The executive director of the Federal Bank of Atlanta’s Center for Financial Innovation and Stability released a paper on smart contracts and their potential to change traditional legal proceedings, finding: “In many circumstances, smart contracts may eventually be a more efficient way of contracting than traditional paper contracts.”

The Cointelegraph reports that Larry Wall, in his paper titled “Smart Contracts in a Complex World,” explored the inefficiency of paper contracts in legal proceedings, which is primarily caused by ambiguity in the language of the law.

“The majority of contracts that are formed between two parties to ensure the fulfilment of the established agreements are often incomplete, because of the difficulty in stating every possible situation where the contract can be utilized,” according to the Cointelegraph article.

“Wall believes smart contracts demonstrate a series of major advantages of paper contracts,” it continues.

Read the article.

In what it described as a case of first impression, the Northern District of California ruled that a professional liability policy that excluded the insured’s “assumption of liability obligations in a contract or agreement” did not extend to breach of warranty or false advertising claims arising out of a genetic data testing company’s marketing and sale of a personal genome service, reports Mary McCutcheon of Farella Braun + Martel LLP.

She writes in the article on the firm’s website that Ironshore Specialty Ins. Co. v. 23andMe, Inc. is noteworthy by the fact that the insurer challenged coverage on this ground.

“While this issue apparently has never been decided in the context of a professional liability policy, both case law and custom and practice recognize that the same phrase used in a general liability policy applies only to liabilities ‘assumed,’ i.e. created by, a contractual indemnity agreement,” according to McCutcheon.

Read the article.

An article in Norton Rose Fulbright’s Data Protection Report discusses a recent ruling by the 11th U.S. Circuit Court of Appeals that affirmed a decision in Silverpop Systems, Inc. v. Leading Market Technologies, Inc., finding that all damages flowing from a vendor’s data breach were barred by a standard provision in IT service contracts, disclaiming all liability for consequential damages.

Matthew Spohn and David Navetta explain that the court’s analysis could apply to almost any breach of data provided to a vendor under an IT service contract, and highlights the need to carefully scrutinize a proposed waiver of consequential damages when confidential or sensitive data is involved in the contract.

“In contracting for IT services, it is important for purchasers to thoughtfully consider the risks of harm presented by the services, and then negotiate terms that appropriately allocate those risks between the parties.  This requires both parties to reconsider the standard vendor-friendly term waiving all consequential damages,” the authors write.

Read the article.

In what may be a trend, several courts around the country this year have embraced strict interpretations of non-compete agreements, refusing to blue pencil or equitably reform overbroad or unreasonable clauses in non-compete agreements, according to an article by Christopher Lindstrom and Emily Fox in Nutter McClennen & Fish LLP’s Non-Compete Law blog.

The explain that courts traditionally have exercised the doctrine of equitable reformation to re-write provisions to render them reasonable, or at the very least, strike unreasonable provisions to save those that are reasonable.

They discuss cases from Nevada, North Carolina and New York that illustrate their point.

Read the article.

The value of Contract Lifecycle Management (CLM) solutions is primarily based on their ability to standardize the contract authoring process through clause and contract templates and self-service wizards, and guide new contracts through a standard workflow through to signature and execution, according to an article published by Seal Software on its website.

Many CLM solutions have performed these process-oriented tasks, but some other critical functional requirements needed to meet everyday challenges in contract management still remain unaddressed.

“The challenge is that many organizations have tens of thousands of active (legacy) contracts that existed prior to a CLM implementation and likely reside across any number of file share drives, document management systems, personal computers and other types of “make-shift” repositories.” the article says. “This is sometimes due to nature of contracting, where the Procurement team has its requirements and solutions for contracting, the Sales team has theirs, Facilities has theirs, and the Legal team uses their own processes for managing various types of legal agreements. Add some M&A into the mix, where thousands of new contacts may be coming into an organization and the problem is magnified. Each legacy contract likely contains more exposed risk due to the typical ad hoc creation and negotiation process than any new contract being created through a new CLM system.”

Read the article.

When a client wants to pursue a lawsuit or arbitration, one of the first things an attorney should do is determine whether the statute of limitations has run on the client’s claim, advise Darren Rowles and Scott Cahalan in a post for  Smith, Gambrell & Russell, LLP’s Construction Law blog.

“Many people are not aware, however, that parties to contracts, including construction contracts, may have the ability to increase the statute of limitations for a written contract by a factor of more than three hundred percent just by adding a few words to make their contracts ‘under seal.’ As a result, these people may increase their exposure to breach of contract/warranty claims without knowing they are doing so,” according to their post.

They explain that, in Georgia, for example, a written contract that is not for the sale of goods would normally have a six-year statute of limitations measured from the date of breach, But a contract signed “under seal,” has a statute of limitations of 20 years from the date of breach.

Read the article.

The term of a contract is one of the most basic questions with regard to any agreement, but drafting provisions regarding the “Term” raises multiple issues, both legal and practical, write Peter M. Watt-Morse and Cindy L. Dole in the Sourcing blog at Morgan, Lewis & Bockius LLP.

In their article, they review some important considerations to keep in mind when drafting this common contract provision.

They start by discussing the effective date, then the end date, and conclude with a section on length of the agreement.

The post  is part of the firm’s recurring “Contract Corner” series, which provides analysis of specific contract provisions.

Read the article.

Arbitration clauses seriously harm many consumers. Yet it is nearly impossible to avoid signing them, if a person wants or needs to use the internet, phone, credit cards, loans, medical or long-term care services, and so on, according to an article posted by Newsome Melton on its Arbitration Law blog.

But lately, many state and federal government representatives, judges, politicians, and interest groups have been speaking up about arbitration, the article adds. Some have publicly pulled away from upholding universal “forced arbitration.”

“Individual arbitration clauses are now on the radar of many attorneys, judges, politicians, regulators, journalists, and consumers. It is too soon to tell whether the new or proposed regulations and rules preserving court trials and permitting class actions for consumers will be upheld or overturned,” the article says.

Read the article.

Commercial construction projects necessarily involve many moving parts, including multiple parties from the owners to the construction managers to the project financiers to the contractors and to the sub-contractors, points out Larry P. Schiffer in Squire Patton Boggs’ Insurance and Reinsurance Disputes blog.

“These moving parts generally result in a web of interrelated insurance policies covering the project. Typically, when there is no controlled insurance program, contractors and sub-contractors are required to obtain liability insurance covering their potential negligence and very often are also required to add others, like the property owner or construction manager, as additional insureds onto those insurance policies,” Schiffer writes.

In his post, he discusses what a New York appellate court recently called an “additional insured by written contract” clause. The language of an additional insured clause may make all the difference as to whether a party is covered as an additional insured or not.

Read the article.

The celebrated “freedom of contract” is not absolute, writes Glenn West for Weil, Gotshal & Manges LLP’s Global Private Equity Watch.

“The right of contracting parties to obligate themselves to one another has always been subject to certain statutory limitations, as well as those imposed by the common-law principles that govern the enforcement of contracts generally. A recent decision by the United States Court of Appeals for the Seventh Circuit, Caudill v. Keller Williams Realty, Inc., 2016 WL 3680033 (7th Cir. July 6, 2016), serves as a reminder of one of those common-law principles—the idea that, as a general rule, parties should not be penalized for breaching a contract,” he writes.

“Parties relying on agreed damages clauses on both sides of the Atlantic should continue to draft such provisions based upon the current interpretation, in the applicable jurisdiction, of the ancient principle of the common law that abhors a penalty for a contractual breach,” West advises.

Read the article.

If you want your electronic contracts to be enforceable, it is a best practice to require the counterparty to affirmatively accept the contract by checking a box or clicking a button, write Nikita A. Tuckett and Aaron Rubin on Morrison & Foerster LLP’s Socially Aware blog.

“A recent New Jersey district court decision, ADP, LLC v. Lynch, reinforces this point. Such issues most often arise in the context of website terms of use, but ADP v. Lynch involved a non-competition provision and forum selection clause contained in documentation presented to employees electronically in connection with stock option grants,” the authors write.

They continue: “ADP had presented the documentation in such a way that each employee was physically unable to click the required ‘Accept Grant’ button unless he or she had affirmatively checked a prior box indicating that he or she had read the associated documents containing the restrictive covenants and forum selection clause.”

The court denied the employees’ motion to dismiss.

Read the article.

When anyone signs up to help Donald Trump’s presidential campaign by making phone calls to prospective voters, they first must sign a 2,271-word nondisclosure agreement that prohibits the volunteer from  criticizing Trump or any member of his family for the rest of their lifetimes, writes Joe Ahmad in the Legal Issues in the Executive Suite blog. The blog is on the website of  Ahmad, Zavitsanos, Anaipakos, Alavi & Mensing P.C. of Houston.

The campaign program is the Trump Red Dialer, an online call system that connects campaign volunteers with potential voters.

“It states you cannot disparage Trump or any “family member,” which includes grandchildren and his nieces and nephews, or any of their companies,” writes Ahmad. “Try figuring out who all of these people and companies are – just try! Nor can you even disparage any of these companies’ products.:

He points out that a legal question to ask is what is the consideration – what does the volunteer get – in return for signing this broad agreement? “One guess is that it could mean they may get access to some type of confidential information. But that is neither promised nor even implied in the agreement,” he writes.

Read the article.

SpringCM has posted a free on-demand webinar discussing contract lifecycle management, including the capabilities as well as the benefits of implementation.

“To ensure your business is well-positioned for success in the 21st century, transforming critical business processes like contract management is pivotal,” the company says on its website. “As a result, Contract Lifecycle Management (CLM) and Contract Discovery and Analytics solutions are quickly being added to a company’s technology portfolio because they work together to help firms gain better visibility and control over their contracts.”

The title of the webinar is “Get Control of Your Contracts! How to Use Contract Management and Analytics to Accelerate Digital Transformation.”

Karry Kleeman, CRO at SpringCM, and Lloyd Alexander, VP of Contract Strategy at Seal Software, join guest speaker Andrew Bartels, vice president and analyst at Forrester Research Inc., to discuss contract lifecycle management in the 60-minute webinar.

Watch the on-demand webinar.

LawGeex has published a case study showing how social media company Brandwatch uses artificial intelligence to reduce costs and speed up the contract review process.

The case study focuses on Dylan Marvin, Brandwatch’s general counsel. His company employs more than 350 people.

He worked closely with LawGeex to build his own customized solution, resulting in:

• 80% reduction in time spent reviewing routine contracts
• 90% cost saving compared to using outside counsel or hiring new staff
• Legal department no longer a bottleneck
• 3 times faster deal closing

Download the case study.

ContractWorks offers a free guide to selecting the appropriate contract lifecycle management software.

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.

By Katie Cook
ContractRoom

Image by Steve Jurvetson

The third season of HBO’s Silicon Valley is now complete and Pied Piper has just released its product to market. Several hurdles have been overcome in the journey to this level of fruition including one of the key executives of the company being trapped in a self-driving car and large amounts of code being accidentally deleted. Legal complications have also played a large role in the plot lines, including many issues related to contractual agreements. These include:

1. Intellectual property theft due to terms in employment agreement

The first term in a contract that became important in the plot line was that about intellectual property in Richard Hendricks’s, Pied Piper’s CEO’s, employment agreement with Hooli. Hooli was the company he was working with before leaving to work full time for Pied Piper. This term specified that the fruits of work done on his work computer would become Hooli’s intellectual property. In trial, evidence showed that Richard had performed some work for Pied Piper on his Hooli computer and so all the intellectual property according to this term was Hooli’s. However, unexpectedly and thankfully for Pied Piper, the judge noted there was also a non-compete clause in the employment agreement which was unlawful. Due to this, the entire employment agreement, as well as the employment agreements of all other Hooli employees were declared by the judge to be null and void and Pied Piper was allowed to keep the intellectual property that Richard had created.

2. Services Agreement between End Frame and Intersite

End Frame is a rival company of Pied Piper. In the first season, some of the people who go on to form End Frame trick members of Pied Piper into disclosing some of their intellectual property to them. In season two, Pied Piper becomes aware of End Frame’s existence after they lose their partnership with “Homicide,” an energy drink, to live stream a stunt for them. Instead Homicide engages End Frame for this. In an act of desperation, when it looks like Pied Piper is losing its funding, some of the Pied Piper team get their hands on the services agreement between End Frame and an internet porn company called Intersite and set out to convince Intersite to contract with them instead of End Frame. Intersite agrees to have End Frame and Pied Piper compete to see which product is the best and Pied Piper wins this competition.

3. Non-disclosure Agreement (NDA) signed by Big Head (Nelson)

Big Head (also known as Nelson) was originally part of the Pied Piper team and a friend of Richard. They knew each other from when they both worked at Hooli. After Pied Piper obtained funding, Big Head was cut from the team, but at the same time was offered a large promotion at Hooli, which he took. CEO of Hooli, Gavin Belson, continued to promote him in an attempt to outsmart Pied Piper, believing he had poached one of their best developers and that Hooli, with Big Head, could create a better product at a company inside Hooli called Nucleus. Once it became clear that Nucleus was a flop and all employee contracts at Hooli were null and void due to a non-compete clause, Hooli offers a redundancy package of $20 million to Big Head which he accepts. However, he takes this on the condition he abides by an NDA which he breaches by talking to tech blogger, C.J. Cantwell, about how Hooli covered up bad reviews about Nucleus by changing how their search engine operated.

4. Sales agreement for Pied Piper’s “box”

One investment firm Raviga takes over the funding of Pied Piper at the end of season 2 and early season 3, Richard is removed as CEO. The new CEO, Jack Barker, believes that creating a ‘box’ to contain the compression product will be more quickly adopted by the market and quicker to sell to enterprises. Richard and his team are not interested in creating the box as they have always wanted to use their compression algorithm to create a product available to consumers. His team devise a plan to create a product for consumers, while pretending to create the box product. However, Jack Barker becomes aware of this plan. In the meantime, Monica, who works for Raviga notices a term in the sales agreement for the box that gives exclusive rights to the owners to use Pied Piper’s algorithm for five years. This deal would prevent Richard and his team from creating the consumer product within that time. In the meantime, Hooli acquires End Frame for $250 million. End Frame is creating a consumer compression product and not a box. This purchase effectively sets the value of Pied Piper if it was creating a consumer compression product and makes obvious that developing a consumer product will be a much more valuable option. Jack Barker is fired by Raviga and the way is paved for the team to continue building the consumer product.

5. Partnership agreement between Erlich and Big Head

Erlich convinces Big Head to go into business with him and drafts a manipulative partnership which gives Erlich complete control over Big Head’s assets but no access for Big Head to Erlich’s Pied Piper shares. Big Head signs the agreement unaware that he is essentially giving Erlich the same financial rights as a spouse. Erlich sets about planning an extravagant party to celebrate the launch of his and Big Head’s new company which is to be called “Bachmanity”.

6. Vendor contracts for Bachmanity Insanity

The extravagant launch party for Bachmanity is held at Alcatraz and it is Hawaiian themed. Erlich engages event planner, Sasha, to organize this party and details of the party include, among other things, pukka shells, roasted pigs and flamethrowers. During the party Sasha informs Erlich that a number of vendors have called to complain that their checks have bounced and just before the main speech that Erlich and Big Head are to give Arthur Clayman, Big Head’s business partner, informs Erlich that Bachmanity is bankrupt.

8. The Retainer Agreement for Big Head’s business manager, Arthur Clayman.

This gave Mr Clayman access to Big Head’s funds. After Clayman explains to Erlich that Bachmanity is bankrupt, Erlich gets Jared Dunn, Richard’s assistant and former personal assistant to Hooli CEO Gavin Belson, to assess what has happened with the funds. He finds that $6 million has been misplaced, which they later realise Clayman has used to pay other clients. Big Head and Erlich consult the District Attorney’s office about taking legal action against Clayman but are told their case would be a low priority. Erlich is told he may have to liquidate his shares in Pied Piper to repay the debts of Bachmanity that are outstanding.

LawGeex has launched new A.I. Contract Review technology designed to help in-house counsel read, review and understand contracts.

The company says the technology features artificial intelligence that reviews contracts and highlights any issues, reviews contracts based on the user’s own legal checklist, reviews other people’s changes to standard contracts, can review any contract custom built for any industry,  and automatically manages contract approvals and escalations.

The streamlined workflows between sales, operations and legal can save users 80 percent of the time and 90 percent of the costs while cutting the time to close deals by two-thirds, the company reports.

The artificial intelligence program can recognize when any clauses are rare, missing, or potentially problematic, and provide a plain English report.

• Interactive contract reports with recommended fixes
• Lightning fast turnaround – 80% time saved reviewing and approving contracts
• Legal speak translated into simple English
• Checked by real life lawyers for quality and accuracy

Learn more.

Wednesday, Sept. 21
2-3 p.m. EDT

eSignLive by Vasco is sponsoring an online presentation providing an overview of the basic terminology, concepts, and laws related to electronic signatures and answer the most frequently asked questions on the topic.

The free webinar will be Wednesday, Sept. 21, beginning at 2 p.m. EDT.

The speaker will be Richard Medina, co-founder and principal consultant of Doculabs.

Topics will include:

• What is the difference between an electronic signature and a digital signature?
• How can you prove who e-signed?
• What legal and compliance requirements do we need to consider?
• What ROI metrics have others reported?
• What do signers need in order to e-sign?
• How do we get started? What’s the cost? What’s the effort?

Register for the webinar.

Managing third-party vendor relationships has recently become a hot topic for state and federal financial bank regulators, writes Jerry Blanchard of  Bryan Cave LLP.

Some examinations have resulted in regulators imposing settlements and impose civil money penalties on vendors, he reports.

He explains that, “The OCC guidance is generally looked at as the ‘gold standard’ for evaluating issues that need to be addressed in a vendor agreement. That does not mean that every contract a bank signs needs to have every one of those issues addressed or that each one needs to be resolved in favor of the bank. Vendor contracts come in many different shapes and sizes and may affect everything from back office processing, internet delivery systems, use of the ‘cloud’ to the people watering the plants at the branch. vendors will vary from small local operations to multi-national companies.”

Read the article.

In reviewing the scope of an arbitration agreement that was part of a supply agreement, the U.S. Court of Appeals for the Federal Circuit affirmed the district court’s decision, determining that the defendant’s breach of contract counterclaims were related to the plaintiff’s patent infringement claims and thus were exempt from compulsory arbitration under the supply agreement, reports Andrea Coronado for McDermott Will & Emery.

She discussed Verinata Health, Inc., v. Ariosa Diagnostics, Inc., Case No. 15-1970 (Fed. Cir., July 26, 2016) in an article published by The National Law Review.

“The Court reasoned that the national policy favoring arbitration when parties contract for that mode of dispute resolution under the Federal Arbitration Act applies only in circumstances where the scope of the agreement is ambiguous as to the dispute at hand, and only where the presumption in favor of arbitration cannot be rebutted,” Coronado wrote.

Read the article.