Day-by-Day Class Plans: Contract Drafting Spring 2025

Be sure you're enrolled in this course in Canvas; see the top of this page for the course numbers.

See this Google Docs page for your initial seating assignments. Please:

• find your initial group; and
• sit where indicated in the seating diagram.

The initial group assignments are alphabetical by first name. The assignments will be shuffled three times during the semester.

In your small groups you'll be doing a lot of in-class handwriting of contract term-sheet outlines, along with a certain amount of hand-copying or sketching of diagrams in the course materials such as the "Hill of Proof" and the "Battle of the Forms Drop-Out Rule."

[DCT TO DO: ADD LINKS TO DIAGRAMS]

Reason 1: Last semester, I noticed — and students commented — that their small-group "discussions" increasingly consisted of everyone typing notes into the group "whiteboards," instead of talking to each other. The students weren't keen on not talking to each other, and pedagogically it's not great. So this semester, I'll experiment with locking the group whiteboards except for the specific times when we do in-class drafting exercises.

Reason 2: Some research indicates that writing notes and sketching diagrams by hand — as opposed to typing — can improve comprehension and retention; this is thought to be because handwriting requires more mental processing by the notetaker than passively transcribing what's being said.

Taking notes on laptops rather than in longhand is increasingly common. … The present research suggests that even when laptops are used solely to take notes, they may still be impairing learning because their use results in shallower processing.

In three studies, we found that students who took notes on laptops performed worse on conceptual questions than students who took notes longhand.

We show that whereas taking more notes can be beneficial, laptop note takers' tendency to transcribe lectures verbatim rather than processing information and reframing it in their own words is detrimental to learning.¹

A later study concluded:

Using a cross-sectional survey, the longhand note taking cohort was more likely to agree with there being fewer distractions and temptations, and having high-quality notes that other students ask to look at, while being more likely to disagree that their attention span limits their understanding.

They also reported recommending that other students attempt more frequent use of longhand note taking, even while recognizing that this modality might not be suitable for all students in all types of courses.²

Some other researchers, though, argue that handwriting's advantages over laptop typing are not statistically significant, and so students should use whatever approach works for them.³

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'll 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'll spin the wheel to call on people. Or, I might announce, "open mike," meaning anyone can volunteer to answer.
• Generally, once I've called on you three times in a class session — it can happen, that's the nature of (pseudo)-randomness — I'll remove your name from the wheel until everyone else has been called on.

That way:

• Neither you nor I know who I'll be calling on to answer a question.
• You have to be ready to answer each question — but you get to discuss the question with your group before I call on anyone.
• You can't "check out" after I've called on you, because I might call on you again ….

This is a form of what pedagogy researchers call "active learning." Research has shown that this improves learning outcomes, even though some students regard it as a mixed blessing (like going to the gym):

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.

[DCT translation: You have to work harder in class, but it's worth it.]

(Emphasis added.)

At the end of the day, students in our course seem to come around concerning this approach. This is pretty clearly shown by course feedback, from Law Center end-of-course reviews except as otherwise noted:

•  "One thing that worked really well for me was being in groups. Sometimes I wouldn't really 'get' something from the readings, and talking with my group is what helped the material click. Also knowing that the other people in your group still need you to stay engaged helped with people not checking out after their name was called on."

•  "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! :)" (From in-class "group whiteboard" comments on the last day of the semester, with me out of the room.)

•  "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?

I'll talk through some key points of the syllabus.

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"

QUESTION 1: Does that mean people will depart for Mars in less than ten years, or that it will take them less than ten years to get there?

QUESTION 2: How could this be rewritten to clarify?

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?

I'll talk through chapter 

BE SURE TO READ these materials early in the semester.

[From a PowerPoint slide deck]

See this tweet thread

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

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 to specify which of these two we're talking about — maybe by moving just one word to different spots?

Today (Jan. 15, 2025) is her 100th birthday — she has all her marbles and can still play!

:

In the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6, DCT to show a useful way of rewriting 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 Style 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.

In your small groups — Group 1 talking to Group 2, Group 3 talking to Group 4, Group 5 talking to Group 6 — "negotiate" the Uncle-Ed short contract for sale and see if you can reach some kind of agreement on basics.

(Just what the agreement ends up being is not of concern: This exercise aims to start identifying possible risks and coming up with cost-effective ways to avoid them, or at least eliminate mitigate [or: reduce] their potential impact.)

Reminder:

• Odd-numbered groups: You represent Uncle Ed, the seller.
• Even-numbered groups: For this exercise, you represent Dale, the buyer (even though the facts say otherwise).

I'll show a quick drafting of signature blocks using the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6.

See this blog entry.

See Setting up the contract's "framing"

See CDL discussion.

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?

(CAUTION: Do we know enough to say?)

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, 239 N E.3d 842, 844-45 (Ind. 2024) (extra paragraphing added).

See Setting up the contract's "framing"

See Drafting tips

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."

From a NY Times obituary of a burlesque dancer, who died at age 106: "Outside the tribal world of burlesque, Ms. Rowland was perhaps not as famous — or as well paid — as other headliners like Tempest Storm, another redheaded queen, who dallied with John F. Kennedy and Elvis Presley, whose breasts were said to be insured by Lloyd's of London …."

Wow. I'd read that Elvis could sometimes be … unusual, but I never knew that about him …. (Let alone JFK!)

QUESTION: How could we fix this?

See below for an example of a signature block — note that this signature block is designed to go at the beginning of the contract — if it was at the end of the contract, then you wouldn't duplicate the "a [STATE] limited liability company" nor the addresses for notice:

DISCUSS IN YOUR GROUPS:

1. MathWhiz is a limited liability company ("LLC"), not a corporation.
2. 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.
3. Nor do we know Gigunda's type of organization — is it a corporation? An LLC? A limited partnership?
4. 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.
5. When you say "MathWhiz LLC, a [STATE] Limited Liability Company" (the bracketed part 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.
6. 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).
7. 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.
8. 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.)

For next week's reading, discuss in your groups:

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

In your groups:

1. Pull up this annotated draft term sheet for the potential acquisition of an AI company that I'm heiping a client (the prospective buyer) to put together on fairly-short notice.
2. On pages 1 through 4, look through the parts that are accompanied by yellow-highlighted comments.
3. From those pages, pick out four things to mention and/or question — these could be things that:
   • caught your attention; or
   • surprised you; or
   • confused you.
4. Pick out three spokespeople — we'll go around the room three times; each time, a group spokesperson is to mention one of the group's four items. (The fourth item will serve as an extra, in case another group beats you to the punch on an item you would have mentioned.

This will provide:

• a drink-from-a-firehose overview of some of the things we'll be covering this semester; and
• an introduction to the contract-negotiation process.

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.

Background: To make a 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 even 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).

In this exercise:

• Odd-numbered groups represent MathWhiz
• Even-numbered groups represent Gigunda.

Use the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6 — 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 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"

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, odd-numbered groups with the next-up even-numbered group (Group 1 with Group 2, etc.).

See this Piled Higher and Deeper comic.

See this post.

To distinguish this document from the coursebook, I changed the highlight color in this document to Cougar Red.

I'm experimenting with putting the reading assignments directly in the coursebook.

Over the weekend I'll be reviewing and commenting on each of your homework assignments so far.

Don't forget: You have two chances — for this quiz, but not necessarily 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?

What's your preference — and what do you think others would prefer — between:

•  Clause notes directly after the section (definition of "Affiliate"), versus

•  Footnotes (the Background Checks protocol); feel free to try out clicking on the footnotes.

Comments?

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       • Group 5       • Group 6:

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.

An AP headline today: "… Trump says he plans to send migrants in US illegally to Guantanamo"

Question: Technically, are there two possible meanings here? (To reiterate: In a headline, ambiguity likely won't matter; in a contract, it very well could — especially if there's money at stake!)

In your groups:

1. Pull up this annotated draft term sheet for the potential acquisition of an AI company that I'm heiping a client (the prospective buyer) to put together on fairly-short notice.
2. On pages 5 through 7, repeat what we did last time.

"Are you not entertained?"

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

In your groups:

1. Pull up this annotated markup of The Other Side's contract form that I recently for my real-life MathWhiz client.
2. On pages 1 through 5: look through the parts that are accompanied by Word comment bubbles.
3. From those pages, pick out four things to mention and/or question — these could be things that:
   • caught your attention; or
   • surprised you; or
   • confused you.
4. Pick out three spokespeople — if time permits, we'll go around the room three times (but more likely just twice); each time, a group spokesperson is to mention one of the group's four items. (The fourth item will serve as an extra, in case another group beats you to the punch on an item you would have mentioned.

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       • Group 5       • Group 6

What if anything was new to you or surprised you, or struck you as important to know, from the Style rules reading assignment?

Gigunda's principal place of business ("PPB") might be different than its initial address for notice — for the PPB, you could just say, "with its principal place of business in [FILL IN CITY/STATE] and an initial address for notice at …."

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.

DEMO: In the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6 I'll break up and simplify 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."

• QUESTION: Given the bold-faced heading of the "BEFORE" version, does the first sentence really belong in this provision?

What if anything was new to you or surprised you, or struck you as important to know, from the Getting paid reading assignment?

When you start working at a law firm (whether this summer or after graduation), you'll probably find that the firm uses contract- and document-management software of some sort. I've started collecting references, so that with any luck you'll at least have heard of your firm's software when you show up.

I've not used any of these products, so YMMV (Your Mileage May Vary).

Contract Companion by Litera – looks for cross-referencing errors, among other things. The company seems to have a lot of related products.

CrossCheck365 appears to be a Microsoft Word add-in that will • use an "Expando" feature to turn spaghetti clauses into macaroni (breaking up wall-of-words clauses into outlines); and • check cross-references.

Grammerly has been around awhile; I've reviewed documents processed by it.

In your groups:

1. Pull up this annotated markup of The Other Side's contract form that I recently did for my real-life MathWhiz client.
2. On pages 1 through 5: look through the parts that are accompanied by Word comment bubbles.
3. From those pages, pick out three things to mention and/or question — these could be things that:
   • caught your attention; or
   • surprised you; or
   • confused you.
4. Pick out two spokespeople — we'll go around the room twice; each time, a group spokesperson is to mention one of the group's three items. (The third item you pick will serve as an extra, in case another group beats you to the punch on an item you would have mentioned.

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.'

We can see two possible meanings of the bold-faced passage:

• Even a single actor could change the status quo; or
• One actor — and only that actor — could change the status quo. (Cf. President Trump's "I alone can fix it" comment in his 2016 RNC acceptance speech.)

Talk to your neighbors:

1. True or false: An email can provide evidence to corroborate the existence of a binding oral contract even if the email doesn't itself constitute a binding written contract.
2. True or false: For an email contract to be binding, each party's email must include the specific word "Signed" to make it clear that the party is assenting to the terms.
3. True or false: An "agreement to agree" will generally be enforceable in the U.S. — the court will weigh expert testimony to determine what reasonable parties likely would have agreed to.

Apropos of (what I've seen referred to as) the upcoming "TaylorBowl 2.0," here's one from The New Yorker: Listening to Taylor Swift in Prison

What if anything was new to you or surprised you, or struck you as important to know, from the Drafting tips reading assignment?

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?

From a student:

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.

What if anything was new to you or surprised you, or struck you as important to know, from the General provisions reading assignment?

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 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?

EXERCISE: Think of minimal ways to rephrase the quote in each of the foregoing ways.

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. Note how the paragraphs are numbered 6.5.1, 6.5.2, etc., which can be 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)

EXERCISE: From part 1, rewrite just part below to be much more reader-friendly — as though you were talking to a lay jury. (Hint: BLUF: Bottom Line Up Front.)

the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6

Here's the part to rewrite:

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 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.

See the comic.

For the employment agreements due next week, here are some comments that I've harvested in previous semesters.

1.  General comment: It can be useful for executives to sign a "standard" employment agreement along with an addendum; see this blog post from 2015.

2.  TEXT: "This employment agreement is between you and MathWhiz regarding your position of Director of Business Development." QUESTION: Does this work for a letter agreement?

3.  TEXT: "For the term of your employment, MathWhiz agrees to employ you in the position of Director of Business Development." QUESTION: Does the italicized part cause any concern?

4.  TEXT: "MathWhiz agrees to employ you in the position of Director of Business Developer [sic; Development]." COMMENT: If this were a purchase-and-sale agreement, you'd want to say (in effect) BOTH that Seller agrees to sell AND Buyer agrees to buy — otherwise it'd be an option, exercisable at Buyer's discretion.

5.  TEXT: "You will report to Mary Marvel (the “CEO”)." QUESTION: What if Mary is the one signing the letter?

6.  TEXT: "Your employment shall be is [or, will be] “at will,” …." COMMENT: I'm not fond of "shall be," especially in letter agreements — use "is" or "will be" or (if imperative) "must be."

7.  TEXT: "Your position will be full-time. You agree to work onsite at Company’s facility or on Company directed travel for at least 50% of your total working hours. For the first year of your employment, you may work remotely for up to 50% of your total working hours. After the first year, Company may, upon reasonable consultation with you, adjust your remote working hours at Company’s discretion." QUESTION: How many potentially-negotiable topics are being addressed in this one paragraph? Is there a better way to do it?

8.  TEXT: "Your annual salary will be [ADD: at a gross annual rate of] $[INSERT SALARY AMOUNT] …." COMMENT: We want to rule out the employee claiming that s/he was entitled to a full year's pay — without deductions — no matter how long she worked during the year.

9.  TEXT: "To the greatest extent not prohibited, you agree that you will be an "at-will" employee during the entire time of this Agreement. QUESTION: To the greatest extent not prohibit by what? By law? By some other agreement? Do we even need the "To the greatest extent" preamble? How could this be fixed?

10.  TEXT: "I. Duties and Scope of Employment." COMMENT: Using Roman numerals isn't the best idea for agreements of this type, because they get unwieldy and can be hard to reference.

11.  Omitted

12.  TEXT: "The Company may unilaterally amend this Agreement by providing at least five days’ notice to the you." QUESTION: What do you think Dave's reaction would be? QUESTION: Is this even necessary?

13.  TEXT: "“Employment relationship” means the contractual relationship between You and Company entered into under this Agreement and controlled by this Agreement. COMMENT: Hmm: This could arguably mean that terminating the employment relationship has the effect of terminating the employment agreement — and with it, a post-term noncompetition covenant if there is one (see the course materials); that would like make your client MathWhiz quite unhappy.

14.  TEXT: "Dear Mr. Dave Doright" QUESTION: Does this look right for a business letter? How could it be fixed?

15.  TEXT: "We have agreed that you will continue to serve as an employee of MathWhiz until either you or MathWhiz terminates your employment." COMMENT: You'd want to explicitly say "at will" because it's a term of art that a judge would immediately understand.

16.  TEXT: "/ s / Dave Doright" COMMENT: "s" means that it's been signed by Dave Doright, so you wouldn't include it here in a letter from Mary.

17.  TEXT: Some students used bullets for their paragraphs. COMMENT: Numbering would be better than bullets, for easier referencing in the future.

18.  TEXT: "The terms of this agreement can be subject to change." COMMENT: This shouldn't be included — for "at will" employment, it's a given, so there's no need to rub Dave's face in it.

19.  TEXT [in a countersignature block]: "I have not relied upon any other verbal, oral, or written statements, other than the ones contained in this Employment Offer." COMMENT: Good thought, but I think I'd leave it out.

20.  TEXT: "The Company will pay you an annual salary of [$XXX,XXX.XX], payable in 24 semi-monthly payments." COMMENT: You'd want to say "a salary at a gross annual rate of …." for reasons discussed in class — the "24 semi-monthly payments" language would arguably support Dave's argument that he'd be entitled to a full year's salary if he were to be let go without cause.

21.  TEXT: "This letter confirms our oral agreement …." COMMENT: You probably don't want this — the offer letter is "it"; you don't want to leave a paper trail helping Dave to prove up a claim that there was a (supposedly-binding) oral agreement that (according to Dave) differed from what's stated in the offer letter.

22.  TEXT: "In consideration of your excellent qualifications and references, I look forward to you joining the MathWhiz team and have full confidence that you will make a significant contribution to our business development efforts." COMMENT: I wouldn't say "In consideration of your excellent qualifications and references" — if litigation were ever to ensue between MathWhiz and Dave, the inclusion of "In consideration …" could be offered into evidence by Dave's lawyer as evidence that MathWhiz had an opportunity to check Dave's references and hired him after doing so.

23.  TEXT: "If these terms are agreeable, please countersign the enclosed copy of this letter and return it to me." COMMENT: The "enclosed copy" bit is really old-school (as in, creakily geriatric); it's what's shown in my Tom Arnold NDA example, but that was in the early 1980s; I seriously doubt that many people use this approach in this day and age of email for pretty much everything.

24.  A couple of students' submissions didn't say anything about compensation — strictly speaking it's not necessary, but it's something that Dave likely will be very desirous of getting in writing.

25.  TEXT (in transmittal email to Mary): "I hope this Agreement is adequate …." COMMENT: I wouldn't say this in an email to a client, even one I'd worked with for a long time — it doesn't exactly bespeak confidence in one's own work product ….

26.  TEXT: "Upon accepting this agreement, your employment by MathWhiz shall be in compliance by the following terms and conditions (this 'Agreement')."

QUESTION: Who is obligated by this sentence?

QUESTION: Is there a "dangling participial phrase" problem here – see, e.g., this article.)

COMMENT: "… shall be in compliance by the following" would not be the correct preposition; it'd be "shall be in compliance with the following …."

27.  TEXT: "Salary will be reviewed each year …."

      • COMMENT: This language triggers the question: Reviewed by whom? (Is this a false imperative?)

      •  QUESTION: What would you suggest as an answer to the "Reviewed by whom?" question above?

28.  TEXT: "Benefits: You will be entitled to participate in any group medical, dental, disability, and life insurance plans, 401(k) plans, pension or profit-sharing plans, stock option plans, and similar benefits that may be offered by MathWhiz." COMMENT: Definitely add, "… that may be offered by MathWhiz to similarly-situated employees" — a director-level employee like Dave might not get the same benefits as the CEO or other C-level executives.

(For those who don't know: In American companies, a typical organizational-chart hierarchy is, starting at the "bottom": A) individual contributor or "IC"; B) manager; C) director, which is different from a member of the board of directors; D) vice president, or VP; E) senior vice president, or SVP; F) executive vice president, or EVP, who will often have a "chief" title of some kind, e.g., chief financial officer (CFO), chief marketing officer (CMO), chief operating officer (COO), chief executive officer (CEO) — these are known as "C-level" or "C-suite" employees.

29.  TEXT: "Non-solicitation: You will not solicit for employment, directly or indirectly, on behalf of yourself or any other person, any employee of MathWhiz." COMMENT: How long does this nonsolicitation covenant last? If there's no defined expiration date, it might be invalid.

30.  One student created a formal employment agreement and used the defined term "You" for Dave Doright.

• COMMENT: The assignment specifically said to do a letter agreement.
• COMMENT: I'd use "Executive" instead of "You" or "Employee" — the former title is a bit more formal, and likely would raise judge- and jury expectations about the standards that Dave was required to meet.

31.  If using the term "You" (capitalized), be consistent about capitalization — inconsistency on that score has caused problems, as discussed in the course materials.

32.  TEXT: "With management approval, you may telecommute from your alternative worksite of your home in Boise, Idaho."

• COMMENT A: This still leaves it up to MathWhiz management to approve or disapprove.
• COMMENT B: You might consider adding some kind of "fence," e.g., gotta be reasonably available during working hours in MathWhiz's time zone.

33.  TEXT: "The Company intends to provide you, during the Employment Relationship, with access to pre-existing and new Confidential Information on an as-needed basis commensurate with your duties, including but not limited to access to appropriate portions of MathWhiz‘s computer network." COMMENT: If you're not going to spell out the confidentiality obligations (or a noncompetition covenant supported by the confidentiality obligations), I don't know that I'd bother with this — the confidentiality obligations would very likely apply as a matter of law anyway.

34.  TEXT: "If the Company exercises this right to termination, you shall be entitled to a severance package equal to the severance package of other MathWhiz directors as outlined in the Employee Handbook. "

• COMMENT A: A severance package is something that would typically be negotiated — and it'd be unlikely to be mentioned in an employee handbook.
• COMMENT B: If the Company were to terminate for cause, there'd typically be NO severance.

35.  TEXT: "Following termination, whether exercised by you or the Company, you may not be employed by any of MathWhiz’s competitors for a period of [blank] months." COMMENT: A noncompetition covenant would need considerably more than this; as written, it might not be enforceable even in Texas — let alone California (where it'd be per se unenforceable and actionable to require an employee to agree to it) or one of the other U.S. jurisdictions that restricts noncompetes.

36.  TEXT: "The Company shall pay you as compensation for your services a base salary at a gross annual rate $175,000. Such salary shall be payable in accordance with the Company’s standard payroll procedures. " COMMENT: Nice work on the "gross annual rate."

37.  TEXT: "MathWhiz may terminate your employment for any reason or no reason, and you may terminate the employment for any reason or no reason; provided that the terminating party gives the other at least thirty days' written notice."

• COMMENT A: It's not a bad idea to include the phrase "at will": It's a term of art that employment lawyers — and judges — are well familiar with.
• COMMENT B: For "optics" purposes, I'd lead off with the employee's right to terminate at will, not with the employer's right to do so.

38.  TEXT (in student's draft email to Mary): "While your employment agreement with Mr. Doright is legally binding, I’ve spotted a few omissions that I believe to be prudent to address at this time." COMMENT: I'd avoid making any pronouncements about "legally binding" — that likely would be construed as a legal opinion, and you don't want to be doing that with a client unless you're being very explicit about it, and going into a lot more detail about what it takes to be legally binding, and noting any assumptions and exceptions.

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

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

I previously mentioned CrossCheck365, a Microsoft Word add-in that will • use an "Expando" feature to turn spaghetti clauses into macaroni (breaking up wall-of-words clauses into outlines); and • check cross-references. Out of the blue I heard from Steve Gullion, who I guess is the founder — many years ago I knew him briefly when my firm's managing partner and I had lunch with him to talk about possibly licensing contract-assembly software from his first company.

Anyway: Steve said that "if anyone in your class would like a free trial for the duration of the class, just have them email me and mention your [DCT's] name." He's at his first and last name at The Big G (you can guess what that is) with a dot between his first and last names; his first name is spelled with a "v" not a "ph."

Steve also said, "Regarding barf clauses [spaghetti clauses], we have a two-minute video that's just about the Expando feature: https://www.youtube.com/watch?v=26N-SZ605kw"

What if anything was new to you or surprised you, or struck you as important to know, from the Common business transactions reading assignment?

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       • Group 5       • Group 6, 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.

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

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

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.

I'll spin the wheel to pick people; don't forget [BROKEN LINK: spin-2].

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?

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?

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       • Group 5       • Group 6

6 p.m. groups

Group 1: Michael, Neha, Connor
Group 2: Saxton, Zahan, Adam
Group 3: Haleigh, Julio, Yohan
Group 4: Arianna, Ben P., Nadin
Group 5: Katelynn, Sarah, Tres
Group 6: Rachel, Reid, Arthur, Ben W.

7:30 p.m. groups

Group 1: Dillon, Joshua, Paola
Group 2: Dustin, Hayden
Group 3: Blake, Sirisha, Corbin
Group 4: Brian, Austin

I realized that I hadn't included interest charges and usury-savings clauses in the reading, so I added that to the list for next week.

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

Don't use an AI for this — the idea here is to develop the mental skill of your own (not least because an AI might not be available when you need one).

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       • Group 5       • Group 6. (Fragment 1 is one sentence!)

I'll show my rewrite in a few minutes.

This afternoon, for my "MathWhiz" client:

• for a new project, one existing MathWhiz customer sent an "update" to a previously-negotiated master agreement. I did a Compare Documents function in Microsoft Word, and ….
• for a new customer, the in-house lawyer (finally) acknowledged receipt of my redline of the customer's master agreement. His comment was (paraphrasing) "there are a number of requested changes; I'll make time tomorrow."

What if anything was new to you or surprised you, or struck you as important to know, from the Efforts clauses reading assignment?

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?

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

In a recent California case:

• A worker signed an employment agreement that included a mandatory arbitration provision that included a prohibition of class-action arbitration.
• At the end of the document, the agreement form said, "The parties acknowledge and agree [sic] that each has read this

agreement carefully and understand that by signing it, each is waiving all rights to a trial or hearing before a judge or jury of any and all disputes and claims subject to arbitration under this agreement."

• The company never signed the worker's agreement.
• After leaving the company, the worker filed a class-action lawsuit alleging wage-and-hour violations .
• The company move to compel arbitration and to strike the class-action claims.

The district court ruled that the arbitraiton agreement was not binding on the worker because the company hadn't signed the agreement; the appeals court affirmed.

See Pich v. LaserAway, LLC, No. B331219, slip op. at 5-7 & n.4 (Cal. App. Jan 28, 2025) (unpublished; affirming denial of motion to compel arbitration, citing cases).

See this Red & Rover comic strip.

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.)

In your groups:

1. Pull up this annotated markup of The Other Side's contract form that I recently did for my real-life MathWhiz client.
2. On pages 6 through 16: look through the parts that are accompanied by Word comment bubbles.
3. From those pages, pick out three things to mention and/or question — these could be things that:
   • caught your attention; or
   • surprised you; or
   • confused you.
4. As usual, pick out two spokespeople — we'll go around the room twice; each time, a group spokesperson is to mention one of the group's four items. (The third item you pick will serve as an extra, in case another group beats you to the punch on an item you would have mentioned.

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.)

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

See this Facebook post.

Question: What did you find useful to you in class this week?

Since students seem to find it useful to see me edit a spaghetti clause in real time, I'll do a quick demo using my whiteboard (which you shouldn't be able to see) to break up just Fragment 2 from the above wall-of-words guaranty:

[START:]

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]

Then: Do likewise; use the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6.

Again: Don't use an AI for this — the idea here is to develop the mental skill of your own (not least because an AI might not be available when you need one).

Suggestion: Separate out the distinct potentially-negotiable ideas into separate paragraphs — possibly using a question-and-answer format as a drafting aid.

To show what I mean, here's an example from Fragment 1:

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.

Was someone thinking ahead? What if NRG Energy hadn't wanted to let "its" stadium name be covered up during the World Cup? That's where SWOT analysis can come in handy: Strenths; Weaknesses; Opportunities; Threats.

From Why NRG Stadium will have a different name during the 2026 FIFA World Cup (BizJournals.com):

Houston-based NRG Energy Inc. (NYSE: NRG) has inked a sponsorship deal for the 2026 FIFA World Cup. However, its namesake Houston stadium — which will host seven matches for the tournament — will go by a different name during the event.

The 2026 World Cup will use the name “Houston Stadium,” as FIFA guidelines prevent any of the host venues from being referred to by their corporate-sponsored names. That’s despite NRG becoming an official supporter of the FIFA World Cup 26 Houston Host Committee, the company announced Feb. 10. The host committee can sell certain rights and assets to its sponsors — but not stadium naming rights.

During the matches, signage referring to NRG Stadium will be covered up, and broadcasters will refer to the venue by its FIFA-mandated title.

NRG’s sponsorship is for the host committee, but even if the company inked a sponsorship deal with FIFA itself, NRG Stadium would still be named Houston Stadium for the duration of the World Cup.

Each of the other 16 host stadiums will follow the same rules: Mercedes-Benz Stadium will be named Atlanta Stadium, Gillette Stadium will be referred to as Boston Stadium, AT&T Stadium — located in Arlington — will be named Dallas Stadium, and so on.

(In the course book, see T O P  S P I N: Identifying threats and opportunities.)

From a law firm, this made me chuckle.

(See here for a compilation of similar Artist-to-Legalese reels.)

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!)

In the reading: Resale Channel

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       • Group 5       • Group 6)

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?

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6:

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.

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.)

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).

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.)

A tweet: "I just learned that today is Wife Appreciation Day. The wording is ambiguous. Does that mean you’re supposed to appreciate her or that she should appreciate you."

(Most of the replies were in the vein of, for example, "You really want trouble, do you?")

We're at four years since the Great Texas Blackout caused by Winter Storm Uri in February 2021, which serves as a large-scale example of the importance of incentives.

Recall the observation of Warren Buffett's business partner Charlie Munger (section 11.7.3 in the readings): "Never a year passes but I get some surprise that pushes a little further my appreciation of incentive superpower. * * * Never, ever, think about something else when you should be thinking about the power of incentives." (Emphasis added.)

As has been reported and discussed at length in the ensuing two years, the incentives available to Texas power generators appear to have played a major role in the blackout:

When it gets really cold, it can be hard to produce electricity, as customers in Texas and neighboring states are finding out. But it’s not impossible. Operators in Alaska, Canada, Maine, Norway and Siberia do it all the time.

What has sent Texas reeling is not an engineering problem, nor is it the frozen wind turbines blamed by prominent Republicans. It is a financial structure for power generation that offers no incentives to power plant operators to prepare for winter.

Will Englund, The Texas grid got crushed because its operators didn’t see the need to prepare for cold weather (WashingtonPost.com Feb. 16, 2021) (extra paragraphing added).

And from the NY Times:

One example of how Texas has gone it alone is its refusal to enforce a "reserve margin" of extra power available above expected demand, unlike all other power systems around North America. With no mandate, there is little incentive to invest in precautions for events, such as a Southern snowstorm, that are rare. Any company that took such precautions would put itself at a competitive disadvantage.

Clifford Krauss, Manny Fernandez, Ivan Penn and Rick Rojas, How Texas’ Drive for Energy Independence Set It Up for Disaster (NYTimes.com Feb. 21, 2021) (emphasis added).

UPDATE: Debate still goes on about whether the Texas electricity grid is structured to provide incentives for maintaining reliable power. See, e.g., Shelby Webb, PUC to take next step on ERCOT market redesign (HoustonChronicle.com Jan. 19, 2023); Shelby Webb, Major PUC decision about Texas' power market won't be the end of debate (HoustonChronicle.com Jan. 9, 2023).

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

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?
10. QUESTION: What is DCT's favorite two-word question when interviewing clients (witnesses, etc.)? [This is a preview of the Jeopardy! game on the last day of class.]

In my whiteboard I'll start to 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]

Now: Your turn — use the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6.

Houston appellate attorney Robert M. "Randy" Roach, with whom I was friendly in law school, found himself in what appears to have been a bitter dispute with a former close friend over an alleged "handshake deal" about ownership of a California wine company. See Schrader Cellars, LLC v. Roach, No. 23-15862, slip op. (9th Cir. Feb. 21, 2025) (reversing and remanding summary judgment that Randy had no ownership interest in wine company).

Of note among the issues of material fact mentioned by the Ninth Circuit:

• Randy's friend insisted on a "handshake" deal, without a written contract, even though Randy had his friend's law firm draft a written partnership agreement.
• Randy's friend sold the wine company and didn't include Randy in the deal, leading Randy to sue in Texas — the buyer then sued Randy in California. (In both lawsuits, all defendants filed extensive counterclaims.)
• Randy was accused of breaching a fiduciary duty to the wine company because he'd done some legal work for the company and thus was obligated by California legal-ethics rules to put his alleged ownership interest in writing.
• Written evidence indicated that Randy was a partner in the enterprise, not merely its legal counsel.

Discuss in your groups:

1. QUESTION: What parts of the Services reading:
   • surprised you; and/or
   • struck you as worth mentioning to an inexperienced client?
2. QUESTION: How much time should a lawyer spend reviewing the statement of work for a client?
3. QUESTION: Should MathWhiz agree to obtain all permits and licenses needed related to its performance of services for Gigunda? Careful: Think broadly about what permits and/or licenses:
   • might be needed by someone; and
   • might be claimed — in hindsight — to have been "related to" MathWhiz's services.
4. QUESTION: What could happen if a Provider failed to get required occupational licenses, e.g., construction-contractor licenses?
5. QUESTION: (Facts:) A home builder finishes a new house and turns the keys over to a young couple, who move in with their new baby (and the wife's in-laws, visiting from out of town). BUT: The builder failed to get the final city inspection done, so the city orders the family to move out, and they have to spend three days in a hotel.
   • Q: Who pays the hotel bills?

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?

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       • Group 5       • Group 6, 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.

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.

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

The shareholders of both companies approved the merger. The merger was announced almost exactlly a year ago but it first had to clear regulatory hurdles.

Let's look at:

•  The Agreement and Plan of Merger

•  Counsel (see the Notices clause, § 9.5):
–  Sullivan & Cromwell for Discover
–  Wachtell Lipton for Capital One.

6.3 Stockholders’ Approvals. Each of Capital One and Discover shall call a meeting of its stockholders (the “Capital One Meeting” and the “Discover Meeting,” respectively) to be held as soon as reasonably practicable after the S-4 is declared effective, for the purpose of obtaining (a) the Requisite Discover Vote and the Requisite Capital One Vote required in connection with this Agreement and the Merger and (b) if so desired and mutually agreed, a vote upon other matters of the type customarily brought before a meeting of stockholders in connection with the approval of a merger agreement or the transactions contemplated thereby, and each of Discover and Capital One shall use its reasonable best efforts to cause such meetings to occur as soon as reasonably practicable and on the same date. Each of Capital One and Discover and their respective Boards of Directors shall use its reasonable best efforts to obtain from the stockholders of Capital One and Discover, as applicable, the Requisite Capital One Vote and the Requisite Discover Vote, as applicable, including by communicating to the respective stockholders of Capital One and Discover its respective recommendation (and including such recommendation in the Joint Proxy Statement) that, in the case of Capital One, the stockholders of Capital One approve the Capital One Share Issuance (the “Capital One Board Recommendation”), and in the case of Discover, the stockholders of Discover adopt this Agreement (the “Discover Board Recommendation”). Each of Capital One and Discover and their respective Boards of Directors shall not (i) withhold, withdraw, modify or qualify in a manner adverse to the other party the Capital One Board Recommendation, in the case of Capital One, or the Discover Board Recommendation, in the case of Discover, (ii) fail to make the Capital One Board Recommendation, in the case of Capital One, or the Discover Board Recommendation, in the case of Discover, in the Joint Proxy Statement, (iii) adopt, approve, recommend or endorse an Acquisition Proposal or publicly announce an intention to adopt, approve, recommend or endorse an Acquisition Proposal, (iv) fail to publicly and without qualification (A) recommend against any Acquisition Proposal or (B) reaffirm the Capital One Board Recommendation, in the case of Capital One, or the Discover Board Recommendation, in the case of Discover, in each case within ten (10) business days (or such fewer number of days as remains prior to the Capital One Meeting or the Discover Meeting, as applicable) after an Acquisition Proposal is made public or any request by the other party to do so, or (v) publicly propose to do any of the foregoing (any of the foregoing a “Recommendation Change”). However, subject to Section 8.1 and Section 8.2, if the Board of Directors of Capital One or Discover, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would more likely than not result in a violation of its fiduciary duties under applicable law to make or continue to make the Capital One Board Recommendation or the Discover Board Recommendation, as applicable, such Board of Directors may, in the case of Capital One, prior to the receipt of the Requisite Capital One Vote, and in the case of Discover, prior to the receipt of the Requisite Discover Vote, submit this Agreement to its stockholders without recommendation (although the resolutions approving this Agreement as of the date hereof may not be rescinded or amended), in which event such Board of Directors may communicate the basis for its lack of a recommendation to its stockholders in the Joint Proxy Statement or an appropriate amendment or supplement thereto to the extent required by law; provided that such Board of Directors may not take any actions under this sentence unless it (A) gives the other party at least three (3) business days’ prior written notice of its intention to take such action and a reasonable description of the event or circumstances giving rise to its determination to take such action (including, in the event such action is taken in response to an Acquisition Proposal, the latest material terms and conditions of, and the identity of the third party making, any such Acquisition Proposal, or any amendment or modification thereof, or describe in reasonable detail such other event or circumstances) and (B) at the end of such notice period, takes into account any amendment or modification to this Agreement proposed by the other party and, after receiving the advice of its outside counsel and, with respect to financial matters, its financial advisors, determines in good faith that it would nevertheless more likely than not result in a violation of its fiduciary duties under applicable law to make or continue to make the Capital One Board Recommendation or Discover Board Recommendation, as the case may be. Any material amendment to any Acquisition Proposal will be deemed to be a new Acquisition Proposal for purposes of this Section 6.3 and will require a new notice period as referred to in this Section 6.3. Capital One or Discover shall adjourn or postpone the Capital One Meeting or the Discover Meeting, as the case may be, if, as of the time for which such meeting is originally scheduled there are insufficient shares of Capital One Common Stock or Discover Common Stock, as the case may be, represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of such meeting, or if on the date of such meeting Discover or Capital One, as applicable, has not received proxies representing a sufficient number of shares necessary to obtain the Requisite Discover Vote or the Requisite Capital One Vote; provided that the date of the Capital One Meeting or the Discover Meeting, as applicable, is not postponed or adjourned more than twice and in each case for more than an aggregate of 15 days in connection with any one postponement or adjournment or more than an aggregate of 30 days from the original date of the applicable meeting in reliance on the preceding sentence (excluding any adjournments or postponements required by applicable law). Notwithstanding anything to the contrary herein, unless this Agreement has been terminated in accordance with its terms, (x) the Capital One Meeting shall be convened and the Capital One Share Issuance shall be submitted to the stockholders of Capital One at the Capital One Meeting and (y) the Discover Meeting shall be convened and this Agreement shall be submitted to the stockholders of Discover at the Discover Meeting, and nothing contained herein shall be deemed to relieve either Capital One or Discover of such obligation. As used in this Agreement, “Acquisition Proposal” shall mean, with respect to Capital One or Discover, as applicable, other than the transactions contemplated by this Agreement, any offer, inquiry or proposal relating to, or any third party indication of interest in, (i) any acquisition or purchase, direct or indirect, of twenty-five percent (25%) or more of the consolidated assets of a party and its Subsidiaries or twenty-five percent (25%) or more of any class of equity or voting securities of a party or its Subsidiaries whose assets, individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the party, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in such third party beneficially owning twenty-five percent (25%) or more of any class of equity or voting securities of a party or its Subsidiaries whose assets, individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the party, or (iii) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving a party or its Subsidiaries whose assets, individually or in the aggregate, constitute twenty-five percent (25%) or more of the consolidated assets of the party.

DCT to do a "live" rewrite of the following in my whiteboard:

6.3 Stockholders’ Approvals. Each of Capital One and Discover shall call a meeting of its stockholders (the “Capital One Meeting” and the “Discover Meeting,” respectively) to be held as soon as reasonably practicable after the S-4 is declared effective, for the purpose of obtaining (a) the Requisite Discover Vote and the Requisite Capital One Vote required in connection with this Agreement and the Merger and (b) if so desired and mutually agreed, a vote upon other matters of the type customarily brought before a meeting of stockholders in connection with the approval of a merger agreement or the transactions contemplated thereby, and each of Discover and Capital One shall use its reasonable best efforts to cause such meetings to occur as soon as reasonably practicable and on the same date. Each of Capital One and Discover and their respective Boards of Directors shall use its reasonable best efforts to obtain from the stockholders of Capital One and Discover, as applicable, the Requisite Capital One Vote and the Requisite Discover Vote, as applicable, including by communicating to the respective stockholders of Capital One and Discover its respective recommendation (and including such recommendation in the Joint Proxy Statement) that, in the case of Capital One, the stockholders of Capital One approve the Capital One Share Issuance (the “Capital One Board Recommendation”), and in the case of Discover, the stockholders of Discover adopt this Agreement (the “Discover Board Recommendation”).

Then: Your turn; use the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6.

DCT to summarize:

• a very-frustrating contract review from yesterday; and
• a pending discussion with the client about just raising the price (for a real-world example, see here).

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.

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 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 this writing (Feb. 26, 2025), 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, 601 U.S. 124, 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?

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, LLC v. Howmedica Osteonics Corp., 92 F.4th 896, 921 n.14 (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." Id. at 921. The court therefore reversed an attorney-fee award in favor of ORP.

2.  Contract's 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.'" Id. at 921 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!

In the Tilly's case, how did the company's contract language boomerang on the company? (The reading: Here.)

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?

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].

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       • Group 5       • Group 6

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.

From Jesse M. Coleman & Eron Reid, Acting NLRB General Counsel Rescinds Biden-Era Policy Guidance on Non-Compete Agreements (TradeSecretsLaw.com Feb. 26, 2025):

On February 14, 2025, NLRB Acting General Counsel William B. Cowan rescinded a number of active General Counsel Memoranda citing an increasing “backlog of cases [grown] to the point where it is no longer sustainable.”

Among those rescinded were a pair of memos issued by recently ousted NLRB General Counsel Jennifer Abruzzo [fired by President Trump] that declare non-compete agreements between employers and workers illegal under the National Labor Relations Act (the “Act”). 

The rescission of these memos and other Biden administration policy memoranda reflect a marked shift in priorities of the agency under the Trump administration towards more pro-employer positions.

Scan through Evergreen renewals and come up with a list of noteworthy points — we'll go around the room.

• This hasn't been part of the reading.
• The point is to give you some experience in "on the fly" lookups, which you'll sometimes have to do in client work
• You'll use your noteworthy points in an exercise later tonight.

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.

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:

Holsum de Puerto Rico, Inc., 116 F.4th 59 (1st Cir. 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)."

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:

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.

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       • Group 5       • Group 6

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?

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 backup-payment sources such as a standby letter of credit and/or one or more personal guaranties from other parties with (reachable) assets.

From The New Yorker:

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 1: "Herzegovina" means duke's land.

Fun fact 2: My maternal grandparents were Croats [pronounced CROW-ah-ts; they immigrated to the U.S. in the early 20th century.

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.

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       • Group 5       • Group 6

As part of transitioning the course materials to a new format, over spring break I'll be updating the reading schedule.

AND: I'm going to continue experimenting with "just-in-time reading" as we did with evergreen renewals.

We'll wrap up the "negotiation" exercise we started on Monday:

PART 3: Each pair of groups should designate a spokesperson to "report out" — one issue at a time, alternating between pairs — on:

• points of agreement; and
• (more importantly) points where you didn't get to agreement.

And you should feel free to ask questions about possible approaches and opportunities to compromise.

From the Houston Business Journal, Feb. 25, 2025:

Houston-based Schlumberger Ltd. (NYSE: SLB) is a big step closer to completing its $7.8 billion acquisition of The Woodlands-based ChampionX Corp. (Nasdaq: CHX), but it will make a key sale to do so.

SLB announced on Feb. 25 the Hart Scott Rodino antitrust waiting period has expired, which means SLB is cleared to close the transaction in the United States.

However, in conjunction with the antitrust review, SLB and ChampionX have reached a definitive agreement to sell all of ChampionX’s equity interests in U.S. Synthetic Corp to Connecticut-based private equity firm LongRange Capital LP for about $300 million. The deal is conditioned on the closing of SLB’s acquisition of ChampionX and is expected to close shortly after that deal does.

The Agreement & Plan of Merger

Why was the Hart-Scott-Rodino waiting period significant? From Wikipedia:

The HSR Act provides that parties must not complete certain mergers, acquisitions or transfers of securities or assets, including grants of executive compensation, until they have made a detailed filing with the U.S. Federal Trade Commission and Department of Justice and waited for those agencies to determine that the transaction will not adversely affect U.S. commerce under the antitrust laws.

While parties can carry out due diligence and plan for post-merger integration, they may not take any steps to integrate operations, such as an acquiring party obtaining operational control of the acquired party. [Such activities are known as "gun-jumping."]

From the Agreement & Plan of Merger (edited):

Section 3.7   Compliance with Law; Permits.

(a) Since January 1, 2021, the Company and its Subsidiaries have been in compliance with, and are not in default under or in violation of, any applicable federal, tribal, state, local, foreign or multinational law, statute, treaty, act, code, ruling, award, writ, ordinance, rule, regulation, judgment, order, injunction, decree or agency requirement of any Governmental Entity, including common law (collectively, “Laws” and each, a “Law”),

except where such non-compliance, default or violation would not have, individually or in the aggregate, a Company Material Adverse Effect.

Since January 1, 2021, neither the Company nor any of its Subsidiaries has received any written notice or, to the Company’s knowledge, other communication from any Governmental Entity regarding any actual, alleged, potential or possible violation of, or failure to comply with, any Law,

except as would not have, individually or in the aggregate, a Company Material Adverse Effect. * * *

Section 3.8  Anti-Corruption.

(a) Since June 3, 2020, neither the Company, nor any Subsidiary, nor any director, officer, or, to the Company’s knowledge, employee, agent, or any other person acting on behalf of the Company or any of its Subsidiaries has directly or indirectly violated or received information suggesting the Company or any Subsidiary has violated any Anti-Corruption Laws;

nor has the Company, any Subsidiary, or any of their respective directors, officers, employees, agents, or any other persons acting on their behalf corruptly offered, paid, promised to pay, authorized, solicited, or received the payment of money or anything of value, directly or indirectly, to or from any person, including any Governmental Official:

(i) to influence any official act or decision of a Governmental Official;

(ii) to induce a Governmental Official to do or omit to do any act in violation of a lawful duty;

(iii) to induce a Governmental Official to influence the act or decision of a governmental Entity;

(iv) to secure any improper business advantage;

(v) to obtain or retain business in any way related to the Company or any of its Subsidiaries; or

(vi) that would otherwise constitute a bribe, kickback, or other improper or illegal payment or benefit.

(b) The Company and its Subsidiaries have developed and implemented an Anti-Corruption Law compliance program which includes corporate policies and procedures designed to ensure compliance with applicable Anti-Corruption Laws. * * *

(e) Since June 3, 2020, no Governmental Entity, customer, or supplier has notified the Company or any of its Subsidiaries in writing of any actual or alleged violation or breach of an Anti-Corruption Law.

Section 3.9  Sanctions; Trade Controls.

* * *

(b) Neither the Company nor any director, officer, employee or agent of the Company is:

(i) a Sanctioned Person;

(ii) subject to debarment or any list-based designations under Trade Controls; or

(iii) engaged in transactions, dealings, or activities that might reasonably be expected to cause such person to become a Sanctioned Person.

* * *

Section 9.1   No Survival. None of the representations, warranties, covenants and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger,

except for the second to last sentence of Section 8.3(e) and covenants and agreements which contemplate performance after the Effective Time or otherwise survive the Effective Time expressly by their terms.

* * *

Section 9.14   Headings. Headings of the Articles and Sections of this Agreement are for convenience of the parties only and shall be given no substantive or interpretive effect whatsoever.

The table of contents to this Agreement is for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.15   Interpretation.

When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated.

Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”

The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, unless the context otherwise requires.

The term “or” is not exclusive.

The word “extent” in the phrase “to the extent” shall mean the degree to which a subject or other thing extends and such phrase shall not mean simply “if.”

Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Schedules” are intended to refer to Sections of this Agreement and Exhibits or Schedules to this Agreement.

All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.

Unless otherwise specified in this Agreement, all references in this Agreement to “dollars” or “$” shall mean U.S. Dollars and all amounts in this Agreement shall be paid in U.S. Dollars, and if any amounts.

The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.

References in this Agreement to specific laws or to specific provisions of laws shall include all rules and regulations promulgated thereunder, and any statute defined or referred to herein or in any agreement or instrument referred to herein shall mean such statute as from time to time amended, modified or supplemented, including by succession of comparable successor statutes.

When calculating the period of time within which, or following which, any action is to be taken pursuant to this Agreement, the date that is the reference day in calculating such period shall be excluded.

References to days shall refer to calendar days unless business days are specified.

Each of the parties has participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.

* * *

Section 9.16 Definitions.

(a)  As used in this Agreement: * * *

(xliii) "knowledge" means

(A) with respect to Sodium, Sodium US and their respective Subsidiaries, as the case may be, the actual knowledge, after reasonable investigation of their direct reports, of the individuals listed in (xliii)Section 9.16(a)(xliii)(A) of the Sodium Disclosure Schedule and

(B) with respect to the Company and its Subsidiaries, the actual knowledge, after reasonable investigation of their direct reports, of the individuals listed in Section 9.16(a)(xliii)(A) of the Company Disclosure Schedule (a “Key Company Employee”).

Something that didn't make the reading in transitioning the course materials to a new format: Parallelism violations.

(In the earn-out rewriting assignment, I didn't count off for parallelism violations, but I'll be doing so in future assignments.)

Here's an 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:

DCT to recount a Zoom-call negotiation yesterday about a MathWhiz customer that insisted it would not agree to a damages cap.

See this short-form audit clause.

This clause might suffice as "hamburger for the guard dog."

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

I'll spin the wheel to call on people.

1. 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?

2. 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?

3. 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?

4. 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?

5. 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?

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? (Hint: Who would be liable?)

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

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?

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 ….

I'll post new group assignment on Wednesday.

Tell me what you see in: Most-favored customer clauses:

• Pick three things you found noteworthy (one will be a backup).
• Pick two spokespeople.

We'll go around the room twice.

On Wednesday we'll do a drafting exercise.

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?

FACTS – from a 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):

See 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).

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.)

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

Seller DISCLAIMS all other warranties, express or implied.

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

In the U.S., suppose that a draft contract for the sale of goods doesn't include a proper disclaimer. In that situation, the seller, if dealing regularly in that type of goods (see UCC § 2-104), would be deemed, under UCC § 2-314, to have made the implied warranty of merchantability. Thus, if the purchased electric motors were to have problems, this implied warranty by Seller might very well give your client Buyer some extra leverage.

Here, it seems that Seller's contract drafter screwed up by failing to include a proper disclaimer. It's not your job to fix that mistake, at least not when doing so might later disadvantage your client Buyer.

In your groups, tell me what you see in this excerpt from a Fifth Circuit opinion — pick two things:

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?

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.

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

QUESTION 1: To what extent if any are Company's and Contractor's indemnity obligations in 12.1 and 12.2 "mirror images" of each other? If they're not the same, are the differences important?

QUESTION 2: Same question for 12.3 and 12.4.

QUESTION 3: 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.)

[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]

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.

See this photo:

Feel free to use the group whiteboards (both classes):       • Group 1       • Group 2       • Group 3       • Group 4       • Group 5       • Group 6

See this yellow-highlighted markup of this blog post.

I'll spin the wheel to call on people.

Last week I finalized a contract for my "MathWhiz" client. We went back and forth with MathWhiz's customer about how much insurance MathWhiz would be required to carry; the customer (in the UK) wanted £5 million but we negotiated that down. At the customer's request, we included a copy of MathWhiz's insurance certificate as an exhibit.

JUST-IN-TIME READING: In your groups, tell me what you see in this sanitized version of the MathWhiz insurance certificate. Focus on the following questions. I'll spin the wheel to call on people.

QUESTION 1. What coverages does MathWhiz have?

QUESTION 2. Item A [far-left column]: Is this an "occurrence" policy or a "claims made" policy limits? What's the difference?

QUESTION 3. Item A: What do you think the "GEN'L. AGGREGATE LIMIT" boxes mean?

QUESTION 4. Item B: What's the difference between "excess" and "umbrella" coverage? (I'll answer this; for future reference, you can see the Web page quotation below.)

QUESTION 5. Item C: Why would the MathWhiz customer care whether MathWhiz is carrying worker's compensation insurance?

QUESTION 6: Item D: What are some other names by which errors and omissions ("E&O") insurance is referred to?

From this Web page (edited):

For example, let’s say Billie the Builder’s underlying policy covers job site injuries, with damages up to $1 million.

In which of the following scenarios would the contractor be completely covered?

Scenario 1: An accident occurs on the job site that the contractor is responsible for. Damages are assessed at $700,000.

Scenario 2: An accident occurs on the job site that the contractor is responsible for. Damages are assessed at $1.4 million.

Scenario 3: An accident occurs off the job site that the contractor is responsible for. Damages are assessed at $700,000.

Billie the Builder is only fully covered in Scenario 1.

Here’s why:

In Scenario 2, while the scope of the incident is covered by the policy, the $1 million limit means the contractor would be responsible for the excess $400,000.

In Scenario 3, the contractor would be responsible for the full $700,000 assessment because the location of the accident was not covered by the scope of the policy—an inclusion gap. No matter the financial cap of the policy, the claim would not be covered.

Fortunately, there are ways contractors can protect themselves against the types of losses in Scenarios 2 and 3: Excess and umbrella insurance.

* * *

What Is Umbrella Insurance?

A form of excess liability insurance, umbrella insurance broadens policy scope, while expanding coverage to claims that exceed the limits of the underlying policy.

Umbrella insurance can extend coverage over multiple primary policies and typically offers higher liability limits compared to primary insurance policies.

For instance, an umbrella policy may cover auto liability in a foreign country even though the commercial auto policy does not extend its territory to these countries.

Therefore, umbrella insurance helps close any outstanding liability gaps.

In the examples above, umbrella insurance would have helped Billie the Builder to protect themselves [sic] in Scenario 3: They [sic] could have purchased an umbrella policy that covered incidents occurring off the job site.

For the above MathWhiz contract was signed with "wet ink" signatures — MathWhiz's customer "Gigunda" is a subsidiary of a significant foreign multinational company but requested wet ink.

Here's the (redacted) email that I sent to all concerned to wrap things up:

From: D. C. Toedt
To: [OMITTED]
Subj: Gigunda-MathWhiz MCA final 2025-03-19 attached

1.  ALL: Attached are Word and PDF versions of the final document.

2.  Mary: Please sign the signature page (also attached as a separate PDF [making things easy on the client]), scan or photograph it, and email it back to both me and Tom [the MathWhiz customer's in-house attorney].

3.  TOM: I put the effective date as yesterday; otherwise I didn't change the final document that you sent me with your email of March 10. [I'm leaving a paper trail here]

4.  TOM: If it works for [Gigunda], please have Gigunda also sign the signature page, scan it, and return to me — and with your permission I'll add the signed signature pages for both Gigunda and MathWhiz to the attached PDF and send it to everyone for use as a "record copy."

Regards,

D. C.

D.C. Toedt

Unless expressly stated otherwise in this message itself,
this message is not intended to serve as assent to any agreement
or other document, even one accompanying this message.

I got back MathWhiz's signed signature page the same day; this afternoon I got back Gigunda's signed signature page with an email from "Tom":

D. C.,

Attached are [Gigunda's]’s signatures on the MCA and on the SOW. Please send to us the record copy. [This establishes that both parties have agreed to the authenticity of the fully-signed "record copy," which could come handy someday.]

Thanks,

Tom

(Emphasis added.)

Here's the PDF that I'll be adding to the final-version PDF to create the record copy — note how both parties' signed signature pages have the date code at the top.

Note also the continuous line numbers 312 and 313 after the signature blocks — using Word's line-numbering feature makes discussion much easier on Zoom- and Teams calls, e.g., "let's go to line 243." (The line numbering doesn't happen for Word tables such as the signature blocks.)

From the Houston Chronicle when politicians and others are looking to point fingers:

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?

QUESTION 2: Same question for [D].

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:

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."

Ramadan is expected to end this weekend, with the attendant celebration of Eid al-Fitr (studentlife.MIT.edu) (Arizona Republic). The customary greeting is "Eid Mubarak," which Google indicates is Arabic for, approximately, "Blessed Feast" or "Blessed Festival."

So: Eid Mubarak to those who celebrate!

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 reading material.)

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 reading material.)

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

I'll spin the wheel to call on people.

Apropos of the termination-clause rewriting exercise we did, let's look at the latest episode in the failed merger between the Kroger and Albertsons grocery chains.

First, from last December:

The grocery chain Albertsons said on Wednesday that it had backed out of its $25 billion merger with Kroger and sued its rival for failing to adequately push for regulatory approval after both a federal and state judge blocked the deal on Tuesday. * * *

On Wednesday, Albertsons also said it filed a lawsuit against Kroger in the Delaware Court of Chancery, seeking billions of dollars in damages and accusing Kroger of failing to exercise “best efforts” to secure regulatory approval.

Kroger refused to divest assets necessary for antitrust approval, ignored regulators’ feedback and rejected strong buyers of stores it had planned to divest, Albertsons said in a statement announcing the lawsuit.

(Formatting edited.) The best-efforts provision is in section 6.3(a) the merger agreement.

And from yesterday:

U.S. grocery chain Kroger countersued Albertsons on Tuesday, escalating a legal battle between the companies following the collapse of their proposed $25 billion merger in December. * * *

In December, Albertsons asked for billions of dollars in damages along with a $600 million termination fee. Kroger had called the claims baseless.

Albertsons engaged in a campaign with divestiture buyer C&S Wholesale Grocers to pursue its own regulatory strategy, Kroger said on Tuesday.

"Albertsons's misconduct shockingly came to light in the middle of the antitrust trials under government cross examination of Susan Morris, Albertsons's recently promoted CEO designate," Kroger said.

The supermarket chain said Albertsons was not entitled to the termination fee or other damages due to its "misconduct".

Lessons:

1. "Best efforts" is subject to Monday-morning quarterbacking.
2. If you file a lawsuit where serious money is involved, there will always be a counterclaim — if for no other reasons than:
   • to throw up obstacles to summary judgment; and/or
   • to try to manuever for better positioning in settlement discussions.

The relevant termination provision seems to be in section 8.1(e) the merger agreement. It's truly a L.O.A.D.:

Section 8.1  Termination of Agreement. This Agreement may be terminated at any time prior to the Closing as follows: * * *

(e)   by the Company or Parent, if the Closing does not occur on or before January 13, 2024 (such date as may be extended pursuant to this Section 8.1(e), the “Outside Date”), provided that the right to terminate this Agreement pursuant to this Section 8.1(e) shall not be available to the Company, on the one hand, or Parent, on the other hand, if the failure of the Closing to occur prior to such time was primarily due to a material breach of the Company, on the one hand, or either Parent or Merger Sub, on the other hand, of this Agreement; provided, further, that if on such date the condition to Closing set forth in Section 7.1(b) (if the failure of such condition to be then satisfied is due to an Antitrust Law) or Section 7.1(c) shall not have been satisfied but all other conditions to Closing set forth in ARTICLE VII shall have been satisfied (or in the case of conditions that by their terms are to be satisfied at the Closing, shall be capable of being satisfied or waived by the Parties entitled to the benefit of such conditions at the Closing), excluding, in each case, any condition which has not been satisfied primarily due to Parent’s breach of this Agreement, [then] the Outside Date may be extended by either Parent or the Company by written notice to the Company or Parent, respectively, for one or more 30-day periods not to exceed 270 days in the aggregate (inclusive of any other extensions by the other Party pursuant to this Section 8.1(e)), provided, further, however, that neither Parent, on the one hand, nor the Company, on the other hand, shall have the right to extend the Outside Date if either Parent or Merger Sub, on the one hand, or the Company, on the other hand, has as of such time failed to duly perform and comply with each and all of the agreements and covenants of such party to be performed and complied with pursuant to this Agreement in all material respects.

In your groups:

1. Tell me what you see in Termination at Will (including the commentary).
2. FACTS: Gigunda wants its master services agreement with MathWhiz to contain a termination-at-will provision.

QUESTION A: What questions might you ask MathWhiz? QUESTION B, and what suggestions might you make? (The same person(s) should answer both.)

I'll spin the wheel to call on people.

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.)

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 form that rejects the "Customer's" terms and also says that 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 on a pure contract theory? What would be Gigunda's basis for a claim? 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.

I ran across this piece (2020).

(You won't be tested on it.)

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.

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

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.