One of a court’s most frequent tasks is interpreting ambiguous contracts created by the use of ambiguous language in contracts; however, by the time a court is deciding the issue, costly litigation may have taken years, write Richard Raysman and Elliot Magruder for Holland & Knight.

In a post for the firm’s Ditigal Technology & E-Commerce Blog, they discuss a recent case in which parties to a software development and license agreement confronted this unfortunate truth, and both left unsatisfied.

In Apacheta Corp. v. Lincare, Inc., Apacheta sued for breach of contract in claiming that Lincare’s termination violated the right-to-cure provision because Lincare neither provided notice of breach nor a cure period.

Read the article.

“Pay when paid” clauses are common in the construction industry, according to Bradley Arant Boult Cummings, but courts generally disfavor conditions precedent (an event that must occur before another party’s performance is due) and will not observe their existence unless they are unambiguously laid out in the contract.

The article, published by JD Supra, states that “subcontractors and general contractors should be aware that if language in a contract clearly establishes that the prime contractor is only obligated to pay the subcontractor if the owner pays the prime contractor for that work, and the contract states that the subcontractor is taking the risk of the owner’s potential insolvency, then courts are likely to enforce the contract as written—condition precedent and all. This language establishes what is known as a pay if paid clause.”

Read the article.

Although limited liability protections normally insulate business owners from personal liability for their business’s debts, lenders routinely require a small business owner to sign a personal guaranty as a condition for a commercial loan to the business entity, points out Thomas C. Wolff, writing for Ward and Smith.

This requirement essentially circumvents the statutory protection against personal liability, he writes.

“Any potential guarantor should read a proposed guaranty agreement carefully and understand each contractual provision. Often the terms can be negotiated, even if a business entity is a startup and has limited assets and income,” writes Wolff.

In the article, he discusses continuing guaranties, unlimited and limited guaranties, joint and several liability, the obligation of contribution, guaranty of payment vs. guaranty of collection, the lender’s right to set-off, and the death of a guarantor.

Read the article.

Seyfarth Shaw has some advice for franchisor when considering their legal strategy in “no-hire” agreement class actions: franchisor employers should assess whether the joint employer risk is worth accepting in order to pursue the single-enterprise defense.”

In its Workplace Class Action Blog, the firm discusses class actions claiming that provisions contained in franchise agreements prohibiting the hiring of employees of other intrabrand franchisees without the consent of their employer violate the antitrust laws.

The authors discuss the single-enterprise defense, potential joint employer liability, and other defenses.

Read the article.

The Supreme Court of Texas recently examined the intersection of the rule against perpetuities and the oil patch in ConocoPhillips Co. v. Koopmann, No. 16-0662, writes Thomas G. Ciarlone Jr. in Kane Russell Coleman Logan’s Energy Law Today blog.

The rule provides “that no interest within its scope is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.”

Ciarlone discusses the Koopman case and explains that it represents a positive result for the industry, one which will promote certainty in deed construction and therefore encourage robust exploration and development activities.

Read the article.

It is important to periodically review form agreements to ensure that the provisions that were favorable or represented your company’s position in the past continue to accurately protect your company’s interests, and that includes a company’s nondisclosure agreements, according to Morgan, Lewis & Bockius.

Michael L. Pillion and Jessica M. Pelliciotta are authors of the article.

They discuss in some detail the subjects of parties, terms, the definition of “confidential information,” disclosure of information, standard of care, the obligation to report misuse, and the return of confidential information.

Read the article.

Recent case law and enforcement actions have made clear, contractual language addressing the issue of exclusivity, while obviously relevant, is not always determinative, write E. John Steren and Patricia Wagner for Epstein Becker & Green’s Antitrust Byte blog.

The authors explain: “Instead, and regardless of the contractual language between the parties, the courts and enforcement agencies look at whether the parties operate, in practice, as if the relationship is exclusive or not. Regarding network participation, the enforcement agencies will look at whether competing networks exist and whether network members actually participate in those competing arrangements. For payor contracts, the enforcement agencies will look at whether payors actually contract with competing providers—and if not, why not.

Read the article.

A recent article published by Goodwin Procter describes a Department of Justice challenge to an agreement between two of the largest rail equipment suppliers in the world that prohibited them from competing to hire each other’s employees, often referred to as “no poach” or “no hire” agreements.

“The negotiated settlement requires the Defendants to cease participation in these agreements and imposes a slew of onerous compliance obligations to assure no conduct of this sort occurs in the future,” according to the article. “This is a notable harbinger of the DOJ’s future enforcement intentions. Companies with any such agreements with competitors – be they written or informal – should consult with counsel immediately to assess their potential exposure. Agreements that are reasonably necessary to achieve a legitimate business transaction or collaboration between or among companies remain lawful.”

Read the article.

Dan Harris of Harris Bricken’s China Law Blog writes that when foreign companies sign dual language contracts without knowing exactly what the Chinese language portion of their contract says, they are engaging in risky business.

He explains: “Many dual language Chinese-English contracts are silent on which language controls. For some unknown reason, foreign companies far too often just assume that the English language portion controls or they just assume that it does not matter because the meaning of both the English and the Chinese portions is exactly the same. Wrong, wrong, wrong.”

He writes that Chinese companies love using a contract with an English portion that is more favorable to the foreign company than the Chinese portion and then relying on the English speaking company to assume that the English language portion will control.

Read the article.

Conga and Forrester have published a new report titled “Best Practices: Uncover the Full Potential of Your CLM Implementation.” The report on contract lifecycle management can be downloaded from Conga’s website at no charge.

In promoting the report, Conga makes three points:

1. Customers are leaving money on the table by not fully implementing CLM. Fewer than one in five of all CLM customers interviewed captures all the strategic values a CLM implementation can bring.
2.  Engage early with stakeholders and manage their expectations. It’s critical to start working with general counsel and other key stakeholders early when developing a business case. Having a holistic plan that ties benefits to stage and to stakeholder will keep the implementation on track.
3. Have a solid and funded business case that drives the later stages of implementation. More than 70 percent of CLM customers interviewed stopped at stage 2 of the implementation. Having funds, resources, and support enables the latter stages of CLM optimization.

Download the report.

Agreements among companies to not hire each other’s workers are more risky than ever, warns Pepper Hamilton LLP in a post on its website.

“The DOJ’s Assistant Attorney General for the Antitrust Division, Makan Delrahim, stated on January 19 that the division has criminal cases targeting these agreements in the works,” the post says. “Meanwhile, lawsuits challenging no-poach agreements in technology, entertainment, health care and other industries have settled, sometimes for hundreds of millions of dollars. The DOJ announced its latest settlement, a civil settlement with two rail equipment suppliers, on April 3, underscoring that it did not bring criminal charges only because the suppliers ended their agreements before the FTC and DOJ issued guidance on ‘no-poach’ agreements in October 2016.”

The article concludes with some actions that firms should take to identify and limit their exposure.

Read the article.

Business News Daily talked to business owners, attorneys and other experts to find out what common contract “gotchas” you should be on the lookout for.

The article, by Adam C. Uzialko, starts by warning about the use of terms like “notwithstanding,” which can contradict a party’s previously stated obligations.

Other topics include intellectual property clauses, last-minute revisions, specific accounting practices, automatic-renewal clauses, financial obligations, forum selection clauses, foreign laws, at-will clauses, and client acquisitions.

Read the article.

Image by NY Photographic

Sinclair Broadcast Group, a company that owns local news stations across the country, is itself in the news for requiring its newscasters to read a script about “one-sided news stories plaguing our country.”

The Conversation reports that some Sinclair employees have said that their employment contracts made it prohibitively expensive to walk away.

Elizabeth C. Tippett, associate professor of law at the University of Oregon and author of the article, offers her take on the issue: “A Los Angeles Times journalist posted an excerpt of a contract that he claims to have received from a Sinclair employee. After reviewing it, I agree with other attorneys who noted that the legality of the provision depends on whether the fine is similar to the costs Sinclair would incur if the employee leaves prematurely.”

Read the article.

Fox Rothschild LLP has posted its Federal Contractors’ Guide to Small Business Administration Set-Aside Contracts, Size Standards, Size Protests, and Affiliation.

The federal government sets aside a significant portion of its procurement dollars each year for purchasing goods and services from small businesses. Small business set-aside procurements and small business contract awards (“Set-Aside Procurements” and “Set-Aside Contracts,” respectively) provide substantial opportunities for a certified small business concern (SBC) to compete for and perform federal contract work. However, SBCs awarded Set-Aside Contracts are frequently subjected to size protests filed with the U.S. Small Business Administration (SBA) by disappointed competitors looking to challenge the awardee’s size, and if successful, to disqualify the awardee from the procurement.

The Fox Rothschild LLP Guide advises federal contractors on the following issues and concepts:

●SBA Set-Aside Procurements, Set-Aside Contracts, and Size Standards;
●The parameters and purposes for SBA size protests, how they are filed, and how contractors can avoid and defend against such protests; and
●The parameters of SBA affiliation, which contractors can use to challenge Large Businesses masquerading as small business concerns, and, as importantly, must understand to protect themselves from being adversely affected by a finding of affiliation at the hands of a size protest.

Download the guide.

An article in Gray Reed & McGraw’s Texas Construction Law Blog offers some steps cleaning and restoration professionals can take in an effort to minimize the damage from a payment dispute with a client after a natural disaster.

Authors Russell Jumper and Tim Fandrey point out the importance of having a form agreement specific to natural disaster mitigation and remediation ahead of time.

Other points discussed in the article are the agreed scope of the project, making sure insurance proceeds go to the contractor, keeping the client or insurer from taking an estimate to a competitor, and being prepared for litigation.

Read the article.

Daniel Schwartz, writing for Shipman & Goodwin’s employment law blog, provides a handy list of typical provisions in a separation agreement between an employer and an employee.

He prefaces the list with a caveat: His description of a “typical” agreement does not mean that these provisions are in every agreement or even that these provisions ought to be in some agreements. Each separation or settlement has differing facts that may make certain provisions more important than others.

Some of provisions on the list include nondisparagement of one or more of the parties, return of property, and benefits upon separation of employment.

Read the article.

Employers large and small are committed to taking action to pursue expanded diversity and inclusion in their workforces through the use of a contract provision known as an “inclusion rider,” points out Don Lawless in a post in Barnes & Thornburg’s Hot Topics in Employment Law blog.

“Consideration of gender, race, or national origin in pursuit of diversity is a legal two-way street,” he warns. “If goals are applied like quotas, it creates the possibility of reverse discrimination claims by qualified and interested job candidates who are not considered because they will not help meet the established metrics.”

The article states that sophisticated employers have used established goals as a tool toward implementing equal employment opportunity objectives, steering clear of applying goals like quotas.

Read the article.

Although non-disclosure agreement negotiations may seem like a perfunctory step in the M&A process, NDAs present many issues that buyers and sellers should carefully consider before escalating discussions and venturing further toward a deal, according to a post by Faegre Baker Daniels.

Lance Bonner and Kate Sherburne explain: “Unlike confidentiality agreements in other commercial transactions, NDAs negotiated at the onset of the M&A process are often non-mutual and only bind the buyer with respect to the seller’s confidential information. As a result, negotiating an NDA typically begins with a form prepared by the seller or its investment bank or their respective legal counsel. Key negotiation points will vary depending on the characteristics of the proposed transaction and relationship of the parties.”

The authors discuss the areas that are commonly important, including confidential information, exclusions, representatives of the buyer, access to employees, suppliers and other business relations, non-solicitation, and more.

Read the article.

An article by two Hogan Lovells lawyers and published by Lexology outlines some of the due diligence steps to take in the age of blockchain age of smart contracts.

Authors of the article are Theodore J. Mlynar and Ira J. Schaefer.

They discuss the need for a traditional analysis of the proposed transaction and negotiated terms, a source code analysis, and the advice that the proposed smart contract be run on a simulator to see how it operates in response to expected and unexpected messages from users and other contracts..

Read the article.

When considering an arbitration clause in a contract, one must always bear in mind the “separability” or “independence” of the arbitration agreement — the autonomy principle, writes Narges Kakalia in the ADR: Advice From the Trenches blog of Mintz Levin.

She asks: “For example, should a plaintiff be compelled to arbitrate a dispute if the contract containing the ADR clause has expired? What if the contract containing the arbitration clause is unconscionable as a matter of public policy? A plaintiff may nonetheless be compelled to arbitrate in order to resolve his dispute, as illustrated recently in a decision by the U.S. District Court for the Northern District of Texas.”

She discusses Athas Health, LLC v. Giuffre and explains how the court reached its decision.

Read the article.