All contractors dread receiving the seemingly inescapable call that a preventable, yet too common, workplace accident occurred such as a crane collapse, the fall of an ironworker, or a delivery vehicle accident, writes James J. Buldas of Pietragallo Gordon Alfano Bosick & Raspanti LLP.

“Besides the human and project costs these accidents bring, claims and lawsuits nearly always follow,” he warns in his article. “While defending claims and lawsuits may cause even the most seasoned contractors to suffer from sleepless nights, responsible parties may take solace in knowing that their counsel negotiated defense and indemnity agreements in their contracts. Why then do such parties sometimes learn that because of the language in an insurance policy, the indemnity clause in the construction contract provides little or no protection?”

Because of unforeseen risk, additional insured endorsements have been revised to link contractual indemnity obligations to additional insured coverage. These new endorsements explicitly limit additional insured status to the indemnity clause of the underlying contract, regardless of whether the endorsement incorporates the “arising out of” or “caused, in whole or in part” language.

Read the article.

A federal judge in the Eastern District of Oklahoma has dismissed a poultry grower’s breach of contract claim against OK Foods Inc. of Fort Smith, Arkansas, after the company severed ties with the grower amid concerns over animal welfare standards.

The company terminated its grower’s agreement with Earl Oldham of Stigler, Oklahoma, just over a year into the three-year agreement following the drowning deaths of an estimated 19,000 broiler chickens during a May 2015 rainstorm. It was the second mass die-off in five years blamed on groundwater flooding at the farm.

In a release, the firm said:

After realizing the water was rising in his three poultry houses, Oldham requested the company remove all chickens from his property. Upon arrival, a company representative discovered that many of the chickens had already died. OK Foods took immediate steps to relocate the surviving chickens to a nearby poultry farm. After OK Foods notified Oldham that his contract would be terminated, the grower filed a breach of contract suit.

The lawsuit dismissal follows a summary judgment motion filed by OK Foods’ attorney Clayton Bailey of Dallas’ Bailey Brauer PLLC. In granting the summary judgment, the court threw out  Oldham’s claims seeking nearly $330,000 in lost-profit damages.

“Mr. Oldham in essence moved to terminate the contract with his demands to remove the broilers from the farm, something OK Foods was more than willing to oblige,” says Bailey.

He noted that the swift termination of the contract was in accordance with animal welfare policies implemented by OK Foods CEO and President Trent Goins, Vice President of Live Operations Gary Hogue and Director of Broiler and Hatchery Operations Kelly Garris.

“OK Foods did not agree with the conditions found at this farm, and it was not something that could be tolerated. The operator’s own words, actions and inactions in effect invalidated his grower agreement. OK Foods simply formalized that termination,” says Mr. Bailey. “Animal welfare is something OK Foods takes seriously. OK Foods’ live operations team is ensuring that OK Foods’ chickens are raised ethically and efficiently, and that the company’s customers receive top-quality products.”

In addition to Bailey, OK Foods was represented in Earl Oldham v. OK Foods, Inc. f/k/a OK Foods, Inc., 6:15-cv-00384-RAW by Niki Cung of Kutak Rock LLP, Fayetteville, Arkansas.

As the risk of cyber threats to all businesses grows, there is a corresponding interest in managing and shifting cyber risks by contract and through cyber insurance, write Branwen Buckley and Corby J. Baumann of Thompson Hine.

“Insurance requirements are common in commercial contracts, and many contracts now include a sub-clause regarding cyber insurance. Whether a company is asking for a contracting party to provide cyber insurance or is on the receiving end of such a request, there are some important background considerations to remember,” the authors explain in their article.

They list some issues to consider when evaluating contractual requirements for cyber coverage: cyber insurance can never be a substitute for proper preventive measures, keep cyber insurance provisions specific, consider asking to see the policy, and be realistic in your expectations.

Read the article.

There are six questions that an owner can ask to evaluate what rights and obligations it will have upon entering into a construction contract, writes Daniel Bradfield, a partner in Arnall Golden Gregory LLP.

“Quite often owners simply verify the economic terms for the project, set a completion date, possibly include references to drawings or plans, and then sign a construction contract with little regard to the various provisions that will impact the amount of leverage available in the event a problem occurs with the project,” Bradfield writes in the article.

He discusses the six questions:

• What is being signed?
• What actions can an owner take if the contractor does not finish the work on time?
• What does the contractor need to provide the owner in order to receive payment?
• How are disputes to be resolved?
• What does the owner owe the contractor if the owner terminates the construction contract?
• What, if any, roles will the architect play in the project under the terms of the construction contract?

Read the article.

Dan Harris of China Law Blog has published a sample email that addresses many of the key points a company should be thinking about if it is contemplating selling into China.

The sample is an email (with identifiers removed) from a China attorney to a client, written to gather sufficient information to create a first draft of a product sales agreement for the sale of a product from an American company to a host of Chinese automobile companies.

The email covers such issues as the product, price terms, payments terms, shipping terms, scheduling and timing, facility, subcontractors and component suppliers, packaging and labeling, molds and tooling, quality contrl, warranty, general service, intellectual property, dispute resolution, and other special matters.

Read the article.

Barbara Melby and Glen Rectenwald of Morgan, Lewis & Bockius address the question of what robotics and automation really mean in the context of an IT outsourcing contract.

“At least for now, they are not about robots rolling around the data center floor or application development center,” they write in the article. “Robotics and automation are about software and tools that allow for automated processing, monitoring, and reporting, which provides real-time data and data analysis and a reduced need for manual (read—’human’) intervention. Many vendors are touting proprietary tools and solutions that enable more automation, resulting in more accurate and timely information and services and lower costs.”

They address five key contract considerations for outsourcing customers considering automation, including costs of automation, documented benefits (upfront and ongoing), sharing of reduced costs, ownership of the output, and back-end considerations.

Read the article.

CLE Luncheon, Sept. 26, 12 p.m. CDT
Belo Mansion, Dallas

Scott & Scott, LLP will present a complimentary CLE luncheon titled “Data Privacy and Security Issues in Cloud Contracts” at the Belo Mansion in Dallas on Monday, Sept. 26, from noon to 1 p.m. CDT. The event will be hosted by the Computer Law Section of the Dallas Bar Association.

Robert J. Scott, managing partner of Scott & Scott, will share suggestions on how each party can mitigate, balance or transfer the privacy and security risks in cloud computing.

On the surface, cloud agreements are similar to traditional technology licensing and services agreements; however, cloud computing engagements expose both the client and the service provider to risks not present in more traditional technology service or software transactions, Scott says. The transformation from on-premises software deployments to cloud based models has widespread implication for data privacy, security, and regulatory compliance.

Scott will address each element that contributes to privacy and security risk in cloud computing, including:
• GLBA Rules Affecting Cloud Contracts
• Using Cloud Services in Healthcare
• Due Diligence Obligations in Selecting Cloud Vendors
• Negotiating Key Provisions including insurance, indemnity, and limitations of liability
• How to Comply with Oversight Regulations involving Cloud Service Providers

Attendance for registrants is free, and lunch will be provided.

Register for the CLE luncheon.

An office lease is a pivotal tool for small law firms to attract better clients and expand their practices. But it is also frequently a small firm’s largest fixed capital expense and longest commitment. Negotiating favorable lease terms is critical to ensure that a lease contributes to, and does not hamper, a firm’s success, writes Laura Drossman of Drossman Law in San Francisco.

Small firms may not be able to compete financially with their market competitors, who will pay higher rents and prepaid rent upon demand, according to her article, originally published by the Bar Association of San Francisco. Failure to maintain adequate financials brings creditworthiness into question and kills tenant’s leverage in lease negotiations.

While base rent and escalations seem like an obvious starting point, due to sky-high demand and flush competition, prospective tenants better serve their interests by focusing on other points.

Those points can include space improvements, commencement date, pass-through costs and tempering spikes, security deposits and letters of credit, subleasing and assignment, maintenance costs and HVAC, and relocation rights.

Read the article.

Ernst & Young LLP cannot require its employees to give up their rights to pursue work-related claims together, a federal appeals court has ruled, giving a major boost to the U.S. National Labor Relations Board’s campaign against so-called class action waivers, reports Reuters.

“Companies have increasingly included provisions in employment contracts forcing workers to arbitrate claims individually as a way to avoid the cost of litigating class actions,” writes Robert Iafolla. “The NLRB has struck down such requirements imposed by dozens of companies, including American Express Co, Citigroup Inc and Domino’s Pizza Inc.”

The court found that the arbitration agreement violated the National Labor Relations Act by making workers arbitrate work-related claims as individuals in separate proceedings.

Read the article.

ContractWorks has published “The Buyer’s Guide to Contract Lifecycle Management,” a comprehensive, complimentary guide available for downloading.

The decision to purchase and implement contract lifecycle management software is not one most companies take lightly, the company says. There are currently over 100 solutions in the market- everything ranging from bare-bones, free solutions, to extremely complex and very expensive solutions- and everything in between. Knowing where to start can be tough, that’s why we’ve put together this guide.

This guide covers:

•The top three reasons companies choose to implement contract management software
•The key benefits companies realize from implementing software
•Budget and cost considerations
•Implementation times and how this can affect the ROI of your purchase
•Security considerations for CLM solutions
•Key factors to consider when vetting providers- including solution scalability and company/vendor reputation

Download the guide.

Susan M. Hartman of Buchanan Ingersoll & Rooney writes that most commercial contracts contain what is called an “indemnification” provision.

She explains in her article published by JD Supra Business Advisor that indemnification is an obligation to be responsible for  losses another party might suffer if certain events occur, possibly including legal fees to defend against a third-party claim and damages awarded to the third party as a result of the claim.

“Indemnification is often one of the last issues to resolve in contract negotiations. However, it is important to take the time to think through each party’s obligations under the contract, and consider what type of indemnification is appropriate based on the deal. A broad indemnification that may have been reasonable for a startup company to provide will not be viewed favorably when the applicable contract is assigned to an acquiring company that has more assets at risk if there is an indemnification claim.

Read the article.

The advantages and disadvantages of arbitration versus litigation have been long debated, writes Kirk Watkins of Womble Carlyle Sandridge & Rice, LLP.

“Because arbitration is a matter of contract, parties are free to adopt existing procedural and substantive rules or invent their own. This freedom can complicate comparisons. For example, the parties can include or exclude discovery, permit or prohibit direct testimony, and require prompt and detailed rulings – or not. Arbitrations have one advantage that is unquestioned – treaties make the international enforcement of arbitration awards easier and more likely than the informant of state judgments.” he explains.

He adds that, “if parties to a license or industry dispute resolution agreement devote appropriate time and effort to preparing an arbitration provision to meet their specific objectives, arbitration can be a valuable tool in resolving patent disputes.”

Read the article.

Whether you are leasing real estate or buying or selling a business or real estate, the letter of intent (LOI) is the usual and practical initial step, writes Bernard B. Kolodner for Kleinbard LLC.

“An LOI or term sheet is how you find out if you are likely to have a deal before you spend a lot of time or legal fees on the deal. The details included in an LOI will be largely dependent on whether the deal proposed is a lease, sale or purchase of real estate or a business,” he writes.

“For a lease, an LOI will often specify the space, rent, security deposit, term, extensions, and commencement. In addition it might include provisions covering work to be done on the space, who will be responsible for the work (landlord or tenant) and the amount of any tenant improvement allowance. Reviewing the LOI is the quick and easy way to gauge the interest of the person on the other side of the deal as well as identifying whether there are unbridgeable business issues that need to be addressed prior to drafting the lease.”

Read the article.

If your job includes reviewing, drafting or negotiating contracts, you’ve probably seen  provisions relating to insurance, indemnification, and limitation of liability, writes Kenneth Gorenberg of Barnes & Thornburg LLP.

“Are they boilerplate that you spend little time on? Do you fully understand exactly what they do? Do you negotiate or revise them?” he asks.

“Fundamentally, the purpose of insurance, indemnification, and limitation clauses is to allocate risks,” Gorenberg explains. “In general, insurance transfers risk from the contracting parties to a third party—an insurance company. Indemnification usually transfers risk between the parties to the contract. Limitation of liability prevents or limits the transfer of risk between the parties.”

Read the article.

By Christopher Barnett
Scott & Scott LLP

On July 28, Oracle announced that it had entered into an agreement to acquire NetSuite for approximately $9.3 billion. NetSuite was founded in 1998 and is one of the very first, enterprise-level, cloud-services providers, delivering various, hosted enterprise resource planning (ERP), customer relationship management (CRM), e-commerce and professional services automation (PSA) solutions to its customers.

Oracle and NetSuite have a long relationship, though that relationship in the past may not have been apparent to NetSuite’s customers. Early in its history, NetSuite received $125 million in initial financial backing from Oracle founder Larry Ellison, and the Ellison family owned nearly half of NetSuite’s common stock as of 2014. NetSuite also traditionally has been based on an infrastructure that is reliant on Oracle Database.

However, with Oracle now set to formally acquire the company, NetSuite’s customers soon may notice some pretty significant changes, at least on the purchasing and contracting side. Oracle sells its existing cloud services generally subject either to its standard-form Cloud Services Agreement (CSA) or to a cloud-services schedule to its standard-form Master Agreement (OMA). Both the CSA and the OMA contain terms that are notoriously pro-Oracle in many important respects, including confidentiality protections, limitations of liability and audits. By contrast, NetSuite’s current Terms of Service document takes a more balanced approach, including:

• Identifying all electronic data or information submitted to and stored in the NetSuite service as “Confidential Information,” subject to the agreement’s non-disclosure provisions.
• Excluding indemnification obligations from the agreement’s limitation of liability and subjecting confidentiality claims to double the monetary liability cap applied to other kinds of claims.
• No audit rights in favor of NetSuite.

Once NetSuite’s formal assimilation into Oracle’s cloud services business is complete, we would expect to see Oracle insist on applying the standard-form CSA or OMA to new or extended NetSuite service orders.

Current NetSuite customers therefore should work closely with their legal counsel to scrutinize the terms of their current NetSuite agreements in advance of any new or renewal NetSuite orders. Those efforts will better equip them to seek appropriate amendments to the CSA or the OMA in the event that Oracle refuses to process the orders under the legacy agreements. In addition, companies that may be considering getting started with NetSuite in the future may want to consider saving a copy of the current NetSuite Terms of Service (available publicly with other, service-specific terms at the above link), so that they can remain mindful of the terms that have historically applied to NetSuite’s offerings.

Lance Koonce, writing on Medium.com, discusses the meaning of “smart” contracts, saying, “Before we can decide whether smart contracts are going to bring significant change to business and law, we first need to make sure we’re all talking about the same thing.”

“It does seem that everyone is talking about smart contracts. People tend to line up on one side or the other: Either smart contracts are going to have a revolutionary impact on business, or they are doomed to fail,” Koonce writes.

He contends that in some situations a smart contract really just a transaction, and in others it’s more like a legal contract.

“One way to view these two different categories of smart contracts is just to see them along a scale, from existing legal contracts, to legal contracts that are partially reduced to code, to transactional terms completed reduced to code. Which type we chose will depend on a variety of factors, and in particular on balancing the need for efficiency and speed with the need to cover all contingencies,” he explains.

Read the article.

In a rare case interpreting the Worker Adjustment and Retraining Notification Act “sale of business” exception, the 8th U.S. Circuit Court of Appeals recently held in Day v. Celadon Trucking Servs., Inc. that a buyer of a business remained liable under WARN to the seller’s employees to whom the buyer did not make offers of employment, despite provisions in the asset purchase agreemen that placed all WARN Act liability on the seller, according to Epstein Becker & Green.

In the firm’s Financial Services Employment Law blog, Marc A. Mandelman wrote that the case involved a typical asset purchase transaction between Continental Express, Inc. and Celadon. Plaintiffs were a class of 449 former Continental employees who were not offered jobs with Celadon after the purchase of Continental’s trucking business.

“The key takeaway of the Day case for parties to a corporate transaction is that WARN liabilities are governed by statute, and the implications of WARN obligations and the sale of business provision of WARN must be carefully evaluated,” according to Mandelman.

Read the article.

Corridor Company has posted an on-demand webinar recording describing the best practices for managing contractural obligations.

“Contract management has become an increasingly strategic initiative,” the company says on its website. “Key to its strategic nature is the management of the obligations contained within the contract. Whether it’s the deliverables due to your customer or those due to you, it’s vital that these obligations are properly tracked and managed. Failure to do so not only creates tremendous organizational risk, but also impacts compliance, profitability and overall customer satisfaction.”

In this session, Corridor Company CEO, Russ Edelman, discussed best practices for managing your contractual obligations. He examined general considerations as well as detailed options for managing these obligations within a contract management tool.

Topics included:

• The Key Steps of Obligation Tracking
• Proper Classifications
• Automation Considerations

Watch the on-demand webinar.

In late June, the District Court of Appeal of Florida, Fourth District, reiterated that in a breach of contract case, lost revenue alone is typically an improper measure of damages, accordingn to a report from Roetzel & Andress.

Thomas P. Wert described the case: In HCA Health Services of Florida, Inc. v. CyberKnife Center of the Treasure Coast, LLC, 2016 WL 3540956 (Fla. 4th DCA, June 29, 2016), CyberKnife entered into a contract with a hospital. Under the contract, CyberKnife was to provide equipment and the site to the hospital for radiosurgery treatments to patients for five years. The hospital agreed to pay CyberKnife $5,150 plus sales tax “per click” for each treatment. The contract also provided that “in no event shall either party be entitled to consequential or punitive damages.”

Less than a year after the contract went into effect,  the hospital terminated the contract, citing federal regulations that would make “pay-per-click” agreements illegal beginning.

“Because CyberKnife failed to submit proof of lost profits at trial, it will collect nothing from the hospital even though the hospital terminated the contract almost two years before it actually could have under the contract,” Wert wrote.

Read the article.

In Nghiem v Dick’s Sporting Goods, Inc.,  the Central District of California held browsewrap terms to be unenforceable because the hyperlink to the terms was “sandwiched” between two links near the bottom of the third column of links in a website footer, write Jeffrey Neuburger and Daryn A. Grossman in Proskauer Rose LLP’s New Media and Technology Law Blog.

“Website developers – and their lawyers – should take note of this case, part of an emerging trend of judicial scrutiny over how browsewrap terms are presented,” they explain. “Courts have, in many instances, refused to enforce browsewraps due to a finding of a lack of user notice and assent. In this case, the most recent example of a court’s specific analysis of website design, a court suggests that what has become a fairly standard approach to browsewrap presentment fails to achieve the intended purpose.”

The authors discuss that case in detail, as well as some other browsewrap cases.

“These recent cases should prompt companies to reexamine electronic contracting practices to ensure that consumers are offered notice sufficient to understand that use of a website will constitute agreement to the terms,” according to the article.

Read the article.