Transcript Slides - On Contracts

Contract Drafting
Class 11
Tues. Feb 21
University of Houston Law Center
D. C. Toedt III
Common contract
screw-ups
Common contract screw-ups
“6. The contract with a date line left blank.”
QUESTION: What do you do about it?
[From “Top 10 howlers when preparing contracts for signature,” by the IP
Draughts blog at http://goo.gl/Km6Dw.]
Couplets & triplets
Some awkward expressions
How could these be improved?
 that property known and described as …
 of every kind and character …
 ABC will not suffer or permit …
 of every type and kind …
 it is understood and agreed …
Representations and
Warranties, cont’d
211 – No reliance
Representations outside this Agreement:
None – the parties have specifically
negotiated this section.
 Each party represents and warrants that,
in entering into this Agreement, it is not
relying on any representation by the other
party, other than those set forth herein or
incorporated by reference.

Why include no-reliance clause?

Vendor: Avoid fraudulent-misrep. claims

Customer (silver lining if forced to agree):
Identify problems BEFORE they arise
Discovery issues for either
warranty or misrep. claim

True value of asset sold
 Inspections
 Comparables
 Expert

testimony
Alt: Repair costs
 Estimates
 Expert
testimony
Extra discovery issues
for misrepresentations

Standard of care (negligence claims):
deals, practices, problems – interrog.,
document production, depositions
 Expert witnesses – fees, report review,
depositions, trial props, trial prep
 Past

Intent (fraud claims):
 Email

trails, interrog., depositions
Net worth – for punitive damages
Negotiating risk allocation
(Stark pp. 17-19)
See Stark’s examples
 Flat representation


Unequivocal
 Without wiggle room

Qualified representation

Hedged
Interplay of Contract Concepts

Rep and Warranty
 The

car is red.
Covenant
 Seller

shall not paint the car.
Condition
 Seller
must have complied with all covenants.
Stark Exercises 7-1
through 7-3
Exercise 7-1: In-line definition
2.1 Grant of License. By signing this Agreement,
Ralph LP grants Merchandisers an exclusive license
to manufacture and sell Licensed Products bearing
the Trademark, during the Term, in Maine, New
Hampshire, and Vermont (those three states, the
“Territory”). The Territory is extended to include
Delaware and Rhode Island for the second and third
years of the Term, but only if Merchandisers’ sales
for the first year of the Term exceed $7 million.
Exercise 7-1: Separate definition
“Territory” means Maine, New Hampshire, and Vermont
“Extended Territory” means the Original Territory plus Delaware, Maine,
New Hampshire, Rhode Island, and Vermont.
***
Ralph LP grants Merchandisers an exclusive license to manufacture and
sell Licensed Products bearing the Trademark, during the Term, in the
Territory.
If Merchandisers’ sales for the first year of the Term exceed $7 million, this
license will apply in the Extended Territory for the second and third years
of the Term.
Exercise 7-2: Separate definition
“Financial Statements” means (i) the balance sheet of the Company as of
December 31, 20X4 and December 31, 20X3 and (ii) the related statements
of income, cash flows, and shareholders' equity for each of the two years in
the period ended December 31, 20X4, including the related notes.
***
3.4 Financial Statements. The Financial Statements present fairly, in all
material respects, the financial position of the Company as of December 31,
20X4 and December 31, 20X3, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 20X4, in
conformity with generally-accepted accounting principles as established and
interpreted in the United States of America, consistently applied.
Exercise 7-2: In-line definition
3.4 Financial Statements. The balance sheet of the Company as of
December 31, 20X4 and December 31, 20X3 and the related statements of
income, cash flows, and shareholders' equity for each of the two years in the
period ended December 31, 20X4, including the related notes (the
“Financial Statements”) present fairly, in all material respects, the financial
position of the Company as of December 31, 20X4 and December 31, 20X3,
and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 20X4, in conformity with generallyaccepted accounting principles as established and interpreted in the United
States of America, consistently applied.
Exercise 7-3

The purchase price for the House (the “Purchase
Price”) is $250,000.

The purchase price for the House is $250,000 (the
“Purchase Price”).
Stark Exercise 5-1
End of class