Contract DraftingClass 6Thurs Feb 2

University of Houston Law Center

D. C. Toedt III

Course fine-tuning

Priorities

Invest the most time on the most-frequent and/or most-important contract provisions

Spot other issues Drafting “style” goal: Basic competence Won’t try to cover the entire Z&B or Stark

book

General format: Lectures

Questions to answer I’ll make the questions available in advance as

much as I can manage it Each student writes down individual

answer Consult your teammates, during or before

class Questions are likely to show up on the final

General format: Assignments

Tuesdays: Homework assignments dueDrafting exercisesSubstantive questionsNot graded unless otherwise announced in

advance Thursdays: In-class negotiation exercises

Focus on the most-important and/or most-frequent provisions

Homework assignment

Stark Exercise 18-5 – bring to class on Tuesday Feb. 7

In the news …

Scenario 1:

Δ Seller provides geological report to π Buyer

K has warranty disclaimer

Geo. report proves wrong; π Buyer sues for fraud

Δ MJMOL - result?

Result dictated by Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W. 3d 323, 333-37 (Tex. 2011)

Scenario 2:

Δ Seller provides geological report to π Buyer

K has warranty disclaimer + express reliance disclaimer

Geo. report proves wrong; π Buyer sues for fraud

Δ MSJ - result?

Amco Energy, Inc. f.k.a. Capco Energy, Inc. v. Tana Exploration Co., No. 11-20264 (5th Cir. Jan. 30, 2012)

Microsoft NDA – confidentiality provisions

Confidential information vs. trade secret Should NDA distinguish between "con-

fidential information" and "trade secrets"?A. No – legally identical

B. Yes – perpetual protection for a trade secret

C. No – little or no practical difference

D. Yes – trade secret can be protected even with no confidentiality precautions

QUESTION: Should an NDA include a “sunset” clause

that ends the receiving party’s confidentiality obligations? (Careful – trick question ….)A. Yes – “date certain” is good practice

B. No – sunset clause can blow DP’s rights

C. Yes, but only w/ a trade-secret carve-out

D. No – obligations end only if info goes public

Microsoft NDA – general provisions

Section 4(e) – entire agreement

Under what circumstances might courts look to extrinsic evidence anyway? (Z&B 21-22)A. Never

B. If contract is ambiguous

C. If justice requires it

D. Assume always

[Write your own answer]

Entire agreement – alternative language

“This Agreement sets forth the parties’

final, complete, exclu sive, and binding

statement of their agreement concerning

its subject matter.” (Underlining is for

class only)

Oral modification Gas-station dealer agreement Integration, no-oral-modification π dealers claim Δ Shell orally

committed to a perpetual pricing subsidy Internal Shell docs: Dealers should plan

their businesses around pricing subsidy A. Shell wins? B. Dealers win?

Marcoux v. Shell Oil Prods. Co. LLC, 524 F.3d 33 (1st Cir. 2008)

Section 4(e) – waivers

Will courts usually enforce provisions like this?A. Yes

B. No Will courts always enforce provisions like this?

A. Yes

B. No

Section 4(f) – attorneys’ fess

Is an attorneys’ fees provision necessary to recover fees in a contract lawsuit?A. No – fees can automatically be recovered by law

B. Yes – “American rule” (each party pays own)

C. No, if a statute provides for fees

D. [Some combination of the above]

Section 4(f) – attorneys’ fess

Who is more likely to be able to recover fees under this provision?A. Disclosing party

B. Receiving party

C. Each is equally likely

Section 4(f) – attorneys’ fess

FACTS: Disclosing party sues receiving party but loses

QUESTION: Can (victorious) receiving party recover its fees under this provision?A. Yes

B. No

C. Maybe [explain]

Attorneys’ fees -- “Texas” rule

Tex. Civ. Prac. & Rem. Code § 38.001 – who can recover in a contract suit?A. Prevailing party

B. Successful claimant

C. Successful defendant

D. Neither party

E. [Multiples of the above]

Attorneys’ fees -- “Texas” rule

Tex. Civ. Prac. & Rem. Code § 38.001 – Prerequisites:

Written demand on claimClaim not paid w/in 30 daysActually employed attorney

Attorneys’ fees -- California rule

California Civil Code § 1717: Any attorneys’ fees provision in a contract is deemed a prevailing-party provision

Forum selection provisions

Courts usually honor them Public-policy exceptions (David v. Goliath) Waiver of forum non conveniens? Waiver of removal right?

Forum selection – exclusive?

QUESTION: Why might it make sense for P to file suit in D’s home court?

[Hint: Think about what P will have to make happen to get relief, and which venue that might be easier in]

Write your own answer, then discuss w/ teammate

Forum selection

FACTS: Contract says exclusive forum is “the courts of the State of Texas”

QUESTION: Can you file in federal court?A. Yes

B. No

Doe I v. AOL, LLC, No. 07-15323, (9th Cir. Jan. 16, 2009)

Governing-law provisions

Courts usually honor them, but with public-policy exceptions, such as:Post-employment non-compete clausesFranchise laws, consumer-protection laws

Must be some relationship to chosen state

Governing-law provisions

FACTS: 1. Draft K says simply that

Texas law applies.

2. One party is from Oklahoma, one from Tex.

3. Contract will be signed, performed in Okla.

Governing-law provisions

QUESTION: How best to “fix” contract to be (more) sure Tex. substantive law will apply?A. Drive across state line to sign K in Texas

B. Use exclusive choice-of-forum clause

C. Recite “without regard to choice of law rules”

Section 4(g) – assignment of K

QUESTION: Are most contracts ordinarily assignable?A. Yes

B. No

C. Yes, with some exceptions

Assignment of K – Port of NY & NJ

Review: Signature line

How would the signature block for Microsoft be written?

End of class