius, which can be translated as, "to explicitly state one thing is to implicitly exclude another." In one of former President Trump's criminal cases, we saw the D.C. Circuit use the same doctrine (without using the Latin phrase) in affirming rejection of the former president's claim of immunity from prosecution for alleged crimes committed while he was in office:

… The Framers knew how to explicitly grant criminal immunity in the Constitution, as they did to legislators in the Speech or Debate Clause. Yet they chose not to include a similar provision granting immunity to the President. …

United States v. Trump, 91 F.4th 1173, 1201 (D.C. Cir. 2024) (cleaned up, formatting revised, emphasis in original), vacated and remanded, 603 U.S. xxx, 141 S. Ct. 2312 (2024); cf. id., 141 S. Ct. at 2357 (Sotomayor, J., dissenting) ("First, the Framers clearly knew how to provide for immunity from prosecution").

Caution: If doing an "amended-and-restated agreement" (in this week's reading) you'll want to consider whether you could be wiping out a provision that your client might later want to rely on. Here's a real-world example:

–  In 2014, a business that sold historical tours entered into a merchant agreement with a payment-processing company;

–  The merchant agreement, drafted by the payment processor, included a personal guaranty signed by the owner of the tour business;

–  Then in 2019 the parties entered into a replacement agreement, also drafted by the payment processor;

–  The replacement agreement likewise included a personal guaranty – –  but this time, the guaranty was signed by another individual, not by the owner of the tour business;

–  The replacement agreement also included an entire-agreement clause.

–  For reasons not relevant here, the payment processor sued the owner of the tour business under the guaranty in the 2014 agreement.

–  The Sixth Circuit held that the 2019 agreement had terminated the 2014 guaranty — and thus the tour business's owner was not liable in respect of transactions governed by the 2019 agreement. See Electronic Merchant Systems LLC v. Gaal, 58 F.4th 877 (6th Cir. 2023) (affirming, in part, dismissal for failure to state a claim).

Presumably apropos of Aaron Rodgers tearing his Achilles tendon on his fourth (!) play for the NY Jets: Here

Question: What did you find useful to you in class today?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

See this Red & Rover comic strip.

This afternoon I came up with the following in working on this topic in the revised course materials:

BASIC FACTS:

• MathWhiz has developed a software package, "GeeWhiz," that will let customers do a lot of the data-analytics that MathWhiz does in its consulting business.
• Because MathWhiz doesn't yet have much of an internal sales force, MathWhiz asks you to develop a form of reseller agreement.
• Under the reseller agreement as MathWhiz envisions it:
  • The reseller will buy licenses to use the new GeeWhiz software at a stated discount from MathWhiz's list price.
  • The reseller will try to resell the GeeWhiz licenses to customers identified by the reseller, at whatever price the reseller chooses.

1.  MORE FACTS: Mary Marvel asks you if MathWhiz can specify a minimum price at which the reseller may resell the GeeWhiz licenses.

QUESTION: What do you tell her — and how can you help her achieve her (likely) business objective? EXPLAIN.

2.  MORE FACTS: The reseller wants MathWhiz to agree that the reseller will have exclusive rights to resell the GeeWhiz licenses.

QUESTION: What if any legal and/or business issues does that raise in your mind? (Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4)

3.  QUESTION: In #2, what business goals do you think the reseller is concerned about? How might you help the reseller accommodate the reseller's concern(s) — assuming that MathWhiz is OK with doing so?

From the "you get what you INspect, not what you EXpect" desk: Last week the Justice Department announced: North Carolina Auto Parts Seller and Its Owner to Pay $10M for Making, Selling and Installing Emissions Defeat Devices on Motor Vehicles

(Or: Some people sometimes lie, cheat, and steal, so it'd be naïve to blindly assume that your client's contract counterparties will always perform as they've agreed.)

From Asli Aydintasbas, Turkey’s earthquake death toll might be more than just a natural disaster (WashingtonPost.com):

The first earthquake, followed by a second one of almost equal magnitude, was massive by any standard. The collapse of buildings directly on the fault line was probably unavoidable.

Yet across the region, there were many structures that stood firm, saving the lives of their occupants, while others next door crumpled — pointing to sloppy construction practices as the main cause of death.

We will need time to fully understand the extent to which human failings may have contributed to the loss of life. But early indications certainly raise questions.

In 1999, we quickly learned that it wasn’t the earthquake itself but human-made concrete blocks that kill people. The blame went to contractors who used cheap materials, to the officials who failed to enforce Turkey’s relatively loose building codes, and, of course, to a government that has failed to develop a nationwide earthquake response strategy.

* * * 

Natural disaster is one aspect of the story. Turkey’s reliance on construction-driven economic growth, cronyism and willingness to ignore its own building standards is the other.

(Emphasis added.)

From The Economist:

When the quake hit, the apartment block in Osmaniye, a city in southern Turkey, where Halise Sen had once lived collapsed like a house of cards, burying her former neighbours under nine floors of concrete. Mrs Sen, the head of the local chamber of architects, looks over the wreckage. “There’s no reinforced steel here,” she says, “so the concrete lost its strength and the columns collapsed, along with the floors, as soon as the ground started to shake.”

None of the blocks had basements, says her husband Mustafa, a former developer. Buildings with such weak foundations were doomed in a strong earthquake, he adds. Mustafa, who now grows olives and walnuts, stopped working in the construction sector years ago. Other contractors were undercutting his prices and ignoring building codes. “If we used 100 tonnes of iron in a building, they would use 90 tonnes,” he says. Osmaniye sits near an active faultline. “I knew we were on the brink of catastrophe,” he says.

* * * 

Turkey has strict building codes, adopted in the wake of an earthquake that killed 18,000 people on the outskirts of Istanbul in 1999 and updated five years ago. Under an urban-renewal scheme thought up by Mr Erdogan’s government, more than 3m housing units have been renewed.

The problems lie in implementation and oversight. Building permits are easy to acquire and inspections are weak. Companies mandated by the government to carry them out are paid by the developers. Projects usually comply with government standards at the start of construction, but not by the end, says Mr Guvenc. As soon as the inspectors leave, developers reduce the amount or the quality of the iron they use or cut down on the number of stirrups, the steel loops that prevent beams and columns from buckling under pressure. They may even tack on an extra floor. Then they enter informal negotiations with local authorities. “A lot of money may end up changing hands,” says Mr Guvenc. “We are talking about corruption par excellence.”

This means the difference between life and death.

(Emphasis added.)

See this Facebook post.

Break up just Fragment 2 from the above wall-of-words guaranty; use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4.

Suggestion: Separate out the distinct potentially-negotiable ideas into separate paragraphs — possibly using a question-and-answer format as a drafting aid. Here's an example from Fragment 1:

Q: Will the Creditor have to go to court against the Debtor first?

A: This is a guaranty of payment and performance and not merely as a guaranty of collection.

Q: Is only existing indebtedness guaranteed?

A: This guaranty is for any and all existing and future indebtedness and liabilities that arise from or are in connection with the "Credit Agreement."

Here's the text of Fragment 2 to break up:

This Guaranty shall not be affected by the genuineness, validity, regularity or enforceability of the Guaranteed Obligations or any instrument or agreement evidencing any Guaranteed Obligations, or by the existence, validity, enforceability, perfection, non-perfection or extent of any collateral therefor, or by any fact or circumstance relating to the Guaranteed Obligations which might otherwise constitute a defense to the obligations of the Guarantor under this Guaranty, and the Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to any or all of the foregoing (other than the defense of final payment in full in cash and performance in full of the Guaranteed Obligations, except for contingent indemnification obligations for which no claim has been asserted).

I'll show my rewrite in a few minutes.

In anticipation of the upcoming homework assignment, you might want to look at this video and article (on your own).

From Mary, Queen of Scots prison letters finally decoded (TheGuardian.com Feb. 8, 2023): "Dr John Guy, a fellow in history The University of Cambridge who wrote the 2004 biography of Mary, Queen of Scots, said the findings are a 'literary and historical sensation' and mark the most important new find on Mary Stuart, Queen of Scots for more than 100 years." (Emphasis added.)

The other night our grand-cat was lying on the couch between us as we watched TV.

• I needed to look for the TV's remote control to fast-forward through commercials.
• But where was the remote — could the cat be lying on it?

Compare (me saying to my wife):

• "I really didn't want to move the cat."
• "I didn't really want to move the cat."
• "I didn't want to really move the cat."

GENERAL QUESTION: Might a choice of word order cause problems in a contract?

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

EXERCISE: Spot the issues, including those from prior weeks' reading.

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

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

Question: What did you find useful to you in class today?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4:

I'll spin the wheel to call on people.

FACTS:

• MathWhiz and Gigunda have agreed (in part) that Gigunda will reimburse MathWhiz for MathWhiz's out-of-pocket expenses.
• Gigunda's services agreement template says that MathWhiz must comply with Gigunda's expense reimbursement policy concerning what Gigunda will or won't reimburse (e.g., no first-class travel).
• Mary Marvel, the MathWhiz CEO, asks what you think.

QUESTION 1: What advice do you have for Mary?

FACTS: Gigunda's services agreement template also says that MathWhiz must submit its invoices no later than 15 days after the end of a calendar quarter.

QUESTION 2: What do you think Gigunda's motivation is?

• Will MathWhiz even care? Why or why not?
• What do you advise Mary Marvel?

FACTS:

• MathWhiz wants to include, in its services agreement template, a provision for charging interest.
• Mary says that she's heard of something called a "usury-savings clause," and asks whether such a clause should be included in the MathWhiz template.

QUESTION 3: From a purely-business perspective, what do we not know, that we might want to find out, before trying to advise Mary?

FACTS: For particular MathWhiz obligations, Mary wants the MathWhiz services agreement template to require only that MathWhiz use its "best efforts" to perform its obligations.

QUESTION 4: Is this a "safe" clause to include? Why or why not?

• From a business perspective, what might a MathWhiz customer think if MathWhiz only committed to use "best efforts" to get something done?
• What might be an alternative to an "efforts" clause?

FACTS: Gigunda wants the MathWhiz contract to say that if MathWhiz doesn't submit an invoice for work within ten days after the end of the calendar quarter in which the work is done, then MathWhiz will be deemed to have waived payment of the invoice.

QUESTION 5: Why might Gigunda want this, and how might you advise MathWhiz about it?

QUESTION 6: What does "1% 15 days, net 30" mean?

FACTS: Assume that Gigunda is a Very Big Company, along the lines of ExxonMobil or Chevron.

QUESTION 7A: Should you recommend that MathWhiz ask Gigunda to establish payment security?

DIFFERENT FACTS: MathWhiz is asked, by a startup-company customer, to do a project that will require MathWhiz to invest a lot of time and resources. Mary Marvel asks you about options for payment security.

QUESTION 7B (for the same spinning-wheel "victim"): What might you advise Mary about payment security?

QUESTION 7C (ditto): Would you want the startup-company customer to be the one to confirm that it has arranged for payment security? Or would it be better for MathWhiz to get more confirmation than that?

See this piece:

Brain electrical activity was recorded in 36 university students as they were handwriting visually presented words using a digital pen and typewriting the words on a keyboard. Connectivity analyses were performed on EEG data recorded with a 256-channel sensor array.

When writing by hand, brain connectivity patterns were far more elaborate than when typewriting on a keyboard, as shown by widespread theta/alpha connectivity coherence patterns between network hubs and nodes in parietal and central brain regions.

Existing literature indicates that connectivity patterns in these brain areas and at such frequencies are crucial for memory formation and for encoding new information and, therefore, are beneficial for learning.

Our findings suggest that the spatiotemporal pattern from visual and proprioceptive information obtained through the precisely controlled hand movements when using a pen, contribute extensively to the brain’s connectivity patterns that promote learning.

We urge that children, from an early age, must be exposed to handwriting activities in school to establish the neuronal connectivity patterns that provide the brain with optimal conditions for learning.

Although it is vital to maintain handwriting practice at school, it is also important to keep up with continuously developing technological advances. Therefore, both teachers and students should be aware of which practice has the best learning effect in what context, for example when taking lecture notes or when writing an essay.

(Extra paragraphing added.) See also the Hacker News discussion.

Continuing the reseller exercise:

EXERCISE: Groups 1 and 3 represent the reseller; Groups 2 and 4 represent MathWhiz — in the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4, set up a "term sheet" of points to be covered in the contract.

SKIM THROUGH Chapter 16 concerning getting to signature sooner.

Then we'll have the groups turn to each other "negotiate" what they want.

[DCT to recount how things worked out]

This is an experiment — when reviewing a contract drafted by someone else, try doing the following:

1.  [If you're reviewing a Word document:] Add a comment somewhere at the top to inform the (hypothetical) drafter that you're expanding the formatting – and briefly explain why you're doing so.

2.  Provisionally break each sentence into its own paragraph — don't number or letter the paragraphs (yet).

3.  Stomp out "… provided, that …." — make it a separate paragraph (usually)

4.  Fix any examples of D.R.Y. for numbers.

5.  Look for things — e.g., in-sentence lists — that can be spun off into separate "defined terms" paragraphs.

6.  For any long-ish provision, answer each question below with SHORT, complete sentences, in possibly executive-summary form. Be aggressive about deferring details until subsequent subdivisions.

• Action: Which party (the "Actor") must do (or refrain from doing) what?
• Timing: Are there deadlines? Maximum- or minimum time periods? Earliest-allowable start date?
• Trigger(s) / prerequisites / exceptions: Is this requirement an absolute one? Or will it come into effect only if triggered, and if so, what is/are the triggers? Are there any "escape clauses" that the Actor can use to get out of the requirement for this action (or non-action)?
• Autonomy? Constraints? Standards? Is the Actor required to conform to any particular restrictions or standards, e.g., "in accordance with professional standards" or "in accordance with the Company's executive bonus plan"?
• Other details / defined terms? Are there any definitions that could be spun off into separate paragraphs and replaced with an in-line defined term?

EXAMPLE: Consider the gross-up language that we previously looked at and rewrote:

2. No Setoff or Deductions; Taxes; Payments. … 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. …

Here's a possible rewrite, using the above protocol — you wouldn't include the questions, just the answers:

From a Houston case: Targa Channelview LLC v. Vitol Americas Corp., 653 S.W.3d 330 (Tex. App–Houston [14th Dist] 2022).

Why we care: Trial counsel made an aggressive argument about the meaning of the term "conclusion of the Term."

DRAFTING LESSON 1: When using the term "Term" think hard about the implications.

Facts:

1. The contract was between Targa and Vitol.
2. Vitol was to deliver crude oil to Targa.
3. Targa was to buy the crude oil from Vitol and refine it into components – jet fuel, naphtha, etc.
4. Vitol would then buy the refined components from Targa.
5. Targa would build a "splitter" plant to do the refining — it's unclear whether this was a contract requirement for Targa, or simply a contemplated action.
6. IMPORTANT: Vitol was to pay Targa ~$43M per year for seven years – the money was to go into a "Noble Account" – and that money would be used to fund any net amounts owed by Vitol for buying refined products from Targa. (In effect, Vitol was prepaying Targa for refined products.)
7. Vitol had the right to terminate if, on or before a certain date, Targa failed to achieve "Startup" (a defined term) of the new splitter plant; the termination clause said that termination was Vitol's "sole and exclusive remedy" [sic] for the failure to achieve Startup. (653 S.W.3d at 333.)
8. Targa failed to meet the Startup requirement, so Vitol sent a notice of termination. At that point the "Noble Account" had ~$129M in it.
9. The contract also said: "At the conclusion of the Term, Targa shall remit to [Vitol] the remaining balance of the Noble Account, if any, pursuant to a final invoice prepared pursuant to Section 6.2(a)." Id. at 335 (italics by the court, bold-faced emphasis added, footnote omitted).
10. The "Term" was defined as follows:

The term of this Agreement shall commence on the Effective Date [i.e., December 27, 2015] and shall continue in full force and effect for eighty-four (84) months from Startup (the "Primary Term"). Upon expiration of the Primary Term, unless extended…, this Agreement shall automatically expire. [Vitol] may elect to extend the Agreement beyond the Primary Term for up to five (5) successive twelve (12) month periods (each, an “Extension Term” and collectively, the "Extension Terms") by giving written notice to Targa no less than twelve (12) months prior to the expiration date of the Primary Term or the then-current Extension Term (the Primary Term, and Extension Terms, if any, the "Term"). . . .

653 S.W.3d at 335 (emphasis added).

QUESTION: Who was entitled to the $129M in the Noble Account? Targa claimed that it, Targa, was entitled to keep the money because "the Term" supposedly never had a "conclusion" due to Vitol's termination of the Agreement.

Affirming (mostly) the trial court's decision in favor of Vitol, the 14th Court said that "The termination of the Agreement [by Vitol] is included in the expression, 'the conclusion of the Term'":

But, Targa is reading words out of the contract, for by its plain language, “Term” is defined to describe “[t]he term of this Agreement."

Because “term” is a characteristic of “this Agreement,” it has no independent existence and cannot outlive the Agreement itself.

Stated differently, “Term” refers to the Agreement’s lifespan, and that lifespan reaches its conclusion not only when it is passively allowed to “expire” on its own, but also when it is actively terminated.

The parties recognized that both were possible outcomes and used the words “expiration” or “termination” as applicable. For example, the parties agreed that, “[n]otwithstanding any expiration or termination of this Agreement, each of the Parties shall remain liable for any unpaid amounts due and owing under this Agreement as of the termination or expiration of the Agreement.”

Targa also takes issue with the word, “conclusion.” In arguing that the Agreement’s Term has never “concluded,” Targa pimplicitly assumes that the Agreement’s Term reaches a “conclusion” only when it is allowed to expire naturally.

But “conclusion” is not contractually defined, so its common meaning applies. As Vitol points out, the common meaning of “conclusion” includes "termination." The reverse is also true: "termination" is commonly defined to include "conclusion."

If the drafters had intended the Term's "conclusion" to mean only its "expiration date" as described in CTC section 3.2, then they presumably would have said so. "As a general proposition, using different language in different parts of a contract means the parties intended different things."

Targa, 653 S.W.3d at 355-56 (cleaned up, emphasis and extra paragraphing added).

DRAFTING LESSON 2: Consider "roadblock" clauses to anticipate arguments that aggressive counsel will try to make.

Example: Perhaps Vitol could have added, in the termination clause, that Targa would be required to comply with the Noble Account refund provisions — sure, that would technically violate D.R.Y., but it might well would have been worth doing so for the "cheap insurance" benefit.

I'll spin the wheel to pick people; don't forget your numbers.

1. TEXT: "Alice says that Bob is cold." QUESTION: Is this more likely to be considered vague, ambiguous, or both?

2. FACTS: (A) Your client is located in Vancouver, Canada and The Other Side (which drafted the contract) is located in Houston. (B) The contract states that the amount your client must pay is $1 million.

   QUESTION: Is this an issue? If so, is it worth burning up negotiation time by asking The Other Side to fix it? EXPLAIN.

3. QUESTION: When calling a partner's or client's attention to a problem, it's best to have a recommended [BLANK] as well.
4. QUESTION: When taking notes during a meeting, why is it useful to indicate whether one or more lawyers is participating?
5. QUESTION: What does DCT's mnemonic "S.t.R." (or "S.T.R.") stand for?
6. EXPLAIN IF FALSE: Summary judgment (i.e., without a trial) is pretty much always improper when a contract term is ambiguous.
7. TEXT: "Tenant will vacate the Premises no later than 12 midnight on December 15; Tenant's failure to do so will be a material breach of this Agreement." FACTS: Tenant moves out at 10:00 a.m on December 15. QUESTION: Is Tenant in material breach? EXPLAIN — INCLUDING coming up with a clearer version.
8. QUESTION: What does contra preferentem mean — both as an English translation of the Latin, and what it means in "our [contract-drafting] world"?
9. QUESTION: What does DCT's mnemonic "A.T.A.R.I." stand for?

In the past couple of classes I've mentioned taking an "answers to questions" approach to breaking up "spaghetti clause" contract provisions. Here's one possible approach for any long-ish provision: "Dissect" the provision, like a frog in a high-school biology class, by answer each question below with SHORT, complete sentences, in possibly executive-summary and list formats — be aggressive about deferring details until subsequent subdivisions:

• Action? Which party must do (or refrain from doing) what? [For this purpose, the term "action" includes refraining from doing something.]
• Timing? Are there deadlines? Maximum- or minimum time periods? Earliest-allowable start date?
• Trigger(s)? Is the requirement for this action an absolute one? Or will it come into effect only if triggered, and if so, what is/are the triggers?
• Exceptions?: Are there any "escape clauses" for this particular action?

• Standard(s)? Must the action conform to any particular standard, e.g.:

  • in accordance with professional standards
  • as stated in the Company's executive bonus plan as adopted by the Board from time to time
  • in a prudent manner [or, in a commercially-reasonable manner]
  • use commercially-reasonable efforts [or, use its best efforts]
  • in the Company's sole and unfettered discretion
  • in the Company's reasonable judgment

  NOTE: The above standards are just examples to illustrate the point.

• Defined terms? Are there any definitions that could be spun off into separate paragraphs and replaced with an in-line defined term?

EXAMPLE: Consider the gross-up language that we previously looked at and rewrote:

2. No Setoff or Deductions; Taxes; Payments. … 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. …

Here's a possible rewrite, using the above protocol — the answers can be used as a pretty-readable, multi-paragraph clause:

In your groups, using the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4, break up the following, from an employment agreement for the vice-chairman of the board of The Men's Wearhouse:

[BEGIN]

In addition to the Annual Salary, Employee shall have an opportunity to earn an annual cash bonus (the "Bonus") in respect of each fiscal year of the Company in accordance with the terms of the Company's annual cash bonus program for executive officers then existing for such fiscal year based on the achievement of performance objectives as may be established from time to time by the Board of Directors or a committee thereof; provided, however, that, except as otherwise provided herein, the Bonus for any fiscal year shall be payable to Employee only if Employee is employed by the Company on the date on which such Bonus is paid, except that if Employee remains employed by the Company through February 5, [year] as contemplated hereunder, then Employee shall be entitled to receive any Bonus earned for the fiscal year ending January 30, [year] notwithstanding the fact that Employee ceases to be an employee after February 5, [year]. In no event will such Bonus be paid later than the last day of the third month following the close of the Company's fiscal year to which such Bonus relates. Employee's target annual cash bonus opportunity shall be set from time to by the Board of Directors or a committee thereof, but such bonus opportunity shall not be less than 100% of Employee's Annual Salary for any given year (the "Target Bonus"). The actual Bonus payable may be greater or lesser than the Target Bonus and shall be determined consistent with the criteria set for other senior management executives at the Company by the Board of Directors or a committee thereof, based on such factors as it shall determine.

[END]

I'll show two possible rewrites later.

Illustrating the contract-negotiation advantages of using short, single-subject paragraphs, consider an analogous situation: Drafting a complaint in a lawsuit, where the defendant must review and respond to each allegation in the complaint.

1.  Background:

• In U.S. litigation, a defendant must respond to allegations made in a complaint by admitting, denying, or pleading ignorance, generally on a paragraph-by-paragraph basis. See generally Fed. R. Civ. P. 8(b) concerning complaints and answers:

(b) … (3) General and Specific Denials. A party that intends in good faith to deny all the allegations of a pleading—including the jurisdictional grounds—may do so by a general denial. A party that does not intend to deny all the allegations must either specifically deny designated allegations or generally deny all except those specifically admitted.

(4) Denying Part of an Allegation. A party that intends in good faith to deny only part of an allegation must admit the part that is true and deny the rest.

(5) Lacking Knowledge or Information. A party that lacks knowledge or information sufficient to form a belief about the truth of an allegation must so state, and the statement has the effect of a denial.

• A plaintiff need not prove up matters that a defendant admits. (See Fed. R. Civ. P. 36(b): "A matter admitted under this rule is conclusively established unless the court, on motion, permits the admission to be withdrawn or amended.")
• But defendants' lawyers often look for reasons to simply deny an allegation — and they might well do just that for a long, wall-of-words paragraph that contains multiple factual allegations.

2. So: Consider the following paragraph from a State of California lawsuit against Google (which Google promptly settled for $93 million):

4.  Google’s primary source of revenue is advertising. Google’s parent company Alphabet Inc. reported that in 2022 it had revenues of over $280 billion, and over $220 billion of that was attributable to Google’s advertising. A critical feature of Google’s advertising platform is location-based (or geotargeted) advertising, as advertisers greatly prefer to precisely target users in narrow geographical locations. In addition to advertising to users based directly on their location, Google also uses their location data to build behavioral profiles of users, which can determine what ads are shown to users.

The state AG's office might profitably have rewritten this paragraph (and others) to increase the odds of Google's lawyers admitting to more things — for example, thusly:

5.  To be sure: The state AG's office could readily prove up each of the above assertions, using depositions, documents, etc. But: The more of these matters that Google will admit right away, the more that will serve to pin Google down — thus simplifying matters for the AG's office as the case develops (to say nothing of reducing costs).

6.  Of course, by breaking up the factual allegations into bite-size chunks, you end up with more numbered paragraphs. Who cares?

7..  Note also how the state AG's office includes screen-grab images directly in the body of the complaint to help educate the judge and jury. Question: In a contract, could screen-grab images be judiciously used to help educate the parties' business people — and later readers such as a judge or jury? (That often won't be worth bothering with, but it's worth keeping in the back of your mind.)

Previewing the reading about arbitration: A federal district judge in Chicago has ordered consumer electronics company Samsung to pay American Arbitration Association ("AAA") arbitration fees — probably totaling around $3 million — for some 35,000 consumers who had demanded arbitration as required by their "agreements" with Samsung. The court noted that:

Alas, Samsung was hoist with its own petard. … [Samsung] made the business decision to preclude class, collective, or representative claims in its arbitration agreement with its consumers, and AAA’s fees are directly attributable to that decision.

(The Hamlet quote is part of a longer speech by Hamlet: "For 'tis the sport to have the engineer || Hoist with his own petard" — that is, for an army engineer, in charge of tunneling under an enemy fortress to plant explosives, to be blown up by his own bomb.)

Emojis can be susceptible to disagreements about their meaning — see, for example, the so-called "chocolate ice cream" emoji 💩.

And from a criminal case: "[W]hile water [emojis] may reference sexual relations, case law also confirms that water can also refer to methamphetamine in drug trafficking communications." United States v. Swanagan (denying motion to suppress wiretap evidence; citation omitted).

As with the contra proferentem rule, if an emoji in a notice is ambiguous — that is, the emoji could plausibly have more than one meaning — and the ambiguity can't be resolved by the usual means, then the ambiguity should be resolved against the party that used the emoji in the notice, on the theory that that party could and should have been more clear.

For additional information about the legal effect of emojis, see the emoji-related blog entries of law professor Eric Goldman, such as Emoji Law Year-in-Review for 2021 (blog.ericgoldman.org).

From Order Granting in Part Plaintiffs' Motion for Sanctions, 655 F. Supp. 3d 899 (N.D. Cal. 2023) No. 18-md-02843-VC (N.D. Cal.):

[At 903:] This case is an example of a wealthy client (Facebook) and its high-powered law firm (Gibson Dunn) using delay, misdirection, and frivolous arguments to make litigation unfairly difficult and expensive for their opponents. Unfortunately, this sort of conduct is not uncommon in our court system. But it was unusually egregious and persistent here. …

[At 903:] … Merely reciting this argument [about the required scope of document production] shows how ridiculous it is, but Facebook and Gibson Dunn repeated it over, and over, and over again—despite the presiding magistrate judge telling them many times that it made no sense. …

[At 904:] All the while, Facebook and Gibson Dunn had the audacity to accuse the plaintiffs’ lawyers of delaying the case, and to assert that the plaintiffs’ reasonable efforts to obtain obviously relevant discovery were frivolous. It’s almost as if Facebook and Gibson Dunn spent the better part of three years trying to gaslight their opponents, not to mention the Court. …

[At 926 n.10:] Orin Snyder, who served as lead counsel when Gibson Dunn’s conduct was at its worst, should consider himself lucky that he has not been sanctioned personally. Presumably this ruling will help ensure that he will not be so lucky if he acts this way again.

[At 53:] Facebook and Gibson Dunn are ordered to pay the plaintiffs $925,078.51 in sanctions. They are jointly and severally liable for this amount, and they must compensate the plaintiffs within 21 days of this ruling. To be sure, this amount is loose change for a company like Facebook, and even for a law firm like Gibson Dunn. But it’s important for courts to help protect litigants from suffering financial harm as a result of their opponents’ litigation misconduct. And hopefully, this ruling will create some incentive for Facebook and Gibson Dunn (and perhaps even others) to behave more honorably moving forward.

QUESTION: Do you think the ordered sanction will have the effect desired by the court?

FACTS – from a 2021 Delaware chancery-court case:

1. A merger agreement provided, in section 8.1, that if the merger was not "closed" by a specified date, then either party could pull the plug (so to speak), that is, terminate the merger agreement, as long as that party's breach was not responsible for the failure to close.
2. The merger agreement also stated in part as follows:

Section 8.2 Effect of Termination. In the event of any termination of this Agreement as provided in Section 8.1, the obligations of the parties shall terminate and there shall be no liability on the part of any party with respect thereto, except for … [list of surviving clauses omitted] … nothing contained herein shall relieve any party from liability for damages arising out of any fraud occurring prior to such termination ….

3. For reasons not important here, one of the parties:
   • pulled the plug, i.e., terminated the merger agreement, as provided in the aforementioned section 8.1; and
   • sued the other parties in Delaware chancery court for breach.
4. Citing section 8.2, the defendants filed a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, on grounds that section 8.2 precluded liability.
5. The plaintiff (i.e., the party that pulled the plug under section 8.1) claimed that the "no liability … with respect thereto" in section 8.2 meant no liability with respect to the termination itself, as opposed to no liability with respect to breach of the obligations of the Agreement. [DCT comment: That would be a pretty-typical intent on the part of the parties.]

The Delaware chancery court disagreed: "Under the Merger Agreement’s plain terms, Yatra extinguished its breach of contract claims when it elected to terminate the Merger Agreement" (emphasis added):

Of course, an agreement is not ambiguous simply because the parties disagree about its interpretation.

Rather, a contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.

By contrast, a contract is unambiguous when the agreement’s ordinary meaning leaves no room for uncertainty, and the plain, common, and ordinary meaning of the words lends itself to only one reasonable interpretation.

[Plaintiff's] reading of the Effect of Termination provision stretches the words beyond their tolerance.

The comma following "Section 8.1" breaks the sentence, reading naturally to indicate the Merger Agreement's drafters intended the phrase "with respect thereto" to modify "the obligations of the parties" as opposed to "any termination of this agreement."

Further, [Plaintiff's] position—that the provision only extinguishes liability arising from "any termination of this Agreement"—is inconsistent with the language immediately following "with respect thereto," which "except[s]" certain obligations under the Merger Agreement, as specifically enumerated, from the effects of the contractual limitation of liability. That clause would be superfluous if the effect of the provision was to limit liability only arising from the act of terminating the Merger Agreement.

Moreover, contrary to Yatra's contention that termination leaves claims for breach of contract based on prior acts unaffected, Section 8.2 expressly carves out only liability for "fraud occurring prior to such termination," implying that liability for all other claims (including contract-based claims) for acts "occurring prior" to termination do no survive post-termination.

Yatra Online, Inc. v. Ebix, Inc., No. 2020-0440, slip op. at 23 (Del. Ch. Aug. 30, 2021) (quotation edited), aff'd w/o opinion, 276 A.3d 476 (Del. 2022).

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.)

Question: What did you find useful to you in class today?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

Request: I'd like to call on someone to take notes in the Group 1 whiteboard — I'll copy and paste the notes into this class plan for future reference. I'll spin the wheel to call on people.

From student drafts:

1. TEXT: "This letter confirms our agreement to have you join the team at MathWhiz on the date we agreed to previously." QUESTIONS:
   • What sort of "chess moves" might play out if Dave Doright declined to sign the letter but insisted on reporting to work and being paid — would he have a case?
   • What other provisions in the offer letter might be relevant?
2. TEXT: "Your compensation will be the amount later agreed upon and competitive with the market." QUESTION: What would likely be Dave's reaction upon reading this?
3. TEXT: "MathWhiz reserves the right to modify any of these conditions in later agreements." QUESTION: What would likely be Dave's reaction? Does MathWhiz really need this?
4. TEXT: "MathWhiz retains all rights to bring suit or any other remedy by law in the event of any breach by you." QUESTION: Dave's reaction? Is this the tone that Mary wants to set?
5. TEXT: A student talked about "employment" in some places but "Employment" in others, without defining the term.
   • QUESTION: What might happen with inconsistent capitalization like this?
   • QUESTION: In this context, do we need a defined term for "Employment"?
6. TEXT: "… either you or MathWhiz shall be entitled to terminate your employment at any time or for any reason, with or without cause." (The student used "shall" in a number of other places.) COMMENT: "Shall be" is legalese — and probably especially awkward in an offer letter.
7. TEXT: "This Agreement shall be governed by the laws of [INSERT STATE], without giving effect to principles of conflict of laws."
   • COMMENT: As we'll see when we get to the governing-law topic, this likely wouldn't be enforced by a court in Dave's state of residence, and it might make Dave want to consult a lawyer.
   • QUESTION: What if this is the only place where the capitalized term "Agreement" is used?
8. TEXT: "Mathwhiz will compensate you at a gross weekly rate of $10,000, paid on a bi-weekly basis, for the first year making your gross yearly salary $520,000." QUESTION: Could Dave later argue that he's entitled to a full year's salary as long as he shows up for work?
9. TEXT: "Sincerely, MathWhiz" QUESTION: Comments about this?

From a press release last week:

bp today announced that it plans to sell its existing US onshore wind energy business, bp Wind Energy ….

bp intends to sell bp Wind Energy as an integrated business, with its experienced workforce expected to transfer to the new owner on completion of a sale. bp intends to launch the sale process shortly."

If a sale is announced, we'll take a look at the relevant contracts.

Note: If a sale is structured as an asset sale, the assignability of the operating contracts will become an issue. [DCT to summarize how contracts are assigned and the restrictions that might complicate matters]

For the upcoming earnout-rewriting homework: As before, I'm advance-posting some of my past comments about common mistakes in earn-out rewrites by students — use them as a guide in doing your own rewrite.

1.  In the event that If Seller shall timely reject timely rejects ….

2.  Seller shall have a period of has [or, will have ] 30 days ….

3.  In the event no Rejection Notice is received by Purchaser If Purchaser does not receive a Rejection Notice during such that 30-day period, then … QUESTION: What if Purchaser refuses the Rejection Notice?

4.  If Seller rejects an Earn-Out Calculation, such then the rejection notice (the “Rejection Notice”) shall is to set forth forth: (i) the reasons for such rejection in reasonable detail and set forth (ii) the amount of the requested adjustment. QUESTION: Do we actually need a defined term "rejection notice"?

5.  … and such The joint determination and any required adjustments resulting therefrom shall be final, conclusive, and binding on the Parties. [It's now a separate sentence, but it doesn't need to be its own separate paragraph.]

6.  … such the determination ….

7.  The Accounting Firm will is to allocate its fees and expenses between the Parties ….

8.  The Accounting Firm’s determination shall be is to be limited to resolving the disagreement set forth in the Rejection Notice.

Comment A: This limitation on the Accounting Firm's authority should preferably be a separate paragraph.

Comment B: Consider instead: The Accounting Firm’s determination shall be authority is limited to resolving the disagreement set forth in the Rejection Notice. [This makes it clear that the Accounting Firm isn't intended to be a binding arbitrator for any other matter -— at least not under this clause.]

9.  (At the beginning of the assignment:) Within 60 days after the last day of an applicable Earn-Out Year, Purchaser shall shall: [note the added colon]

OR: … Purchaser shall is to:

OR: … Purchaser shall is to do the following: [the phrase, "the following" is a signal to the reader that the sentence will continue in the following subdivisions — theoretically the colon alone does that, but it might be missed by a skimming reader]

10.  Payment to Seller from Purchaser will be is to be by wire transfer ….

11.  In the event If Seller and Purchaser are unable to do not agree upon the Annual Earn-Out Payment ….

Milos Prod. Tanker Corp. v. Valero Mktg. & Supply Co. (9th Cir. Sept. 18, 2024) (formatting modified):

In 2020, Milos transported by searoughly 40,000 tons of jet fuel belonging to Valero.This transport cost a little over $1,000,000 $1 million [edited by DCT].

But after Milos delivered, Valero refused to pay. Valero had already paid freight costs when it bought the fuel from a third company, Koch Refining International PTE Ltd., Co. (“Koch”), and had no intention of paying twice. Koch was also unwilling to pay Milos.

Milos’s contract was with a fourth company, ["GP Global"], which arranged the voyage. But GP Global had "experienced financial difficulties" and could not pay.

So Milos sued Valero for, relevant here, breach of contract.

The district court granted summary judgment against Valero in favor of Milos, the tanker company. But the Ninth Circuit reversed:

Valero was not party to the contract between Milos and GP Global. That contract specifically stated that GP Global would pay freight.

Why Valero’s payment for freight to Koch never made it to Milos through GP Global is beyond the scope of this case. And States Marine [a maritime-law decision] does not support an implied obligation for Valero to pay.

Drafting lesson: Consider advising the client to check the counterparty's creditworthiness — and to consider asking for some kind of payment security.

I'm toying with the idea of converting the course materials' sample contract terms into an operating-rules format for easier reading by students and business people and easier negotiation.

Example: The course materials' invoicing terms (at § 22.88) and payment terms (at § 22.120) provision might be rephrased along the following lines:

Comments — especially from a business-reader perspective?

"Indemnify" means "reimburse for loss"; many contracts contain express indemnity obligations. The wording of an indemnity obligation can be crucial, as illustrated in Nissan N. Am., Inc. v. Continental Auto. Sys., 92 F.4th 585 (6th Cir. 2024).

Here's the relevant sequence of events.

• Nissan's North America operation buys brake assemblies and parts from Continental.
• A driver's brakes fail, apparently due in part to bad design choices by Nissan engineers (and a technical error in Continental-supplied software), and three people in another car are killed.
• Nissan gets hit with a $24MM jury verdict; Nissan demands indemnity (reimbursement) from Continental, the manufacturer of the brake assemblies in question.

The indemnity language in Nissan's purchase order says (in relevant part):

8.  … Seller’s liability shall also include … damages or cost arising from claims of personal injury or property damages caused directly or indirectly by defective parts supplied by Seller.

Nissan argued: "Paragraph 8 requires Continental to indemnify Nissan for expenses arising from claimed defects in Continental parts." (Emphasis in court's opinion.)

Continental responded that it would be liable under Section 8 for "actual—not alleged—defects in its products, and then only when the actual defect is to blame for the harm to Nissan." (Emphasis added.)

The Sixth Circuit ruled:

By the terms of the contract, the district court held, Continental must indemnify Nissan where Continental’s defective parts caused injury or property damage.

Nissan could establish this either by (1) showing a preclusive finding that a Continental defect caused a relevant injury or (2) litigating that issue in the first instance in the indemnification action.

We agree with this assessment of the contract. And we agree that because Nissan did neither, it cannot recover.

Id. at 591 (emphasis and extra paragraphing added).

From AdamsDrafting.com, some dialog from an episode of Mr. & Mrs. Smith on Amazon Prime Video:

[Husband:] You said last night that you weren’t going to work the whole day.

[Wife:] No, I didn’t. I said I wasn’t gonna work the whole day. I have to work some of the day.

Ken Adams describes this as "ambiguity of the part versus the whole!" concerning which he devotes 31 pages in his book.

FACTS: You have a school-aged daughter (let's say). You want to bribe reward her if she makes straight-A grades for a given report-card period.

QUESTION: Which of the following would she prefer — and why:

• Option A: "I'll pay you $100 at the end of the reporting period unless your report card has any grade less than an A."
• Option B: "I'll pay you $100 at the end of the reporting period if you show me your report card and it has all A's."

Question: What did you find useful to you in class today? Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

We'll wrap up the "negotiation" exercise we started on Monday, especially Part 3 (reporting out).

In amendments to the Texas Disciplinary Rules of Professional Conduct, the Supreme Court of Texas approved the following definition (emphasis added):

"Confirmed in writing," when used in reference to the informed consent of a person, denotes informed consent that is given in writing by the person or a writing that a lawyer promptly transmits to the person confirming an oral informed consent.

If it is not feasible to obtain or transmit the writing at the time the person gives informed consent, then the lawyer must obtain or transmit it within a reasonable time thereafter.

Question 1:

• Conventionally, "net 10 days" uses digits, even though ordinarily "ten" is spelled out when used in a sentence. This time I'm not counting off for saying that it should be "net ten days."
• We don't know whether net 10 days is "enough time" for payment because we don't know which side we represent — the payer, or the biller.

Question 2: The federal Fair Credit Reporting Act imposes advance-consent requirements in all states, including Texas.

Question 3: Invoices: "The phrase that pays" is internal controls. (Invoices also give the billing party a convenient way of tracking payments owed, a.k.a. "accounts receivable.")

Question 4: It's not the job of the Buyer's counsel to add a Seller-favoring provision (i.e., a disclaimer of implied warranties) that's missing from Seller's contract draft!

TEXT, from a Hacker News discussion: "You should only short term trade with your 401k."

QUESTION: How can this sentence be clarified by simply moving words around? (There are two possible meanings.)

(This is a review exercise for Chapter 16.)

FACTS:

1.  MathWhiz asks you to develop a form of services agreement for where MathWhiz is the service provider. The agreement form will be posted on MathWhiz's Web site so that MathWhiz's customers can easily review the agreement form.

2.  MathWhiz's business-development VP wants you to make the form as tough as you can, to give MathWhiz maximum legal advantage over its customers.

3.  You happen to know that MathWhiz also needs to engage another company to provide certain specialized services — that is, MathWhiz will itself be the customer.

QUESTION: Any thoughts?

From an employment agreement for the vice-chairman of the board (!) of The Men's Wearhouse:

… In the event of termination of Employee's employment, other than for "cause", as described in Section 7, or by reason of voluntary termination as described in Section 8, a number of unvested shares of Restricted Stock shall immediately vest equal to 19,360 times a fraction the numerator of which shall be the sum of (i) the number of days from and including the most recent February 6 to and including the Termination Date (as defined below) and (ii) the lesser of 730 or the number of days from the Termination Date to and including the second following February 5, and the denominator of which shall be 365; any other unvested shares of Restricted Stock shall immediately terminate and be of no further force or effect.

(Emphasis added.)

This brought to mind Monty Python's Holy Hand Grenade of Antioch scene from Monty Python and the Holy Grail:

And the Lord spake, saying, "First shalt thou take out the Holy Pin. Then shalt thou count to three, no more, no less. Three shall be the number thou shalt count, and the number of the counting shall be three. Four shalt thou not count, neither count thou two, excepting that thou then proceed to three. Five is right out! Once the number three, being the third number, be reached, then lobbest thou thy Holy Hand Grenade of Antioch towards thy foe, who, being naughty in My sight, shall snuff it.

Here's a possible rewrite, along the general lines of NCD § 7.11:

[x]. Accelerated vesting.

(a) Triggers: This section will apply if either of the following occurs:

      (1) the Employee's employment is terminated by the Company, other than for "cause", as described in Section 7; or

      (2) the Employee resigns for "good reason" as set forth in Section 6.

(b)  Calculation: When this section applies, a certain number of previously-unvested shares of the Employee's Restricted Stock will immediately vest as follows:

• No. of shares vesting = 19,360 x Vesting Fraction (defined below)
• Vesting Fraction = Additional Vesting Days (defined below) / 365

• Additional Vesting Days = The sum of:

          (i) the number of days: (x) from and including the most recent February 6; (y) to and including the Termination Date (as defined below); and

          (ii)  the lesser of (x) 730, and (y) the number of days from the Termination Date to and including the second following February 5. [DCT note: I didn't include a sample calculation here, but it's worth considering.] here

(c) Termination of other shares: Any other unvested shares of Restricted Stock will immediately terminate and be of no further force or effect [sic].

From TexasLawbook.net (login required, but a UH email address might work):

A case hinging on an alleged oral promise for compensation was recently decided in favor of a retired employee who alleged he had been defrauded by his former boss, who owned about 150 Popeyes restaurants across Texas, Oklahoma and Florida.

The panel of six Dallas County jurors heard eight days of testimony and deliberated for two hours before deciding Jerry “Scott” Stockton wasn’t lying when he told them his former employer, Guillermo Perales and his company Sun Holdings, had promised to pay him 5 percent of the annual operating profits of the restaurants he helped oversee. Stockton was awarded about $15.6 million in compensatory damages and $15.1 million in punitive damages. [DCT question: Punis for a breach-of-contract case?]

Stockton’s lead attorney, Daniel Charest of Burns Charest, said he told the jury during opening statements that deciding who was credible would decide the whole case.

“I said, ‘One person says a promise was made and one person said it never happened. But the good news is it’s not just a he said-she said. We have witnesses who corroborate our story and they don’t have anyone,’” Charest told The Lawbook. “I told them, “If you don’t believe [Stockton], don’t find for him. But when you hear from him, you will believe him.’”

Charest said he believes delivering on the promise of corroboration, plus having a client he described as “salt of the earth,” carried the day.

As of late Sept. 2024, the employer's appeal is pending.

It'd be worth your while to read this online article by Kyle Mitchell, a (younger) lawyer friend of DCT in California. EXCERPT:

For example, many big companies’ form master procurement agreements obligate vendors to replace personnel the customer objects to, for any reason at all. If that person’s role happens to be account manager, and your company has a dozen of those, you might assume you’ll have a replacement to hand.

But even so, you’re betting that bad things won’t happen, and won’t happen at once. If they do, you’ll get stuck scrambling to train, recruit, or contract a new sub.

If you happen to be a small startup of three people without a reserve mountain of cash, you run a higher risk.

• Any objection could mean hiring someone you did not intend to hire, or at least not hire yet.
• You might accelerate plans and take that person on ahead of schedule … and get a termination notice soon after, or fail to renew the deal. After all, the customer’s already unhappy with at least part of the relationship. Now you’re firing someone you never really wanted to hire in the first place.

Solution?

• Add a “reasonableness” limit on the customer’s veto, to your obligation to replace, or both.
• Put a hard numeric limit on the number of people they can ding, like one per year, or tie it to fees paid.
• Or just strike the whole concept of a designated, replaceable person.

(Emphasis, extra paragraphing, and bullets added.)

From Pulsifer v. United States, 144 S. Ct. 718 (U.S. Mar. 15, 2024):

KAGAN, J., delivered the opinion of the Court, in which ROBERTS, C. J., and THOMAS, ALITO, KAVANAUGH, and BARRETT, JJ., joined. GORSUCH, J., filed a dissenting opinion, in which SOTOMAYOR and JACKSON, JJ., joined.

Justice KAGAN delivered the opinion of the Court.

The "safety valve" provision of federal sentencing law exempts certain defendants from mandatory minimum penalties, thus enabling courts to give them lighter prison terms.

To qualify for safety-valve relief, a defendant must meet various criteria, one of which addresses his criminal history.

That criterion, in stylized form, requires that a defendant "does not have A, B, and C"—where A, B, and C refer to three ways in which past criminality may suggest future dangerousness and therefore warrant a more severe sentence.

In brief (with details below), A, B, and C are "more than 4 criminal history points," a "3-point offense," and a "2-point violent offense."

The question presented is how to understand the criminal-history requirement.

•  The Government contends that the phrase "does not have A, B, and C" creates a [disqualification] checklist with three distinct conditions. On that view, a defendant meets the requirement (and so is eligible for safety-valve relief) if he does not have A, does not have B, and does not have C. Or stated conversely, a person fails to meet the requirement (and so cannot get relief) if he has any one of the three.

•  The petitioner here instead contends that the phrase "does not have A, B, and C" sets out a single, amalgamated condition for relief. On his reading, a defendant meets the requirement (and is eligible for relief) so long as he does not have the combination of A, B, and C. Or put conversely, he fails to meet the requirement (and cannot get relief) only when he has all three.

Today, we agree with the Government's view of the criminal-history provision.

(Cleaned up, formatting revised.)

QUESTION: How could this statutory language have been clarified?

QUESTION: If all else fails in trying to interpret a contract provision, what two-word Latin maxim about "against the drafter" will courts often follow?

Reseller relationships can be important for suppliers looking to grow their "sales channels." Reseller relationships can work well, but over time — and as the parties' management personnel and strategic plans change — even once-successful relationships can deteriorate and ultimately end into expensive, time-consuming litigation, as seen for example in ORP Surgical (10th Cir. 2024).

1.  First-party indemnity? In part III.B of its opinion, the ORP Surgical court had to untangle a spaghetti-clause indemnity provision that the court found to be ambiguous about whether first-party claims were indemnified, or third-party claims only. The court looked to a New Jersey rule that "courts must construe ambiguous indemnification provisions against the indemnitee." ORP Surgical (10th Cir. 2024), slip op. at 42. The court therefore reversed an attorney-fee award in favor of ORP.

2.  Disclaimer of contra proferentem: The court also noted that: "All the typical canons [of contract construction] apply, except that, contrary to New Jersey’s convention to construe ambiguity against the drafter, … we will not automatically construe the ambiguity against Stryker because of the [contract's] Section 28: 'The Parties acknowledge that this Agreement is the result of negotiations so neither Party shall avail itself of any rule of construction that would resolve ambiguities against a drafting party.'" ORP Surgical (10th Cir. 2024), slip op. at 42 n.14.

On this issue Ken has the sensible view about D.R.Y.

Excerpt:

And using both words and digits violates a cardinal rule of drafting—that you shouldn’t say the same thing twice in a contract, because it introduces a potential source of inconsistency.

Even if when you first state a words-and-digits number the words and digits are consistent, they might become inconsistent as a draft is revised. It’s easy to see how that can happen—digits are more eye-catching than words, so you might change the digits but forget to change the words. …

So a convention that aims to catch an error in writing digits introduces the potential for an additional, and entirely different, and potentially broader, kind of mistake.

Furthermore, because it’s more likely that any inconsistency caused by revisions is due to changing digits and forgetting to change the words, rather than vice versa, applying in that context the principle of interpretation that words govern might result in a court choosing a meaning that’s contrary to what the drafter had intended.

But a commenter says:

I would add an internal interpretive rule to the effect that ‘when the digital version of a number clashes with the alphabetic version, the digital version prevails’.

Washington state's supreme court decided Nelson v. P.S.C., Inc., 535 P.3d 418 (2023), which turned on whether a state statute's reference to "within three years of the marriage" required a specified event to occur:

• during the three years before the marriage; or
• no later than the three years after the marriage.

The details aren't important, only that the case had to be litigated — thanks a lot, legislative drafters!

FACTS: In the negotiation of a master services agreement, Gigunda wants the agreement to contain a most-favored customer ("MFC") clause.

EXERCISE: Draft the MFC clause, as follows:

• Groups 1 and 3: You represent Gigunda.
• Groups 2 and 4: You represent MathWhiz.

BE SURE to address how the MFC clause will be administered as time goes on.

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

(The relevant reading was here.)

In Meta (N.D. Cal. 2024) (citing cases), the court noted that the law would likely invalidate perpetual confidentiality obligations for non-trade-secret confidential information.

From this essay about the eight-hour Get Back documentary, referring in this quote to Paul McCartney:

We see a toothy, boyish, involuntary grin, different to [sic; from, or than] his practiced public smile, which lights up his face when John makes a joke or Billy Preston plays a ravishing lick on the keyboard.

QUESTION: Which of these "lights up [McCartney's] face" — his involuntary grin? Or his practiced public smile? (The answer should be obvious, but the words themselves leave this open.)

QUESTION: How could this ambiguity be resolved with just a change of internal punctuation?

Question: What did you find useful to you in class today?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

Holsum de Puerto Rico, Inc. (1st Cir. Sept. 20, 2024): The "Warranty" section of the contract in suit stated: "For a complete list of our Terms & Conditions and Warranty details, please visit our website at [omitted]."

Affirming denial of a motion for prevailing-party attorney fees, the court noted the general consensus that for external terms to be considered part of a contract, "the contract must clearly communicate that the purpose of the reference is to incorporate the referenced material into the contract."

The court held that "[t]his section did not convey a clear message that, by accepting the offer, Holsum would agree to bind itself to further promises (including the fee-shifting term)."

Question: What did you find useful, or interesting, or surprising, in the reading for this week or about the reading for any past week?

We'll go around the room (in groups) twice.

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

In Sloan v. Allen (D.C. App. Sept. 26, 2024), the D.C. Court of Appeals (which is not the federal D.C. Circuit) observed:

It would run contrary to our usury statute to permit creditors to avoid its sting via savings clauses purporting to cap the loan’s interest rate to the maximum allowed by law. The animating force of usury statutes is to relieve the borrower of the necessity for expertise and vigilance regarding the legality of rates he must pay, putting that onus instead on the lender to set the rate in clear terms that are within the bounds of the law.

A usury savings clause will not save a usurious transaction when a note is usurious on its face, that is, when the savings clause is directly contrary to the explicit terms of the contract, or when there is no evidence of the lender attempting to effectuate the savings clause.

That is why many jurisdictions have ruled that usury savings clauses, like the one Sloan relies upon here, can never operate to rescue an otherwise facially usurious rate.

In short, it is contrary to public policy to enforce a usury savings clause if the interest provided in the loan agreement is otherwise facially usurious at the time of contracting.

(Cleaned up, formatting edited.)

From a real-life 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").

QUESTION 1: What drafting problems do you see? (I see three of them.)

QUESTION 2: What potential business problems do you see? (I see two.)

I'll show my rewrite in a few minutes.

In Dellinger (Ala. Sept. 20, 2024), a de facto general contractor, Dellinger, lost his bid to be paid over $150K by the nominal general contractor because Dellinger was not licensed as a general contractor and in fact he was acting as such, not as the agent of the nominal general contractor. See slip op. at part III.B.

As of this afternoon, the employer's appeal is pending.

See this list of tips and a (short) Hacker News discussion thread.
Best tips:

• Date every page.
• Write on only one side of the paper.

Noteworthy Hacker News comment: "[I]n practice most notes are write-only and are never read back ever again. Add the fact that writing a note by hand is proven to be a much better memory aid than storing it in a computer."

See also a 2010 blog post of mine: Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for.

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

FACTS: Your elderly, childless Uncle Ed is selling his car to a stranger and wants your help. He says he doesn't know of any mechanical problems.

QUESTION 1: If the stranger asks Uncle Ed to represent and warrant in writing that the car has no problems, how might Uncle Ed respond as to the requested representation?

QUESTION 2: How might Uncle Ed respond as to the requested warranty?

I literally laughed out loud at this:

https://twitter.com/heyitsalexsu/status/1707420562442825839

(EOQ stands for end of the quarter — which is today! See also EOY. Also: 1Q24 stands for first quarter of 2024; 1H24 stands for ….)

The following is a provision from a real-life contract form.

–BEGIN QUOTE–

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.

–END QUOTE–

Here's a rewrite for greater readability:

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: What are you going to recommend to the partner as far as what the partner should say to the client? Important: What do we not know from these facts?

This goes into my SPP file, a.k.a. S**t People Pull:

A store chain, Paper Source:

• ordered unusually-large quantities of merchandise from its small-business suppliers; and
• shortly afterwards, filed for bankruptcy protection — which lets the chain (mostly) stiff the suppliers, likely paying them pennies on the dollar.

FTA: "Paper Source ordered more from The Card Bureau in a 60-day period than it had in all of 2020, according to Velencia." Jeremy Hill, Paper Source Bankruptcy Squeezes Small Greeting Card Sellers (WashingtonPost.com March 5, 2021).

Lesson: When drafting a contract for a supplier, consider recommending that the client:

• do due diligence as to The Other Side's ability to pay;
• ask for one or more sources of payment security (readings § 22.119) such as a standby letter of credit and/or personal guaranties (readings § 22.74).

Background: Citi Can’t Get Back $500 Million It Accidentally Wired To Revlon Lenders, Federal Judge Rules (see also the court's findings of fact and conclusions of law)

From the S.D.N.Y.'s findings of fact (slip op. at 11-16): Three different people misinterpreted the information displayed on the wire-transfer software.

Second Circuit: Vacated and remanded; "[t]he traditional rule of New York law governing mistaken payments generally calls for restitution of the mistaken payment unless the recipient so significantly changed its position in reliance on the mistake that it would be unjust to require repayment. … The facts were sufficiently troublesome that a reasonably prudent investor would have made reasonable inquiry, and reasonable inquiry would have revealed that the payment was made in error." (Emphasis added.)

LESSON: It took two years — and who knows how much in legal fees — for Citi to get the Second Circuit to rescue it from an employee [foul]-up. "You get what you INspect, not what you EXpect." (And: Second-checking can be a lifesaver.)

From The New Yorker:

As part of its push into healthcare, Amazon closed its acquisition of One Medical (formally, 1Life Healthcare, Inc.).

Here's the Agreement and Plan of Merger, from the Securities and Exchange Commission's EDGAR Web site.

Note that the agreement is "Exhibit 2.1" of a Form 8-K filing; it's also part of a proxy statement sent to One Medical shareholders to get them to approve the transaction.

QUESTIONS:

1. What was to happen at the "Closing"? (See Article I of the Agreement — note the numbering scheme used in the Agreement for "Articles" and "Sections.")
2. In Section 7.02(d), what must an officer of the "Company" (i.e, One Medical) certify?
3. If no One Medical officer was willing to sign the certificate referred to in #2 above, would Amazon be able to sue One Medical for breach of contract for that alone? (Hint: Review the preamble to section 7.02.)
4. Name one thing that would allow One Medical to walk away from the deal but would not allow One Medical to sue Amazon for breach of contract.

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

I'll spin the wheel to call on people.

From the Washington Post:

A fragile amalgam of territories inhabited by Muslim Bosniaks [generally, Muslim residents of Bosnia-Herzegovina], Orthodox Christian Serbs and Roman Catholic Croats, few of whom are religiously observant, the Republic of Bosnia and Herzegovina has stumbled from crisis to crisis since 1995 ….

(Emphasis added.) So: Which of these groups are not religiously observant: Bosniaks? Serbs? Croats? More than one?

Fun fact: My maternal grandparents were Croats [pronounced CROW-ah-ts; they immigrated to the U.S. in the early 20th century.

Fun fact: "Herzegovina" means duke's land.

From a presidential tweet (by then-President Trump): "Such amazing reporting on […] the crooked scheme against us by @foxandfriends. …" (Hat tip: Chris Richardson.)

QUESTION: How could this be rewritten to clarify?

Settlement report: David Thomas, Law firm Proskauer Rose, ex-client settle $636 million (!) malpractice lawsuit. Excerpt:

Adelman accused Proskauer of committing a "botched cut-and-paste" job with the partnership agreement.

He cited handwritten notes from Proskauer partner Sarah Cherry, who allegedly drafted the agreement. Adelman claimed Cherry later drew brackets around the key provision that gave Aghazadeh broad authority and wrote the word "f[**]k" next to it, indicating a mistake.

(Alteration mine.)

Prior article: Alison Frankel, Proskauer headed to crucial hearing in $636 million malpractice case.

Susman Godfrey represented the malpractice plaintiff.

The Demcratic-majority National Labor Relations Board — overruling a decision by the Republican-majority Board issued during the Trump presidential years — has said:

[A]n employer violates Section 8(a)(1) of the Act when it proffers a severance agreement with provisions that would restrict employees’ exercise of their NLRA rights. …

Where an agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the Act, because it has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain employed. …

Examining the language of the severance agreement here, we conclude that the nondisparagement and confidentiality provisions interfere with, restrain, or coerce employees’ exercise of Section 7 rights. Because the agreement conditioned the receipt of severance benefits on the employees’ acceptance of those unlawful provisions, we find that the Respondent’s proffer of the agreement to employees violated Section 8(a)(1) of the Act.

McLaren Macomb and Local 40 RN Staff Council, OPEIU, 372 NLRB No. 58, at 7-8 (opinion) (cleaned up, emphasis added); explained in this Bryan Cave memo.

Question: What did you find useful to you in class today?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

L'shana tovah to all who celebrate.

TEXT (apropos of Rosh Hashanah, from Joshua Rothman in The New Yorker): "My grandmother is ninety-three and, to my knowledge, has never kept kosher." (Emphasis added.)

QUESTION: Is there any way the bold-faced part could be misinterpreted — perhaps intentionally?

QUESTION: How could this be rewritten to avoid reduce the chances of misinterpretation?

(For more words to avoid and safer alternatives, see this compilation I did in 2012.)

1.  Parallelism – what not to do: See § 9.2 of the assigned reading for early in the semester (Aug. 21 to be precise).

Example — note how the b) subdivision below reads, in effect, "… Purchaser shall: … The year 5 statement …," which doesn't make sense as a sentence. (See my revision after item 2 below.)

c) Earn-Out Provision

          i. Within 60 days after the last day of an applicable Earn-Out Year, Purchaser shall:

                    a) prepare a statement reflecting its Calculation of the Annual Earn-Out Payment for each Earn-Out Year, for five years.

                          i) For example, following Earn-Out Year three the Annual Earn-Out Payment Calculation would be applicable to year three only.

                    b) The year 5 statement must in addition include:

                          i) reasonable supporting documents, and

                          ii) a Payment to Seller.

2.  In #1 above, note the "i) For example, following Earn-Out Year three …" — if there's no "ii)" then don't give that subdivision a "i)"; instead, just make it an unnumbered grammatical paragraph, perhaps in parentheses. (I didn't count off for that, this time, because I can't find it in the reading assignments; I'll be counting off for it in future assignments.)

DCT REWRITE OF JUST THIS PART:

DCT REWRITE OF THE WHOLE THING:

Discuss in your groups — what strikes you as noteworthy?

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

You previously rewrote an audit clause. Now, work in your groups to draft a bare-bones, one-paragraph audit clause — with internal "numbering," e.g., (a), (b), etc., such as in this example — that you could save for easy copying and pasting as a "hamburger for the guard dog" provision. Use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

I'll show my version afterwards.

Reprising from a few weeks ago: Argyle Sweater

(Here's the prior mention.)

See if you can spot the "spaced repetition" in this exercise.

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

I'll spin the wheel to call on people.

1. QUESTION: Name four examples of "Hollywood accounting." (I'll ask each group for an example.)

2. FACTS: MathWhiz is ordering some expensive, high-powered computer gear from a supplier in Singapore, to be delivered to Ulaan Baatar (the capital of Mongolia).

   QUESTION: Would MathWhiz prefer that delivery of the equipment be made under: A) INCOTERMS DDP; or B) INCOTERMS EXW? Why?

3. FACTS: MathWhiz and Gigunda are negotiating a master services agreement under which MathWhiz might undertake any number of projects for Gigunda — some of which will be high-dollar.

   QUESTION: What are some pros and cons of:

   • having each successive new project's "statement of work" under the master services agreement become an addition to that agreement, versus
   • having each new statement of work be a separate agreement that incorporates the master agreement by reference?

4. FACTS: Gigunda asks MathWhiz to send Gigunda a sales quotation (a "quote") for data-processing services for a different project.

   QUESTION: Why might MathWhiz want its quote to have an expiration date?

5. FACTS: You represent a supplier, ABC Corporation, whose customer, XYZ Inc., wants XYZ's "affiliates" to be listed in the preamble as parties to a master purchasing agreement with the following language: "This Master Purchasing Agreement is between ABC Corporation ('Supplier') and XYZ Inc. and its affiliates ('Customer')."

   QUESTION: As ABC's lawyer, what do you think of this — what do you think XYZ really wants?

   QUESTION: As ABC's lawyer, how might you structure the contract to accommodate Customer's likely desires — and to protect Supplier?

6. FACTS:

   • MathWhiz is negotiating a referral agreement with MegaLeads, Inc.
   • Under the referral agreement — drafted by MegaLeads — MathWhiz will pay MegaLeads a commission on all MathWhiz sales to a new customer, referred by MegaLeads, that are "consummated" within one year after MegaLeads introduces MathWhiz to the new customer.

   QUESTION: What do you think of the word "consummated" in this context?

Some time back, Chevron signed a deal to acquire Hess — but ExxonMobil and China Offshore National Oil Corp. ("CNOOC") have a "right of first refusal" that could impair the deal. From a Chevron filing with the SEC:

Hess Guyana Exploration Limited (HGEL), a wholly owned subsidiary of Hess, is party to an operating agreement (the Stabroek JOA) with affiliates of Exxon Mobil Corporation (Exxon) and China National Offshore Oil Corporation (CNOOC), which governs the rights and obligations of such parties (the Stabroek Parties) with respect to the exploration and development of their respective interests in the Stabroek Block offshore Guyana (the Stabroek Block).

The Stabroek JOA contains a right of first refusal (the Stabroek ROFR) provision that, if applicable to a change of control transaction and properly exercised, provides the Stabroek Parties with a right to acquire the participating interest in the Stabroek Block held by the Stabroek Party subject to such transaction (at a value that is based on the portion of the value of the change of control transaction that reasonably should be allocated to such participating interest and is increased to reflect a tax gross-up) only after, and conditioned on, the closing of such transaction.

Chevron and Hess believe that the Stabroek ROFR does not apply to the merger due to the structure of the merger and the language of the Stabroek ROFR provisions.

Following the announcement of the merger, Exxon and CNOOC informed Hess and Chevron that they disagree with this view and believe the Stabroek ROFR applies to the merger.

Hess, Chevron, Exxon and CNOOC have been engaged in constructive discussions [DCT comment: Involving money, perhaps?] regarding the Stabroek ROFR, and Chevron and Hess believe these discussions will result in an outcome that will not delay, impede or prevent the consummation of the merger.

In the event such discussions do not result in an acceptable resolution, either Hess or Chevron could elect for HGEL to pursue arbitration to resolve the matter.

If the discussions with Exxon and CNOOC do not result in an acceptable resolution and arbitration (if pursued) does not result in a confirmation that the Stabroek ROFR is inapplicable to the merger, then there would be a failure of a closing condition under the Merger Agreement, in which case the merger would not close and, pursuant to the terms of the Stabroek JOA, Exxon and CNOOC would cease to have rights under the Stabroek ROFR with respect to the merger.

In that event, Hess would remain an independent public company and would continue to own its participating interest in the Stabroek Block.

Based on their discussions with Exxon and CNOOC and the terms of the Stabroek JOA, Chevron and Hess do not believe there is any material likelihood that the circumstances described in this paragraph will occur.

Recent developments: On Monday the FTC seems to have approved the merger — subject to John Hess's being banned from the Chevron board of directors:

The FTC on Monday alleged that Hess communicated with OPEC representatives about global oil output and inventory management over the years, encouraging them to take action that supports higher prices.

A significant portion of Hess’s private communications are blacked out in the FTC’s complaint. The FTC also pointed to public statements made by the CEO praising OPEC policy. In one such statement, Hess said Saudi Arabia did a “masterful job leading OPEC plus” by “not oversupplying the market.”

The FTC said in the complaint that Hess’ participation on Chevron’s board would meaningfully increase “the likelihood that Chevron would align its production with OPEC’s output decisions to maintain higher prices.”

* * *

The FTC’s decision to allow the deal leaves the companies’ dispute with Exxon Mobil as the final hurdle for the transaction to close. Exxon has filed claims with an arbitration panel arguing a right of first refusal over Hess’ lucrative oil assets in Guyana.

If the arbitration panel rules in Exxon’s favor, the Chevron-Hess deal will not close. Chevron and Hess have said they are confident that panel will rule in their favor.

Let's take a quick look at the Agreement and Plan of Merger.

• The general architecture is much the same as other M&A deals.
• Sections 3.27 (for Hess) and 4.18 (for Chevron) includes not just a "no additional representations" disclaimer but also a statement that the disclaiming party is not relying on any representations by the other parties. (See [BROKEN LINK: https://toedtclassnotes.site44.com/Notes-on-Contract-Drafting-2021-08-21.html#rel-waiver-cmtry].)
• Section 10.1 (notices) lists the lead outside counsel for each party — nice PR ….
• Section 10.5 requires Hess to pay Chevron a $1.715 billion breakup fee in certain events.

See this blog post (I'll play the video clip).

Lesson: Try not to write your contracts that way — especially not standard-form sales contracts that your supplier-client will be sending to customers ….

No "second look" at liquidated-damages provisions: Cummings Prop., LLC v. Hines, 492 Mass. 867 (2023).

(For general reference, see NOCD § 21.7, which isn't assigned as part of the course reading.)

See below for a example of "readability malpractice per se," from the Agreement and Plan of Merger, the drafting of which presumably was overseen by partners Krishna Veeraraghavan and Kyle Seifried of Paul, Weiss, Rifkind, Wharton & Garrison LLP (see Section 9.02, notices).

QUESTIONS:

1. As a lawyer, which version would you prefer:
   • to draft?
   • to review as the supervising partner — or as the non-drafting party?
   • to revise if changes needed to be made?
   • to proof-read one last time before signature?
2. As a client, which version would cost you less money for the above law-firm and in-house activities?

ORIGINAL:

Section 3.03, Capitalization.

(a) [omitted]

(b) As of the close of business on July 18, 2022, (i) 195,170,531 shares of Company Common Stock were issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable and were issued free of preemptive (or similar) rights, (ii) no shares of Company Common Stock were held in the treasury of the Company, (iii) no shares of Company Common Stock were held by the Company Subsidiaries, (iv) no shares of Preferred Stock were issued (whether outstanding or held in the Company’s treasury), (v) 52,973,002 shares of Company Common Stock are reserved for future issuance in connection with the Company Stock Plans and the Purchase Plan (including 28,040,107 shares of Company Common Stock subject to outstanding Company Stock Options (assuming satisfaction of any market or performance conditions at maximum levels) and 11,324,697 shares of Company Common Stock subject to outstanding Company Restricted Stock Unit Awards, 6,562,538 shares of Company Common Stock reserved for issuance under the Company Stock Plans, and 7,045,660 shares of Company Common Stock reserved and available for issuance under the Purchase Plan, (vi) 9,252,432 shares of Company Common Stock were reserved for issuance pursuant to the Indenture and (vii) 437,741 shares of Company Common Stock were reserved for issuance pending the tender of letters of transmittal pursuant to the Agreement and Plan of Merger, dated June 6, 2021, by and among the Company, SB Merger Sub, Inc., Iora Health, Inc. and Fortis Advisors LLC, solely in its capacity as the representative of the stockholders of Iora Health, Inc. Since the close of business on July 18, 2022, through the date hereof, (x) no shares of Company Common Stock have been issued, except pursuant to the exercise of Company Stock Options or settlement of Company Restricted Stock Unit Awards, in each case, outstanding on or prior to the close of business on July 18, 2022, and (y) no grants of Company Stock Options or Company Restricted Stock Unit Awards have been made. Except for the Convertible Notes and as set forth in this Section 3.03, there are no options, warrants, calls, subscriptions or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued shares or other equity interests or capital stock of the Company or any Company Subsidiary or any securities convertible into or exchangeable or exercisable for any such shares, capital stock or other equity interests, or any other rights or instruments that are linked in any way to the price of the shares of Company Common Stock or any shares of capital stock of any Company Subsidiary, the value of all or any part of the Company or any Company Subsidiary (the “Equity Interests”), in each case, obligating the Company or any Company Subsidiary to issue, sell or grant any such Equity Interests. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable and free of preemptive (or similar) rights.

[Subdivisions (c) through (e) omitted]

REWRITE:

From an E.J. Dionne column in the Washington Post, quoting then-House Minority Leader Kevin McCarthy: "We should ensure women only compete in women’s sports."

QUESTION: Was now-former Speaker McCarthy suggesting that women's professional-tennis pioneer Billie Jean King should not have played (and beaten) Bobby Riggs in 1973's legendary "Battle of the Sexes"?

QUESTION: How could McCarthy's quote be rewritten in two different ways to clarify each meaning?

TEXT, from the Sheryl Sandberg employment agreement in the Supplement, starting at page 101, lines 72-73: "[Y]our Employment will not infringe the rights of any other person."

QUESTION: From a drafting-technique perspective, what's wrong with this provision?

Per a student's request, I created this (sanitized) excerpt from a markup that I did for a client.

Think about what it takes to get thousands of different consumer products actually, physically onto the shelves at Walmart, Target, H-E-B, etc. — including, for example:

• Who will bear the cost of getting products from the grocery store's receiving dock, into the "back room," and ultimately onto the correct shelves;
• Who will bear the cost of correcting mistakes in labeling, bar-coding, etc.

Apropos of those questions, see Daniela Sirtori-Cortina, Retailers Crack Down on Suppliers With Harsher Rules for Orders (Bloomberg.com). Excerpt:

Walmart recently rolled out extra levies for suppliers using its transportation services.

The company is telling suppliers that their shelf space will be reviewed more frequently than in the past, a person familiar said, and that vendors with persistent out of stocks could see their products quickly replaced.

 * * *

Store operators that grappled with empty shelves over the past three years say that penalties encourage vendors to get their supply chains in order to avoid out of stocks, which in 2021 cost consumer-goods retailers $82 billion, according to NielsenIQ.

 * * *

Artisan coffee purveyor Bean Box, which entered Walmart this year, uses a workaround: It only bills the retailer for the number of cases that actually made it to a distribution center, not for the number ordered.

That way invoices won’t get held up over the difference, allowing the coffee firm to get paid on time, said Chief Executive Officer Matthew Berk.

"We’ve engineered our whole process to be as Walmart-friendly as possible," he said.

(Formatting modified.)

Question: What did you find useful, or interesting, or surprising, or troubling, or puzzling, in the reading for this week?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

SUGGESTION: Add notes to your personal "gouge."

1. Some students drafted language along the lines of the following (edits are mine):

[The Purchaser shall:] Prepare an Earn-Out Calculation statement, which will is to include:
      a. In Year One, a calculation of the Annual Earn-Out Payment for Year One;
      b. In Year Two, a calculation of the Annual Earn-Out Payment for Year Two;
      c. In Year Three, a calculation of the Annual Earn-Out Payment for Year Three;
      d. In Year Four, a calculation of the Annual Earn-Out Payment for Year Four;
      e. In Year Five, a calculation of the Annual Earn-Out Payment for Year Five

That's a big waste of space; see my rewrite of last week. (No points deducted, though, because that wasn't one of the "rules" or suggestions.)

2. Some students drafted a lot of unnumbered sections — how would someone pinpoint-reference a particular item in a memo or brief? (A few unnumbered paragraphs here and there are OK, no more than, say, one or two per numbered section; I'm revising ts this time but I'm adding to Rule 11.)
3. Here's a Rule 8 violation (capitalization of list items):

Upon Seller’s receipt of the Earn-Out Calculation, Seller has 30-days [the hyphen doesn't belong] to:

1. Accept it ["Accept" shouldn't be capitalized; see [[Rule 8] in writing; or
   
2. Reject it in writing, providing detailed reasons and specifying the requested adjustments.

4. TEXT: Each party is responsible for paying their its portion …." COMMENT: I didn't deduct points this time but I'm adding to Rule 13 (about "they").

This is from a contract that my MathWhiz client just asked me to review:

[BEGIN]

1. DEFINITIONS

(o) “Wilful Misconduct” means intentional, conscious or reckless disregard of any provisions of this Contract by any director, officer, or employee of any Party or by any other personnel, agent or contractor of the Party in question in the exercise of any function, authority or discretion conferred upon respectively such Party thereunder, but shall not include any error of judgement or mistake made in the exercise in good faith of any function, authority or discretion vested in or exercisable by any such director, officer, or employee, or by any other personnel, agent or contractor of the Party in question.

12.  LIABILITY AND INDEMNITY

12.1 Except to the extent caused or contributed to by the Wilful Misconduct of the Company Group, Contractor shall be responsible for and shall save, indemnify, defend and hold harmless the Company Group from and against any and all claims, demands, losses, damages, costs (including but not limited to legal costs), expenses and liabilities in respect of:

(a) loss of or damage to property of the Contractor Group whether owned , hired, leased or otherwise provided by the Contractor Group arising from or relating to the performance or non-performance of this Contract; and

(b) personal injury including sickness, disease or death to any personnel of the Contractor Group arising from or relating to the performance or non-performance of this Contract; and

(c) subject to any other express provisions of this Contract, personal injury including sickness, disease or death or loss of or damage to the property of any third party to the extent that any such injury, loss or damage is caused by the negligence or breach of duty (whether statutory or otherwise) of the Contractor Group. For the purpose of this Clause 12.1(c) “third party” shall mean any party which is not a member of the Company Group or the Contractor Group.

12.2 Except to the extent caused or contributed to by the Wilful Misconduct of the Contractor Group, Company shall be responsible for, and shall save, indemnify, defend and hold harmless the Contractor Group from and against all claims, demands, losses, damages, costs (including but not limited to legal costs), expenses and liabilities, in respect of:

(a) loss of or damage to the property of the Company Group whether owned, leased or otherwise obtained under arrangements with financial institutions and provided by the Company Group arising from or related to the performance of this Contract located at the worksite; and

(b) personal injury including sickness, diseaseor death to any personnel of theCompany Group arising from or relating to the performance or non-performance of this Contract; and

(c) subject to any other express provisions of this Contract, personal injury including sickness, disease or death or loss of or damage to the property of any third party to the extent that any such injury, loss or damage is caused by the negligence or breach of duty (whether statutory or otherwise) of the Company Group. For the purpose of this Clause 12.2(c) “third party” shall mean any party which is not a member of the Company Group or the Contractor Group.

12.3 Except to the extent caused or contributed to by the Wilful Misconduct of the Contractor Group, and except as provided by Clause 12.1(a), 12.1(b) and 12.4, Company shall save, indemnify, defend and hold harmless the Contractor Group from and against any claim of whatsoever nature arising from pollution and/or contamination emanating from the reservoir and/or from any equipment or property of the Company Group.

12.4 Except to the extent caused or contributed to by the Wilful Misconduct of the Company Group, and except as provided by Clause 12.2(a) and 12.2(b), Contractor shall save, indemnify, defend and hold harmless the Company Group from and against any claim of whatsoever nature arising from pollution and/or contamination arising from or relating to the performance of this Contract where: (a) such pollution occurs on the premises of the Contractor Group; or (b) such pollution emanates from the property or equipment of the Contractor Group (including but not limited to marine vessels).

12.5 Notwithstanding the provisions of Clause 12.1(a) above and except to the extent of fair wear and tear, Company shall reimburse Contractor in respect of loss of or damage to property, materials or equipment of the Contractor Group which occurs whilst in-hole below the rotary table except to the extent that such damage is caused by the negligence or breach of duty (whether statutory, contractual or otherwise) or by the Wilful Misconduct of the Contractor Group. Company’s liability for such loss or damage shall, subject to the depreciation provision in Clause 12.7 below, be either the actual repair or replacement cost, whichever is the lesser, as substantiated by Contractor toCompany.

12.6 Notwithstanding the provisions of Clause 12.1(a) above, and except to the extent of fair wear and tear, if Contractor can demonstrate that Contractor’s equipment other than that located down-hole has been subject to abnormal damage (meaning damage which could not be reasonably expected) which has resulted directly from corrosion, erosion or abrasion caused by the nature of the well effluent, Contractor shall be reimbursed for the costs of repair or replacement resulting from such damage except to the extent that such damage is caused by the negligence or breach of duty (whether statutory, contractual or otherwise) or by the Wilful Misconduct of Contractor. Where repair is possible, Company shall, at its sole option, reimburse Contractor in respect of either the foregoing repair or replacement costs.

12.7 Any replacement cost for which Company is liable under Clause 12.5 and Clause 12.6above shall be reimbursed to Contractor subject to the deduction of depreciation, which shall be calculated from the substantiated date of the original purchase or the last refurbishment (if applicable) of each item or component part thereof, at two percent (2%) per month from the applicable date up to a maximum depreciation of eighty percent (80%). Contractor shall notify Company in writing within thirty (30) days of the date of recorded loss or of return of Contractor’s equipment to Contractor as applicable, giving full details of any loss and/or damage to such equipment and the amount of reimbursement due to Contractor under Clause 12.5 and Clause 12.6 above.

12.8 Subject to Clause 12.1 and Clause 12.4, but notwithstanding anything contained elsewhere in this Contract to the contrary, Company shall save, indemnify, defend and hold harmless the Contractor Group against all claims, losses, damages, costs (including but not limited to legal costs), expenses and liabilities resulting from: (a) loss or damage to any Company well or hole; and (b) blow-out, fire, explosion, cratering or any other uncontrolled well condition (including the costs to control a wild well and the removal of debris); and (c) damage to any reservoir, geological formation or underground strata or the loss of oil or gas therefrom arising from, relating to, or in connection with the performance or non-performance of this Contract.

12.9 All exclusions and indemnities given under this Clause (save for those under Clauses 12.1(c), 12.2(c), 12.5 and 12.6) and Clause 14 shall apply irrespective of the cause and notwithstanding the negligence or breach of duty (whether statutory or otherwise) of the indemnified party or any other entity or party, but not irrespective of the Wilful Misconduct of the indemnified party or any other entity or party, and shall apply irrespective of any claim in tort, under contract or otherwise at law. Company’s rights and remedies under this Contract are in addition to its rights and remedies conferred by statute and common law.

12.10 Indemnity provisions under Clause 12 do not limit the Contractor Group’s: (a) obligations to rectify or re-perform defective Services in accordance with the terms of this Contract; or (b) responsibilities for remedying any other breach of this Contract.

12.11 Notwithstanding any other provision of this Contract, all liability and indemnity provisions in this Contract shall apply whether there is insurance coverage or not in a particular event.

[END]

QUESTION 1: To what extent if any are Company's and Contractor's indemnity obligations "mirror images" of each other?

QUESTION 2: Suppose that a Company employee gets injured on-site due to Contractor's ordinary negligence — as between Company and Contractor, which party is responsible for the Company employee's medical expenses, etc., if the employee files a lawsuit? (Assume arguendo that Texas law applies, even though that's not actually the case here IRL.)

On Facebook, Stanford law professor Mark Lemley said that on hikes he uses hiking poles:–

quite a bit, especially on the downhill. (I also got a hip replacement three years ago, and highly recommend it)

QUESTION: What exactly does "it" refer to here?

See this blog post.

In a Slow Boring political newsletter, Matthew Yglesias talks about how some people are vegans, some try to cut back on meat for ethical reasons, and some are concerned about humane conditions in which animals are rasied for slaughter. Then comes this:

But absolutely nobody I know who is anywhere on the spectrum of concern about animal welfare is confused as to why Joe Biden isn’t giving speeches about this or doing “animal welfare is infrastructure” tweets and getting mad at Congress.

Notice how much "distance" there is between the subject ("absolutely nobody I know") and the verb ("is confused"); that makes it more difficult for the reader to figure out what the sentence is supposed to be about.

Here's one possible rewrite of the quoted sentence:

Here's another possible rewrite of the quoted sentence:

From here:

You will likely find that attempting to write things out will reveal that you were not as clear about your topic as you thought you were. …

Perhaps the most important principle of good writing is to keep the reader in mind: What do they know so far? What do they expect next and why? …

As part of this, make sure you know what level of reader you are writing for and stay consistent with that level.

See this photo:

FACTS: Consider a contract for the purchase of 1,000 small electric motors, which Buyer — your client — 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? (Hint: Think about the business aspects of the provision.)

From a Fifth Circuit opinion:

The Texas Oilfield Anti-Indemnity Act (“TOAIA”) voids indemnity agreements that pertain to wells for oil, gas, or water or to mineral mines, unless the indemnity agreement is supported by, inter alia, liability insurance.

 * * *

When the parties agree to provide differing or unspecified amounts of coverage, the mutual indemnity obligations are limited to the lower amount of insurance.

 * * *

CP Well contended that it only agreed to maintain $1 million in general liability insurance and $2 million in excess liability insurance to meet its indemnification obligation under the MSA; the remaining coverage in its excess liability coverage was thus not for the benefit of Cimarex.

In response, Cimarex contended that because CP Well obtained a $1 million general liability policy and a $10 million excess liability policy, CP Well effectively agreed to maintain $11 million in indemnity coverage for Cimarex’s benefit.

 * * *

Enter TOAIA. The statute states that, “[w]ith respect to a mutual indemnity obligation, the indemnity obligation is limited to the extent of the coverage and dollar limits of insurance . . . each party as indemnitor has agreed to obtain for the benefit of the other party as indemnitee.” Tex. Civ. Prac. & Rem. Code Ann. § 127.005(b).

 * * *

The parties in this case agreed to indemnify each other, consistent with TOAIA, by setting a "floor" of required insurance coverage each was to obtain. They were free to procure more. CP Well obtained a policy that expressly set the "ceiling" of coverage "for the benefit [of Cimarex] as indemnitee" at the minimum "floor" provided by the parties’ contract. CP Well did not breach its contractual duties to Cimarex in doing so.

Cimarex Energy Co. v. CP Well Testing, L.L.C., 26 F.4th 683, passim (5th Cir. 2022) (cleaned up, emphasis and extra paragraphing added): The court affirmed summary judgment that CP Well owed no further indemnity than the contract's minimum insurance requirement.

When designing "business plans" for contracts, think about the humans who will have to carry out the contract's obligations and exercise its rights.

See Gabby Birenbaum, Accidents Waiting to Happen, reviewing Jessie Singer, There Are No Accidents: The Deadly Rise of Injury and Disaster—Who Profits and Who Pays the Price.

Excerpt from Birenbaum review:

In Singer’s telling, mistakes are inevitable. Injury and death should not be.

But our workplaces and politics mete out individual punishment for mistakes, rather than preventative [sic; preventive] measures that make such mistakes less lethal.

We’re terrible at holding institutions accountable for their systemic errors even as we hunt for individual culprits.

AND: A 26-year-old Cuban immigrant living in Houston, with a recently-acquired commercial drivers license, was sentenced to 110 years in Colorado prison for vehicular manslaughter after he lost control of a runaway truck carrying lumber — causing a 28-vehicle accident that killed four people and injured six others. See Kevin Davis, Runaway Sentences (Colorado's governor commuted the driver's sentence to ten years.)

A comment from activist Jason Flom (son of legendary M&A lawyer Joe Flom):

“I mean, this is not a guy who did anything on purpose,” Flom says. “The culpability lies more with the people who didn’t train him and put a 23-year-old kid with limited training behind the wheel of a massive 18-wheeler.”

And from a Houston lawyer representing one of the victims in a lawsuit against the broker that arranged the lumber transport:

Federal Department of Transportation records show that [the driver] was not properly trained before taking the fatal journey. “The carrier did not ensure this entry-level driver received required training prior to operating in interstate commerce.” He had been fired from his previous job because he did not know how to drive a stick shift.

“They should have never put that guy in a truck,” McCormick says. “He was in way over his head driving a tractor-trailer. It would be like possessing a pilot’s license for a Cessna and piloting the space shuttle.”

LESSON: Don't be afraid to ask (tactful) questions of your supervising partner, and/or your client, about safety matters, and even just business efficacy.

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!)

From someone tweeting — I had to think about this one for a minute:

customer: I'd like to buy a bagel with cream cheese

me [barista]: sorry, we only take cash

manager: can I talk to you

From a contract discussed in a Ken Adams blog post: "If the Force Majeure Event prevents a Party from performing any of its obligations under this Agreement for two hundred seventy (270) days or more, then the other Party may terminate this Agreement immediately upon written notice to the non-performing Party." (Emphasis added.)

Ken rightly asks: "May the other party terminate if the nonperforming party is prevented from performing one or more of its obligations? Or does it apply only if the nonperforming party is unable to perform all of its obligations? (Emphasis added.)

QUESTION: How could this be clarified?

See this thread by Jack Shepherd.

From this Fortune article: "Delta is fourth major U.S. airline to find fake jet aircraft engine parts with forged airworthiness documents from U.K. company"

DCT to recount his wife's DAR bylaw-amendment problem:

• Any proposed bylaw amendment must be distributed to the chapter members 30 days before the meeting where the amendment is to be voted on.
• She emailed a proposed amendment well in advance.
• But she discovered that in another place in the bylaws, there's another "copy" of the language to be amended — which wasn't mentioned in her email about the proposed amendment.

DCT to recount having to come up to speed in a hurry for a client concerning the federal government's Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

From the Houston Chronicle:

Texas lawmakers grilled executives from Deloitte, the consulting firm contracted to manage a $5 billion taxpayer-funded program mainly intended to kickstart construction of natural gas power plants, after the organization [Deloitte] advanced a potentially fraudulent loan application.

Allegations first arose last month that a little-known company, Aegle Power, sought loans for its proposed natural gas power plant by listing another big-name company as a sponsor without permission. Additional scrutiny revealed Aegle Power CEO Kathleen Smith had previously been convicted in an “embezzlement scheme” related to the development of a different power plant.

In addition to seeking to slash the consulting firm's up to $107 million contract, lawmakers heard accusations Tuesday that Aegle Power falsified yet another aspect of its application to the state.

* * *

The Public Utility Commission of Texas, the state agency overseeing the fund, has emphasized no loans have yet been given to any organization. The remaining 16 projects are still in the monthslong "due diligence" stage, when Deloitte is supposed to verify the information submitted by the applicants. The commission can only execute loans with developers that pass that review.

* * *

Forty-five Deloitte consultants assumed the information applicants submitted was factual in evaluating which of the 72 applicants would move forward to due diligence, Kleinhammer said. Deloitte staff didn’t contact applicants during that evaluation to keep the process "unbiased," he said.

The consulting firm did conduct an initial search on the sponsors of each of the 17 finalists and the names of those projects, but no negative news results appeared in that search, Kleinhammer said. The in-depth review was supposed to come after, he said.

"Given that this was going to be released publicly, we absolutely should have moved those steps up earlier. We admit that as a mistake," Kleinhammer said after lawmakers repeatedly pressed him to say that Deloitte "screwed up."

From a giant company's general terms and conditions form for performance of services:

[B] Contractor shall read carefully the drawings, plans, specifications and all other documentation having a bearing upon this Contract and the Services in order for Contractor to provide the Service. ….

[D] Contractor shall ensure that it contacts Company Representative to establish which Company procedures apply to the Services and to obtain an up-to-date copy of such procedures prior to commencement.

QUESTION 1: What do you think motivated this company to include [B] in its form? I'll spin the wheel to call on people.

QUESTION 2: Same question for [D].

FACTS:

1. You're working on drafting a master services agreement for MathWhiz and Gigunda. (Unusually, Gigunda has asked MathWhiz to produce the first draft.)
2. Mary Marvel (MathWhiz CEO) says that her "business customer" at Gigunda mentioned to her, almost casually, that Gigunda would of course need an indemnity clause.

EXERCISE: In your small groups:

• Think about what kind of "indemnity clause" might satisfy Gigunda's lawyers ("hamburger for the guard dog") without provoking them to ask for their own, possibly-onerous clause.
• Draft such a clause — including defense-against-claims language — using the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

QUESTION: If you left out the defense-against-claims language, would MathWhiz automatically be required to defend Gigunda against third-party claims, just on the basis of the indemnity clause? (Careful — remember the facts, including where Gigunda seems to be located ….)

I'll spin the wheel to call on people.

Here are some possibilities for the "Termination" clause homework:

And without redlining:

Here's another, even-more-readable possibility:

Chase v. Hodge, 95 F.4th 223 (5th Cir. 2024) (affirming summary judgment):

This litigation is a business dispute over the formation and ownership of a limited liability company.

The plaintiff alleges there was an agreement with the defendant that the plaintiff would be an equal owner of the business, but the company was improperly formed with the defendant as the sole owner.

The district court granted summary judgment to the defendant based on, among other grounds, the statute of limitations and the statute of frauds. We AFFIRM.

Dean Chase, Ryan E. Hodge, and Mark Guedri owned HMR Funding, a business that provided case-expense loans for litigants. In 2013, they decided to form a business to make pre-settlement medical advancement loans to litigants, with the loans to be secured by future proceeds of any lawsuit settlement.

Chase alleges Hodge, *as attorney for both Chase and Guedri, was to form the entity, and the parties would have equal ownership interests in the business and split the profits equally.

There is no written agreement among the parties and thus no text to interpret.

*  *  *

Helping Hands Capital, LLC was formed as a Texas limited liability company on March 28, 2013.

• Only Hodge was listed on the Certificate of Formation as the managing member of the business.
• Hodge was also named in the initial Company Operating Agreement as the sole owner of Helping Hands’ member units.
• Neither Guedri nor Chase was ever listed as owners in any document.

In 2016, Guedri transferred any interest he had in Helping Hands back to the business. Chase’s sworn declaration states that after the transfer, Hodge informed him they were now 50/50 partners.

Distributions to both Hodge and Chase were made on a 50/50 basis until early 2018.

Chase then began insisting that Hodge provide him with Helping Hands’ financial information, but Hodge responded in April 2018 that Chase held an “economic benefit only” in the company, not “legal ownership,” and Helping Hands was “owned 100% by a trust.” Chase contends that this was the point when Hodge began excluding him from the business, causing a breach of contract claim to accrue.

* * *

It is obvious the agreement Chase entered contemplated an endeavor that would take more than a year to perform, with expenditures and no income at first, and potential income as claims were settled or litigated.

(Extra paragraphing added.)

1. QUESTION: From a litigator's perspective, what's an advantage of litigating (or arbitrating) a contract that includes illustrative examples, charts, diagrams, etc.?
2. QUESTION: Are there any disadvantages to including the items listed in #1 above?
3. FACTS:
   • MathWhiz's Mary Marvel asks you to review a contract form that's provided by a prospective MathWhiz supplier.

   • The contract form includes a statute-of-limitations provision as follows: "Any action for breach of this Agreement must be brought within three months year after the date of execution of this Agreement."

     QUESTION: Any issues here?

4. SAME FACTS AS #3: The contract says: "If a party materially breaches this Agreement and fails to cure the breach within ten (10) business days after the non-breaching party gives notice of the breach, then the non-breaching party may terminate this Agreement effective immediately upon notice." QUESTION: Any issues here?

I'll spin the wheel to call on people.

FACTS:

1. In the interest of "productizing" its services (something that services companies like to do when possible), MathWhiz has started offering its oil-patch customers a line of disposable, one-time-use seismic sensors that include some built-in MathWhiz software.
2. The disposable sensors should help customers speed up getting results about a potential oil- or gas field.
3. Mary Marvel (MathWhiz CEO) has talked informally by phone with Gigunda's business customer "Genie," who has agreed that Gigunda will serve as a "beta" customer for 20 of the new sensors at a super-discounted price of $20 each.
4. Gigunda's "Sourcing" department (a.k.a. "Purchasing") sends MathWhiz a purchase order in which "Supplier" (MathWhiz) agrees:
   • to defend and indemnify Gigunda for any and all harm relating to MathWhiz's filling of the purchase order; and
   • to maintain "errors and omissions" insurance ("E&O," a.k.a. "professional liability," a.k.a. "malpractice") in an amount of at least $10 million.
5. But then MathWhiz sends an order confirmation that says the seismic sensors are "beta" and therefore are sold AS IS, WITH ALL FAULTS.
6. MathWhiz ships the seismic sensors and sends an invoice.
7. Gigunda receives the sensors, uses them in the field, and pays the invoice.
8. Unfortunately, it turns out that there's a subtle bug in the MathWhiz software that's built into the sensors; the bug causes Gigunda to incur several million dollars worth of extra drilling expense.
9. Mary's business customer Genie doesn't want to push the matter, but Genie's VP, "George," insists on demanding that MathWhiz cover Gigunda's extra expense.

QUESTION 1: What might Gigunda want to try to recover from MathWhiz, and on what theory? How might MathWhiz respond?

QUESTION 2: If Mary had called you when she received Gigunda's P.O., what if anything might you have advised her to do, and why?

I'll spin the wheel to call on people.

ASSIGNMENT — GROUPS 1 and 3: As counsel for MathWhiz, come up with some bare-bones "hamburger for the guard dog" bullet points for a master purchase agreement form to send to customers — possibly as part of the Battle of the Forms — for just the following topics:

– Order submission

– Order fulfillment

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

Don't just blindly copy the Tango Terms provisions — try to put yourself in a customer's shoes (e.g., Gigunda) and think about what would be a happy medium between:

• sales appeal to the customer; versus:
• cost and burden to MathWhiz.

ASSIGNMENT — GROUPS 2 and 4: As counsel for Gigunda, do likewise for bullet points for the same order-submission and -fulfillment provisions.

Then we'll compare notes.

From an L.A. Times article about combatting gobbletygook in laws comes this street sign: "PERSONS SHALL REMOVE ALL EXCREMENT FROM PETS PURSUANT [¶] BY [sic] LAW #122-87 MAX. PENALTY $2000.00 [¶] THANK YOU"

Or as the L.A. Times article put it: "In other words, clean up your dog’s mess."

In small groups, be ready to discuss these:

1. What happened to the Trump Organization when one of its contract clauses "boomeranged" on it? (This was in 2015 before Donald Trump announced his presidential candidacy.) (Hint: That part of the reading was here.)
2. What's DCT's view of the term, "true and correct"? Do I have a preferred alternative? If so, why?
3. Any speculation about the historical basis for using "provided, however, that …." (emphasis added) in wall-of-words contract provisions? (Hint: It's been in past reading.)

I'll spin the wheel to call on people.

See this NY Times article about an Australian defamation case. Excerpt:

In the post last year, Anthony Zadravic, the agent, appears to accuse Stuart Gan, his former employer at a real estate agency, of not paying retirement funds to all the agency’s workers.

At issue is the word “employees” in the post, which read: “Oh Stuart Gan!! Selling multi million $ homes in Pearl Beach but can’t pay his employees superannuation,” referring to Australia’s retirement system, in which money is paid by employers into super accounts for employees. “Shame on you Stuart!!! 2 yrs and still waiting!!!”

Less than 12 hours after the post was published on Oct. 22, Mr. Zadravic, who is based on the Central Coast in New South Wales, deleted it. But it was too late. Mr. Gan became aware of the message and filed a defamation claim against Mr. Zadravic.

On Thursday, a judge in New South Wales ruled that the lack of an apostrophe on the word “employees” could be read to suggest a “systematic pattern of conduct” by Mr. Gan’s agency rather than an accusation involving one employee. So she allowed the case to proceed.

Note the quote from the book Eats, Shoots and Leaves: “No matter that you have a Ph.D and have read all of Henry James twice. If you still persist in writing, ‘Good food at it’s best’ [emphasis added], you deserve to be struck by lightning, hacked up on the spot and buried in an unmarked grave.”

(Update: I just looked online to see whether the case had progressed, or settled; a Google search revealed nothing on point.)

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

The links below are not in the assigned reading — one purpose of this exercise is to get (more?) accustomed to looking things up "on the fly."

QUESTION 1: What happened in the Oregon v. Oracle lawsuit that's of interest to us in this context? (Hint: See the NOCD.)

QUESTION 2: What's a Himalaya clause — and when might you want to use one? (Hint: Google is your friend, or you could see the NOCD.)

QUESTION 3: Is it ethically permissible to look out for a client’s employees, when the employer is the client?

QUESTION 4: What does it mean for an employee to be "put on plan"?

I'll spin the wheel to call on people.

Question: What did you find useful, or interesting, or surprising, or troubling, or puzzling, in the reading for this week? [NEW:] Is there anything you'd like explained in class?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4

SUGGESTION: Add notes to your personal "gouge."

See the following, from the Transnational Litigation Blog. QUESTION: What does that say about contracts where a lot of money is involved?

A recent dispute in U.S. federal court shows that efforts to isolate Russia through sanctions are seeping into the courts of both countries. As the economic and legal regimes of Russia and the United States drift further apart, both Russian and U.S. courts have become increasingly bold in flouting the orders of the other. This makes life difficult for companies like JPMorgan that are caught in the middle.

* * *

In February 2022, the US Treasury Department expanded sanctions against Russia to include several of Russia’s largest financial institutions. This included freezing the U.S.-based assets of the majority Russian state-owned VTB Bank (VTB), $439.5 million of which is held in a JPMorgan account in New York. …

* * *

On the heels of the REPO Act’s passage, VTB filed suit in Russian courts against JPMorgan to recover the $439.5 million in frozen assets held in New York.

* * *

On April 24, the Russian courts froze $439.5 million of JPMorgan’s assets held in Russia as security while they heard the suit against JPMorgan.

As of now, the United States has not confiscated any frozen Russian assets pursuant to REPO, nor has Russia confiscated the frozen JPMorgan assets, leaving the situation at an uneasy stalemate. It is hard not to see JPMorgan as the loser in the broader conflict between Russia and United States (as well as Europe and the G-7).

JPMorgan’s assets are effectively being used by Russia as security against the possibility that the United States will confiscate the frozen Russian assets pursuant to the REPO Act.

The litigation illustrates the difficulty of participating (or even winding down participation) in both Russian and U.S. markets and complying with both Russian and U.S. law—an issue which is only likely to become more pronounced.

(Formatting modified)

FACTS:

• MathWhiz's CEO Mary Marvel emails you to say that MathWhiz is in very-preliminary discussions with a potential new customer/client, "Hellacious Healthcare."
• Hellacious will be letting MathWhiz see some confidential information about Hellacious's business. [Note how I used the apostrophe-s just now.]

ASSIGNMENT:

• Groups 1 and 3 represent Hellacious
• Groups 2 and 4 represent MathWhiz
• Use the group whiteboards (both classes):       • Group 1       • Group 2       •  Group 3       •  Group 4 to outline a "term sheet" of significant points for a confidentiality agreement.

Here's a tale from Karen Gover, Read the Fine Print: Covenant Not to Sue “At Any Time” Terminated Upon License Expiration (JDSupra.com):

• AlexSam licensed certain patented technology to MasterCard.
• When MasterCard didn't pay the agreed royalties, AlexSam filed suit for breach of contract.
• Unfortunately for AlexSam, the license agreement included a covenant not to sue, which barred AlexSam from bringing suit against MasterCard — even for unpaid royalties — until the patents expired or the license was terminated for uncured breach, neither of which had happened when AlexSam had brought its lawsuit.
• The district court granted MasterCard's motion for summary judgment dismissing the case. The Federal Circuit affirmed on the must-terminate-first interpretation, but remanded for consideration of other issues.

The opinion is at AlexSam, Inc. v. MasterCard Int’l., Inc., No. 22-2046 (Fed. Cir. 2024) (non-precedential), in which the court said:

This case illustrates the importance of carefully reviewing the language in a covenant not to sue when entering a license agreement.

AlexSam reads the covenant to prohibit it from suing for patent infringement only, while MasterCard reads the covenant much more broadly to prohibit suits not just for patent infringement, but also for breach of contract for failure to pay royalties due under the contract.

We conclude that MasterCard has the better interpretation given the language in the license agreement at issue.

That said, we hold that the covenant not to sue does not survive the termination of the License Agreement. Because the License Agreement has terminated, we reverse the district court's summary judgment in favor of MasterCard and remand for further proceedings consistent with this opinion.

(Emphasis and extra paragraphing added.)

Long story short — with a "whose throat do we choke?" epilogue:

Avid [a company] forgot, for two years, to take the restrictive legend off of its convertible [bond]. This was very understandable: Its obligation to remove the restricted legend was boring and technical and buried in Section 4.06(e) of a bond indenture that surely nobody read.

It could only remove the legend a year after it issued the bonds, after everyone had stopped paying attention.

And, as Avid points out, it "did not receive any notices and was not otherwise made aware" of this provision in, sure, a contract that it signed, but a very long and boring contract. (And, to be fair, the holders forgot too!)

And because it completely forgot about its obligation to remove the legend, Avid also forgot to pay the 0.5% penalty interest rate for two years.

And because it forgot to pay the extra interest, it created a non-curable default on the bonds: The holders can demand all of their money back, with interest, immediately, with no chance for Avid to fix the problem by removing the legend and paying the overdue interest.

So Avid issued a new $160 million convertible bond, yesterday, on a fairly emergency basis, to raise money to pay back the old one.

The new one will be considerably more dilutive and will pay 7% interest instead of 1.25%. Not ideal! …

Also there’s a cross-default in its revolving credit agreement. Just a mess.

* * *

[Footnote 6] Also arguably its lawyers should have sent it a reminder? Its bankers? I mean, no, I was a convertibles banker and it would never in a million years have occurred to me to ping my clients a year after issuing their bonds to say “hey remember to unrestrict the CUSIP”; that was someone else’s problem. Whose? Nobody's?

In an Iowa disciplinary case:

• A husband and wife agreed to a mediated settlement of a divorce case.
• The wife's lawyer drafted an agreement and sent it to the husband's lawyer, one Leitner.
• Leitner added a provision giving the husband (his client) certain additional child-custody rights.
• Leitner had the husband sign the surreptitiously-modified agreement and returned it to the wife's lawyer, who had the wife countersign it; the agreement was filed with the court.
• Leitner's surreptitious modification eventually came to light when he tried to enforce the additional child-custody rights he had inserted into the agreement for the husband.

Leitner was given a minimum two-year suspension (for that plus other offenses). See Leitner at ¶ 28-45 (Iowa 2024).

See this article about employee handbooks & policies:

The National Labor Relations Board moved from theory to practice in this administration’s battle against restrictive covenants. Recently, the Regional Director of Region 9 of the National Labor Relations Board filed a consolidated complaint alleging that certain restrictive covenants contained in offer letters and policies in an employee handbook violated the National Labor Relations Act.

* * *

According to the complaint, the clinic maintained a number of policies that run afoul of the NLRA, including:

• A confidentiality provision that expressly listed “salaries, bonuses, and compensation package information” in its scope;
• An insubordination policy that prohibited disparaging statements about management or other employees;
• A company communication policy that prohibited employees from making communications that could harm the “goodwill, brand, or business reputation” of the clinic;
• A non-compete provision that imposed a two-year limitation on the employee’s ability to provide similar services within a 20-mile radius of the clinic, as well as a two-year limitation on customer and employee solicitation; and
• An “Exit Agreement” that included an acknowledgment that damages for any violation of the non-compete, client non-solicit, and employee non-solicit amounted to, respectively tens of thousands of dollars in costs spent training the breaching employee (prorated under certain circumstances), $25,000 per solicited client, and $150,000 per solicited employee.

And in a similar case, an appeals court upheld an NLRB decision in McLaren Macomb, discussed in Sixth Circuit Affirms NLRB’s Expansive Interpretation of Protected Concerted Activity

Apropos of "Combat Barbie" distractors — i.e., giving The Other Side's contract reviewer something to object to in an otherwise-balanced draft, discussed at NOCD 16.3 — see the Dilbert strip for Monday, Feb. 15, 2021 (the link is to the Wayback Machine archive copy).

This also resonates with the "You get what you INspect" saying.

See this post. A response: "I demand to be placed in clear plastic bags! And I’ll bring my own damn container."