Contract Drafting Class 25 Tues. Apr. 17

1. Contract DraftingClass 25Tues. Apr. 17 University of Houston Law Center D. C. Toedt III

2. Course evals

3. Please tell me in the comments… (1) what you thought of the new Zarfes & Bloom course book (the red book); and  (2) in your view, which if any of the experiments we tried were especially worthwhile, such as -- *  the red-card green-card question exercises -- would that be better with clickers?  Some articles say "yes," but clickers are more expensive than index cards .... *  mock negotiations -- should we do more of them next year (possibly with just three or four clauses to negotiate each time)? *  guest speakers -- especially if coordinated with the mock negotiations *  having the class-discussion questions posted in advance *  preparing written answers to class-discussion questions in advance, to hand in -- does answering written questions help you to grasp the reading?

4. Common contract screw-ups

5. Common contract screw-ups “3. The contract that names a different party at the top of page 1 to the party named in the signature block.” QUESTION: What do you do about it? [Discuss with your neighbor] [From “Top 10 howlers when preparing contracts for signature,” by the IP Draughts blog at http://goo.gl/Km6Dw.]

6. Chapter 6: Asset Purchase Agreement

7. Instructions • Count off by [TBD] • Buyers • Sellers • Pair up into: • Two-person Buyer teams • Two-person Seller teams • Pair up Buyer and Seller teams

8. Consideration for purchase BACKGROUND: Consider the process described in § 3.2 (c)-(d), p. 492-93. ISSUE: In (d), should the Accountants bother (incurring the expense of) writing up their calculations, given that they can only choose one party’s position or the other? TEAMS: Formulate your position(s).

9. Consideration for purchase(§ 3.2(c)-(d), p. 492) BACKGROUND: Consider the process described in § 3.2(c)-(d), p. 492. QUESTION: What one word could the drafters have used to make this process more “bullet-proof” in terms of enforceability?

10. Assets to be sold ISSUE: What if the parties don’t agree on whether an asset is “used primarily in the Business”? What could the contract provide? TEAMS: Prepare (a) your proposals and (b) your responses to what you expect the other side will propose.

11. Assets to be sold (§ 1.2(g), p. 485) ISSUE: Should any phone number(s) be included in the transferred Assets? EACH TEAM: Come up with (a) reasons for your desired answer, and (b) responses to the other side’s desired answer.

12. Effort to obtain assignments(§ 1.3(a), p. 486) ISSUE: How much effort should Sellers have to make to obtain consent? Is “reasonable best efforts” good enough? TEAMS: Prepare (a) your proposal, with reasons, and (b) your reasons for not wanting the other side’s proposal.

13. Other contracts(§ 1.3(b), p. 487) Renegotiate § 1.3(b). QUESTION: Is your proposal enforceable?

14. Assumption of liabilities(§ 2.1, p. 487) ISSUES: (1) Should Buyer assume liabilities that are only partly “relating to or arising out of the Business or the Assets”? (2) How can this be reliably determined? TEAMS: Prepare (a) your proposal, with reasons, and (b) your reasons for not wanting the other side’s proposal.

15. Assets and liabilities QUESTION: How can a contract be made more explicit about what assets and liabilities are, or are not, being transferred? (Exchange ideas with your teammate(s), then with “the other side.” Try to give each person roughly equal “talking time.”)

16. Assets and liabilities (p. 489) QUESTION: Why is Section 2.2(j) of the Disclosure Schedule --- concerning litigation and related matters --- numbered in that way? Why not just number the D/S sections in a standard 1, 2, 3, … sequence? (Exchange ideas with your teammate(s), then with “the other side.” Try to give each person roughly equal “talking time.”)

17. Consideration for purchase(§ 3, p. 490) ISSUE: In general, what type(s) of “currency” could Buyer use to pay for the Assets, and why? TEAMS: Prepare your offer and backup offer(s) --- with reasons.

18. Tax contest - Hypothetical (§ 3.4(d), p. 495) FACTS: Seller is hit with a tax assessment for a tax that the K requires Buyer to pay. Seller’s attorneys contest the tax, but Buyer isn’t happy with them or their approach. QUESTION: What option(s) does Buyer have? (Exchange ideas with your teammate(s), then with “the other side.” Try to give each person roughly equal “talking time.”)

19. Tax contests BACKGROUND: Consider § 3.4(d), p. 495 QUESTION FOR DCT TO ADDRESS: What do the “control of defense” provisions resemble?

20. Closing – hypothetical (§ 4.2(a)) FACTS: (a) One of the Sellers uses a copy of XYZ Software (retail cost USD $495.00) for certain back-office functions. (b) The XYZ software license agreement prohibits assignment without XYZ’s consent. QUESTION: Under 4.2(a), can Buyer walk away for breach of 5.2(c)? Why or why not?

21. Closing – hypothetical (§ 4.2(a)) FACTS: (a) A footnote buried deep in the Sellers’ financial statements states that Sellers are using a special-purpose entity (SPE). (b) A business journalist publishes an article saying that Sellers are doing just what got Enron into trouble. (c) Buyer tells Seller it wants to walk away from the deal for breach of 5.3(a). ISSUE: What are the parties’ options and motivations? TEAMS: Formulate your positions and reasons.

22. Permits (§ 5.15(b), p. 509) QUESTION: Why does 5.15(b) say “true, complete and correct list,” while 5.19 (see p. 513) says “true, accurate and complete [Books and Records]”?

23. Permits (§ 5.15(b), p. 509) QUESTION: Who likely keeps track of Permits?

24. Permits (§ 5.15(b), p. 509) ISSUE: Should any part(s) of 5.15(b) be renegotiated? TEAMS: Prepare your positions and reasons.

25. End of class