Comments on: Getting Rid of the “Successors and Assigns” Provision http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/ Tue, 31 Jan 2012 01:23:03 +0000 hourly 1 http://wordpress.org/?v=abc By: David P. Wilson http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-94872 David P. Wilson Tue, 23 Feb 2010 17:28:27 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-94872 What about the case where one or more of the parties to the agreement are individuals, one of the parties dies, the agreement does not contain the successors and assigns provision (is completely silent on this issue), and the agreement does contain a restrictive covenant (non-compete/non-solicit/non-disparagement) provision. Would the restrictive covenant be enforceable against the estate of the deceased party—even if the agreement otherwise terminates on the death of a party? What about the case where one or more of the parties to the agreement are individuals, one of the parties dies, the agreement does not contain the successors and assigns provision (is completely silent on this issue), and the agreement does contain a restrictive covenant (non-compete/non-solicit/non-disparagement) provision. Would the restrictive covenant be enforceable against the estate of the deceased party—even if the agreement otherwise terminates on the death of a party?

]]> By: AdamsDrafting » Blog Archive » Excluding Consequential Damages Is a Bad Idea http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-94815 AdamsDrafting » Blog Archive » Excluding Consequential Damages Is a Bad Idea Tue, 16 Feb 2010 14:10:03 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-94815 [...] is just one example of an accepted bit of boilerplate that doesn’t make much sense. In this September 2006 blog post I wrote about another favorite waste o’ time, the “successors and assigns” [...] [...] is just one example of an accepted bit of boilerplate that doesn’t make much sense. In this September 2006 blog post I wrote about another favorite waste o’ time, the “successors and assigns” [...]

]]> By: Ken Adams http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-56623 Ken Adams Tue, 29 Jul 2008 22:50:36 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-56623 Jim: I believe that you're referring to reason number 2 above. Ken Jim: I believe that you’re referring to reason number 2 above. Ken

]]> By: Jim http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-56591 Jim Tue, 29 Jul 2008 18:58:23 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-56591 Ken - Could not another purpose of the clause be to prevent the non-assigning party from arguing it has no contractual privity with a successor or assignee in an action by the assignee to enforce the contract? Especially where another boilerplate provision typically provides that there are no third party beneficiaries to the contract, it would seem the "inure to the benefit of" clause still has value here. Ken –

Could not another purpose of the clause be to prevent the non-assigning party from arguing it has no contractual privity with a successor or assignee in an action by the assignee to enforce the contract? Especially where another boilerplate provision typically provides that there are no third party beneficiaries to the contract, it would seem the “inure to the benefit of” clause still has value here.

]]> By: Ken Adams http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-56559 Ken Adams Tue, 29 Jul 2008 12:32:12 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-56559 Al: Making order out of chaos is certainly a noble endeavour, but not if the lawyer is the one making the mess. I see plenty of advantages, and no disadvantages, to eliminating a profoundly confused provision and accomplishing the client's goals more directly. Ken Al: Making order out of chaos is certainly a noble endeavour, but not if the lawyer is the one making the mess. I see plenty of advantages, and no disadvantages, to eliminating a profoundly confused provision and accomplishing the client’s goals more directly. Ken

]]> By: Al Sklover http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-56512 Al Sklover Tue, 29 Jul 2008 02:53:44 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-56512 Ken, I've given careful consideration to your thoughts. Are we to accept that the highest purpose is simplicity for lawyers (our generation or the next)? Although it has been said that "simplicity is the ultimate sophistication," it is not, to my mind, the ultimate purpose. I don't think I find change to be either counterproductive or scary; rather, I do seek every possible advantage for my clients, actual or perceived, for they are often the same. I think the highest purpose of the law is the welfare of humankind, however messy, disorderly or complicated that may be. Al Sklover Ken,

I’ve given careful consideration to your thoughts. Are we to accept that the highest purpose is simplicity for lawyers (our generation or the next)? Although it has been said that “simplicity is the ultimate sophistication,” it is not, to my mind, the ultimate purpose. I don’t think I find change to be either counterproductive or scary; rather, I do seek every possible advantage for my clients, actual or perceived, for they are often the same. I think the highest purpose of the law is the welfare of humankind, however messy, disorderly or complicated that may be.
Al Sklover

]]> By: Ken Adams http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-56016 Ken Adams Thu, 24 Jul 2008 19:11:55 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-56016 Al: When you look at change from the perspective of the needs of any given lawyer, change can seem counterproductive, even downright scary: expedience is the order of the day. But I have the luxury of looking at change from a broader perspective, and in that context, all that matters is your suggestion that my points are conceptually hard to argue with. If we fix the language of business contracts, life will be much simpler for the next generation of lawyers. Ken Al: When you look at change from the perspective of the needs of any given lawyer, change can seem counterproductive, even downright scary: expedience is the order of the day. But I have the luxury of looking at change from a broader perspective, and in that context, all that matters is your suggestion that my points are conceptually hard to argue with. If we fix the language of business contracts, life will be much simpler for the next generation of lawyers. Ken

]]> By: Al Sklover http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-55913 Al Sklover Wed, 23 Jul 2008 22:12:11 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-55913 Ken, All of your points are all well-taken, rational and coherent; conceptually hard to argue with. That being said, I defer to what has worked, and continues to work, for me, which is the standard clause. Practicality is key to my practice. In my 25 years of law practice on behalf executives worldwide, I've found the standard successors-and-assigns clause, coupled with a cautionary reminder to general counsel of the employer that he/she should advise successors/assigns of this important obligation, or be potentially considered to have withheld material information, has gotten my clients where they want to go. In court, too, I've enforced the standard clause upon acquiring entities on a "knew or should have known with reasonable due diligence" argument. Though potentially rife with risks and imperfections, the standard clause invites universal acceptance, and generally works. Al Sklover, SkloverWorkingWisdom.com Ken,

All of your points are all well-taken, rational and coherent; conceptually hard to argue with. That being said, I defer to what has worked, and continues to work, for me, which is the standard clause. Practicality is key to my practice. In my 25 years of law practice on behalf executives worldwide, I’ve found the standard successors-and-assigns clause, coupled with a cautionary reminder to general counsel of the employer that he/she should advise successors/assigns of this important obligation, or be potentially considered to have withheld material information, has gotten my clients where they want to go. In court, too, I’ve enforced the standard clause upon acquiring entities on a “knew or should have known with reasonable due diligence” argument. Though potentially rife with risks and imperfections, the standard clause invites universal acceptance, and generally works.

Al Sklover, SkloverWorkingWisdom.com

]]> By: Bea Grossman http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-8177 Bea Grossman Sat, 01 Sep 2007 02:28:48 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-8177 Ken, I am very happy that I came across your article -- I was actually researching this issue myself with respect to the scenario suggested above by Robert Sonenthal. In the matter I was recently working on there was a provision in a contract that was binding on the purchaser of a business and its "successors and assigns." That party is now selling the business and the question was raised as to whether that provision would be binding on the new buyers in the context of an asset purchase agreement. In my view, the draftsman of the original contract may have had the intention of binding all future successors in interest, but this was not specified in the original contract. As you note in your response to Robert Sonenthal (which I agree with), I don't see how you would be able to bind a future purchaser with the standard "successors and assigns" provision alone. Your article provided excellent authority in an area that most practioners do not stop to think about - thank you! Ken, I am very happy that I came across your article — I was actually researching this issue myself with respect to the scenario suggested above by Robert Sonenthal. In the matter I was recently working on there was a provision in a contract that was binding on the purchaser of a business and its “successors and assigns.” That party is now selling the business and the question was raised as to whether that provision would be binding on the new buyers in the context of an asset purchase agreement. In my view, the draftsman of the original contract may have had the intention of binding all future successors in interest, but this was not specified in the original contract. As you note in your response to Robert Sonenthal (which I agree with), I don’t see how you would be able to bind a future purchaser with the standard “successors and assigns” provision alone. Your article provided excellent authority in an area that most practioners do not stop to think about – thank you!

]]> By: Ken Adams http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/comment-page-1/#comment-7238 Ken Adams Sun, 05 Aug 2007 14:56:55 +0000 http://www.adamsdrafting.com/2006/09/18/successors-and-assigns/#comment-7238 Luis: You're seeking to attribute to the "successors and assigns" provision a function that would be redundant for contract purposes: under state statutory law, if Company A merges into Company B, Company B automatically assumes all Company A's obligations. And secondarily, as I explained in my original post, a contract between Company A and some other party would be an unpromising vehicle for imposing obligations on Company B. Ken Luis: You’re seeking to attribute to the “successors and assigns” provision a function that would be redundant for contract purposes: under state statutory law, if Company A merges into Company B, Company B automatically assumes all Company A’s obligations.

And secondarily, as I explained in my original post, a contract between Company A and some other party would be an unpromising vehicle for imposing obligations on Company B.

Ken

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