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7 Deadly Sins of Confidentiality Provisions and NDAS
Although the classic Deadly Sins do not ordinarily impact the process of drafting a Confidentiality Provision, the dramatic title is appropriate since this paper will focus on seven issues that arise in negotiation and drafting of contract terms related to "confidentiality" (and to Non-Disclosure Agreements - "NDAs") that can present significant difficulties for practitioners and clients.
2023 Business Drafting Workshop: LLCs
Reps and Warranties | Breach, Remedies, and Dispute Resolution | Conditions, Discretionary Authority, & Declarations | Annotated Covenants
Contract Drafting Building Blocks: Reps and Warranties
Sample Stock and Goodwill Purchase Agreement
Contract Drafting Building Blocks: Breach, Remedies, and Dispute Resolution
I often describe contract drafting as a “creative process.” A statement that has drawn unbelieving looks from many past students. But drafting a contract presents the opportunity to create a private body of law between two or more parties. That private body of law, along with any other applicable statutes, regulations, and common law, dictate how the parties will work together to achieve some common goal. To draft that document appropriately and in a way that helps the parties reach the goal, the lawyer has to think through the process of each party’s performance – the who, what, when, where, and how of each obligation, condition, or discretionary action. Once that process is complete, the lawyer drafts those obligations, conditions, and discretionary actions in a way that memorializes the parties’ intentions. I have also often told students that a major perk of a transactional practice (for me at least)is that your clients are typically happy to be working with you. They haven’t hired you because they are fighting with someone or at the beginning stages of litigation. Instead, the client is embarking on a new deal or relationship. Very often, one that brings sought-after potential and opportunity for the client. And in this situation, they are happy to have you on board.However, while we prefer to focus on the positive aspects of the transaction, we also know that part of that creative process includes consideration of what can go wrong. It is inevitable that a percentage (hopefully a very, very small percentage) of contracts we draft will end up in some type of dispute or litigation. Relationships go south or economic circumstances change for the parties, and the contract should address those potential situations. We have to think through what constitutes a default, when is termination of the agreement allowed, what are the consequences of that termination (both monetary and nonmonetary), and what are the remedies the parties may seek– specific, common law, or both.
Contract Drafting Building Blocks: Conditions, Discretionary Authority, & Declarations
Sample Stock and Goodwill Purchase Agreement
Annotated Covenants
Set forth below is a typical covenants section that would appear in a stock purchase agreement. Note that these covenants assume that defined terms are set forth in the rest of the agreement.
Structuring Earnout Provisions
An earnout is a contractual provision stating that the seller of a business is to obtain additional compensation in the future if the business achieves certain financial goals, which are usually stated as a percentage of gross sales or earnings. For example, if an entrepreneur seeking to sell a business is asking for a price more than a buyer is willing to pay, an earnout provision can be utilized. In a simplified example, there could be a purchase price of $1 million plus 5% of gross sales over the next three years.
What to Do When Someone Comes Knocking: Non-Disclosure Agreements
When business enterprises undertake to evaluate a proposed transaction, the parties will usually begin by negotiating the terms of a non-disclosure agreement. That non-disclosure agreement will serve as the frame work that allows the parties to share confidential and proprietary information necessary to fully evaluate, negotiate, and consummate a proposed transaction, while sufficiently protecting against unauthorized disclosure. Set forth below is a discussion of a few key considerations when negotiating non-disclosure agreements in business transactions.
Simultaneous vs. Split Sign and Close: Drafting and Practical Considerations
This article describes the difference between a simultaneous and split signing and closing structure in M&A transactions and provides drafting and practical considerations and sample provisions for M&A practitioners. Practitioners have many options to address the risks posed by a delayed closing, some of which can be complex and specific to the idiosyncrasies of a transaction. Therefore, this article seeks to provide an introductory overview to some of the key provisions utilized to address the risks of a delayed closing
Contract Drafting
This paper is comprised of excerpts from Waks, Whitlock, Texas Practice Guide—Business Transactions,Chapter 1, Contracts (Thompson Reuters, 2022). Section references are to the particular section from the Chapter where the excerpted material is located.
How to Negotiate Cloud Contracts to Avoid Cyber and Privacy Disasters
As the use of Computer Computing continues to expand it is likely that there will be litigation if there are data breaches, cyber intrusions, and loss of data. So, it is critical that all lawyers help client negotiate important Cloud Computing contracts to protect client as well as their law practices.
Drafting the Bullet Proof Non-Compete
The basic principle of non-compete law is reasonableness, and that’s a pretty fuzzy concept. That means there will almost always be some argument that no matter how well the non-compete is drafted, it is unreasonable. Still, there are ways to draft a non-compete to maximize the chance that a court will enforce it later. So here are the key questions that come up when you’re drafting a typical Texas non-compete.
Ethics of Contract Drafting and Negotiation
Any time a lawyer negotiates or drafts a contract there are at least six ethical concepts in play which apply to your duties to the client under the Texas Disciplinary Rules of Professional Conduct. The attorney's duty to read the draft contract is excused when there is fraud or mistake. Nevertheless. as a matter of preventive law, the attorney should review the contract- perhaps with the help of a computer program- before it is signed. Also, the attorney should provide the client with an opportunity to review it. Not only can review by a second set of eyes be helpful in detecting problems, but if the attorney victimized by these situations faces a client's malpractice claim, it will be helpful if the attorney gave the client an adequate opportunity to review the contract, for most of the problems could be detected (or at least questioned) by the review of a layperson.
A Litigator's Perspective on Contract Provisions in Commercial Transactions
This article should serve as a reminder of the types of issues that can develop if things go south after your clients have signed on the dotted line. Every time you draft a contract, you are potentially drafting Exhibit Number 1 in a litigation (or arbitration if you thoughtfully crafted an arbitration provision). Make it easy for your client and its litigation counsel to convince a court and jury that the contract clearly says what they claim it says by making the contract easy to follow, stripping away the legalese, and eliminating the need to reference multiple pages to understand the parties’ obligations. Also, resist the temptation to skim over those miscellaneous clauses at the end of your otherwise perfectly drafted contract. These clauses can have a tremendous impact if a dispute arises. Pay as close attention to the miscellaneous provisions as you do to the substantive provisions of the contract.
Drafting Contracts (and Everything Else) to Avoid Ambiguity
This paper is so brief a collection of ideas about drafting contracts that it really constitutes little more than a random collection of personal pet peeves. In applying these suggestions, remember that rules – at least many of them – were made to be broken.
7 Deadly Sins of Boilerplate: How Cut-and-Paste Can Get You Sued
Those “standard” sections at the end of a contract may look like the same provisions you have seen in hundreds of contracts. But those tried and true, cut and pasted, provisions can often create, rather than resolve, problems. The fallout from improperly drafted (and typically neglected) boilerplate provisions can determine the enforceability of a contract, the value to be received by a party, and the remedies available to the parties.
General Contract Provisions
This article provides an overview of certain general contract provisions typically included in a purchase agreement entered into in connection with an acquisition or disposition transaction. First, it will discuss the indemnification obligations of the parties in such a transaction. Next, it will address the choice of law and choice of jurisdiction provisions that the parties can include in the purchase agreement and the implications of each such provision. After that, the article will analyze the dispute resolution alternatives that the parties can choose to include in the purchase agreement. Finally, the article will provide an overview of representation and warranty insurance, which can be purchased by a party to the transaction.
Serving Your Clients After the Deal: Drafting Tips from a Litigator to Transactional Lawyers
Complex transactions are documented as a transaction is set to begin, when the parties are optimistic and cooperative. Almost all complex transactions will include clauses that relate to dispute resolution, a concept that may be obscured by the wave of optimism. Often, these kinds of clauses are an afterthought to the dealmakers (your client and the counter-parties). And after you have spent countless hours drafting the “real” substance of the transaction documents, you may be inclined to use boilerplate language to round out the documents. But thoughtful and careful drafting of language related to dispute resolution will save your clients time, money, and anxiety if the deal goes awry, which will enhance the likelihood that the client returns to you to advise on the next transaction. In this article, I will discuss how you can serve your clients’ interests by giving sound advice regarding arbitration, jurisdiction, choice of law, attorney’s fees, and other issues that are sure to arise if a once-promising transaction gives rise to actionable legal disputes.
The Cloud — With Enough PUC, UCC, CPE, M&A, AAPl, D/T And EU Law To Advise Clients And Draft an Engagement Letter
This paper begins with an identification of some ethical issues that require or encourage greater technical skills for attorneys. After a brief introduction to technology applications, the technology is applied to both real and hypothetical examples of arising from both common business practices and legal ethics.
Contracting In Cyberspace
Acceptance of an offer to contract on the internet “has exposed courts to many new situations, [but] it has not fundamentally changed the principles of contract.” One of these bedrock principles is “[m]utual manifestation of assent, whether by written or spoken word or by conduct . . .” Contracts formed in cyberspace can manifest primarily in one of two ways: i) “‘clickwrap’ or ‘click-through’ agreement in which the internet purchaser is required to affirmatively click an ‘I agree’ box after being presented with a list of terms and conditions of use [or ii)] [a]lternatively, consumers may be presented with a ‘browsewrap’ agreement, in which terms and conditions of use are posted on a website accessible through a hyperlink at the bottom of the subscriber's computer screen.” Recent caselaw has further granulated cyberspace contracting, recognizing both "scrollwrap" and "sign-in-wrap", in addition to clickwrap and browsewrap. Regardless of the moniker given to the cyber-contract at issue, in determining the existence and enforceability of contracts in cyberspace, the case law focuses on the very simple issue of whether the parties know that a contract is being offered and formed.
7 Deadly Sins of Contract Drafting - Constructive Interpretation and Interpretative Construction
This paper will analyze and discuss 7 topics regarding contract drafting that can impact the effectiveness, predictability and enforceability of an agreement. There are many other topics that deserve comment, so this paper will seek to include references to other resources useful to a practitioner in drafting, interpreting and construing contracts in many different types of transactions.
Last but not Least: Negotiating and Drafting the "Miscellaneous" Section of a Contract - the Severability & Merger Clauses
After expending a significant amount of time and expense negotiating and drafting the core elements of a business deal, it is not all that uncommon for parties to breathe a sigh of relief once they get to the “miscellaneous” section of the contract and it is assumed that a simple cut and paste of the standard boilerplate provisions is all that is necessary to “seal the deal.” Boilerplate terms can afford drafting efficiency, certainty, and predictability; however, ancillary as they may seem, boilerplate terms, if not given their due consideration, could potentially lead to devastating consequences to the contracting parties. Two such boilerplate provisions are the severability clause and the merger clause. Although seemingly innocuous, these clauses, as discussed below, may in fact result in such complexities that the very essence of the underlying bargain between the parties may be threatened by the inclusion and/or construction of such provisions in a contract.
Negotiating and Drafting the "Miscellaneous" Section of a Contract - Assignment and Third Party Beneficiary Clauses
The key to successfully drafting any contract or agreement is to determine exactly what your client is bargaining for, and the client’s current and long-terms goals which make the bargain beneficial. These specific considerations are important, not just in the drafting and negotiating the business and economic terms of a contract or agreement, but also in determining whether to add and how to draft the “miscellaneous” provisions that are applicable to the deal. Two very important provisions within the “miscellaneous” section of a contract that may have a significant and long-lasting impact on your client’s agreement and bargain are the assignability and third party beneficiary clauses. These clauses dictate who has ultimate control over and responsibility for the obligations and duties imposed by a contractual agreement, and the persons and parties who may benefit from and levy a claim or cause of action for breach of the agreement.
The (Surprising Complex) Art of Drafting Arbitration Clauses
Parties often view arbitration as a concept distinct from litigation. For commercial disputes, however, arbitration and litigation have several similarities. Each is a form of dispute resolution; each employs a neutral person to resolve differences, whether factual or legal; each depends upon rules that are (generally) developed before the dispute arises. And when all is said and done, at least one party is going to be unhappy with the result because, like litigation, arbitration is a zero-sum game: at the end of the day someone loses. But there are differences. Despite the increasing frequency with which parties contract to arbitrate their potential disputes, rather than litigate them, parties rarely give sufficient consideration to how that arbitration will work. Their image of arbitration as a non-litigation panacea that will save time and money in the event of future disputes is often shattered when they realize that they put too little thought into how to shape resolution of those future disputes. That lack of planning often causes arbitration to cost more than, and take longer than, the default litigation would have required. In arbitration, parties lose many of the procedural safeguards provided by the judicial process. See, e.g. Glazer’s Wholesale Distr. v. Heineken USA, Inc., 95 S.W.3d 286 (Tex. App.—Dallas 2001), judg’t vacated and remanded by agreement (Tex. July 3, 2003). This paper will provide an overview of the law of arbitration and identify some considerations for attorneys who counsel clients about whether arbitration might be an appropriate dispute resolution vehicle for their relationship and how to shape their arbitration framework. It will also discuss special considerations for the drafter of an arbitration clause when the parties’ transaction is international.
Construction Clauses and Presumptions in Business Agreements
All of us want to prepare clear, accurate and complete agreements for our clients. Understanding a bit more about the construction of agreements under Texas common law may help us do so and may also help our clients avoid disputes. The use of Construction Clauses – relatively standard “miscellaneous” clauses in our agreements – may help us and our clients accomplish these goals.