A “force majeure” clause is a contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise, making performance commercially impracticable or impossible, write Raedtha A. Vasquez and Edward Hart Bergin, partners in Jones Walker LLP.

In their article, they explain, that, in Louisiana, absent agreement to the contrary, force majeure excuses parties from liability when they fail to perform due to a fortuitous event that makes performance impossible.

“So, in determining whether the doctrine applies, it is necessary to determine (1) whether performance is impossible and (2) whether the impossibility was caused by a fortuitous event.”

They discuss some of the points to consider when confronting force majeure issues.

Read the article.

In orders issued just six days apart last month, the U.S. Securities and Exchange Commission (SEC) rejected language in severance agreements requiring employees to waive rights to receive additional monetary recovery, particularly awards for providing information to government enforcement agencies, reports Ogletree, Deakins, Nash, Smoak & Stewart.

“The Commission’s actions underscore its continuing scrutiny of any provisions that might impede the flow of information to the government, even where there is no evidence of any such effect. They also drive home that employers must continue to stay abreast of legal developments and modify their policies, practices, and agreements promptly.” write the authors, Margaret H. Campbell and Karen L. Vossler.

The advise employers to review and revise policies, practices, and employment agreements, including confidentiality, severance, separation and similar agreements. “In particular regarding recovery-limiting language, employers should consider carefully whether to use it at all, given that an enforceable waiver cuts off additional recovery from the employer,” they write.

Read the article.

An insurer’s duty of good faith is pervasive and its application to claim handling has matured into a formidable body of law, write Douglas L. Christian and Nathan D. Meyer for Jaburg Wilk.

But when a bad faith lawsuit converts the quasi-fiduciary relationship with the policyholder into an adversarial one, how does a policyholder lawsuit affect the insurer’s duty of good faith? And, how does the insurer’s duty of good faith affect the lawsuit?

“Policyholders argue that if a lawsuit obviates the insurer’s duty it will encourage insurers to engage in conduct that will precipitate a lawsuit. Insurers respond by arguing that if the fiduciary duty continues unabated, it will encourage premature lawsuits by policyholders, deprive insurers of their ability to adjust losses, and eviscerate their rights as litigants,” according to the article.

The authors discuss   the development of the continuing duty of good faith, whether insurer litigation and post-filing conduct is admissible under current rules of evidence, and whether continuing bad faith is actionable as a separate theory of liability.

Read the article.

With all the pressure on companies to build a robust cybersecurity defense within their own four walls, one area of risk might be getting overlooked, writes Shawn Shinneman of the Dallas Business Journal.

He talked to Sara Romine, an attorney at Carrington Coleman in Dallas, to find out how to deal with an attack that comes in through a third-party vendor.

Companies can be at risk and liable when dealing with vendors who have direct access to sort, store or transmit their data, she told the reporter.

“She’s found that companies tend to make some mistakes that grant leverage to the other side during negotiations either to strike a new agreement or renew an existing one. One big one is waiting until the last month or so to start the process,” the article reports.

Read the article.

All contractors dread receiving the seemingly inescapable call that a preventable, yet too common, workplace accident occurred such as a crane collapse, the fall of an ironworker, or a delivery vehicle accident, writes James J. Buldas of Pietragallo Gordon Alfano Bosick & Raspanti LLP.

“Besides the human and project costs these accidents bring, claims and lawsuits nearly always follow,” he warns in his article. “While defending claims and lawsuits may cause even the most seasoned contractors to suffer from sleepless nights, responsible parties may take solace in knowing that their counsel negotiated defense and indemnity agreements in their contracts. Why then do such parties sometimes learn that because of the language in an insurance policy, the indemnity clause in the construction contract provides little or no protection?”

Because of unforeseen risk, additional insured endorsements have been revised to link contractual indemnity obligations to additional insured coverage. These new endorsements explicitly limit additional insured status to the indemnity clause of the underlying contract, regardless of whether the endorsement incorporates the “arising out of” or “caused, in whole or in part” language.

Read the article.

A federal judge in the Eastern District of Oklahoma has dismissed a poultry grower’s breach of contract claim against OK Foods Inc. of Fort Smith, Arkansas, after the company severed ties with the grower amid concerns over animal welfare standards.

The company terminated its grower’s agreement with Earl Oldham of Stigler, Oklahoma, just over a year into the three-year agreement following the drowning deaths of an estimated 19,000 broiler chickens during a May 2015 rainstorm. It was the second mass die-off in five years blamed on groundwater flooding at the farm.

In a release, the firm said:

After realizing the water was rising in his three poultry houses, Oldham requested the company remove all chickens from his property. Upon arrival, a company representative discovered that many of the chickens had already died. OK Foods took immediate steps to relocate the surviving chickens to a nearby poultry farm. After OK Foods notified Oldham that his contract would be terminated, the grower filed a breach of contract suit.

The lawsuit dismissal follows a summary judgment motion filed by OK Foods’ attorney Clayton Bailey of Dallas’ Bailey Brauer PLLC. In granting the summary judgment, the court threw out  Oldham’s claims seeking nearly $330,000 in lost-profit damages.

“Mr. Oldham in essence moved to terminate the contract with his demands to remove the broilers from the farm, something OK Foods was more than willing to oblige,” says Bailey.

He noted that the swift termination of the contract was in accordance with animal welfare policies implemented by OK Foods CEO and President Trent Goins, Vice President of Live Operations Gary Hogue and Director of Broiler and Hatchery Operations Kelly Garris.

“OK Foods did not agree with the conditions found at this farm, and it was not something that could be tolerated. The operator’s own words, actions and inactions in effect invalidated his grower agreement. OK Foods simply formalized that termination,” says Mr. Bailey. “Animal welfare is something OK Foods takes seriously. OK Foods’ live operations team is ensuring that OK Foods’ chickens are raised ethically and efficiently, and that the company’s customers receive top-quality products.”

In addition to Bailey, OK Foods was represented in Earl Oldham v. OK Foods, Inc. f/k/a OK Foods, Inc., 6:15-cv-00384-RAW by Niki Cung of Kutak Rock LLP, Fayetteville, Arkansas.

As the risk of cyber threats to all businesses grows, there is a corresponding interest in managing and shifting cyber risks by contract and through cyber insurance, write Branwen Buckley and Corby J. Baumann of Thompson Hine.

“Insurance requirements are common in commercial contracts, and many contracts now include a sub-clause regarding cyber insurance. Whether a company is asking for a contracting party to provide cyber insurance or is on the receiving end of such a request, there are some important background considerations to remember,” the authors explain in their article.

They list some issues to consider when evaluating contractual requirements for cyber coverage: cyber insurance can never be a substitute for proper preventive measures, keep cyber insurance provisions specific, consider asking to see the policy, and be realistic in your expectations.

Read the article.

Dan Harris of China Law Blog has published a sample email that addresses many of the key points a company should be thinking about if it is contemplating selling into China.

The sample is an email (with identifiers removed) from a China attorney to a client, written to gather sufficient information to create a first draft of a product sales agreement for the sale of a product from an American company to a host of Chinese automobile companies.

The email covers such issues as the product, price terms, payments terms, shipping terms, scheduling and timing, facility, subcontractors and component suppliers, packaging and labeling, molds and tooling, quality contrl, warranty, general service, intellectual property, dispute resolution, and other special matters.

Read the article.

Barbara Melby and Glen Rectenwald of Morgan, Lewis & Bockius address the question of what robotics and automation really mean in the context of an IT outsourcing contract.

“At least for now, they are not about robots rolling around the data center floor or application development center,” they write in the article. “Robotics and automation are about software and tools that allow for automated processing, monitoring, and reporting, which provides real-time data and data analysis and a reduced need for manual (read—’human’) intervention. Many vendors are touting proprietary tools and solutions that enable more automation, resulting in more accurate and timely information and services and lower costs.”

They address five key contract considerations for outsourcing customers considering automation, including costs of automation, documented benefits (upfront and ongoing), sharing of reduced costs, ownership of the output, and back-end considerations.

Read the article.

ContractWorks has published “The Buyer’s Guide to Contract Lifecycle Management,” a comprehensive, complimentary guide available for downloading.

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.

Susan M. Hartman of Buchanan Ingersoll & Rooney writes that most commercial contracts contain what is called an “indemnification” provision.

She explains in her article published by JD Supra Business Advisor that indemnification is an obligation to be responsible for  losses another party might suffer if certain events occur, possibly including legal fees to defend against a third-party claim and damages awarded to the third party as a result of the claim.

“Indemnification is often one of the last issues to resolve in contract negotiations. However, it is important to take the time to think through each party’s obligations under the contract, and consider what type of indemnification is appropriate based on the deal. A broad indemnification that may have been reasonable for a startup company to provide will not be viewed favorably when the applicable contract is assigned to an acquiring company that has more assets at risk if there is an indemnification claim.

Read the article.

The advantages and disadvantages of arbitration versus litigation have been long debated, writes Kirk Watkins of Womble Carlyle Sandridge & Rice, LLP.

“Because arbitration is a matter of contract, parties are free to adopt existing procedural and substantive rules or invent their own. This freedom can complicate comparisons. For example, the parties can include or exclude discovery, permit or prohibit direct testimony, and require prompt and detailed rulings – or not. Arbitrations have one advantage that is unquestioned – treaties make the international enforcement of arbitration awards easier and more likely than the informant of state judgments.” he explains.

He adds that, “if parties to a license or industry dispute resolution agreement devote appropriate time and effort to preparing an arbitration provision to meet their specific objectives, arbitration can be a valuable tool in resolving patent disputes.”

Read the article.

Whether you are leasing real estate or buying or selling a business or real estate, the letter of intent (LOI) is the usual and practical initial step, writes Bernard B. Kolodner for Kleinbard LLC.

“An LOI or term sheet is how you find out if you are likely to have a deal before you spend a lot of time or legal fees on the deal. The details included in an LOI will be largely dependent on whether the deal proposed is a lease, sale or purchase of real estate or a business,” he writes.

“For a lease, an LOI will often specify the space, rent, security deposit, term, extensions, and commencement. In addition it might include provisions covering work to be done on the space, who will be responsible for the work (landlord or tenant) and the amount of any tenant improvement allowance. Reviewing the LOI is the quick and easy way to gauge the interest of the person on the other side of the deal as well as identifying whether there are unbridgeable business issues that need to be addressed prior to drafting the lease.”

Read the article.

If your job includes reviewing, drafting or negotiating contracts, you’ve probably seen  provisions relating to insurance, indemnification, and limitation of liability, writes Kenneth Gorenberg of Barnes & Thornburg LLP.

“Are they boilerplate that you spend little time on? Do you fully understand exactly what they do? Do you negotiate or revise them?” he asks.

“Fundamentally, the purpose of insurance, indemnification, and limitation clauses is to allocate risks,” Gorenberg explains. “In general, insurance transfers risk from the contracting parties to a third party—an insurance company. Indemnification usually transfers risk between the parties to the contract. Limitation of liability prevents or limits the transfer of risk between the parties.”

Read the article.

Lance Koonce, writing on Medium.com, discusses the meaning of “smart” contracts, saying, “Before we can decide whether smart contracts are going to bring significant change to business and law, we first need to make sure we’re all talking about the same thing.”

“It does seem that everyone is talking about smart contracts. People tend to line up on one side or the other: Either smart contracts are going to have a revolutionary impact on business, or they are doomed to fail,” Koonce writes.

He contends that in some situations a smart contract really just a transaction, and in others it’s more like a legal contract.

“One way to view these two different categories of smart contracts is just to see them along a scale, from existing legal contracts, to legal contracts that are partially reduced to code, to transactional terms completed reduced to code. Which type we chose will depend on a variety of factors, and in particular on balancing the need for efficiency and speed with the need to cover all contingencies,” he explains.

Read the article.

In a rare case interpreting the Worker Adjustment and Retraining Notification Act “sale of business” exception, the 8th U.S. Circuit Court of Appeals recently held in Day v. Celadon Trucking Servs., Inc. that a buyer of a business remained liable under WARN to the seller’s employees to whom the buyer did not make offers of employment, despite provisions in the asset purchase agreemen that placed all WARN Act liability on the seller, according to Epstein Becker & Green.

In the firm’s Financial Services Employment Law blog, Marc A. Mandelman wrote that the case involved a typical asset purchase transaction between Continental Express, Inc. and Celadon. Plaintiffs were a class of 449 former Continental employees who were not offered jobs with Celadon after the purchase of Continental’s trucking business.

“The key takeaway of the Day case for parties to a corporate transaction is that WARN liabilities are governed by statute, and the implications of WARN obligations and the sale of business provision of WARN must be carefully evaluated,” according to Mandelman.

Read the article.

Corridor Company has posted an on-demand webinar recording describing the best practices for managing contractural obligations.

“Contract management has become an increasingly strategic initiative,” the company says on its website. “Key to its strategic nature is the management of the obligations contained within the contract. Whether it’s the deliverables due to your customer or those due to you, it’s vital that these obligations are properly tracked and managed. Failure to do so not only creates tremendous organizational risk, but also impacts compliance, profitability and overall customer satisfaction.”

In this session, Corridor Company CEO, Russ Edelman, discussed best practices for managing your contractual obligations. He examined general considerations as well as detailed options for managing these obligations within a contract management tool.

Topics included:

• The Key Steps of Obligation Tracking
• Proper Classifications
• Automation Considerations

Watch the on-demand webinar.

In late June, the District Court of Appeal of Florida, Fourth District, reiterated that in a breach of contract case, lost revenue alone is typically an improper measure of damages, accordingn to a report from Roetzel & Andress.

Thomas P. Wert described the case: In HCA Health Services of Florida, Inc. v. CyberKnife Center of the Treasure Coast, LLC, 2016 WL 3540956 (Fla. 4th DCA, June 29, 2016), CyberKnife entered into a contract with a hospital. Under the contract, CyberKnife was to provide equipment and the site to the hospital for radiosurgery treatments to patients for five years. The hospital agreed to pay CyberKnife $5,150 plus sales tax “per click” for each treatment. The contract also provided that “in no event shall either party be entitled to consequential or punitive damages.”

Less than a year after the contract went into effect,  the hospital terminated the contract, citing federal regulations that would make “pay-per-click” agreements illegal beginning.

“Because CyberKnife failed to submit proof of lost profits at trial, it will collect nothing from the hospital even though the hospital terminated the contract almost two years before it actually could have under the contract,” Wert wrote.

Read the article.

In Nghiem v Dick’s Sporting Goods, Inc.,  the Central District of California held browsewrap terms to be unenforceable because the hyperlink to the terms was “sandwiched” between two links near the bottom of the third column of links in a website footer, write Jeffrey Neuburger and Daryn A. Grossman in Proskauer Rose LLP’s New Media and Technology Law Blog.

“Website developers – and their lawyers – should take note of this case, part of an emerging trend of judicial scrutiny over how browsewrap terms are presented,” they explain. “Courts have, in many instances, refused to enforce browsewraps due to a finding of a lack of user notice and assent. In this case, the most recent example of a court’s specific analysis of website design, a court suggests that what has become a fairly standard approach to browsewrap presentment fails to achieve the intended purpose.”

The authors discuss that case in detail, as well as some other browsewrap cases.

“These recent cases should prompt companies to reexamine electronic contracting practices to ensure that consumers are offered notice sufficient to understand that use of a website will constitute agreement to the terms,” according to the article.

Read the article.

Owners who are dissatisfied with their contractors’ performance increasingly assert fraud-based claims in addition to breach of contract claims because fraud-based claims are not typically barred by contractual waivers and limits of liability, according to a client alert published by Pepper Hamilton.

“Fraud-based claims may also create the potential for punitive damages in addition to compensatory damages,” wrote the authors, Ralph A. Finizio, Robert A. Gallagher and Jane Fox Lehman. “Contractors and their counsel, however, can limit their potential exposure for fraud-based claims through careful contract drafting and thoughtful selection of the law to be applied to disputes.”

They wrote that contractors should first consider: the codified law of the jurisdiction where the project is to be built, statutes that regulate the availability of punitive damages, and differences in common law.

“Contractors should also keep in mind that their choice of law will likely impact the conduct and cost of any litigation, as well as the best choice of outside counsel to handle the matter,” they wrote.

Read the article.