Rethinking “Standard” Provisions and “Boilerplate” in Contracts: Identify Key Drafting Issues and Avoid Litigation Monday, April 11, 2016 Presented by Lex Mundi, ACC Litigation Committee, and ACC Small Law Department Committee

Faculty Members Bryon Koepke Senior Vice President, Chief Securities Counsel Avis Budget Group, Inc. Kevin Norman Senior Counsel, Legal and Compliance North America Evonik Corporation Ken Adams President and Consultant Adams Contracts Consulting LLC Patrick De Ridder Partner McGuireWoods LLP (Lex Mundi Member Firm for USA, Virginia) Jamie Levitt Partner Morrison & Foerster LLP (Lex Mundi Member Firm for USA, California)

Session Overview and Objectives Focus on rethinking certain boilerplate provisions in an interactive manner Discuss common pitfalls and hidden issues in certain “boilerplate” or “standard” provisions in commercial contracts Work in small groups on two collaborative breakout exercises

Session Overview and Objectives (Cont.) First Breakout: “What's Wrong with This Clause?” Second Breakout: “Strategic Approach of Contract Structure” Boilerplate Demonstration Final insights from the Faculty

Context on Contracts and Risk Management Boilerplate provisions are mostly at the end of a contract, often under the heading “Miscellaneous” Many of these provisions interact with and are linked to key business goals Business people assume that these are standard provisions and do not always understand the importance of boilerplate provisions

Context on Contracts and Risk Management (Cont.) Incomplete or conflicting boilerplate provisions may result in devastating consequences for the business with significant financial ramifications In case of a dispute, litigators will pull apart and dissect standard and boilerplate provisions, often interpreting such provisions very differently than the parties may have originally intended

First Breakout: “What is Wrong with this Clause?” Objective and Context Introduce the Scenario Instructions for the Exercise Table Exercise Report Findings Additional Insights from the Faculty

First Breakout (Cont.) Main Boilerplate Issues: Force Majeure Time is of the Essence Indemnification Notices Governing Law Binding Effect Attorneys’ Fees Entire Agreement Assignment

Second Breakout: “Strategic Approach of Contract Structure” Objective and Context Introduce the Scenario Instructions for the Exercise Table Exercise Report Findings Additional Insights from the Faculty

Second Breakout (Cont.) Key Business and Risk Management Goals Strategic Clauses to Consider Addressing: Termination Limitation on Liability Non-Reliance Jury Waivers Forum, Venue and Choice of Law

Termination Clauses Consider business context that informs termination advantages and disadvantages E.g., are there alternative vendors ready to step up, particularly where transition costs are low? Termination rights provide leverage But may not always provide realistic options when: A party reliant on a specific product or service (e.g., licensee of mission critical technology in a license agreement) A party has no other options (e.g., customer in a sole source service agreement) A party has other commitments that depend upon the underlying contract (e.g., buyer has made promises to third party customers)

Limitation on Liability Clauses Know what business or strategic needs may impact your ability to limit liability in the agreement Generally DE and NY will enforce more strictly, CA will consider whether limitation is against public policy DE , NY and CA allow exclusion of liability for simple negligence under appropriate circumstances CA will not allow limitation of liability for fraud, gross negligence or willful injury

Non-Reliance Clauses Is a party relying on any oral or written representations made by the other party that are not expressly set forth in agreement? Can you exclude liability for fraudulent statements made outside the contract? DE & NY = Yes, where there are clear provisions between sophisticated parties (need to watch out for omissions) CA = No, but some cases give weight to the provision Contracts typically limit liability for breach of reps and warranties Can you limit liability for fraudulent statement within the contract? DE, NY & CA = No Cannot exclude gross negligence either Need to consider Legal and Business views

Jury Waivers

Jury Waivers Enforceability: Varies by jurisdiction Traditional considerations David v. Goliath? Sympathetic or not? Desire to avoid (or have) a runaway jury Cost Complexity Time

Jury Waivers (Cont.) Other considerations Different relationship with judge Likelihood of dismissal or summary judgment Fewer evidentiary battles Impact on appeal Other options (e.g., mediation, arbitration)

Forum, Venue and Choice of Law Clauses 2015 State Rankings for Overall Treatment of Tort and Contract Litigation* *U.S. Chamber Institute for Legal Reform, 2015 Lawsuit Climate Survey

Will Your Forum Selection Clause be Enforced? DE – “presumptively valid;” Enforced unless unjust NY – has statutory provision for large commercial contracts Will enforce NY forum clause involving foreign corporation or resident if: (1) NY Choice of law; (2) contract for over $1 million N.Y. Gen. Oblig. Law § 5-1402 CA – enforced, at the court’s discretion, unless shown to be unreasonable

Will Your Venue Provision be Enforced? DE – Yes, unless unreasonable or unjust NY – Yes, if venue can host a fair trial CA – Unsettled Cannot select venue that would not otherwise be permitted by statute Some cases hold venue provisions unenforceable

Will Your Choice of Law be Enforced? DE and CA – follow Restatement, may not enforce if no substantial relationship or against public policy NY – will enforce NY choice of law in commercial contracts over $250,000 even if no substantial relationship to state N.Y. Gen. Oblig. Law § 5-1401

Breakout Takeaway Materials First Breakout: Cheat Sheet: http://www.lexmundi.com/ACCMidYear_Breakout_Takeaway1 Online Writings on Boilerplate: http://www.lexmundi.com/ACCMidYear_Breakout_Takeaway2 Second Breakout Cheat Sheet: http://www.lexmundi.com/ACCMidYear_Breakout_Takeaway3

Boilerplate Demonstration

QUESTIONS?

Thank You Bryon Koepke Senior Vice President, Chief Securities Counsel Avis Budget Group, Inc. bryon.koepke@avisbudget.com Kevin Norman Senior Counsel, Legal and Compliance North America Evonik Corporation kevin.norman@evonik.com Ken Adams President and Consultant Adams Contracts Consulting LLC kadams@adamsdrafting.com Patrick De Ridder Partner McGuireWoods LLP (Lex Mundi Member Firm for USA, Virginia) pderidder@mcguirewoods.com Jamie Levitt Partner Morrison & Foerster LLP (Lex Mundi Member Firm for USA, California) jlevitt@mofo.com