Transcript Remedies
Contract Drafting Class 3
University of Houston Law Center
D. C. Toedt III
In the news ….
§ 3.4 OPTION TO EXTEND: … [T]his Lease [will be] extended on the same terms and conditions set forth herein, except that . . . (ii) no Rent concessions, abatements, lease buyouts, tenant allowances or limitations on tax or expense pass-throughs granted with respect to the Lease Term hereof shall be applicable to any Option Period ….
Other provisions: § 5.3 Percentage rent [INTENTIONALLY OMITTED] § 6.4 Tenant share of landlord operating costs [INTENTIONALLY OMITTED] § 13.2 Tenant contribution to promotion & marketing fund [INTENTIONALLY OMITTED]
SAME QUESTION: Does AMC have the right to extend the lease on the same terms?
Probably Probably not Unclear
SAME QUESTION: Does AMC have the right to extend the lease on the same terms?
No - AMC must negotiate
Camelot LLC v. AMC ShowPlace Theatres, Inc.
, No. 11-1767 (8th Cir. Jan. 18, 2012)
Court’s rationale: The “intentionally omitted” provisions were “Rent concessions,” etc. (!) During extension, those “concessions” must be “unconceded” → indeterminate Minnesota law: “Renewal” must be negotiated
Redraft ?
§ 5.3 Percentage rent [INTENTIONALLY OMITTED] § 6.4 Tenant share of landlord operating costs [INTENTIONALLY OMITTED]
Redraft ?
§ 3.4 OPTION TO EXTEND: … [T]his Lease [will be] extended on the same terms and conditions set forth herein
.
, except that . . . (ii) no Rent concessions, abatements, lease buyouts, tenant allowances or limitations on tax or expense pass-throughs granted with respect to the Lease Term hereof shall be applicable to any Option Period ….
Redraft ?
REDRAFT POSSIBILITY: § 3.4 OPTION TO EXTEND: … [T]his Lease [will be] ex tended on the same terms and conditions set forth herein ….
WHAT DO CLIENTS - AND PARTNERS - WANT?
Exercise 18-3: Legalese No later than 90 days after the end of each fiscal year, the Borrower shall provide the Bank a copy of the Borrower’s year-end financial statements. Such financial statements shall be certified by the Borrower’s chief financial officer to fairly present the financial condition of the Borrower.
Exercise 18-3: Legalese No later than 90 days after the end of each fiscal year, the Borrower shall provide the Bank a copy of the Borrower’s year-end financial statements. Such financial statements shall be certified by the Borrower’s chief financial officer to fairly present the financial condition of the Borrower.
No later than 90 days after the end of each fiscal year, the Borrower will provide the Bank with a copy of its [?] year-end financial state ments, certified by the Bor rower’s chief financial officer as fairly presenting the Borrower’s financial condition.
Signature dating Big Public Software Company hypothetical Questions: 1.
2.
Backdate signatures?
Reason(s) for backdating?
Computer Associates Sanjay Kumar what happened to him, and why?
Steven Woghin?
Exercise: Electronic signatures
Question: Statute of frauds defense because of lack of handwritten signature?
E-SIGN -- 15 USC § 7001 Notwithstanding any statute, regulation, or other rule of law (other than this subchapter and subchapter II of this chapter), with respect to any transaction
in or affecting interstate or foreign commerce
—
(1)
a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability
solely
because it is in electronic form; and
(2)
a contract relating to such transaction may not be denied legal effect, validity, or enforceability
solely
because an electronic signature or electronic record was used in its formation.
Tex. Bus. & Comm. Code § 322.007
(a) A record or signature may not be denied legal effect or enforceability electronic form.
solely
because it is in (b)AAA contract may not be denied legal effect or enforceability
solely
because an electronic record was used in its formation.
Question: Handwritten “pre-signature” needed to show consent to e-signatures?
Tex. Bus. & Comm. Code § 322.005
(b) This chapter applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties ’ conduct.
Question: Record retention – hard copies needed?
Tex. Bus. & Comm. Code § 322.012
(a) If a law requires that a record be retained, the requirement is satisfied by
retaining an electronic record
of the information in the record which: (1)
accurately reflects
the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and (2)
remains accessible
for later reference.
Post-signature changes FACTS: Contract is “signed, sealed, delivered” Oops – exhibit has a mistake
What to do?
Post-signature changes Link to LA Times story Sept. 2010: Lawyer for Dodgers’ owner changes exhibit to prenup,
after
it’s been signed,
but didn’t tell the parties
• Exclusive inclusive • Represented H and W
Notarization
End of class
Exercise 18-4: Legalese Except as herein to the contrary provided otherwise provided in this Agreement, each party releases, remises and forever discharges the other party from any and all actions, suits litigations, debts,
claims,
and obligations whatsoever , both in law and equity, that either of them ever had, now has, or may hereafter subsequently have, against the other by reason of any matter, cause, or thing for any reason to [through] [to but not including] [to but excluding] the date of the execution of this Agreement [this Agreement’s execution].
Exercise 18-5: Legalese In the event of the failure of If the Borrower aforesaid fails to comply with the terms any term of the aforementioned Note, the undersigned Guarantor waives [notice of acceptance of this Guaranty, diligence, presentment, notice of dishonor, demand for payment, any and all notices ] of whatever kind or nature , and the exhaustion of legal remedies available to the Note’s holder.
“Texas” rule on atty. fees Tex. Civ. Prac. & Rem. Code § 38.001
Who can recover? Prerequisites?
Arele Partners v. Gunnerman Procedural history Evidentiary standard for fraud. intent Measure of damages 5 th Cir. majority opinion focus Higginbotham – motive for dissent?
Lessons
Legalese (Stark ch. 18)
Reps and warranties (Stark ch. 3)
Trade-offs: Representations versus Warranties Representations Avoidance Punitive damages Warranties No reliance component Benefit of the bargain damages No need to prove defendant’s scienter
CBS v. Ziff-Davis – sale of magazine division Rep/warranty re financial statements Due diligence: Accounting problems Lawsuit: Misrep. + breach of warranty
(really: litigating the price afterwards)
Holding: No misrep.: Reliance not justified BUT: Warranty claim succeeded Parties settled after appellate holding
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): Past deals, practices, problems – interrog., document production, depositions Expert witnesses – fees, report review, depositions, trial props, trial prep 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
Review: Pros and cons of reps and warranties Representation Not strict liability – must also prove scienter (intent or recklessness), plus justified reliance “As of” date Punitive damages, rescission Burden of discovery, pre-trial motion practice Warranty Strict liability – scienter & reliance not relevant Can survive for months / years (to be discussed later in the course) Fewer hassles with discovery, pre-trial motions
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.