Chad suggested that although fraud includes intentional misrepresentation, at least three state courts have treated the terms fraud and intentional misrepresentation as synonyms. That doesn’t worry me, because if you use in the contract just the word fraud, those courts wouldn’t conclude that a claim for intentional misrepresentation falls outside the scope of the provision.

But of greater concern was Chad’s suggestion that the elements of a claim for misrepresentation are different from the elements of a claim for fraud. That might lead a court to treat a reference to fraud not as an umbrella term that covers various kinds of claims but instead as a reference to a kind of claim, one distinct from a claim for intentional misrepresentation.

That we’re even discussing these niceties leads me to a conclusion that I should have come to earlier: referring to fraud and intentional misrepresentation at all is a losing proposition. Using fuzzy doctrinal terms is conducive to confusion. So I say let’s get rid of them and refer instead to the underlying actions.

So rather than refer to “any claim for fraud or intentional misrepresentation,” how about saying “any claim that the Indemnifying Party supplied one or more Indemnified Parties with information that the Indemnifying Party knew was inaccurate or any claim that the Indemnifying Party withheld information from one or more Indemnified Parties.”

How does this language relate to the “entire agreement” provision? As a rule, a merger provision doesn’t prevent a party from introducing parol evidence to show fraud.

And note that with this language I attempted to exclude from its scope an “honest mistake,” a concept Chad mentioned in his comment.

Sure, this new language is wordy, and I’m sure it could be improved. But that’s a small price to pay for getting rid of words that wrap a contract in fog.

Professor Alaka notes that “many, if not most, legal writing instructors have been surprised by the sometimes astounding lack of basic writing skills exhibited by a few of their students.” Is this something new? The following quotation in the article (taken from this article [pdf copy]) suggests that to some extent it is: “Widespread cultural changes, resulting in overall declining student writing levels and reading efforts, will likely affect incoming law student preparedness for law schools at every tier level.” But as Professor Alaka notes, Derek Bok (the former president of Harvard) says that “freshmen have never arrived at college with impressive writing skills” and that about 25 percent of Harvard freshmen in the 1890s were deemed poor writers ill-prepared for college coursework.

So I don’t agonize over the causes of current writing standards; all I know is that what I read and hear suggests that they’re a cause for concern. (To hear some people talk, being a legal writing instructor is akin to engaging in trauma triage.)

I got to wondering how this plays out for contract drafters. Would the same kind of remedial work be required to turn the current crop of law students into accomplished drafters? In other words, does clear drafting require the same kinds of skills as other kinds of writing (descriptive, expository, narrative, persuasive)?

In that regard, I have some good news and some bad news.

The good news is that because contract drafting seeks to regulate conduct, it’s more limited and stylized than other kinds of writing. For example, it offers a limited range of verb use, a limited vocabulary, and generally seeks to accomplish a limited range of goals. So you don’t have to be Proust to be an excellent contract drafter. Instead, you have apply to language the mindset of a software engineer—one with some creativity!—and you have to follow the rules.

But the bad news is that if you screw up in drafting a contract, the consequences can be vastly more traumatic than in other kinds of writing: in a contract, every provision serves a function; the stakes are high; the future is uncertain; and the parties can be expected to leap on anything that works to their advantage. By contrast, other kinds of writing are generally much more forgiving.

Those factors operate as a carrot and a stick on those learning to draft contracts: Consider yourselves lucky that you’re dealing with a more manageable kind of writing. And be sure to take advantage of that, because there’s a lot riding on your command of contract language.

He noted that it’s commonplace for both terms to be used in specifying exceptions to limits on indemnification. Here’s the sort of provision he was referring to (I haven’t attempted to clean it up):

Notwithstanding the above, the Basket and Cap shall not apply to claims for indemnification made by an Indemnified Party related to … (ii) any fraud by or intentional misrepresentation of the Indemnifying Party in connection with the transactions evidenced by this Agreement … .

But, he asked, don’t those terms mean the same thing? If so, why is it routine for drafters to use them as a couplet?

When you’re dealing with doctrinal terms of art, it can be difficult to isolate simple, universally recognized meanings. From the WestlawNext presentations I recently attended, I know that different jurisdictions use different terminology when referring to drunk driving. Due to the same dynamic, you can expect the courts and legislatures in different jurisdictions to attribute slightly different meanings to the same term of art.

So it comes as no surprise to have Williston on Contracts § 69:2 note that fraud “has been defined by many courts in slightly different language.” But it goes on to define fraud as “a deception deliberately practiced in order to unfairly secure gain or advantage, the hallmarks of which are misrepresentation and deceit, though affirmative misrepresentation is not required, as concealment or even silence can under certain circumstances constitute fraud.” I’ll make do with that definition, as for purposes of this post I’m not about to wade into an ocean of caselaw on the subject.

Because intentional misrepresentation would seem equivalent to “misrepresentation and deceit,” intentional misrepresentation would seem to constitute fraud. That much is confirmed by Restatement (Second) of Torts § 526, which states that “misrepresentation is fraudulent if the maker (a) knows or believes that the matter is not as he represents it to be, (b) does not have the confidence in the accuracy of his representation that he states or implies, or (c) knows that he does not have the basis for his representation that he states or implies.”

But given the cases cited in Williston to the effect that fraud can arise not only through misrepresentation but also concealment, it would seem that intentional misrepresentation is only one kind of fraud. That suggests that for purposes of contracts, it would be more economical and less confusing simply to refer to fraud and omit any reference to intentional misrepresentation, unless for some reason you wish to convey the narrower meaning.

But that’s a bird’s-eye view of the relationship between these terms. For purposes of any given contract, you’d best check on the meaning given those terms in the courts of the governing-law jurisdiction and how the legislature uses them. Don’t be surprised if what you find is rather messy.

Latham & Watkins and Manatt Phelps & Phillips are the targets of a malpractice lawsuit filed by ECC Capital Corp., which accuses the firms of botching a deal to sell its mortgage-origination business and a subprime-loan portfolio to Bear Stearns & Co.

…

In the suit–filed on Friday in Los Angeles Superior Court–ECC Capital claims that two law firms drafted an agreement with Bear Stearns that was flawed and incomplete. Specifically, the complaint states, provisions that should have shifted the risk of early defaults in the loan portfolio to Bear Stearns were not properly drafted.

…

The complaint goes on to state that ECC Capital specifically informed Latham and Manatt that it was critical for the executed agreement between the two parties to clearly and unambiguously describe the transfer of risk this way. …

…

The filing cites several instances of what it describes as malpractice, including the drafting of the agreement, which, ECC Capital claims, fails to clearly stipulate that Bear Stearns would assume the risk related to early defaults as agreed.

ECC’s complaint also says the firms failed to have the appropriate Bear Stearns subsidiary sign the agreement regarding the loan-portfolio purchase. As a result of this confusion, ECC claims, Bear Stearns refused to buy loans shortly after they were originated, and imposed requirements that borrowers make first payments before the loans would be purchased.

Although I have no notions as to the merits of ECC’s complaint, this dispute brought to mind a couple of points:

First, in the press of business it’s alarmingly easy to forget to include in a contract an important but out-of-the-ordinary deal point. To reduce the odds of that happening, I’ll usually start with a term sheet that the client signs off on, so as to ensure that the important deal points are included from the get-go. Going straight to a contract makes it harder for all concerned to do that sort of checking. A term sheet is in effect a checklist, a concept that’s generated a lot of chatter recently, with publication of Atul Gawande’s The Checklist Manifesto: How to Get Things Right. I discussed Gawande’s notions regarding checklists in this December 2007 blog post.

Second, getting the right party to sign a contract would seem a laughably basic matter, but sometimes things can be complicated. I recall the comments to this July 2008 blog post on having a company enter into a contract “on behalf of” an affiliate.

The article mentions me, but that’s not how it came to my attention. Honest.

This bugs me. I see a lot of nondisclosure agreements. A typical definition of the information protected by such an agreement includes a notion that the information is “confidential or proprietary.” The “proprietary” part just seems wrong to me. So what if the information is owned as property? A company’s website is owned as property, but it shouldn’t be protected as “confidential information” under a nondisclosure agreement.

What do you think?

Black’s Law Dictionary defines proprietary as meaning “1. Of or relating to a proprietor {the licensee’s proprietary rights}. 2. Of, relating to, or holding as property {the software designer sought to protect its proprietary data}.”

I see it used three different ways in a definition of Confidential Information. First, it’s used on its own, without confidential:

As defined herein, “Confidential Information” means information or material proprietary to either party, whether written or oral, tangible or intangible, relating, but not limited to, the parties’ business and products.

Second, it’s used in definitions that encompass confidential information or proprietary information:

Confidential Information ” means information, whether or not originated by the Employee, that relates to the business or affairs of the Company, its affiliates, clients or suppliers and is confidential or proprietary to, about or created by the Company, its affiliates, clients, or suppliers.

With respect to these two uses, I agree with Chris—why should all information, whether confidential or not, constitute confidential information for purposes of an NDA?

Third, you have those definitions that encompass information that is confidential and proprietary:

“Confidential Information” means information delivered to any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to any of the Loan Documents that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by such Purchaser as being confidential information of the Company or such Subsidiary … .

Rather than being overbroad, this approach might be too narrow. A disclosing party could conceivably disclose information that isn’t proprietary but is nevertheless information that it would want to keep confidential, for example information that had been disclosed to it under an NDA.

So my default mode would be to omit proprietary from a definition of Confidential Information.

And I do so even though transactional lawyers don’t represent the core users of Westlaw. (That’s been my assumption, and responses to the polls in this recent blog post appear consistent with that.) So regular readers of this blog might not find WestlawNext of compelling interest. But I use Westlaw a lot, so indulge me if I go slightly off message for this post.

WestlawNext’s Home Page

The biggest change offered by WestlawNext is evident at the home page (see the screenshot below).

Westlaw’s current home page offers you the main search box plus a range of others, among them “Find by citation” and “KeyCite this citation.” It also asks you to specify which of Westlaw’s 40,000-plus databases you wish to search and offers you a few dozen to choose from. By contrast, WestlawNext offers one search box into which you type your search, whatever it might be, without asking you to specify a database. The obvious analogy is Google.

The home page could conceivably have been limited to that search box, but after exhaustive customer research West elected for a compromise between utter austerity and the current Westlaw approach: you can restrict your search by jurisdiction, and by clicking on one of the limited number of links below the search box you can instead elect to go directly to whatever kind of materials, topics, or tools interest you.

Searching

You can search on WestlawNext using “natural language” or by using Boolean terms and connectors. But a natural-language search on WestlawNext is much more sophisticated than a natural-language search on Westlaw. For one thing, that’s because WestlawNext’s search algorithms leverage West’s extensive proprietary analytical content, notably the West Key Number system. If two cases are grouped together in the Key Number system, a WestlawNext search that retrieves one of the cases will take that grouping into account in determining whether to include the other case. Similarly, WestlawNext searches also consider KeyCite citation links between documents.

I found it particularly intriguing that in handling a given search, WestlawNext also considers customer usage with respect to comparable searches. More specifically, it looks to “meaningful interactions.” If a customer looked at a given document retrieved in a search, that’s not especially meaningful. But if the customer printed the document, or saved it to a folder, that would increase the odds that the document was particularly relevant for purposes of a similar search performed subsequently. When amassed over thousands upon thousands of searches, that sort of incremental information should add real value.

This enhanced searching means that documents retrieved in a given search aren’t purely a function of the search terms. For example, different states use different terminology when referring to drunk driving; if your search refers to “driving under the influence,” WestlawNext is designed to retrieve cases in which the court uses a different term, such as “driving while impaired.” In fact, WestlawNext will retrieve relevant cases even if you misspell a search term, and it will also likely ask you whether you in fact meant, for example, ”Brown v. Board of Education” rather than “Brawn v. Board of Education.”

To distinguish WestlawNext’s enhanced search function, West has dubbed it “WestSearch.” You get the benefit of WestSearch even if you elect to use Boolean terms and connectors. That can be a bit disconcerting to those who are used to such searches on Westlaw: if you use quotation marks to designate a search phrase, WestSearch will nevertheless retrieve, if it thinks them particularly relevant, documents that contain the phrase elements used separately. I asked West whether it expects Boolean searching to fall by the wayside, but they said they did not—that if you’re looking for something very specific, a Boolean search may be the best way to retrieve it. They suggested that in due course they may add an “advanced search” function that would allow the user to perform a pure, un-WestSearch-enhanced Boolean search.

The Overview Page

Because WestlawNext is structured to allow you to perform a search without specifying a database, search results include anything relevant retrieved by WestSearch from all databases. WestlawNext first presents those results on an overview page containing a link to, and a brief extract of, the few documents deemed most relevant, ranked by relevance. (See the screenshot below.) They would come from one or more of the various categories (cases, statutes, regulations, secondary sources, and so on). You can go directly to one of those documents, or you can elect to see all documents in a given category. You can also specify which category you want to appear first.

To the left of the overview is a list of how many documents have been retrieved in each category. Clicking on that list provides another way to get to all the documents in a category.

Documents

In WestlawNext, documents look sharper and are easier to read—the result of West’s exhaustive customer research. (See the screenshot below.) It’s no surprise that Arial won out for the body text, even though it’s no thing of beauty: when it comes to typography, people like what they’re used to.

One nice feature new to WestlawNext is that when you’re in a document, you can highlight text and elect to save it to a folder, you can copy text with a reference specifying the document the text came from, or you can add a note to the document. If you’ve taken any of those actions in a given document in the previous 30 days, that will be indicated by one or more of three symbols to the right of the overview entry for that document.

Folders

You can save documents and copied text to “folders.” (Folders don’t contain the documents themselves but rather links to the documents.) Using folders provides users with a simple way to organize search results, but more important is the fact that all links are kept up-to-date, so any time you view a document in one of your folders you can quickly check for any changes in its subsequent history and how it has been cited since you last viewed it.

West told us that at launch users won’t be able to share folders; that functionality will be added after launch. Users within an organization, or among organizations, will then be able to share search results, as long as each user is covered by a WestlawNext plan.

Pricing

In WestlawNext, searches would be covered by your plan. Whether you’d be charged for viewing or printing a document or saving it to a folder would, I gather, depend on what’s covered under your plan. If you save a document to a folder, during the following year you wouldn’t be charged for viewing that document again. (If you share a folder, other users would be charged for viewing any document in that folder, and then they too would have a year to view it without incurring any additional charges.)

In terms of absolute pricing, West would only say that WestlawNext will be charged at a “modest premium” to current Westlaw pricing, with the price for each Westlaw customer to be determined in discussions between that customer and its West representative. As I understand it, the premium is not necessarily a function of how user actions are priced. It may be that the premium comes in the form of a requirement that a given user beef up their plan by adding users or databases.

The Payoff

So what benefits does WestlawNext offer?

Allowing users to search without specifying a database means that a user will be supplied with all relevant documents, wherever they might be stashed. You won’t risk missing a document because you weren’t aware of a given database, or didn’t know that it would be relevant.

The enhanced searching results in searches that retrieve a greater number of relevant documents and place them higher in the search results. That makes searches not only more successful, but also faster, as fewer searches are required. West showed us a scary graphic of a representative series of searches on Westlaw: the user retrieved relevant documents, but because they were buried lower in the results, the user missed some relevant documents and instead elected to do another search, a process that was repeated a number of times. Presenting relevant documents higher up the search results reduces the likelihood of such futility.

Being able to highlight or copy text, add notes, and save documents to folders that you’ll be able to share (once WestlawNext rolls out that function) makes the whole search process more efficient. The same goes for the graphic-design enhancements.

Dumbing Down?

During our presentations, West mentioned that it had heard squawking in some circles to the effect that enhanced natural-language searching, plus the fact that WestSearch’s default mode is not to follow Boolean searches slavishly, means that WestlawNext represents a “dumbing-down” of legal search.

Here’s my take on that: If you’re a Boolean-search wizard, the transition might be disconcerting: you’re ceding control to the unknowable algorithms of WestSearch on the assumption that the enhanced searching will routinely produce greater results than you could achieve with your Boolean artistry. My limited exposure to WestlawNext suggests that it’s worth it to cede that autonomy.

But consider this from West’s perspective. The boolean-search wizards among us are greatly outnumbered by searchers who are busy, stressed, not very experienced, or unfamiliar with the topic being searched, or some combination of those factors. They’re the ones who are most subject inefficiencies on Westlaw, and I suspect that they’d be only too happy to surrender some autonomy for the prospect of quicker searches and more relevant results.

Market Response?

I have no idea to what extent West will convince Westlaw customers to pay a premium for WestlawNext. I suspect that among larger customers, market psychology will ensure that no one will want to be seen to be relying on yesterday’s search technology.

And I won’t speculate how WestlawNext will match up against—ranked in order of plausibility—the next generation of Lexis, less-expensive services such as Fastcase, and Google Scholar. I’m fortunate not to have to consider pricing, as free Westlaw and Lexis searching is a perk of my teaching at Penn Law. Once Penn Law hands out WestlawNext passwords—sometime in fall 2010, as rollout at law schools is purposely being delayed—I anticipate that I’ll do the bulk of my searching through WestlawNext. I’m prepared for a bit of a learning curve, but I’m looking forward to it.

Links

You might find of interest the views of some of those who were with me in Eagan. Each of the following links will take you to that person’s blog post on WestlawNext:

• David Bilinsky
• Tom Boone
• Simon Chester
• Jason Eiseman
• Carolyn Elefant
• Greg Lambert
• Besty McKenzie
• Lisa Solomon
• Jason Wilson

And of course, there’s the official WestlawNext site.

Disclosure

West footed the bill for my trip to Eagan. And I do public seminars and webcasts with another part of the West family, West LegalEdcenter. But it would take more than that to make me a West stooge! I recall, as a sign of my independence, one of the oddest bits of feedback I received after a seminar: the participant in question was disconcerted that, at a seminar offered by West, I mentioned Lexis a couple of times. That’s me—a mavericky rogue.

When is an amendment not an amendment? When it’s a separate agreement!

From the introductory paragraph of a supplier’s attachment to another agreement:

IMPLEMENTATION ASSISTANCE AMENDMENT NUMBER ONE TO BASIC LICENSE AGREEMENT NUMBER [redacted] CUSTOMER: [redacted]

This Amendment, together with the terms and conditions contained int he Basic License Agreement, dated January ___, 2010 shall constitute a separate and distinct Agreement between the parties. All the terms and conditions of said Basic License Agreement continue in full force and effect and shall control this Amendment unless specifically modified hereby.

I’m not entirely sure what this means. From what I gather, what they really intend is for this “Amendment” not to amend anything, but to use the “Basic License Agreement” as a master set of terms and to add additional terms to address “implementation assistance” services. Sort of like an addendum with additional legal terms. Nevertheless, I wonder whether its prudent under any circumstance to refer to something as an “amendment” when you don’t intend it to modify the agreement to which it is attached.

From the world of bizzaro-drafting!

I agree: don’t give anything in a contract a misleading label, because someone—notably a judge—may take you at your word.

A recent Texas Supreme Court decision highlights the importance of thoughtful drafting. In Intercontinental Group Partnership v. KP Home Lonestar L.P., 295 SW3rd 650 (Tex. 2009), the Texas Supreme Court addressed the simple question: What does “prevailing party” mean?

In the Intercontinental case, the contract contained the following attorney’s fees provision: “If either party named herein brings an action to enforce the terms of this Contract or to declare rights hereunder, the prevailing party in any such action, on trial or appeal, shall be entitled to his reasonable attorney’s fees to be paid by losing party as fixed by the Court.”

The term “prevailing party” was not defined in the contract.

KB Home sued Intercontinental for breach of contract and lost profits. The jury found that Intercontinental breached the contract, but the jury awarded zero dollars in damages. However, the jury did award KB Home $66,000.00 in attorney’s fees. In view of this trial result, both parties claimed to be the “prevailing party.”

The singular issue addressed by the Texas Supreme Court was summarized succinctly by the Court as follows: “When a contract mandates attorney’s fees to a “prevailing party,” the term undefined in the contract, has a party “prevailed” if the jury finds the other side violated the contract but awards no monetary damages?”

After an illuminating discourse on litigants’ entitlement to attorney’s fees and the ordinary meaning of the term “prevailing party,” the Texas Supreme Court ruled that, absent a contractual definition of “prevailing party,” a party must receive affirmative judicial relief to be considered a prevailing party. Inasmuch as KB Home recovered no monetary damages, the Court concluded that KB Home did not qualify as a “prevailing party.” Consequently, the award of $66,000.00 attorney’s fees to KB Home was reversed, and the Court rendered a judgment that KB Home take nothing.

Patrick closed by recommending that “prevailing party” be defined whenever it’s used in a contract. But as Chadwick suggested to me, it must be rare for a party to have the benefit of a favorable verdict but not be awarded even nominal damages. Given that the odds of such an outcome would seem remote, I’m not sure that guarding against it is worth another defined term, or even being more specific as to meaning. Any thoughts?

Another thought—what if a court’s holding is a mixed one?

But kicking the tires of WestlawNext caused me to consider how computer-assisted legal research is used in contract drafting. I invite you to take the following desperately unscientific polls and post a comment on the utility of such research.