1. Contract Drafting Class 4 University of Houston Law Center D. C. Toedt III

2. Exercise 18-3: Legalese No later than 90 days after the end of each fiscal year, the Borrower shall provide the Bank a copy of the Borrower’s year-end financial statements. Such financial statements shall be certified by the Borrower’s chief financial officer to fairly present the financial condition of the Borrower.

3. Exercise 18-3: Legalese No later than 90 days after the end of each fiscal year, the Borrower shall provide the Bank a copy of the Borrower’s year-end financial statements. Such financial statements shall be certified by the Borrower’s chief financial officer to fairly present the financial condition of the Borrower. No later than 90 days after the end of each fiscal year, the Borrower will provide the Bank with a copy of its [?] year-end financial state- ments, certified by the Bor- rower’s chief financial officer as fairly presenting the Borrower’s financial condition.

4. Coca-Cola NDA (Z&B p. 5)

5. End of class

6. Exercise 18-4: Legalese Except as herein to the contrary provided otherwise provided in this Agreement, each party releases, remises and forever discharges the other party from any and all actions, suits litigations, debts, claims, and obligations whatsoever, both in law and equity, that either of them ever had, now has, or may hereafter subsequently have, against the other by reason of any matter, cause, or thing for any reason to[through] [to but not including] [to but excluding] the date of the execution of this Agreement [this Agreement’s execution].

7. Exercise 18-5: Legalese In the event of the failure of If the Borrower aforesaid fails to comply with the terms any term of the aforementioned Note, the undersigned Guarantor waives [notice of acceptance of this Guaranty, diligence, presentment, notice of dishonor, demand for payment, any and all notices] of whatever kind or nature, and the exhaustion of legal remedies available to the Note’s holder.

8. “Texas” rule on atty. fees Tex. Civ. Prac. & Rem. Code § 38.001 Tex. Civ. Prac. & Rem. Code Who can recover? Prerequisites?

9. Arele Partners v. Gunnerman Procedural history Evidentiary standard for fraud. intent Measure of damages 5 th Cir. majority opinion focus Higginbotham – motive for dissent? Lessons

10. Legalese (Stark ch. 18)

11. Reps and warranties (Stark ch. 3)

12. Trade-offs: Representations versus Warranties Representations  Avoidance  Punitive damages Warranties  No reliance component  Benefit of the bargain damages  No need to prove defendant’s scienter

13. CBS v. Ziff-Davis – sale of magazine division Rep/warranty re financial statements Due diligence: Accounting problems Lawsuit: Misrep. + breach of warranty (really: litigating the price afterwards) Holding:  No misrep.: Reliance not justified  BUT: Warranty claim succeeded Parties settled after appellate holding

14. Discovery issues for either warranty or misrep. claim True value of asset sold  Inspections  Comparables  Expert testimony Alt: Repair costs  Estimates  Expert testimony

15. Extra discovery issues for misrepresentations Standard of care (negligence claims):  Past deals, practices, problems – interrog., document production, depositions  Expert witnesses – fees, report review, depositions, trial props, trial prep Intent (fraud claims):  Email trails, interrog., depositions Net worth – for punitive damages

16. Negotiating risk allocation (Stark pp. 17-19) See Stark’s examples Flat representation  Unequivocal  Without wiggle room Qualified representation  Hedged

17. Review: Pros and cons of reps and warranties Representation  Not strict liability – must also prove scienter (intent or recklessness), plus justified reliance  “As of” date  Punitive damages, rescission  Burden of discovery, pre-trial motion practice Warranty  Strict liability – scienter & reliance not relevant  Can survive for months / years (to be discussed later in the course)  Fewer hassles with discovery, pre-trial motions

18. Interplay of Contract Concepts Rep and Warranty  The car is red. Covenant  Seller shall not paint the car. Condition  Seller must have complied with all covenants.

19. General provisions