Contract Drafting Class 13 Tues. Feb 28 University of Houston Law Center D. C. Toedt III

In the news …

In the news Canadian vendor Angolan buyer N. American-style contract template: Disclaimer of warranties, but not of conditions Choice of law: England and Wales Sales of Goods Act 1979, § 14 Lessons? See IP Draughts,

In the news Struggling startup signs NDA with potential acquirer Due diligence – shows the crown jewels Acquirer says “looks great, we’re going to Board for approval” – but then later, “no thanks, we can build this ourselves” Lessons? See article at and Hacker News commentary at

Stark Exercise 9-1, Examples 8 & 9

Stark Exercise 9-1, Example 8 No Material Adverse Change. Since the date of the Financial Statements, (a) no material adverse change has occurred in the financial condition, operations, or business of the Borrower and the Subsidiaries taken as a whole; and (b) no property or asset of the Borrower or any Subsidiary has suffered any material damage, destruction, or loss. QUESTION: Would Borrower prefer (a) or (b)?

Stark Exercise 9-1, Example 8 No Material Adverse Change. Since the date of the Financial Statements, (a) no material adverse change has occurred in the financial condition, operations, or business of the Borrower and the Subsidiaries taken as a whole; and (b) no property or asset of the Borrower or any Subsidiary has suffered any material damage, destruction, or loss. [Very “granular”] QUESTION: Would Borrower prefer (a) or (b)?

Stark Exercise 9-1, Example 9 Leases. With respect to each lease listed in Schedule 3.11, … (b) no event [of default] has occurred … except for those defaults, if any, that … (ii) do not, severally or in the aggregate, materially detract from the value, or interfere with the present use of, the property subject to the lease. QUESTION: What does “severally or in the aggregate” mean in this context?

Consulting Agreement (Z&B p. 114)

Consulting Agrmt (Z&B p. 115) How many hours per week does Landa have to work for HP? A. None – it’s up to him B. Half time C. Full time

Consulting Agrmt (Z&B p. 115) How many hours per week does Landa have to work for HP? A. None – it’s up to him - p. 115, § 3 B. Half time C. Full time

Consulting Agrmt (Z&B p. 116) What cash compensation does Landa get from HP under this agreement? A. None B. $25K per month + expenses C. Expenses only

Consulting Agrmt (Z&B p. 116) What cash compensation does Landa get from HP under this agreement? A. None B. $25K per month + expenses C. Expenses only - p. 116, § 4(e)

Consulting Agrmt (Z&B p. 114) To whom at HP does Landa report? A. Chief Technology Officer B. Chief Executive Officer C. No one

Consulting Agrmt (Z&B p. 114) To whom at HP does Landa report? A. Chief Technology Officer B. Chief Executive Officer - p. 114, § 1 C. No one

Consulting Agrmt (Z&B p. 115) How much access to HP information and people will Landa have? A. None B. Not much C. Some D. A lot E. Who knows?

Consulting Agrmt (Z&B p. 115) How much access to HP information and people will Landa have? A. None B. Not much C. Some D. A lot E. Who knows? See p. 115, § 4

Consulting Agrmt (Z&B p. 116) What kind of support will HP provide Landa? A. None B. As if he were the General Manager C. Lab space & staff

Consulting Agrmt (Z&B p. 116) What kind of support will HP provide Landa? A. None B. As if he were the General Manager, AND C. Lab space & staff - § 4(c) (What’s a General Manager?)

Consulting Agrmt (Z&B p. 121) Non-solicitation – § 9: Separate from non-compete DOJ went after Google, Apple, etc. – collusive action in market for employee talent

Consulting Agrmt (Z&B p. 121) What’s the term of Landa’s agreement? A. One year, renewable B. No fixed term C. Five years

Consulting Agrmt (Z&B p. 121) What’s the term of Landa’s agreement? A. One year, renewable B. No fixed term C. Five years – p. 121, § 10(a)

Consulting Agrmt (Z&B p. 114) How can Landa’s agreement be terminated? A. No termination B. Terminable for breach only C. Terminable at will upon 60 days notice

Consulting Agrmt (Z&B p. 121) How can Landa’s agreement be terminated? A. No termination B. Terminable for breach only C. Terminable at will upon 60 days notice (but only after two years) § 10(b)

Consulting Agrmt (Z&B p. 114) What’s the likely business context of this agreement? A. HP needs Landa’s special expertise? B. HP isn’t sure the non-compete clause in the Offer Agreement would be enforceable? C. Extend the non-compete period? D. Something funky about Israeli law?

Consulting Agrmt (Z&B p. 114) What’s the likely business context of this agreement? A. HP needs Landa’s special expertise? B. HP isn’t sure the non-compete clause in the Offer Agreement would be enforceable? C. Extend the non-compete period? D. Something funky about Israeli law?

Consulting Agrmt (Z&B p. 120) § 7: “Landa certifies that he has no outstanding agreement or obligation that is in conflict with … this Agreement, … and further certifies that he will not enter into any such conflicting agreement ….” Q: How could this be improved?

Consulting Agrmt (Z&B p. 120) § 7: “Landa certifies that he has no outstanding agreement or obligation that is in conflict with … this Agreement, … and further certifies that he Landa will not enter into any such conflicting agreement ….”

Consulting Agrmt (Z&B p. 122) Will a court necessarily pay attention to the “Independent Contractor Status” language in § 12? If not, how could the language be beefed up?

Consulting Agrmt (Z&B p. 122) Will a court necessarily pay attention to the “Independent Contractor Status” language in § 12? If not, how could the language be beefed up? A: Add specific prohibitions, e.g., neither party will represent itself as authorized to speak for the other, etc.

Consulting Agrmt (Z&B p. 114) How much IP ownership does Landa have of whatever he comes up with during the term of the agreement? Hint: Compare p. 117, § 5(b) with § 5(a); be sure to read the definition of “LEP” in the Preamble.

Consulting Agrmt (Z&B p. 118) What happens to Landa’s moral rights in any LEP IP he comes up with? See p. 118, § 5(c) (buried!) A. N/A: Moral rights are non-assignable B. Moral rights are assigned to HP C. Moral rights are waived

Consulting Agrmt (Z&B p. 118) What happens to Landa’s moral rights in any LEP IP he comes up with? See p. 118, § 5(c) (buried!) A. N/A: Moral rights are non-assignable B. Moral rights are assigned to HP C. Moral rights are waived – can they be? Better approach: Expressly authorize HP to do things governed by moral rights

Consulting Agrmt (Z&B p. 118) What happens if Landa incorporates IP owned by him into some LEP IP that he comes up with? A. HP owns the Landa-owned IP B. HP gets a royalty-free right to use the Landa IP C. HP will negotiate a license to use the Landa-owned IP

Consulting Agrmt (Z&B p. 118) What happens if Landa incorporates IP owned by him into some LEP IP that he comes up with? A. HP owns the Landa-owned IP B. HP gets a royalty-free right to use the Landa IP – see p. 118, § 5(e) C. HP will negotiate a license to use the Landa-owned IP

Consulting Agrmt (Z&B p. 122) Assignment – which party must obtain the other party’s consent to assign? A. Both B. HP only C. Landa only

Consulting Agrmt (Z&B p. 122) Assignment – which party must obtain the other party’s consent to assign? A. Both B. HP only C. Landa only – see § 15

Consulting Agrmt (Z&B p. 122) Assignment – can a right under the Agreement be assigned without consent?? A. Yes, by HP only B. Yes, by Landa only C. No

Consulting Agrmt (Z&B p. 122) Assignment – can a right under the Agreement be assigned without consent?? A. Yes, by HP only – see § 15 B. Yes, by Landa only C. No Why would HP care about this?

Consulting Agrmt (Z&B p. 122) Assignment – what would the non-assigning party’s remedy be for a breach? A. Act as though the assignment didn’t happen (refuse to deal w/ assignee)? B. Sue for damages for breach? C. Terminate the agreement for breach? D. Sue to rescind the agreement for breach?

Consulting Agrmt (Z&B p. 122) Assignment – what would the non-assigning party’s remedy be for a breach? A. Act as though the assignment didn’t happen (refuse to deal w/ assignee)? B. Sue for damages for breach? C. Terminate the agreement for breach? D. Sue to rescind the agreement for breach? [The “voidable” phrase might make a difference.]

Consulting Agrmt (Z&B p. 122) Rewrite the following language: Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by … without the express written consent of ….

Consulting Agrmt (Z&B p. 122) Rewrite the following language: Neither this Agreement nor any right hereunder or interest herein may be assigned or transferred by … without the express written consent of …. [Name(s)] may not assign or otherwise transfer this Agreement, nor any right under this Agree- ment, nor any interest in this Agreement, with- out the express written consent of [name(s)]. [See § 15]

Consulting Agrmt (Z&B p. 122) Rewrite the following language: Landa warrants that he will not engage the services of independent contractors to provide any Services under this Agreement without the prior written consent of HP.

Consulting Agrmt (Z&B p. 122) Rewrite the following language: Landa warrants that he will not engage the services of independent contractors to provide any Services …. [See § 15] This is a covenant, not a warranty

Consulting Agrmt (Z&B p. 123) The choice of New York courts in § 17 is: A. Enforceable – courts generally honor contractual choices of forum B. Not enforceable – public policy precludes an employer from forcing an employee to be sued in a remote jurisdiction C. Who knows?

Consulting Agrmt (Z&B p. 123) The choice of New York courts in § 17 is: A. Enforceable – courts generally honor contractual choices of forum B. Not enforceable – public policy precludes an employer from forcing an employee to be sued in a remote jurisdiction C. Who knows? [It might depend on who makes the first move, and where]

Consulting Agrmt (Z&B p. 123) The choice of New York law in § 17 is: A. Enforceable – courts generally honor contractual choices of law B. Enforceable – NY Gen. Obl. Law § says so C. Not enforceable – public policy precludes enforc- ing non-competes that are contrary to local law D. Who knows?

Consulting Agrmt (Z&B p. 123) The choice of New York law in § 17 is: A. Enforceable – courts generally honor contractual choices of law B. Enforceable – NY Gen. Obl. Law § says so C. Not enforceable – public policy precludes enforc- ing non-competes that are contrary to local law D. Who knows?

Consulting Agrmt (Z&B p. 123) Rewrite the following language: In any court action at law or equity which is brought by one of the parties to enforce or interpret the pro- visions of this Agreement, the prevailing party will be entitled to reasonable attorney’s fees ….

Consulting Agrmt (Z&B p. 123) Rewrite the following language: In any court action at law or equity or other proceed- ing which is brought by one of the parties to enforce or interpret the provisions of arising out of or relating to this Agreement, the prevailing party will be en- titled to its expenses of the proceeding, including for example reasonable attorney’s attorneys’ fees and expenses …. [What about arbitrations? EEOC charges? Is this even enforceable against Landa?]

End of class