A new Seventh Circuit Court of Appeals case demonstrates the importance of filing suit in a timely manner in order to retain one’s contractual rights, writes Myanna Dellinger in ContractsProf Blog. It also shows just how nasty contractual parties may act towards each other in violation of the duty of good faith and fair dealing.

The article details the case in which JTE distributed products in Chicago for Bimbo Foods Bakeries Distribution Company for over a decade. The contract had no duration, but stipulated that it could be terminated in cases of non-curable breaches by one of the parties.

Bimbo allegedly did not meet the standard of good faith because, according to JTE, Bimbo “began fabricating curable  breaches.” However, because the four-year statute of limitations had run, JTE could still not have asserted that argument, the court found.

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Michael Volkov of Volkov Law group has posted an article that says a contract management system is imperative for businesses.

The article discusses the four important purposes for such a system:

• To maintain consistency in the formulation and enforcement of contractual relationships;
• To mitigate business risks between the company and a party (e.g. customer, vendor, supplier);
• To protect the company’s culture and mitigate compliance risks through imposition of certifications, representations and warranties, and specific compliance obligations;
• To protect the accuracy of the company’s financial payment and receivables system by verifying the accuracy of payment terms and conditions in accordance with the company’s contractual agreements.

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Liability in the construction process is usually determined and allocated by contract, explains a post on the website of Faegre Baker Daniels LLP.

“It is quite common for construction contracts to contain indemnity provisions requiring one party to defend and reimburse the other against various expenses or losses. When contracts include express indemnity provisions, they will likely receive more attention, and be the subject of more negotiations between counsel, than any other provisions. Yet, if pressed to state what it means to ‘indemnify’ or ‘hold harmless,’ many are at a loss,” according to the firm.

The post discusses strict construction, express negligence, and the liberal or fair construction rule.

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You can do a lot of damage with a signature, warns Jack Garson of Garson Law LLC in Bethesda, Maryland. You can go broke.

In an article on the website of Forbes, he discusses five types of contracts that have caused the most disasters.

First, he warns of the dangers of assuming that leases are standard, so there’s no reason to read every clause.

On the subject of loan agreements, Garson’s advice is to negotiate, consult advisors, and bargain. Most of all, he adds, get the right to prepay the loan.

He also covers construction contracts, partnership agreements, and personal guarantees.

Read the article.

A recent Ninth Circuit ruling that Uber’s arbitration agreements did not violate the National Labor Relations Act provides a major victory to Uber by requiring each plaintiff to separately arbitrate his or her claims.

Christine M. Fitzgerald, writing in the Jackson Lewis California Workplace Law Blog, explains that plaintiffs filed a putative class action against Uber for failure to remit gratuity paid by customers, and for misclassification of the drivers as independent contractors and failing to pay their business expenses. The O’Connor plaintiffs sought an order declaring Uber’s 2013 arbitration agreements unconscionable.

The panel rejected plaintiffs’ argument that the lead plaintiffs constructively opted out of arbitration on behalf of the entire class.

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A  bankruptcy court has ruled that an arbitration clause was binding and ordered the stay lifted to permit arbitration in a bankruptcy proceeding to go forward, according to a post on the Bankruptcy Update Blog of Patterson Belknap Webb & Tyler.

Authors Jonah Wacholder and Daniel A. Lowenthal explain that, when a bankruptcy petition is filed, an automatic stay comes into effect staying proceedings against the debtor or the debtor’s property.

The court “reasoned that because the contracts had been formed before the bankruptcy case was filed, and because the bankruptcy case was now a chapter 7 liquidation rather than a chapter 11 reorganization, adjudication of the validity of the contracts was not sufficiently entangled in the bankruptcy case to count as a core proceeding.”

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Resolving disputes in arbitration can sometimes lead to surprising results, even ones that might be inconsistent with the underlying contract or with applicable state law, warns Ken Slavens for Husch Blackwell.

A recent Eighty Circuit decision is an example: The arbitrator in this case awarded attorney’s fee of nearly a million dollars more than the liability cap in the contract. Despite the possibility that this result was inconsistent with state law, the Eighth Circuit let the award stand.

“In the court’s words, ‘[t]he parties bargained for the arbitrator’s decision; if the arbitrator got it wrong, then that was part of bargain,’” writes Slavens.

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Indemnity provisions are widely used in the energy industry as a method of contractually apportioning liability between parties. These provisions are a staple in Master Service Agreements and can be unilateral or mutual, explains Zoe Vermeulen in a post on the website of Kean Miller LLP.

The author discusses oilfield anti-indemnity acts in Texas, Louisiana, New Mexico and Wyoming,.

The article also covers construction anti-indemnity acts.

“Like the Oilfield Anti-Indemnity Acts, these construction anti-indemnity acts vary widely from state to state and have many exceptions and nuances. And awareness of and familiarity with these statutes is also critical to adequately evaluating the viability of a contractual indemnity provision,” writes Vermeulen.

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A post on the website of Meislik & Meislik discusses the differences between two contract provisions that sometimes are confused: forum selection and choice of law.

Ira Meislik explains:

What’s a forum selection provision? That’s the one your agreement says where you can file suit to enforce your agreement. What is often confused with a forum selection provision? That would be a choice of law provision. That’s where the parties agree as to which state’s law will apply to their agreement. Once you are properly in any state’s courts, those courts can apply whatever law you’ve agreed should be used.

His article describes how the two provisions work in various states and then concludes with six points to keep in mind during the drafting process.

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There is a growing trend in the construction industry wherein contractors, subcontractors and designers are working together to pursue large construction projects, according to a JD Supra post by Snell & Wilmer.

“The terms of these collaborations are typically referred to as ‘teaming agreements’ which are intended to define the relationships, rights and responsibility of all parties involved during both the pursuit of the work and, if ultimately successful, the performance of the project including the financial remuneration,” the post explains.

It continues: Your goal in drafting these agreements is to define the relationship, the rights and responsibility of all parties involved on the “team” during both the pursuit of the contract and, if the contract is awarded, the performance of the project.”

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As a general practice, section headings should be used to identify the general subject matter of each contract provision, making it easier for the reader, writes Julie Brook for CEBblog.

“Section headings are very useful for ease of reference. They enable the reader to skim an agreement when searching for a particular provision or group of provisions,” she explains. “But headings can be a trap for the unwary—courts have used them to interpret the parties’ intent when a provision is ambiguous or misleading.”

She offers some advice on how the contract drafter can avoid the unintended consequences of headings.

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A federal appeals court Tuesday ruled that Uber can force its drivers into individual arbitration over pay and benefit disputes, voiding an effort by thousands of drivers to join in a class-action suit against the ride-hailing company, according to the Los Angeles Times.

The U.S. 9th Circuit Court of Appeals in San Francisco overturned a lower-court order that had certified the drivers’ class-action effort.

The court’s opinion cited a 5-4 U.S. Supreme Court decision in May that employers could enforce arbitration agreements that require workers to give up the ability to collectively pursue claims that they were shortchanged or treated unfairly.

Read the LA Times article.

Franchisors need to review their franchise agreements and take immediate action in response to the recent onslaught of legal action over “naked no-poaching” provisions in franchise agreements, according to a post in Franchise Law Update on the website of Fox Rothschild.

“In a typical franchise agreement, a franchisor will prohibit a franchisee from poaching its or its other franchisees’ employees during the term of the franchise agreement and for a period of time after the franchise agreement ends,” the authors explain.

In April 2018, the U.S. Department of Justice initiated a criminal complaint against a number of companies respecting naked no-poaching agreements. While the case settled with only civil penalties imposed, the DOJ expressly stated that it was reserving the criminal question and planned to “zealously enforce” the law.

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Ken Adams has brought his contract expertise to a Pittsburgh artificial intelligence startup, according to the ABA Journal.

The author of A Manual of Style for Contract Drafting has joined LegalSifter, a Pittsburgh artificial intelligence startup. Adams told ther Journal that LegalSifter has two main functions: reviewing the other side’s contract drafts, and creating contract templates without having to “endlessly reinvent the wheel.”

In a podcast, Adams discusses his work on contracts and on the new software.

Read the article and listen to the podcast.

Nearly every form of service agreement contains a provision restricting the ability of one or both parties to subcontract their obligations, points out a post in the Tech & Sourcing blog at Morgan Lewis.

But authors Doneld G. Shelkey and Valerie A. Gross offer a caution: “These limitations are often included as a standard part of the legal boilerplate without much thought, but can present significant problems, especially given the broad use and incorporation of third-party technologies and services.”

In their post, they discuss use of a subcontracting principle called a “material subcontractor” provision.

Read the article.

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Employers should review and revise their employee non-compete/non-solicitation agreements to decrease the risk that a court holds such agreements to be unenforceable, advises J. Lane Crowder in a web post on the website of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC.

“In 2018, there is a growing trend to invalidate non-compete and non-solicitation agreements. State and federal courts, as well as state legislatures, are pushing for enhanced scrutiny of the ‘reasonableness’ of these agreements,” she writes.

Companies should consider the reasonableness of the restrictions and consider whether the restrictions can be tied to legitimate protectable business interests.

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Following the abrupt halftime retirement of Buffalo Bills defensive back Vontae Davis, his former agent has confirmed that the decision voids nearly all the guarantees in Davis’ contract. He will only be paid for two games because he was signed in the offseason and his contract only guaranteed the full amount if he played all 16 games.

But Dallas labor and employment attorney Rogge Dunn of Rogge Dunn Group, PC, says that the NFL veteran legally had the freedom to make the move.

“The law does not require a professional athlete or executive to continue working despite an employment contract,” says Dunn. “Surprising as it seems, an NFL football player, a CEO or a partner in a partnership can generally walk off the job at any time. It’s another example of one of the few big hammers that professional athletes have. As we’ve seen many times, players skip organized team activities or hold out during camp – even when they are under contract and facing the financial consequences.”

Minimum volume commitment contracts (MVCs), often referred to as throughput agreements, are agreements under which a shipper or producer—a counterparty—undertakes to transport an agreed minimum volume of a commodity such as natural gas, NGL or crude oil through a third-party operator’s assets, such as pipelines or processing plants, over a specified period, explains a post on the website of Opportune.

“In the midstream industry, these contracts are typically utilized to enable the operator to recoup the costs of constructing infrastructure, such as a processing plant or pipeline lateral, for the benefit of the counterparty. Under these agreements a counterparty pays a shortfall or deficiency fee if the MVC is not met for a specified period—monthly, quarterly or annually,” the authors write.

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It’s an unfortunate fact that many construction projects end in disputes, driving the parties into some form of dispute resolution, writes Jason T. Strickland, a litigator with Ward and Smith.

Many of these construction disputes are resolved through arbitration, he writes in a web post.

His article explains how arbitration is different, the major differences between arbitration and lawsuits, court involvement in the arbitration process, avoiding unfavorable local law, and third-party administration of arbitration.

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Can an unsigned contract still be a contract? The answer is yes, for statute of limitations purposes, says the 7th Circuit Court of Appeals, according to Stephen M. Proctor in a post for Masuda, Funai, Eifert & Mitchell.

On this basis, he writes, it permitted a Chicago law firm to pursue a claim of unpaid fees against a foreign company and its U.S. subsidiary.

The court’s ruling quoted prior cases: “A contract is deemed written for these purposes ‘if parties are identified and all the essential terms are in writing and ascertainable from the instrument itself.’”

Read the article.