When entering into outsourcing agreements, what provisions of the governing contract (such as a master services agreement) should both parties pay particular attention to? Seth A. Northrop of Robins Kaplan addresses that question in an article published on the firm’s website.

“Whether it is how each parties’ responsibilities are outlined or measured, how pricing operates, how disputes are resolved, data security and privacy issues, or what happens if the agreement terminates, spending time to understand these critical components at the front end of the agreement may be critical to building a relationship based on mutual benefit as opposed to animosity,” he writes.

The nine provisions include service definitions, pricing model and incentives, data security, IP ownership, service levels, governance and audit provisions, dispute resolutions, bankruptcy contigencies, and exit. He discusses each in detail.

Read the article.

Failure to pay proper attention to indemnification provisions in contracts can lead to painful surprises down the road, writes Michael Didriksen on the Baker Botts website.  On the other hand, a modest amount of forethought can address some of the more common defects seen in indemnification provisions.

His article focuses on commercial contracts, as opposed to M&A transactions.

He presents a sample indemnification clause that seems comprehensive and coherent, but which contains some subtle infirmities, and then analyzes potential problems with the agreement. He then presents a revised version that’s designed to avoid the problems in the first.

Read the article.

When an organization is contemplating a large commercial agreement or outsourcing arrangement covering global operations across multiple service locations, subsidiaries, or affiliates, it should consider the advantages and potential pitfalls of using a single global agreement versus local (or “site-specific”) agreements to govern the transaction, writes Emily R. Lowe in an article published in a Morgan Lewis blog.

She outlines the benefits of global agreements and of site-specific agreements and discusses some potential pitfalls.

Lowe also describes effective general approach that can benefit from the advantages of using a global agreement while avoiding its potential pitfalls: entering into a single global agreement applicable to all services from a single service provider that either requires or permits (as appropriate) the divisions, subsidiaries, or affiliates of the parties to enter into separate local agreements.

Read the article.

Contracts with tech vendors increasingly include requirements of cyber-risk insurance coverage, but where the value and risks associated with the data to be shared with or created by the vendor warrant such a requirement, you should probably take a look at the coverage – and not just a certificate of coverage – to see what you’re getting, writes Jon Neiditz in Kilpatrick Townsend’s Big Data Tech Law blog.

First of all, he advises, always make sure you know what if any critical digital assets other than personally-identifiable information (PII) are covered.

He categorizes the questions as general, amount and scope of coverage, insurance claims process and dispute resolution, and provisions regarding the defense of an underlying claim or lawsuit.

Read the article.

A federal appellate court has denied Google’s breach of contract claim relating to assignment of the invention of an employee of another company, reports Dennis Crouch in the patent law blog Patentlyo.

An employee of a non-profit company developed a personalized information service – the subject of the patent that he filed – as an outside project. Later he sued Google for alleged patent infringement. Google contacted the developer’s employer and obtained a quitclaim deed over “any rights” in the patent held by company. Then Google argued in court that the developer had breached his employment agreement by failing to assign rights to the patents to his employer.

The alleged breach of contract was in the 1990s, so the statute of limitations came into play. But the site of the suit, Delaware, has a “discovery rule” that tolls any statute of limitations for the period in which an injury is “inherently unknowable.” The district court and the Federal Circuit found in favor of the developer, Crouch reports.

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Two recent cases confirm that incorporation of AAA Rules into an arbitration agreement evidences an intent to allow the arbitrator to determine what issues are arbitrable — including arbitration, reports The National Law Review.

“The question of whether parties to a dispute have agreed to arbitration is often termed a “gateway” issue to be decided by a court, unless the parties agree otherwise,” the story says. “Both the Commercial and Construction Arbitration Rules of the American Arbitration Association expressly grant to the arbitrator “the power to rule on his or her jurisdiction.”

In one of the cases, Fremont Cmty. Digester, L.L.C. v. Demaria Bldg. Co., Inc., 2015 WL 3917635 (Mich. Ct. App. June 25, 2015), the court noted that the AAA Rules authorize the arbitrator to decide matters relating to jurisdiction. “The Court of Appeals affirmed, defining the central issues as whether the new claims were within the scope of the letter agreement, recognizing that contract interpretation is an issue for the arbitrator,” according to the Review story.

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A recent 9th Circuit Court of Appeals decision suggests that in certain circumstances overly broad language in a no-rehire provision may violate California law (namely, section 16600 of California’s Business and Professions Code) as a contract restraining the lawful practice of a profession, writes Daniel J. Kanter of Ogletree Deakins and published on Lexology.com.

“When resolving an employment dispute, employers often wish to include a ‘no-rehire’ provision in the settlement agreement,” he writes. “In a typical no-rehire clause, the parties agree that they wish to resolve their dispute and sever any relationship they may have now or in the future. The employee agrees that his employment has ended and promises not to seek reemployment with the company. Further, if the employee obtains reemployment with the company or any related entity, the employee agrees that his or her employment may be terminated immediately without any legal recourse.”

The article discusses the ruling and offers some key take-away conclusions.

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Every foreign business person who enters into a contract with a Chinese company needs to consider a fundamental question: how will the contract be enforced, writes Steve Dickinson on the China Law Blog, published by Harris & Moure. in the article, he discusses how to be able to pursue a claim successfully against a Chinese company.

“First, there must be a written contract between the parties, executed by both parties in accordance with the requirements of Chinese law,” he writes.

“Second, the contract must be enforceable in China. As a practical matter, no Chinese court will enforce a foreign judgment and it can be quite difficult to get them to enforce a foreign arbitration award.”

Read the article.

Piliero Mazza has posted a complimentary on-demand webinar that covers the ins and outs of contract terminations, both for convenience and for default.

Presenters are Jon Williams and Michelle Litteken, attorneys in the firm’s Government Contracts Group.

The discuss:

– The termination for default process and response strategies
– Converting a termination for default to a termination for convenience
– The termination for convenience process and response strategies
– An overview of appeals process

Watch the on-demand webinar.

Many attorneys representing a client who procures technology from a service provider know to request a security audit, but there is still confusion even among sophisticated technology attorneys about which security audit to request and how to interpret the report once it is received, writes Amanda Witt in an article in Big Data Law Tech blog at Kilpatrick Townsend & Stockton.

The article, reposted by Lexology.com, describes the types of security audits and third-party security certifications that are most frequently requested by customers or offered by vendors.

“As concerns about the security practices of service providers continue to grow with the occurrence of each high profile security breach, the reliance on security audits and security certifications will continue to steadily increase.” she writes.

Read the article.

An article by Adam Groff in Global Construction gives some advice on what construction companies need to remember when drawing up a contract.

The article features sections headed “Construction Contracts: A Changing Landscape,” “Common Contracts in Construction,” “Union Contracts” and “Hiring Types.”

“If you work in the construction industry, then you already know how important contracts are,” he writes. “Although construction contracts have changed over the years, there are still some basic guidelines to follow when creating a contract.”

Read the article.

A generation ago, mediation of construction disputes was unusual, writes Bruce W. Ficken in Pepper Hamilton’s Constructlaw blog. Today, it is rare that a construction claim goes to trial without some effort at mediation first. Indeed, a substantial percentage of construction contracts require mediation as a precondition to filing suit or demanded arbitration.

“Still, as pervasive as mediation has become, misperceptions about mediation persist among the contractor population generally.

“What does a mediator decide? Who controls the proceedings? Is there such a thing as binding mediation? How confidential is confidential during and after a mediation?”

The author addresses those questions in the article.

Read the article.

A complimentary webinar presented by Exari will help participants learn how to sell a CEO on a contract initiative.

The event will be Wednesday, Sept. 9, at 11 a.m. EDT. The webinar will be recorded and made available later to participants who register.

In a release, Exari said many good contract management initiatives never get off the ground because of a failure of communication – after all, contract professionals and lawyers may speak a different language than the CEO.

“Your evaluation team may compile a long list of impressive-sounding benefits, but when presented to an impartial executive team with no intuitive connection to the project, those benefits may be discounted as too soft or too hard to measure,” the release said. “To convince them, you need to pitch your business case in terms of solving an urgent problem and delivering measurable results. You need to convert your CEO.”

This webinar will walk through a three-pronged framework to bring the CEO on board:

• Focus on the “Burning Platform” – A contract-related problem that must be solved
• Tell the Story in Hard Numbers – How will your contracts solution improve the balance sheet and P&L?
• Remember to Account for Execution Risk – Is the plan supporting these numbers realistic?

“You need to know how to explain to the CEO why “fixing our contract problems” deserves attention and money; what it will deliver in terms of top line, bottom line and balance sheet impact; and whether the scope and timetable of your project is grounded in reality,” the release said.

Join the discussion between Jamie Wodetzki of Exari and IACCM’s Tim Cummins on Sept. 9. There will be opportunities to ask questions of the speakers.

Register for the webinar.

Defining and incentivizing high-quality performance is often key to the structure of complex service or technology-oriented agreements, writes Steve Gold, a McGuireWoods LLP partner in a legal alert from the firm.

“In this class of agreements, merely having a performance warranty that answers a yes or no question – in breach or not in breach − just doesn’t do the job. To augment those performance warranties, a common approach is to use a ‘service level agreement’ (SLA). The SLA is a familiar and essential feature in information technology-oriented agreements, such as outsourcing, cloud computing, software-as-a-service and the like,” the alert says.

Gold writes that SLAs, when properly structured and negotiated, can be an effective tool for more nuanced vendor management than a performance warranty alone could afford.

His article catalogs some of the best practices for structuring a service level agreement and discusses elements enterprise corporate counsel can put to use in the IT and service contracts that come across their desk.

Read the article.

The Eight U.S. Circuit Court of Appeals has concluded that the Arkansas Supreme Court would likely adopt the majority rule that a covenant not to compete can be assigned to the purchaser of a business, reports Jackson Lewis in its Non-Compete and Trade Secrets Report.

The case is Stuart C. Irby Company, Inc. v. Tipton, No. 14-1970 and 14-2682 (8th Cir. Aug. 6, 2015).

The appellate court reversed an across-the board win for defendants in this Arkansas non-compete dispute, disagreeing with the district court on almost every point, writes V. John Ella and James R. Mulroy of Jackson Lewis. They report that one of the take-aways of the ruling is that assignability of restrictive covenants is often a source of confusion, and best addressed explicitly at the drafting stage, even if no merger or acquisition is on the horizon.

Read the article.

A New York court earlier this year explored the issue of disclosure obligations in “as-is” commercial transactions and came to an unexpected answer, writes DLP Piper’s Michael Hamilton in Commercial Property Executive.

The state appellate court ruled “that the seller of an apartment building in New York City had a duty to disclose certain facts about the building’s physical defects where those facts were not known to and not easily discovered by the buyer,” he writes. “The court found that the seller was obliged to provide those facts not only under its contract but also under common-law fraud doctrines.”

The case was TIAA Global Investments L.L.C. v. One Astoria Square L.L.C.

Read the article.

Term sheets and commitment letters are documents frequently used by lenders to outline the terms of a potential financing. However, these two documents differ with respect to what is required of, and whether the terms are binding on, the parties, write Paul M. Fogleman and Brian F. Corbett of Poyner Spruill LLP.

“A commitment letter differs from a term sheet in that it creates a binding agreement on the part of a lender to make a loan on the stated terms.” they write. “In addition, a commitment letter generally requires that a borrower reimburse a lender for out-of-pocket expenses and possibly pay a break-up fee if the loan transaction does not close, whereas there is generally no obligation for the borrower to pay these costs and fees in a term sheet.”

They offer some points to consider in drafting commitment letters and term sheets.

Read the article.

A thoughtful entrepreneur knows it is a better use of their time and money to hire someone to draft a contract at the beginning of a project than to try to do it themselves and have to hire a lawyer later to clean up the mess they created for themselves, writes Ruth Carter of Carter Law Firm in Phoenix.

She writes that she’s been seeing multiple situations where problems could have been prevented if the people involved had fully thought the situation through, called a lawyer to help them record their agreement in writing (and had the provisions they didn’t think about in advance), and signed their contract.

“Well written contracts are business gold,” she writes. “They put everyone on the same page from the beginning of the relationship and they outline how the parties will deal with problems when they occur.”

Read the article.

One of the more common forms of business disputes is a dispute over the failure to perform certain obligations set forth in a contract, and many businesses and individuals often wonder what is or what constitutes a “breach of contract,” writes Robert Fojo of Fojo Dell’Orfano of New Hampshire.

“If you entered into a contract, performed your obligations under that contract, and you are experiencing issues with getting the other party to perform its own obligations, you may have a situation where that party has not fulfilled its end of the bargain,” he writes.

“What do you do next? This is a question that haunts many businesses and individuals. How do you know what is a breach of contract? Are there any specific steps that need to be taken to make that determination? Should you go back and read the actual contract? How long do you have to do this? Should you talk to an attorney?”

Read the article.

Letters of intent can be minefields, writes Jeffrey Brown of Thompson Coburn.

“On the one hand, business people want to use them to tie up a deal. On the other, they don’t want to be bound by them if they want to walk away,” he explains in the article published on JDSupra.com. “As one court explained, ‘It is a common commercial practice for two negotiating parties to sign a letter of intent or an agreement in principle, signaling that they have come to a tentative agreement on the general outlines of a deal without having nailed down all of the details. Not infrequently, the negotiations that follow the execution of this document break down, prompting the disappointed party to sue on the theory that the preliminary document is binding.’ ”

He writes that parties must be careful in drafting LOIs if they want to avoid having a judge later hold that instead of a precursor to an agreement, the LOI became an enforceable agreement.

Read the article.