When conditions are encountered on a construction project that are contrary to the information provided to bidders, the parties’ contract should provide a roadmap for how the parties ought to proceed, writes Timothy W. Gordon, a partner in Holland & Hart, in an article published on Lexology.com. When the parties’ contract is silent on the issue, the price of contracting increases, uncertainty arises, and the likelihood of disputes increases.

His article includes sections titled:

• Why Have A Differing Site Conditions Clause?
• What If There Is No Differing Site Conditions Clause?
• What About Public Projects?
• What About Exculpatory Clauses?

Read the article.

Contract terms and purchaser assent to those terms, conditions, intended use and warning information provided with a purchased product are known fertile ground for defending product claims, write Amy Alderfer and Sara Poster in Cozen O’Connor’s Products Liability Prevention & Defense blog.

The authors point out that consumers often turn to the internet to purchase products, particularly during the holiday season. The paper examines the enforceability of online contracts and corresponding reliance upon virtually provided product documentation.

By following the guidelines in the article, the authors write, “manufacturers and sellers can place themselves in a stronger position to successfully enforce the terms and conditions on their websites in court, and hold consumers accountable for having received, reviewed and accepted the warnings and product related information so diligently provided.”

Read the paper.

Employers generally embrace a policy of utilizing at-will employment as often as possible, where employers and employees can end their relationship with each other at any time and for any (legal) reason, writes F. Kytle Frye III of Fisher & Phillips LLP in an article posted on JDSupra.com. Written employment contracts are usually reserved for select executives and a few professionals.

“Numerous states, often through judicial pronouncements, have recognized varying exceptions to the at-will employment concept, such as allowing employees to challenge their termination as a violation of public policy,” he writes.

“The 8th Circuit Court of Appeals recently published a decision which sharply limits the application of the public policy exception. Interestingly, this limitation does not apply to at-will employees, but to employees with employment contracts. Somewhat ominously, the decision does not extend to all such contracts, creating an air of uncertainty for any healthcare business with employment contractual situations.”

Read the article.

Lawyers with Dallas-based Gruber Hurst Elrod Johansen Hail Shank won a $33 million verdict in a gas transportation contract dispute and a $28 million verdict in a fraud/fiduciary breach claim in the oil patch in recent weeks.

A Minnesota federal court has entered a $32.9 million judgment on behalf of Great Lakes Gas Transmission Limited Partnership, a Houston-based interstate natural gas pipeline company, finding that an Indian conglomerate violated the company’s contract to provide natural gas transmission services. The judgment was entered on September 16 by U.S. District Judge Susan Richard Nelson, following a jury trial in Duluth.

“This case has been resolved after more than six years of attempts by the defendants to avoid the simple principle of honoring a written contract,” says attorney David W. Elrod of Gruber Hurst Elrod Johansen Hail Shank, who represented Great Lakes throughout the litigation. “Given the issues involved and the size of this judgment, the case offers important precedents for determining an appropriate discount rate in future litigation involving long-term contracts, as well as federal court jurisdiction.”

In the other case, a Texas jury has awarded more than $60 million to two groups of oil and gas investors who were defrauded of significant profits from oil and gas production leases covering thousands of acres in West Texas. The Aug. 19 verdict includes more than $28 million awarded to Lowry Hunt of Mansfield’s L.W. Hunt Resources and Richard Raughton of Fort Worth, and is believed to be the largest ever in Fisher County and the surrounding counties.

The 3½-week trial heard in Judge Glen Harrison’s 32nd District Court included evidence that attorney Kerwin Stephens of Stephens & Myers in Graham and Abilene oilman Chester Carroll of Alpine Petroleum concocted a fraudulent scheme to cut existing partners out of an oil and gas partnership and take the profits for themselves.

As the market shifts from on-premises to cloud deployment, the risk of getting locked into a disadvantageous cloud contract increases for three main reasons, according to a report by  R. “Ray” Wang with Constellation Research.

“Cloud apps have dominated new license sales in the enterprise applications market in recent years.” he writes. “Constellation estimates that 93 percent of all new enterprise software license sales offer a cloud deployment option.  In the cloud model, buyers do not own the software license. Instead, the software is leased and accessed, while the purchaser owns the data.”

He discusses the three main reasons behind the risk of getting locked into a vendor.

Read the article.

Most contracts in the construction industry supply chain require the “downstream” project participant to indemnify those “upstream” against a spectrum of losses or claims relating to the project, write Shawn M. Doorhy and Patrick J. O’Connor, Jr. on the website of Faegre Baker Daniels LLP.

“Upstream participants, such as owners and general contractors, naturally seek the broadest indemnity available under the circumstances. It is not uncommon for owners and general contractors to draft broad indemnity agreements seeking protection from loss due to the indemnitee’s own direct fault,” they write. “Whether this can be successfully accomplished depends on a number of factors, including the specific language used and the law of the applicable jurisdiction.”

They add that — because indemnity agreements often are strictly construed against the party seeking indemnification — careful drafting is especially important.

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There are many ways to measure the success of a contracting cycle, according to an article published by ContractRoom. “For example, the time the contract took to negotiate, the timeliness of the delivery of services and the accuracy and quality of the services delivered are all things that could be measured and considered. But how many of these factors can be used to measure the performance of your internal contract managers? Is it the case that some factors lie outside of their control and should not be considered in managing their overall performance?”

The article says that many of these factors can and should still be considered. It discusses nine factors that should be reviewed.

Read the article.

A recent case from the 7th Circuit Court of Appeals discussed an interesting issue of contract interpretation of termination provisions, denying summary judgment and requiring further proceedings, writes Stephen M. Proctor, Vice Chair of the Business Group at Masuda Funai. But the decision also provoked a vigorous dissent that was probably more consistent with the freedom of contract principles (including freedom to make a bad contract) frequently espoused by circuit judges, he added.

The case is Life Plans, Incorporated v. Security Life of Denver Insurance Company, 7^th Circuit Court of Appeals, No. 14-1437, August 31, 2015.

Read the article.

A recent decision by the Patent Trial and Appeal Board (PTAB) has reduced a “covenant not to challenge” clause to mere words on paper, and fails to deter licensees from seeking a review of the licensed patent under the America Invents Act (AIA), write   Lillian Safran Shaked & Asaf Naymark in IPWatchdog.

“Covenant Not to Challenge” clauses are common in patent licenses, they write. “The clause provides that a licensee may not challenge the license in court or an administrative proceeding, and can also provide that the licensee cannot assist others in doing so.”

After discussing the case at length, the authors conclude that there is significant risk of damage to a patent licensor from a post-license IPR challenge, whether or not a “covenant no to challenge” is enforceable. “Given the costs involved and the possibility that unrelated license agreements may also be invalidated or terminated as a result of an IPR, there is need for clarification,” they write.

Read the article.

Many businesses have software licenses that are tailored to the business’ needs, and are for business operations on a day-to-day basis. But what happens if the software provider goes out of business or discontinues support for the software? In short, the business may not have meaningful access to necessary software after it is no longer offered or supported by the publisher. That is, unless the business negotiated a source code escrow agreement, writes Stephen Pinson in Scott & Scott‘s Software & Copyright Law Blog.

A source code escrow agreement is an agreement to deposit the source code of the software with a third party escrow agent. During the negotiation of the software license agreement, the licensee (the business seeking the software for its business needs) can request that the publisher place the source code into escrow and release the source code upon a defaulting event. A defaulting event is usually defined as insolvency, or the filing of bankruptcy by the software provider, or the inability of the software provider to maintain or update the software as promised under the software license agreement.

Normally, a software license agreement conveys access to the object code for the software. However, when there is a source code escrow agreement in place, the source code remains with the escrow agent, and when there is a subsequent defaulting event, the source code is released to the licensee by the escrow agent.

The agreement’s terms are heavily negotiated, because the events that trigger the release of the source code effect the licensor’s possession and control of the source code. Some important defaulting events that should be included in the agreement and negotiated by a licensee are the following:

1. Bankruptcy
2. Insolvency
2. Assignment to the software publisher’s creditors
4. Appointment of a receiver
5. Failure to provide maintenance and/or support agreed upon
6. Failure to correct any material malfunction, defect, or nonconformity of the software functionality
7. Change in control of the provider
8. Default by the licensor after ample opportunity to cure
9. Laying off a substantial number of employees who provide support for the software

Finally, the licensee should negotiate the software provider to escrow the names, phone numbers, and addresses of the software’s programmers so that the licensee can contact them and hire them if needed in case of a defaulting event.

It is important to seek advice from experienced counsel in order to understand all the risks involved when negotiating software licensing agreements.

Lawyers may argue that by nature the art of drafting contracts is so complex that it would be nearly impossible to use any form of analytics to assist in the process, writes ContractRoom on its website. But the new wave of contract drafting and management software is seeking to defy that argument.

The article says Kingsley Martin of KMStandards (publisher of ContractStandards) suggests there are three main metrics that define the success of a contract negotiation process: quality, cost and time.

“Newer technology is seeking to help optimize all three of these aspects of the contract management process by measuring metrics on contracts for various purposes.  An analysis of this data could lead a system to automatically produce contracts with optimized terms – i.e., the terms in the past that have required the least amount of time to negotiate.” the article says.

Read the article.

Waivers of consequential damages have become the industry standard in construction projects, and these clauses are found in most industry templates, writes Gregory Faulkner in Robinson+Cole’s blog, Construction Law Zone.

“No contractor wants to accept the risk that any one breach could lead to the financial ruin of its company,” he writes. “But does this clause, and others like it, go too far in the other direction?”

“Neither party should rely blindly on standard industry forms to define what losses are recoverable in the event of breach.  A project owner should analyze its potential exposures as part of its overall business plan for the project,” Faulkner writes.

Read the article.

Technology companies can preserve both significant sums of money and valuable intellectual property rights if they take action when a customer or business partner files for bankruptcy protection, according to a report published on the Buchalter Nemer website.

Shawn Christianson, Valerie Bantner Peo and Ivo Keller wrote the article.

“Far less effort is usually required to preserve these rights than what may be involved in a major piece of litigation; but, in almost every case, the company must take timely steps to ensure that its interests are protected,” they write.

They discuss measures that technology companies can take, and the procedures they should be aware of, to protect their rights in this area of law.

Read the article.

The International Association for Contract & Commercial Management will present a free, three-week online course offering ideas and insights into the world of business and trading relationships. This course will be a repeat of an April event.

Starting on Nov. 9, “the three week course will help you to better understand what is involved in commercial business relationships, and the process of managing contractual agreements,” IACCM says on its website. “You will learn how a person’s or organization’s objectives – and those of their customers and suppliers – can be achieved in an effective way, without threat or failure.”

Three modules, 5-10 minutes each, are released each week. They are recorded so participants can listen at their convenience.

Topics include:

• Relationship fundamentals; the things that can go right or wrong in commercial relationships
• The rules that govern public and private sector procurement
• The complexities of supply chains and networks that are a feature of many contracts
• How to manage interdependencies and the needs of multiple stakeholders
• Judgment and the data needed to inform it

Register for the course.

Contract managers carry with them a lot of valuable knowledge, data and wisdom, so it is important that a business captures this information so that when an employee contract manager leaves the company, these gems do not exit with them and can be leveraged for future use, reports ContractRoom on its blog.

The post outlines a list of information and valuable data a contract manager holds and why it should be captured, such as “Knowledge about the terms or specific parts of contracts that caused the most amount of pain in specific transactions,” and “Knowledge of the personalities people have with whom you negotiate regularly,”

Read the article.

The latest of a line of recent cases in which the U.S. Supreme Court has weighed the enforceability of class action waivers in arbitration agreements was before the court on Oct. 6, 2015, when the court heard oral argument in DirecTV, Inc. v. Imburgia, et al., No. 14-462, reports James A. McKenna of Jackson Lewis.

“These decisions almost uniformly have favored arbitration, and many employers have adopted and successfully utilized arbitration agreements containing class action waivers,” he explains.

DirecTV’s customers signed agreements requiring claims relating to the agreement or to the company’s service to be decided by binding arbitration on an individual basis. “Arbitration on a class basis was specifically prohibited. At the time Amy Imburgia signed the agreement, the controlling California law was the “Discover Bank rule” announced by the California Supreme Court in 2005. Under the Discover Bank rule, almost all consumer arbitration agreements containing class action waivers were deemed unconconscionable and, therefore, unenforceable,” according to the article.

Read the article.

An article in Kane Russell Coleman & Logan’s new Energy Law Today blog reports on a case before the 5th U.S. Circuit Court of Appeals that raises the question: “When will an anti-indemnity statute bar an often well-crafted legal indemnity term in a master-service agreement?”.

The case is Tetra Techs., Inc. v. Continental Ins. Co., No. 15-30446.

“In Tetra, the commercial fight was between Tetra, which sought to enforce an indemnity clause against its subcontractor, Vertex Services.  Continental, Vertex’s insurer, tried to block any indemnity payment, relying, in large part, on the LOAIA,” writes Andrea (A.J.) Johnson.

“The district court held that the decommissioning of a platform in a salvage operation did not come under the LOAIA, and, thus, Tetra’s claim for indemnity was enforceable. In opposition, appellant Continental contends that the trial court too restrictively interpreted the [Louisiana Oilfield Anti-Indemnity Act].”

Read the article.

Good attorneys constantly evolve their contract provisions, but contract evolution hates to discard pieces that were once useful, writes J. Benjamin Patrick of Gordon & Rees LLP in an article published on Lexology.com. The tendency to keep these pieces can result in a contract having the equivalent of the human appendix: a piece no longer of any positive use and that harbors the potential for harm.

For example, outdated contract provisions linger in the “standard form” contracts used by many contractors and owners, he writes. “The presence of such a provision in your standard contract is a sign that some additional evolution is necessary in order to bring your contract up to current laws, standards, and industry practices.”

Read the article.

Current contract management processes are lacking proper rules and controls, says ContractRoom in an article posted on its website. Serious consequences typically arise from lack of oversight during the negotiation phase or mismanagement of contract commitments after execution.

The company says poor time management or a simple manual error, either pre-or post-signature, could lead a business to miss a key deliverable and even risk being sued. This in turn could lead to significant legal expenses or even the loss of future business from a counterparty.

The article lists efforts a good contract manager (whether legal counsel or a business professional) can do to add control — even with a manual contracting process.

Read the article.

The Consumer Financial Protection Bureau (CFPB) announced that it is exploring a rulemaking to eliminate the use of certain arbitration agreements in consumer contracts that block consumers from participating in class-action lawsuits, report Bill Mayberry and Jodie Herrmann Lawson of McGuireWoods. They write that, if the new rule is enacted, it will impact companies that fall within the CFPB’s broad interpretation of businesses that provide financial products and services for consumer purposes.

“The announcement comes on the heels of the CFPB’s publication of a three-year study on arbitration that concluded that consumers generally are better served through litigation. According to CFPB Director Richard Cordray, arbitration clauses amount to ‘a free pass to sidestep the court and avoid accountability for wrongdoing,” they write.

The article is on the firm’s Subject to Inquiry blog.

Read the article.