I sometimes give a presentation on simple contracting practices that businesses can adopt to reduce their risk. I’ve posted a cliff notes version in Contract Hygiene: Five Healthy Contracting Habits (Part 1) and (Part 2). Without spending a dime on lawyers, a lot of businesses can significantly reduce the number and size of the time bombs that are sitting in their file cabinets cleverly disguised as contracts.
Habit #2 is Give important contracts special attention.
Whack-A-Mole. Cockroaches. Electronic confidential information. What’s the common thread? They’re all difficult to destroy. The moles of the carnival game relentlessly pop up in new places. Cockroaches could survive a nuclear attack. And it would be difficult — potentially impossible — to completely destroy electronic confidential information as is required under many confidentiality agreements.
The Typical Return or Destroy Requirement
Confidentiality agreements often require the party that has an obligation to protect the confidential information (the receiving party) to either return or destroy the information at the end of the agreement. Here’s a typical provision, which I borrowed from the Iowa State University Extension website:
In my first roundup post of 2011 Eighth Circuit contracts cases, I discussed Weitz v. MH Washington, a breach of contract case that was decided by the Eighth Circuit a year ago. I focused in the post on the role of sloppy contract drafting and sloppy contract performance in the court’s piercing the corporate veil analysis. The court considered other contract law issues, however, including the principle that a party to a contract can’t hinder the other party’s performance and then sue for its failure to perform.
In Weitz, a developer refused to pay its contractor although the contractor had substantially performed its duties under the contract. [click to continue…]
I recently stumbled upon a couple of contracts products. One is TOSAmend, which allows you to mark up online terms of service before agreeing to them in the hope that you’ll be able to form a contract on more favorable terms. The other is PocketNDA, a small notebook of form non-disclosure agreements for those times when lunch conversation gets serious. What do you think, are these useful contracts tools or mere novelties?
Liquidated damages provisions can be a useful way to ensure that you have a remedy if the other party to a contract fails to live up to its end of the bargain. When things go south in a commercial relationship, proving that a breach of the contract has occurred is only half the battle; the other half is proving damages, which can often be difficult. (The third half is executing on the judgment, but that’s a subject for a different blog.) A liquidated damages clause can help solve that problem.
I don’t often link to content located in the nether regions of a law firm’s website, but this piece about indirect damages is worth an exception. It was written by Stephen Brett of the UK intellectual property law firm Anderson Law LLP. Not coincidentally, one of the best contract law blogs I follow is the firm’s IP Draughts blog, which covers intellectual property issues with a heavy emphasis on contract issues.
You sign two identical contracts with two different suppliers, one to buy stuff and the other to buy services. If both of your suppliers default in the exact same way, your rights will be the same under each contract, right?
Probably not, because the law that applies to the sale of goods is not the same as the law that applies to the sale of services. There’s a lot of overlap, and most contract law principles apply to both, but the law isn’t the same. [click to continue…]
If a travel website erroneously lists a low price for air fare and you book a trip, can you hold the airlines to the low fare? As the ContractsProf Blog recently explained, it depends, but you might be able to. The ContractsProf’s post discusses a situation where the published fare was a fraction of the going rate for a round trip from San Francisco to Palau. Was it a case of a unilateral mistake? It depends on whether the customer should have known that the fare was in fact too good to be true.
Sometimes the boring standard provisions in the back of a contract can really be brutal.
Take this scenario, for example:
Your company books a trip on a cruise ship and signs a contract to charter the ship.
It’s the spring of 2001 and you have the foresight to obtain verbal assurances and a letter from the cruise company stating that in the event of war or an act of terrorism, it will work with you to reschedule the trip or refund your prepayment. [click to continue…]
Bloomberg reported yesterday that Groupon has been accused in a lawsuit of altering emails containing agreements with merchants after both sides had accepted the terms.
The plaintiff has accused Groupon of intentionally altering contracts after the fact (“Unbeknownst to Plaintiff and the other Class members … Groupon accesses its merchant-clients’ emails containing the Merchant Agreements while those emails are in post-transmission electronic storage and alters the content of those emails.”). [click to continue…]