Transcript Negotiating Contract issues for in

Hot Topics in Business Law
Panel 1: Negotiating Contract Issues
for in-House Counsel
FACULTY
• David Munn, General Counsel, Pramata Corporation
[email protected]
• Sarah Sederstrom, Contracts Counsel, KBM Group
[email protected]
• Bill Thornton, Chair of Larkin Hoffman’s Corporate law
department [email protected]
In-House Practice is Different
• Perfect isn’t (usually) the goal
• Business people always want a short agreement
• Risk tolerance/perspective
Understand Your Business
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Understand the business and the industry
Understand your client’s products and services
Understand the business goals
Know the people involved
Understand the regulatory environment
Keep everything in perspective
General Drafting Caveats
• Watch out for urban legends in
contract law (example: “best
efforts”)
• Watch out for forms from outside
counsel
• Do you know what the word “shall”
means?
Systems Can Help
• At least learn how to use Word (e.g., automatic
numbering
• Online collaboration (e.g., GoToMeeting)
• Document assembly systems
• Contract management systems
• Automated contract review (proofreading)
• Electronic signatures (e.g., DocuSign, EchoSign)
Negotiations
● Understand your leverage
● Beware the non-negotiable form
● Keep the value of the contract and the effect of a breach in
mind
● Beware unreasonable negotiating positions
● Know when to fold’em
Ethical Issues - Dealing with NonLawyers
• Minnesota Rules of Professional Conduct: Rule 4.2:
Communication with Person Represented by Counsel
“In representing a client, a lawyer shall not
communicate about the subject of the
representation with a person the lawyer knows
to be represented by another lawyer in the
matter, unless the lawyer has the consent of the
other lawyer or is authorized to do so by law or a
court order.”
Hot Topic – No Reliance Clauses
• Also known as “anti-reliance clauses”
Example: “Acme acknowledges that because it is not
relying on any statements made by Widgetco to
Acme, other than in this agreement, regarding the
subject matter of this agreement, Acme will have no
basis for bringing any claim for fraud in connection
with any such statements.” *
Source: Ken Adams, Adams on Contract Drafting blog
http://www.adamsdrafting.com/entire-agreement-provisions-waiver-of-fraud-claims-andmagic-words/
Challenging provisions
A: Typical Areas of Negotiation
• Indemnification
• Limitation of liability
• NDAs / Confidentiality Agreements
• IP ownership and assignment
• MFN pricing
• Data security requirements
Indemnification
• Often misunderstood
• Often poorly drafted
Indemnification
Indemnification is an
undertaking by one party (the
indemnifying party) to
compensate the other party (the
indemnified party) for certain
costs and expenses.
From Practical Law, Inc.
Indemnification
Indemnification is a way of
shifting risks from one party to
another.
Typically combined with an
obligation to defend against
third-party claims.
Common types of claims subject to contractual
indemnification:
• Breach of representation or warranty
• Breach of agreement
• Losses incurred by a party
• Third party claims for specific subject
matter, such as (1) claims of infringement
or misappropriation of IP, (2) use of
goods by the indemnitee, (3) product
defect or liability claims, (4) claims arising
out of death or personal injury.
Hold Harmless
Commonly seen as “indemnify,
hold harmless, and defend”
Ongoing debate about whether
“hold harmless” means the
same as “indemnify” or has a
separate or broader meaning
Defend
Obligation to defend is not
inherent in the obligation to
indemnify.
COMMON NEGOTIATION ISSUES
• Third-party claims or also breach of
contract claims?
• Interplay with limitation of liability
(indemnification obligations often
“carved out” of limitations)
• Component part mfgr. liability
• Indemnification for a party’s own
negligence
• Liability for data breach costs
• Insurance coverage
Limitation of Liability
• Limitation as to types of damages (e.g.,
no consequential damages). Know what
you are waiving.
• Limitation as to amount of damages
• “Carve-outs”
• Interplay between limitation of liability
and indemnification
Confidentiality and NDAs
• Make sure to cover use as well as
disclosure
• Term of the NDA
• Period of disclosure
• Period of protection – trade secret
issues
• “Residuals”
• Marking or written notice
• Return or destruction
Other Common Issues
• IP ownership and assignment
• Who owns what? Get assurance of
assignment for what is yours
• Data security requirements
• Often pages long, get IS involved
• MFN pricing
Questions?
Thank You!
USEFUL RESOURCES:
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Ken Adams: A Manual of Style for Contract Drafting, 3rd Edition http://www.amazon.com/A-Manual-Style-ContractDrafting/dp/1614388032/ref=pd_cp_b_0/177-3084921-2242128 and blog http://www.adamsdrafting.com/blog/
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Urban Legends in Contract Law (slides):
http://webcasts.acc.com/handouts/LDMC_Urban_Legends_in_Contract_Law[1].pdf
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IACCM (International Association for Contract and Commercial Management) iaccm.com
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Coming to Terms When Negotiating with a Non-Lawyer. November 2012 ACC Docket Article
http://www.acc.com/vl/membersonly/ACCDocketArticle/loader.cfm?csModule=security/getfile&pageid=1319262&pag
e=/legalresources/resource.cfm&qstring=show=1319262&title=Coming%20to%20Terms%20When%20Negotiating%
20with%20a%20Nonlawyer
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Minnesota Rules of Professional Conduct:
http://lprb.mncourts.gov/rules/Documents/MN%20Rules%20of%20Professional%20Conduct.pdf
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Contract Review Technology http://static.legalsolutions.thomsonreuters.com/static/pdf/dat_software.pdf
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For ACC Members:
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ACC Contracts Portal http://www.acc.com/contracts/
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Urban Legends in Contract Law - ACC Law Department Management Committee Legal Quick Hit - Archived
Presentation http://webcasts.acc.com/detail.php?id=514319&go=1
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Negotiating with Non-lawyers: http://community.acc.com/egroups/viewthread/?GroupId=121&MID=46633