Transcript Remedies - On Contracts

Contract Drafting
Class 6
Thurs 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 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
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 "confidential information" and "trade secrets"?
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
A.
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
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
A.
Microsoft NDA –
general provisions
Section 4(e) – entire agreement

Under what circumstances might courts look
to extrinsic evidence anyway? (Z&B 21-22)
Never
B. If contract is ambiguous
C. If justice requires it
D. Assume always
A.
[Write your own answer]
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)
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?
Yes
B. No
A.

Will courts always enforce provisions like this?
Yes
B. No
A.
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
B. Yes – “American rule” (each party pays own)
C. No, if a statute provides for fees
D. [Some combination of the above]
A.
Section 4(f) – attorneys’ fess

Who is more likely to be able to recover fees
under this provision?
Disclosing party
B. Receiving party
C. Each is equally likely
A.
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
B. No
C. Maybe [explain]
A.
Attorneys’ fees -- “Texas” rule

Tex. Civ. Prac. & Rem. Code
§ 38.001 – who can recover
in a contract suit?
A.
B.
C.
D.
E.
Prevailing party
Successful claimant
Successful defendant
Neither party
[Multiples of the above]
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
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?

Yes
B. No
A.
Doe I v. AOL, LLC, No. 07-15323, (9th Cir. Jan. 16, 2009)
Governing-law provisions

Courts usually honor them, but with publicpolicy exceptions, such as:
 Post-employment
non-compete clauses
 Franchise laws, consumer-protection laws

Must be some relationship to chosen state
Governing-law provisions

FACTS:
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.
1.
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
B. Use exclusive choice-of-forum clause
C. Recite “without regard to choice of law rules”
A.
Section 4(g) – assignment of K

QUESTION: Are most contracts ordinarily
assignable?
Yes
B. No
C. Yes, with some exceptions
A.
Assignment of K – Port of NY & NJ
Review: Signature line

How would the signature block for
Microsoft be written?
End of class