Contract Drafting Class 6 Thurs Feb 2

1. Contract DraftingClass 6Thurs Feb 2 University of Houston Law Center D. C. Toedt III

2. Course fine-tuning

3. 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

4. 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

5. General format: Assignments • Tuesdays: Homework assignments due • Drafting exercises • Substantive questions • Not graded unless otherwise announced in advance • Thursdays: In-class negotiation exercises • Focus on the most-important and/or most-frequent provisions

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

7. In the news …

8. Scenario 1: Result dictated by Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W. 3d 323, 333-37 (Tex. 2011) Δ Seller provides geological report to π Buyer K has warranty disclaimer Geo. report proves wrong; π Buyer sues for fraud Δ MJMOL- result?

9. Scenario 2: Amco Energy, Inc. f.k.a. Capco Energy, Inc. v. Tana Exploration Co., No. 11-20264 (5th Cir. Jan. 30, 2012) 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?

10. Microsoft NDA – confidentiality provisions

11. Confidential information vs. trade secret • Should NDA distinguish between "con-fidentialinformation" and "trade secrets"? • No – legally identical • Yes – perpetual protection for a trade secret • No – little or no practical difference • Yes – trade secret can be protected even with no confidentiality precautions

12. QUESTION: • Should an NDA include a “sunset” clause that ends the receiving party’s confidentiality obligations? (Careful – trick question ….) • Yes – “date certain” is good practice • No – sunset clause can blow DP’s rights • Yes, but only w/ a trade-secret carve-out • No – obligations end only if info goes public

13. Microsoft NDA – general provisions

14. Section 4(e) – entire agreement • Under what circumstances might courts look to extrinsic evidence anyway? (Z&B 21-22) • Never • If contract is ambiguous • If justice requires it • Assume always [Write your own answer]

15. Entire agreement – alternative language “This Agreement sets forth the parties’ final, complete, exclu­sive, and binding statement of their agreement concerning its subject matter.” (Underlining is for class only)

16. Oral modification Marcoux v. Shell Oil Prods. Co. LLC, 524 F.3d 33 (1st Cir. 2008) Gas-station dealer agreement Integration, no-oral-modification π dealers claim Δ Shell orallycommitted to a perpetual pricing subsidy Internal Shell docs: Dealers should plan their businesses around pricing subsidy A. Shell wins? B. Dealers win?

17. Section 4(e) – waivers • Will courts usually enforce provisions like this? • Yes • No • Will courts always enforce provisions like this? • Yes • No

18. Section 4(f) – attorneys’ fess • Is an attorneys’ fees provision necessary to recover fees in a contract lawsuit? • No – fees can automatically be recovered by law • Yes – “American rule” (each party pays own) • No, if a statute provides for fees • [Some combination of the above]

19. Section 4(f) – attorneys’ fess • Who is more likely to be able to recover fees under this provision? • Disclosing party • Receiving party • Each is equally likely

20. Section 4(f) – attorneys’ fess • FACTS: Disclosing party sues receiving party but loses • QUESTION: Can (victorious) receiving party recover its fees under this provision? • Yes • No • Maybe [explain]

21. Attorneys’ fees -- “Texas” rule • Tex. Civ. Prac. & Rem. Code §38.001 – who can recover in a contract suit? • Prevailing party • Successful claimant • Successful defendant • Neither party • [Multiples of the above]

22. Attorneys’ fees -- “Texas” rule Tex. Civ. Prac. & Rem. Code §38.001 – • Prerequisites: • Written demand on claim • Claim not paid w/in 30 days • Actually employed attorney

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

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

25. 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

26. Forum selection Doe I v. AOL, LLC, No. 07-15323, (9th Cir. Jan. 16, 2009) • FACTS: Contract says exclusive forum is “the courts of the State of Texas” • QUESTION: Can you file in federal court? • Yes • No

27. Governing-law provisions • Courts usually honor them, but with public-policy exceptions, such as: • Post-employment non-compete clauses • Franchise laws, consumer-protection laws • Must be some relationship to chosen state

28. Governing-law provisions • FACTS: • Draft K says simply that Texas law applies. • One party is from Oklahoma, one from Tex. • Contract will be signed, performed in Okla.

29. Governing-law provisions • QUESTION: How best to “fix” contract to be (more) sure Tex. substantive law will apply? • Drive across state line to sign K in Texas • Use exclusive choice-of-forum clause • Recite “without regard to choice of law rules”

30. Section 4(g) – assignment of K • QUESTION: Are most contracts ordinarily assignable? • Yes • No • Yes, with some exceptions

31. Assignment of K – Port of NY & NJ

32. Review: Signature line How would the signature block for Microsoft be written?

33. End of class