November 2012

I recently made a presentation for fellow business lawyers entitled “Contractual Limitations: Why Are You Suing Me When Our Contract Says You Can’t?” (Here’s a copy of my presentation notes.) The answer is that in Missouri contractual provisions that limit the time within which suit may be brought are unenforceable, although, as with many rules, there are exceptions.

It’s common to see contractual limitations provisions in commercial contracts. For example, a contract might state, “No action on this agreement may be brought more than 12 months after it accrues.” As a commercial attorney, I’ve often pushed back on such clauses, arguing that the statute of limitations provides adequate protection against stale claims and that the contractual limitations provision could unfairly trip up my client even when there’s a legitimate claim. But in many cases, the provision isn’t enforceable anyway. [click to continue…]

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100 Posts

by Brian Rogers on November 29, 2012

in Miscellany

Well, it took almost two years, but you’re reading my 100th Contracts Guy post. I started the blog as a personal project to keep the saw sharp and demonstrate expertise after leaving the safety and brand name of a corporate firm to build a transactional practice at a boutique litigation firm.

It’s been far more rewarding than I’d ever imagined.

In addition to providing a place to write about contracts and law business issues, theContractsGuy has helped me meet great people, and it’s facilitated stimulating conversations. To those who’ve participated in those conversations and to those who silently check in from time to time, thank you.

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In our recent discussion on his blog about the appropriate cost of legal documents for startups (which he argues is zero), Bill Carleton posed an interesting question about the role of lawyers in the early lives of startups.

Bill reasons in his post that startups are in a somewhat unique situation — at least compared to businesses in other contexts requiring legal services, such as acquisitions — because their legal needs are standard. According to Bill, “[E]ntrepreneurs do not want the relevant legal documents – charter, bylaws, stock subscriptions, assignments of invention – to be unique or to feel customized. They want them to read like everyone else’s.”

In fact, this attitude reflects a general “ecosystem of efficiency.” Commenting on the role of lawyers, Bill states that “lawyers need to participate in that ecosystem of efficiency; if they do not, entrepreneurs and the ecosystem will find ways to bypass them.” Then he asks “Is a startup ecosystem without lawyers a good thing or a bad thing?”

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Yesterday the U.S. Supreme Court vacated a decision by the Oklahoma Supreme Court, which held that the “existence of an arbitration agreement in an employment contract does not prohibit judicial review of the underlying agreement.” The Supreme Court disagreed and held that a dispute as to a contract’s enforceability was a question for the arbitrator, not a court.

The case, Nitro-Lift Technologies, L.L.C. (2012), involved two employment contracts that contained binding arbitration provisions. Alleging that two of its former employees had breached the confidentiality and noncompetition agreements they had signed, Nitro-Lift Technologies served a demand for arbitration on them. The employees filed suit in Oklahoma, asking the court to declare the restrictive covenants null and void. On review of the trial court’s dismissal of the case, the Oklahoma Supreme Court held that enforceability of the contracts was an issue for a court to decide, and it further held that the restrictive covenants violated Oklahoma’s public policy.

[click to continue…]

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One of my favorite memes from the interwebs is “You’re doing it wrong.” To quote the Urban Dictionary, it’s “what you would say to someone who is failing it miserably,” for example, a soccer player standing on his head (no hands!), a pickup driving down a boat ramp into the water head first, President Bush holding the phone upside down, carpooling, parenting, sunscreen, football, cycling, … well, you get the point.

I’ve had some interesting interwebs conversations about the law business, including one on my blog that included this comment from Ken Adams: “As I read the closing two paragraphs of your post, the final words of The Count of Monte Cristo came to mind: ‘Wait and hope.’ Not a particularly promising sentiment when it comes to law practice!” Here are the last two paragraphs he was talking about:

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Monday night I put the following question to Bill Carleton in a comment to an older piece on his blog:

Bill: I revisited this piece because I’ve been thinking about your discussion with Ken [Adams] about whether the benefit of contract standards lies in increasing quality vs. increasing transaction efficiency/lowering costs. Commoditizing contract drafting should drive down costs significantly, whether your aim is lowering costs or increasing efficiency.

But why does the cost of basic legal documents need to be zero, even for startups?

You can read Bill’s response here and my response to his response here.

[click to continue…]

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Earlier this year I wrote Can the Crowd Produce a Decent Contract? in response to some back and forth between Ken Adams and Bill Carleton about the topic on their blogs. In the comments to my post, Ken expressed skepticism, but another comment, by Max Mednik, suggests that crowd-sourcing can “up-vote” contracts with the best quality contract language.

Up-voting contract language. Now that sounds interesting. So I’d like to try an experiment in up-voting. Quora seems like a good platform to invite people to submit contract language for the crowd to vote on, so I’ve done just that. If you’d like to play, click on this link to go to my question “What’s the best anti-assignment provision in a contract ever?” and drop in a suggested clause. Then we’ll let the crowd decide whether it has the chops to be the best ever.

I’ve already taken the plunge and submitted a provision (which, truth be told, is probably lifted from Tina Stark’s awesome work, Negotiating and Drafting Contract Boilerplate). At least do me a solid and give me a jump on the competition!

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I’ve written on occasion about the effectiveness of electronic communications to create binding contracts. For example, in Contracts Quiz: Is This Email Settlement Binding? I discuss a recent case in which a court found that an exchange of emails created a binding settlement agreement, and “NO LIMIT” + “Awesome!” = Contract Modification considers a pithy instant message conversation that modified a written contract. Not all electronic communications that purport to have legal consequences are effective, however.

Venkat Balalsubramani wrote about a recent case where an email exchange was held not to create a contract in Email That Says “Done … thanks!” Doesn’t Transfer Copyrights — MVP Entertainment v. Frost. Here’s an excerpt from Venkat’s description of the facts:

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I noticed via a post yesterday on the ADR Prof Blog that the Supreme Court has granted certiorari in an arbitration case that I characterized in a post earlier this year as probably the case most affected by the Supreme Court’s recent arbitration decisions (i.e., Stolt-Nielsen v. Animal Feeds and AT&T Mobility v. Concepcion). This will be the third time for the case to make its way to the Supreme Court.

My initial reaction to Concepcion was that it’s not a bad deal for consumers because the tradeoff AT&T had to make to ensure that it wouldn’t be subject to a class action was to provide consumers with better relief than they would likely receive in court. As a (rather cynical) consumer who would expect to receive very little in a class action suit, that seems like a fair tradeoff, as I noted in AT&T Mobility v. Concepcion: Is Class Arbitration Dead?.

[click to continue…]

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