If you’re a fan of the litigation-versus-arbitration debate, you’ll find of interest this article on law.com. It’s from the Legal Intelligencer, and it’s by Gina Passarella. The title says it all: “Litigators Losing Love of Arbitration Argue for Trials.” But what caught my eye was the suggestions made by those interviewed for the article regarding how [...]
It’s commonplace for a contract to require a party to use efforts (reasonable efforts or some suboptimal variant) to accomplish something to the extent possible (using those words or words to that effect). The notion of to the extent possible is redundant, as it’s implicit in an efforts provision that the party under the obligation [...]
Some months ago a reader asked the following: At some point down the road, can you do a blog posting on Most Favored Nation clauses? My feeling is that within the last 2-3 decades, some professor in some business school somewhere wrote an article on how important these clauses are. Current CEOs, CFOs, and procurement leaders [...]
Here’s yet another cautionary tale. This article on Lexology by Doug Batey of Stoel Rives LLP considers a recent Idaho Supreme Court opinion addressing a dispute over a fee-shifting provision in a limited-liability-company operating agreement. Here’s the contract provision at issue: In any action or proceeding brought to enforce any provision of this Agreement, or where any [...]
As a follow-up to this recent post, let me tell you about another opinion featuring a dispute over a jurisdiction provision. (My thanks to the indefatigable Steven H. Sholk for the lead.) The case is D.B. Zwirn & Co. v. Dittman, No. 09 Civ. 10498 (S.D.N.Y. filed Mar. 23, 2010) (click here to go to a [...]
In this May 2007 blog post I mentioned the dispute between Crusader Entertainment and schlockmeister Clive Cussler. In this post, the ContractsProf Blog provides the latest installment in this gripping saga—an opinion by a California appellate court. Here’s the bit that caught my eye: On the key issue in the appeal, the court found that [...]
My recent post on stand-alone purchase orders prompted a related thought: When you issue a stand-alone purchase order (in other words, one not issued under a master contract), you could incorporate the general terms (in other words, everything that doesn’t relate to deal-specific matters such as product and price) in different ways. You could include [...]
I received the following inquiry from a reader: As you know, goods or services can be purchased by means of purchase orders issued under a master contract or by POs that aren’t issued under a master contract—I’ll refer to the latter as “stand-alone” POs. They can be issued for one-off purchases or on a regular [...]
After chewing over the comments to this post on excluding consequential damages, I’m left with the following thoughts: I remain of the view that putting a cap on damages is the simplest and least contentious way to limit damages. And it can make excluding certain kinds of damages less relevant, or even entirely irrelevant. Whether [...]
[For a follow-up to this post, see this March 2, 2010 blog post.] I have in front of me a contract—it’s for the sale of goods—that contains the following provision excluding certain kinds of damages: Neither party will be responsible or held liable for any consequential, special, or incidental losses or damages. You can rely [...]
Rarely do I have occasion to offer thoughts on drafting under article 2 of the Uniform Commercial Code, which applies to sales of goods. Here are two warranty disclaimers from some equipment purchase agreements I’ve been reviewing: NO OTHER WARRANTY TO CUSTOMER FROM SELLER IS EXPRESS OR IMPLIED. SELLER SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OF [...]
I find that the notion of categories of contract language (considered in detail in chapter 2 of MSCD) often provides a useful framework for analyzing substantive drafting issues. Take an issue I was asked about twice recently, once at the ACC annual meeting, once by one of my Penn Law students. It’s routine for contract [...]
[Revised Aug. 30 7:20 p.m. EDT to reflect comments by Mark and Richard; revised further Oct. 18 with respect to "arising out of and relating to," as discussed in this post.] Here’s the standard arbitration clause recommended by the American Arbitration Association, as stated in the AAA commercial arbitration rules (free registration required): Any controversy or claim arising out [...]
Now that my summer is officially over … I suspect that many drafters think that an indemnification section should appear in contracts as a matter of course, much like a governing-law provision. But before you include an indemnification section, consider the pros and cons. Indemnification Can Benefit a Party Bringing a Claim Bring In Deep [...]
In contracts, addresses occur in the notices provision. And if a contract doesn’t include a notices provision, usually I’ll include in the introductory clause the address of any individual that’s a party, so as to distinguish that individual from anyone else with the same name; see MSCD 1.49. But some addresses are more dependable than [...]
This Mace & Jones “Education Update” alerted me to the recent English case of KG Bominflot Bunkergesellschaft fur Mineralole MBH & Co KG v Petroplus Marketing AG (2009). Here’s the gist of it: The buyers purchased from the sellers fuel oil that tested OK before shipping but was found to be unsatisfactory on arrival. The [...]
[You might also want to read this September 2009 post in which I refine my thinking on "arising out of" and "relating to".] A Canadian law firm recently shared with me its draft “boilerplate” template. On reading it, I saw that the law firm recommends that its lawyers use the following language in any governing-law provisions [...]
Not satisfied with having prompted my recent foray into fax terminology, reader David Baghdassarian posted to that item the following comment on providing for notice by email: As for email notices, the problem I have is that there is too much room for an email to inadvertently be deleted or overlooked, email server to crash, [...]
A recent Texas case, XTO Energy, Inc. v. Smith Production, Inc., 2009 WL 442003, No. 14-07-00069-CV (Tex. App. Hous., Feb. 24, 2009), shows why it’s a good idea to be excruciatingly comprehensive when specifying in a contract the procedures to be followed when the parties make important decisions. Appellee Smith was an operator under two [...]
Included in the extensive comments to my recent post “Language Requiring Deletion of Electronic Files” is a comment by Michael Fleming to the effect that it’s appropriate to impose on a party receiving confidential information an obligation to destroy all electronic versions of that information, regardless of whether that’s in fact possible to do. Michael [...]
I received the following inquiry from Sarita Nair of the New Mexico law firm Sutin, Thayer & Browne: I am struggling to find a concise way to limit an obligation to delete electronic records. As you know, many contracts and letters of intent contain an obligation to destroy documents if a commercial relationship ends. In [...]
In MSCD 12.328, I say that respectively serves to indicate that each item in a list earlier in a sentence is to be paired with its counterpart in a list that follows and contains an equal number of items, as in The first and second prizes went to Marie and Frank, respectively. But in a [...]
Here’s a generic bit of granting language from a software license agreement: Acme hereby grants Widgetco a nonexclusive, perpetual, irrevocable, royalty-free, fully paid-up, worldwide license to the Software (that license, the “License“). I’m not a licensing guy, so it is with some trepidation that I ask the following question: Are such adjective-heavy formulations really the [...]
Eric Goldman recently sent me the following inquiry: A typical vendor’s contract will say something like “Customer shall pay invoiced amounts within 30 days of invoicing.” With some frequency, customers have been marking up this language to read: “Customer shall pay *UNDISPUTED* invoiced amounts within 30 days of invoicing.” From a vendor’s perspective, I think [...]
The May 2008 issue of The Business Lawyer contains a great article by Glenn D. West and Sara G. Duran of Weil Gotshal entitled “Reassessing the ‘Consequences’ of Consequential Damage Waivers in Acquisition Agreements.” Click here for a copy. Here’s the abstract: Consequential damage waivers are a frequent part of merger and acquisition agreements involving [...]
A common feature of M&A contracts is the “earnout” provision—a provision that specifies that the purchase price will be increased if the business being acquired meets, post-closing, stated financial-performance targets. If you’re interested in earnout provisions, of if you’d just like to see yet one more example of how lackadaisical drafting can result in litigation, you [...]
Reader David recently posed the following question: I have a question for you that has bugged me for several years. From time to time, my company shares company-related information with a third party and, before doing so, enters into a confidentiality agreement (CA) [also known as a nondisclosure agreement—KAA] with the third party. Our CA [...]
Here’s a standard waiver provision: Waiver. No provision in this agreement may be waived, except by means of a writing signed by the party against whom the waiver is sought to be enforced. I find such provisions very odd. Let’s start by considering what a waiver is. There are two kinds of waiver: First, a [...]
In this July 2006 post I said that although it’s standard to refer to “survival” of representations, it’s unhelpful to do so. I quoted language that I find much clearer. Well, it would seem that both the traditional language and my preferred language were found wanting in a 2007 case applying California law that I [...]
A cautious drafter would be advised to include in a comprehensive forum-selection provision elements that might seem redundant. Here’s why: An agreement could provide for either permissive (also know as non-exclusive) jurisdiction or mandatory (also know as exclusive) jurisdiction. The following language provides for permissive jurisdiction: Any party commencing against the other party any legal [...]
Regarding use of the word parties as a defined term, MSCD 2.42 says the following: [D]o not use the defined term the Parties. It ostensibly spares the drafter from having to refer throughout a contract to the parties to this agreement, but one can simply refer to the parties, because such a reference could not [...]
Via the InHouse Blog I learned of a briefing paper written by Leon N. Ferera, John R. Phillips, John Runnicles, and Jeffery D. Schwartz of Jones Day entitled “Some Differences in Law and Practice Between U.K. and U.S. Stock Purchase Agreements.” It touches on various subjects of interest to me, but what caught my eye [...]
A reader recently sent me the following email: I’d appreciate your comments on an issue that’s been plaguing me off and on. I often see contracts with a fixed term. This works for a lease or license or a funding agreement where government agrees to provide funding to an entity for a specific period. At [...]
The November 6, 2006, issue of the National Law Journal contains my article on pre-closing knowledge of inaccurate representations. Go here for a copy. I apologize for the small print. I had given it the title “M&A Contracts: Addressing Pre-closing Knowledge of Inaccurate Representations,” but of course that wasn’t catchy enough for the editorial staff, [...]
A standard ingredient of contract boilerplate is the “successors and assigns” provision. Here’s what a run-of-the-mill successors and assigns provision looks like: This agreement is binding upon, and inures to the benefit of, the parties and their respective permitted successors and assigns. I’ve long considered the successors and assigns provision to be one of the [...]
Drafters should be aware of laws that can trump provisions of a given contract. A good example of this is the way the U.S. Bankruptcy Code can render unenforceable contract provisions that restrict assignment of rights under a contract or give a party the right to terminate if the other party files for bankruptcy. To [...]
I’ve recently been thinking about the concept of “survival.” It crops up in contracts in three ways, and in each of those contexts it’s either unnecessary or inferior to an alternative approach. I discuss each of these three contexts below. Survival of Claims Sometimes an agreement will specify that any claims that arise before an [...]
This weekend, I decided to explore the implications of the Buyer knowing, pre-closing, that a Seller representation is inaccurate. (I haven’t seen the various aspects of this topic treated together in any detail from the perspective of the drafter.) Here’s what I put together; you should consider it a first draft. I’d be happy to [...]
