So-called “smart contracts” are science fiction realized, write Professor Michael Mainelli, executive chairman of Z/Yen Group and principal advisor to Long Finance, and Bob McDowall, an Associate of Z/Yen. Executable pieces of code stored on a mutual distributed ledger for future execution bind people and payments to actions and outcomes, they explain in their article published by CoinDesk.

In their article, the authors discuss challenges facing blockchain-based smart contracts and make recommendations for how they can be best used in the short term as they mature.

“Most critically, the implementation of the contract requires no direct human involvement after the smart contract has been made a part of the distributed ledger, which makes these contracts “smart,” or autonomous. The code automates the “what if this happens” element of traditional contracts,” according to the article.

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Encouraged by consumer groups and trial lawyers, federal regulators are pushing for limits on arbitration provisions in consumer contracts, writes George Calhoun in IfrahLaw’s FTC Beat.

“At its core, the debate is about whether companies may compel consumers to arbitrate rather than litigate disputes and – perhaps more significantly – bar consumers from class action remedies as part of the arbitration requirement,” he writes.

“We will not be surprised to see some companies restrict their consumer offerings or increase prices to account for these new rules.” the article continues. “If you work in American business, we urge you to take notice of these changes and review how to protect your company from undue litigation in future contracts.”

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Just days after the city of Dallas filed an R-rated defense of the City Council’s vote to ban Exxxotica from the city-owned convention center, the porn expo has fired back that Dallas officials knew exactly what they were getting when they took the porn expo’s $28,080 last year, writes Robert Wilonsky for The Dallas Morning News.

The porn expo’s response is in response to a March 25 Dallas filing, which claimed Exxxotica’s organizers misrepresented the amount of nudity and sexually oriented activity that would take place during Exxxotica’s first event at the Kay Bailey Hutchison Convention Center last August. “As far as Dallas’ attorneys are concerned, broken promises to keep women (mostly) clothed trump Exxxotica’s allegations that the City Council trampled its First Amendment rights when it voted to ban the event two months ago,” reports Wilonsky.

U.S. District Judge Sidney Fitzwater will hear Exxxotica’s motion for a preliminary injunction on April 18.

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The Texas Plain Language law will mandate that auto finance contracts be written at an 11th-grade reading level by 2017, writes Nicole Munro of Hudson Cook LLP in an article published in Auto Dealer Today.

The Consumer Financial Protection Bureau already has a “know before you owe” program aimed at simplifying mortgage disclosures and a few states have had “plain language” laws on the books for awhile, but there has been no discernible move by other states to follow the readability route — until now, she writes.

“Requiring that documents be written in language an 11th grader can understand seems perfectly reasonable. Requiring that legal documents setting forth the rights and duties of parties to a transaction involving tens of thousands of dollars be written in 11th-grade prose? Not so much,” she writes.

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In petrochemical projects, the engineering, procurement and construction (EPC) contracts are often negotiated after the technology licenses have been negotiated between the technology licensors and the project owner, write Sean Goldstein, Jean Shimotake and Raymond Azar of White & Case LLP.

“Both sets of agreements are also typically settled before financing is sought for the project. Given the significant interrelationship between the EPC contracts and license agreements, and common lender requirements for the bankability of such project documentation, these timing differences may give rise to a number of issues.” they write.

They discuss issues for the EPC contractor, project owner and lenders, along with possible solutions.

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An increasing presence in contractual transactions is the automatic renewal clause known as the “Evergreen Clause,” writes Andrew C. Voorhees of Weltman, Weinberg & Reis Co., LPA.

“An Evergreen Clause allows for an agreement to continue for a defined period if the existing agreement is not renegotiated or properly cancelled within a specified time. Evergreen Clauses can be found in both consumer and commercial contracts, including Residential Lease Agreements, Advertising Contracts, Gym Memberships, and many other service-based agreements,” he explains. “The question is whether Evergreen Clauses are enforceable, as their effect is to automatically bind a contracting party to an agreement beyond the original contract term.”

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“Boilerplate” is standardized language used in common documents to reduce the time spent in negotiation and document preparation, explains Brad Reid, Senior Scholar, Dean Institute for Corporate Governance and Integrity at Lipscomb University, in an article published on the HuffingtonPost. He says it would be a mistake not to analyze boilerplate, because it may vary.

His article provides a brief and incomplete educational overview of some forms of boilerplate.

He covers such topics as choice of language provision, dispute resolution provisions, arbitration or mediation provisions, waiver of a jury trial, amendment and anti-waiver language, amendment and anti-waiver language, assignments and delegations, third party beneficiaries, force majeure, and more.

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Buying or selling a business is a detail-intensive ordeal, and one of the most crucial parts of the final sales agreement is the non-compete agreement, according to an article posted by Brad Denton of Denton Peterson, PC.

“A non-compete agreement is a contract where the seller agrees not to compete directly with the buyer within mutually agreed-upon parameters. Clearly, any potential buyer is obligated by common sense to have this agreement set in stone before completing a big transaction. If no non-compete agreement is in place, nothing prevents the seller from setting up shop next door with the same product right after the sale is finalized,” the article says.

He covers such topics as geographic limitations, time period restriction, blue pencil rule, step-down provisions, and selling businesses vs. employment contracts.

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In previous articles on employee separation agreements, Jonathan Orleans of Pullman & Comley, LLC discussed provisions that must – under federal law, specifically the Older Workers Benefit Protection Act – be included in employee separation agreements if the employee’s release of potential claims under the Age Discrimination in Employment Act is to be valid.

“And as I’ve pointed out previously, even if the employee is under 40 (and therefore isn’t protected by ADEA), it’s still wise to write the agreement in clear, understandable language and to have the employee confirm that he or she is entering into it knowingly and voluntarily,” he writes.

In a new article, he discusses some other provisions of employee separation agreements that his clients often ask about.

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Tom Monahan, the CEO of CEB, a multi-national best practice insight and technology company recently wrote an article in Fortune Magazine titled “Revving Up Your Corporate RPMs” that notes that, despite advances in technology, decision-making and change in the business world has actually slowed down in the last decade, writes ContractRoom on its blog.

His article offers these statistics:

• Hiring a new employee now takes 63 days on average – up from 42 in 2010;
• The average time to deliver an office IT project increased by more than a month from 2010 to 2015. It’s now over 10 months from start to delivery; and
• The time required for one company to sell something to another has risen 22% in the past five years.

in the article, Monahan suggests the reasons for this increase in corporate decision-making.

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Ken Adams of Adams on Drafting writes that he has recommended that contract drafters not use in the terms of art condition precedent and condition subsequent. But drafters should be aware of the underlying concepts, he explains in a recent post on his site, considering the recent opinion in Total Recall Techs. v. Luckey.

He discusses the case, which involved the alleged breach of a confidentiality agreement, in that the nondisclosure and exclusivity provisions had never taken effect. He explains that obligations can use a dynamic verb (pay, sell, terminate) or they can use a stative verb (keep, maintain, preserve).

“Critiquing how courts interpret confusing contract language has its interest, but what’s more important to anyone drafting or reviewing contracts is how you avoid this sort of fight. In this case, it’s simple enough: with an obligation containing a stative verb, it would be clearer to replace an unless conditional clause with except that and an if conditional clause,” he writes.

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An article written by Jeremy Andrews and Talia Taylor of DLA Piper highlights the key points to consider whether you are looking to terminate a contract or challenging an attempt to terminate.

The paper covers topics such as reasons to terminate, contractual termination, termination at common law, repudiatory breach, election, anticipatory repudiatory breach, affirming the contract, terminating the contract, termination notice requirements, and practical points.

“Can I terminate my contract? Does the other party have a right to terminate? These appear to be simple questions, but termination of contracts is a complex area of law,” the authors write.

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A venture capitalist who worked for Sequoia Capital for almost 20 years and an exotic dancer who has filed claims of being used as a “sex  slave” are involved in a breach of contract suit that arose from an alleged agreement for the businessman to pay her $40 million to halt a personal injury suit.

Michael Goguen and exotic dancer Amber Baptiste met at a Dallas strip club, reports The Fort Worth Star-Telegram.

“Baptiste says Goguen sexually abused her for more than a decade and then reneged on an agreement to pay her $40 million to halt a personal injury lawsuit, according to her March 8 breach-of-contract lawsuit. Six days later, Goguen countersued saying the relationship was consensual and alleging that Baptiste tried to extort him because he declined to make a greater commitment to her,” the report says.

Sequoia Capital, where Goguen worked for almost 20 years, said Goguen’s departure from the firm “was the appropriate course of action.”

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Even though they are still largely theoretical, smart contracts are being hailed as a force that will disrupt a number of industries, write Mark Hines and Niklas Holmberg of Gowling WLG in a post on Lexology.com. However, only superficial attention has been paid to the impact smart contracts will have on contract law and the role of the law in determining where and how smart contracts will be used.

Their post provides an overview of smart contracts and how they work and identifies some of the areas of contract law that we expect will be the focus of jurisprudential change.

They explain smart contracts, blockchain technology, and the legal implications of smart contracts.

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A recently decided case from an Ohio Court of Appeals found that an employee handbook may create a contract as to the terms of employment, including an employee’s rate of pay and insurance coverage, absent a clear disclaimer to the contrary, according to an article by Michael C. Griffaton of Vorys, Sater, Seymour and Pease LLP.

“The Court explained that ’employment manuals may constitute binding contracts between employees and employers provided all necessary elements of an implied contract are present.’ Thus, an employee claiming the existence of an implied contract must prove offer, acceptance, consideration, and mutual assent,” he wrote.

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Electronic signatures are in use across the globe, reports eSignLive in a new ebook the company has made available for complimentary downloading. (The download form is below.)

The widespread adoption of e-signatures has been supported by electronic signature laws around the world, including the Americas, Europe, Middle East, Africa and Asia-Pacific. Many of these are based on a model law enacted by the United Nations Commission on International Trade Law – Model Law on Electronic Signatures (2001).

Today there are more than 75 countries that recognize the legal validity of e-signatures. This eBook provides an introduction to electronic signature laws around the world, including:

• The three forms of electronic signatures – Basic, Advanced and Certificate/Qualified E-Signatures;
• A list of e-signature types allowed by each country;
• Links to resources such as the Database of Electronic Signature Legislation;
• Information about data residency and privacy laws.

Download the ebook:

One of the most critical and important contracts a startup can focus on, and do correctly, is to properly license IP from a university so that it can be commercialized going forward, according to a video prepared by Peter Buckland of Wilmer Cutler Pickering Hale and Dorr LLP.

He explains that a common question he hears from entrepreneurs is about how to work with technology that they created at their universities, going forward in a commercial endeavor.

“In most cases, anyone that is in anyway being paid by a university to do research, the university owns that research and for many of the universities we work with in this area, whether it’s Stanford or Cal or others, they’re all pretty in tune with their mandate, which is to commercialize that technology,” he says in the video. And the best way to do that, he adds, is to partner with the people who created that technology.

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An arbitration agreement is unenforceable where a party retains the right to make unilateral modifications effective upon notice to the other party, writes David Goodman of Greensfelder, Hemker & Gale, P.C.

“A starting point is to identify the transactional risks to be addressed in the contract and the entity’s needs that must be achieved, Goodman writes. “Often, drafters opt for a “belt and suspenders” approach, which is not only a terrible fashion faux pas but may result in an overreach nullifying the effectiveness of the risk management strategy.”

He discusses the example of the danger of how an attempt by an employer to get what it wanted in excess of what it needed is presented in Nelson v. Watch House Int’l, LLC, ___ F.3d ___ (5th Cir. March 2, 2016). Watch House Int’l is a March 2016 Fifth Circuit decision based on Texas law holding that the arbitration provision incorporated in a pre-employment agreement rested on illusory consideration.

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By Christopher Barnett
Scott & Scott LLP

Companies that have long relationships with Microsoft know that the company’s form licensing agreements have steadily evolved over time, and typically for the worse. If software licensing can be said to have any “natural laws,” certainly the First Law could be paraphrased to something like: “If you agree to an inch, be prepared to give a mile.” So it is with Microsoft’s standard-form Services Provider License Agreement (SPLA).

The most recent iterations of the SPLA include a handful of noteworthy changes, relative to the forms that many current SPLA licensees may have signed at the beginning of their relationships with Microsoft. Those changes include the following:

• End User License Terms (EULTs) now apply to all end users.
  In the past, the EULTs – a form end-user license agreement for SPLA providers to include in their customer contracts – were necessary only in connection with services that included Client Software or Redistribution Software. All other end user agreements needed to include terms that aligned with a laundry list of requirements that was set forth in the SPLA. The laundry list now is gone, and all end user agreements now must incorporate the EULTs. As a result, all SPLA providers will need to be familiar with the EULTs and will need to be prepared to incorporate them into their customer agreements.
• No limitation of liability when defending Microsoft.
  The new SPLA now expressly provides that the standard, mutual limitation-of-liability included in the Microsoft Business and Services Agreement (the master agreement to which the SPLA is attached) no longer applies to a licensee’s duty to defend Microsoft against certain third-party claims. Thus, a SPLA licensee could have effectively unlimited exposure arising from such claims. That state of affairs may be inconsistent with a licensee’s internal insurance or risk-management policies.
• Extensive new audit rights for Microsoft.
  The most troubling new developments pertain to audits. The audit clauses in all of Microsoft’s license agreements has become more and more burdensome for licensees over recent years, and the new SPLA forms are no exception. Past SPLAs said very little regarding audits, leaving most of the parties’ audit-related obligations to be defined by the MBSA. However, the new forms contain language broadly obligating licensees to provide Microsoft’s software auditors with “access to all servers running the Products,” without defining what that “access” entails. In addition, in some forms Microsoft has incorporated extensive, new provisions related to “anti-corruption” policies, recordkeeping and audits. Those anti-corruption audits theoretically would be limited to confirming a licensee’s compliance with the new SPLA’s anti-corruption requirements. However, those requirements include an obligation to maintain an accounting system that would enable Microsoft to probe every aspect of a licensee’s finances related to SPLA.

Prospective and renewal SPLA licensees with bargaining power should seriously consider mounting a determined effort to seek appropriate amendments to the above (and other) terms in the new SPLA form. Absent appropriate amendments, companies providing hosting services may want to think about organizing their infrastructures and business models to minimize or eliminate their reliance on SPLA licensing.

Bankruptcy Judge Shelley Chapman held that Sabine Oil & Gas Corp. has satisfied the standards for rejection of several gathering and handling agreements between Sabine and its midstream counter-parties, Nordheim Eagle Ford Gathering, LLC and HPIP Gonzales Holdings, LLC, report Ron D’Aversa and Douglas Mintz of Orrick, Herrington & Sutcliffe LLP in an article posted by JDSupra.com.

The authors say the ruling has limits, and the matter ultimately turns on whether certain covenants “run with the land” under Texas law.

“While the Court held that Sabine exercised reasonable business judgment in rejecting the agreements, the Court declined to decide ‘in a binding way the underlying legal dispute with respect to whether the covenants at issue run with the land,’ and instead offered a ‘non-binding’ analysis to determine the reasonableness of Sabine’s rejection. Thus, if the counter-parties can demonstrate that the covenants do run with the land in an adversary proceeding, Sabine may not be able to terminate those covenants,” according to the article.

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