Contract Drafting Class 7 Tues Feb 7 University of Houston Law Center D. C. Toedt III

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Common contract f***-ups

10. The contract that is signed with an illegible signature and no information is given as to who has signed or their position within the organisation. [From Top 10 howlers when preparing contracts for signature, by the IP Draughts blog at

Drafting exercise: Stark 18-5

Microsoft NDA – general provisions

Assignment of K – Port of NY & NJ

Section 4(g) – assignment of K QUESTION: Are most contracts ordinarily assignable if K doesnt say otherwise? A. Yes B. No C. Yes, with some exceptions IP licenses Special situations (e.g., unique capabilities / personal trust & confidence)

Assignment of K (Z&B pp ) QUESTION: Why might a party want to restrict the other sides assignability? (Think of both business reasons and because I can reasons.)

Assignment of K (Z&B pp ) QUESTION: Why might a company want to refuse to agree to an assignment- consent requirement in a draft contract? A. Dont want to have to get consent to spin off a division or other future M&A deals B. Requirement would cause tax problems C. Might want to move contract rights to affiliate D. Requirement would cause antitrust problems

Assignment of K (Z&B pp ) QUESTION: Why might a software vendor want its customers to be able to assign their license agreements? Hint: If a customer had to pay a large fee for consent to assign, what might it decide to do instead? Would the vendors competitors have anything to contribute to the customers thinking process?

Assignment of K (Z&B pp ) FACTS: Youre entering into a contract with an agency of the State of New York. QUESTION: Is there any way around the state-law assignment-consent requirement? Hint: See NY State Finance Law art. 9, § 138

Assignment of K (Z&B pp ) CONTRACT PROVISION: Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendors prior written consent. [Questions follow on subsequent slides]

Assignment of K (Z&B pp ) CONTRACT PROVISION: Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendors prior written consent. QUESTION: If Customer merges with another company without consent, is the merger void?

Assignment of K (Z&B pp ) CONTRACT PROVISION: Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendors prior written consent. QUESTION: What if the contract provision were like Microsoft NDA § 4(g) [Z&B p. 20]?

Assignment of K (Z&B pp ) CONTRACT PROVISION: Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendors prior written consent. QUESTION: What additional language might Customer want to negotiate, and why? (Hint: See the subheading Assignment with transfer of business assets at

Third-party beneficiaries (Z&B p. 20 § 4(b); pp ) FACTS: 1. Sam signs a contract to sell Betty his car for $2, Betty fails to pay. 3. As a result, Sam cant pay his rent. 4. Sams landlord sues Betty as 3PB. [Questions follow on subsequent slides]

Third-party beneficiaries (Z&B p. 20 § 4(b); pp ) FACTS: 1. Sam signs a contract to sell Betty his car for $2, Betty fails to pay. 3. As a result, Sam cant pay his rent. 4. Sams landlord Larry sues Betty as 3PB. QUESTION: Betty files MSJ - what result? A. MSJ denied – Larry was a 3PB B. MSJ deferred for further discovery C. Betty wins – Larry was only incidental 3PB

Third-party beneficiaries (Z&B p. 20 § 4(b); pp ) FACTS: 1. Sam signs a contract to sell Betty his car for $2, Betty fails to pay. 3. As a result, Sam cant pay his rent. 4. Sams landlord Larry sues Betty as 3PB. QUESTION: What result if K said Betty will pay $500 to Larry to take care of Sams back rent and the remaining $1,500 to Sam ….?

Review: No-oral-modification provisions (Z&B pp ) QUESTION: In a contract under NY law for the sale of 1,000 widgets, will a court enforce a no-oral-modification provision? A. No – past contract cant prevent parties from agreeing to an amendment B. Yes – NY statute expressly validates C. Maybe, if no proof of estoppel

Review: Signature line How would the signature block for Microsoft be written?

End of class