1. Contract Drafting Class 6 Thurs Feb 2
University of Houston Law Center
D. C. Toedt III

2. Course fine-tuning

3. Priorities
Invest the most time on the most-frequent and/or most-important contract provisions
Spot other issues
Drafting “style” goal: Basic competence
Won’t try to cover the entire Z&B or Stark book

4. General format: Lectures
Questions to answer
I’ll make the questions available in advance as much as I can manage it
Each student writes down individual answer
Consult your teammates, during or before class
Questions are likely to show up on the final

5. General format: Assignments
Tuesdays: Homework assignments due
Drafting exercises
Substantive questions
Not graded unless otherwise announced in advance
Thursdays: In-class negotiation exercises
Focus on the most-important and/or most-frequent provisions

6. Homework assignment
Stark Exercise 18-5 – bring to class on Tuesday Feb. 7

7. In the news …

8. Scenario 1: Δ Seller provides geological report to π Buyer
K has warranty disclaimer
Geo. report proves wrong; π Buyer sues for fraud
Δ MJMOL - result?
Result dictated by Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W. 3d 323, (Tex. 2011)

9. Scenario 2: Δ Seller provides geological report to π Buyer
K has warranty disclaimer + express reliance disclaimer
Geo. report proves wrong; π Buyer sues for fraud
Δ MSJ - result?
Amco Energy, Inc. f.k.a. Capco Energy, Inc. v. Tana Exploration Co., No.  (5th Cir. Jan. 30, 2012)

10. Microsoft NDA – confidentiality provisions

11. Confidential information vs. trade secret
Should NDA distinguish between "con-fidential information" and "trade secrets"?
No – legally identical
Yes – perpetual protection for a trade secret
No – little or no practical difference
Yes – trade secret can be protected even with no confidentiality precautions

12. QUESTION:
Should an NDA include a “sunset” clause that ends the receiving party’s confidentiality obligations? (Careful – trick question ….)
Yes – “date certain” is good practice
No – sunset clause can blow DP’s rights
Yes, but only w/ a trade-secret carve-out
No – obligations end only if info goes public

13. Microsoft NDA – general provisions

14. Section 4(e) – entire agreement
Under what circumstances might courts look to extrinsic evidence anyway? (Z&B 21-22)
Never
If contract is ambiguous
If justice requires it
Assume always
[Write your own answer]

15. Entire agreement – alternative language
“This Agreement sets forth the parties’ final, complete, exclu­sive, and binding statement of their agreement concerning its subject matter.” (Underlining is for class only)

16. Oral modification Gas-station dealer agreement
Integration, no-oral-modification
π dealers claim Δ Shell orally committed to a perpetual pricing subsidy
Internal Shell docs: Dealers should plan their businesses around pricing subsidy
A. Shell wins? B. Dealers win?
Marcoux v. Shell Oil Prods. Co. LLC, 524 F.3d 33 (1st Cir. 2008)

17. Section 4(e) – waivers
Will courts usually enforce provisions like this?
Yes No
Will courts always enforce provisions like this?

18. Section 4(f) – attorneys’ fess
Is an attorneys’ fees provision necessary to recover fees in a contract lawsuit?
No – fees can automatically be recovered by law
Yes – “American rule” (each party pays own)
No, if a statute provides for fees
[Some combination of the above]

19. Section 4(f) – attorneys’ fess
Who is more likely to be able to recover fees under this provision?
Disclosing party
Receiving party
Each is equally likely

20. Section 4(f) – attorneys’ fess
FACTS: Disclosing party sues receiving party but loses
QUESTION: Can (victorious) receiving party recover its fees under this provision?
Yes No
Maybe [explain]

21. Attorneys’ fees -- “Texas” rule
Tex. Civ. Prac. & Rem. Code §  – who can recover in a contract suit?
Prevailing party
Successful claimant
Successful defendant
Neither party
[Multiples of the above]
Tex. Civ. Prac. & Rem. Code § 38.001

22. Attorneys’ fees -- “Texas” rule
Tex. Civ. Prac. & Rem. Code §  –
Prerequisites:
Written demand on claim
Claim not paid w/in 30 days
Actually employed attorney
Tex. Civ. Prac. & Rem. Code § 38.001

23. Attorneys’ fees -- California rule
California Civil Code § 1717: Any attorneys’ fees provision in a contract is deemed a prevailing-party provision

24. Forum selection provisions
Courts usually honor them
Public-policy exceptions (David v. Goliath)
Waiver of forum non conveniens?
Waiver of removal right?

25. Forum selection – exclusive?
QUESTION: Why might it make sense for P to file suit in D’s home court?
[Hint: Think about what P will have to make happen to get relief, and which venue that might be easier in]
Write your own answer, then discuss w/ teammate

26. Forum selection
FACTS: Contract says exclusive forum is “the courts of the State of Texas”
QUESTION: Can you file in federal court?
Yes No
Doe I v. AOL, LLC, No , (9th Cir. Jan. 16, 2009)

27. Governing-law provisions
Courts usually honor them, but with public-policy exceptions, such as:
Post-employment non-compete clauses
Franchise laws, consumer-protection laws
Must be some relationship to chosen state

28. Governing-law provisions
FACTS:
Draft K says simply that Texas law applies.
One party is from Oklahoma, one from Tex.
Contract will be signed, performed in Okla.

29. Governing-law provisions
QUESTION: How best to “fix” contract to be (more) sure Tex. substantive law will apply?
Drive across state line to sign K in Texas
Use exclusive choice-of-forum clause
Recite “without regard to choice of law rules”

30. Section 4(g) – assignment of K
QUESTION: Are most contracts ordinarily assignable?
Yes No
Yes, with some exceptions

31. Assignment of K – Port of NY & NJ

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

33. End of class