Every word matters in a contract and this is as true in Chinese as it is in any language, writes Dan Harris on Harris & Moure‘s China Law Blog.

“Words have very particularized meanings in contracts and those meanings are sometimes different in a contract than in real life. Contracts also have terms that have become recognized and defined over time,” he writes in the article. “The only people who can truly know how to use these specialized and particular words and terms are lawyers who know both China’s contract laws and who are completely fluent in written and spoken Chinese. On top of this, it is critical that the Chinese version explicitly reflect our client’s goals. To put it another way, we pretty much never see a ‘translated’ contract that works as intended.”

He explains the importance of having a judge or arbitrator being able to understand the Chinese language contract in the context of Chinese law.

Read the article.

A New Hampshire court has issued a decision on the duty to defend arising from an indemnity obligation in a design contract, distinguishing between the duty to defend often invoked for insurance coverage, from a duty to defend expressed in a contractual indemnity, writes Stan Martin of Commonsense Construction Law LLC.

The court found that an engineering firm owed a duty to defend the New Hampshire town that had hired the firm to design a wastewater treatment plant, from claims arising from the design against the town made by the contractor.

Martin describes the case and the arguments made by the parties. He concludes: “An explicit contractual duty to defend against allegations of negligence or breach by the indemnitor may well be construed to require such a defense from the outset, even when parties are still arguing over ultimate liability. And an indemnitor who has not been in breach of its contract up to that point may yet breach its contract by refusing to defend when required.:

Read the article.

Kevin Perry and Joanne Elieli of of Cooley offer some insight for American general counsel on the drafting of international arbitration clauses, covering preliminary considerations and specific drafting issues.

The article is posted in the Cooley blog Cooley M&A.

The topics they discuss in the article include: consider likely nature of the dispute, should the clause cover all disputes that could arise?, should you include a dispute escalation clause? could any dispute include more than two parties? will there be any enforcement issues? choice of law issues (the contract and the arbitration), institutional or ad hoc arbitration, confidentiality, the rules to be used, the number of arbitrators, the seat/place of arbitration, and the language of the arbitration.

Read the article.

Practical Law and Honigman Miller Schwartz & Cohn LLP partners Ron Whitney, Todd Sable, and Lawrence Murphy will present a free 75-minute webinar on managing risk in supply agreements.

The event will be Thursday, June 23, beginning at 1 p.m. EDT.

During this session, the presenters will discuss: risks associated with supply agreements; tools counsel can use to assist clients in managing such risks; and tips for addressing, limiting, and resolving disputes. The discussion will also highlight some of the key differences between the U.S. and Canada when it comes to supply agreements. A brief Q&A session will follow.

Presenters:
Ron Whitney, Partner, Honigman Miller Schwartz & Cohn LLP
Todd Sable, Partner, Honigman Miller Schwartz & Cohn LLP
Lawrence Murphy, Partner, Honigman Miller Schwartz & Cohn LLP
Robert Ford, Associate Legal Editor, Practical Law Commercial Transactions (Moderator)
John Mackie, Senior Lawyer/Editor, Commercial Practice, Practical Law Canada

CLE credit is available for: Arizona, California, Colorado, Georgia, Hawaii, Illinois, Indiana, Missouri, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Vermont, Washington. CLE credit is being sought for: Minnesota, Oregon, Tennessee, Texas, Virginia CLE credit can be self-applied for in: Florida.

The webinar also will be available on-demand.

Register for the webinar.

Construction contracts are often such voluminous documents that it can be difficult for owners to recognize and adequately negotiate the key terms that play the largest role in how construction risk and costs are allocated, writes Mike Madigan in Kegler, Brown, Hill + Ritter‘s Ohio Construction Law blog.

In the article, he considers 10 questions owners should ask themselves before signing a contract with a contractor for a commercial project.

A few of those questions are: Is there a consequential damages waiver? Is there a liquidated damages provision? Is the contractor required to provide a performance and payment bond? What costs are recoverable by the contractor under a termination for convenience?and has the contract been coordinated with the requirements of the lending institution?

Read the article.

In today’s business environment, bank officers are heavily recruited by competitors, and these competitors offer opportunities for promotion and higher salaries and benefits, write Amber M. Rogers and Alan J. Marcuis for Hunton & Williams.

If a bank doesn’t have a contract with its officers, it must consider the legal ramifications of an officer departing to work for a competitor when an agreement is not in place.

“Having an employment agreement with an officer and other key employees is advisable, as it is the easiest way to protect the bank’s interest when an officer departs,” the authors explain. “With proper planning and preparation, any financial institution can proactively prevent the disruptive event and potential loss of business that can be caused by the announcement of an officer’s resignation.”

Read the article.

When negotiating and drafting a contract on behalf of a business, one of the most important considerations is whether it will create personal liability for the individual signing on behalf of the business, as illustrated by a recent decision from Florida’s Third District Court of Appeal, Frieri v. Capital Investment Services, Inc., writes Adam B. Edgecombe of Jimerson & Cobb, P.A.

“Frieri involved an investor who contributed $6 million to a business trust that he formed with the president of a small corporation, with each of them owning 50% of the trust,” Edgecombe explains. “In exchange for the investor’s contribution, the president of the corporation was to transfer 78% of the corporate stock to the trust. However, after the investor paid over his $6 million contribution, the president of the corporation never transferred the stock.”

The investor sued both the president of the corporation and the corporation, alleging that the defendants had breached the stock-purchase agreement. The trial court agreed, entering a final verdict in the amount of $7,369,222.00 against the corporation and the president individually. On appeal, the president and the corporation argued there was no basis for his personal liability.

“The Third District disagreed with the president’s position, finding that, when two businesses contract, the entirety of the document must be analyzed to determine whether the parties intend to bind the businesses alone or whether the obligation extends to the signing agents in their individual capacities,” Edgecombe writes.

Read the article.

While subscription services (sometimes referred to as auto-renewal programs) can be lucrative, companies should be mindful of the applicable laws to avoid the costs of fighting off the type of lawsuits that led to Sirius XM Radio settling an auto-renewal case for $3.8 million and Angie’s List settling a similar suit for $2.8 million, warn Andrew Klungness and Aaron Ginsburg on Bryan Cave’s Retail Law blog.

They discuss the the three main categories that various states use to regulate automatic renewal programs as they relate to contracts.

“Given the significant penalties and potential litigation costs associated with non-compliance, companies should work with experienced professionals to maximize compliance without adversely impacting the business,” the article says.

Read the article.

A blog post on the Cooley M&A site discusses the “option to acquire” structure, which addresses both the needs of a target company to develop a product or business on the one hand and the desire by a buyer to identify growth opportunities on the other.

“In an option to acquire transaction, the buyer agrees to pay the target an option fee in exchange for the exclusive option to acquire the target for a fixed price during an option period subject to certain conditions and agreements that are set forth in a fully negotiated and executed acquisition agreement,” the post explains. “As part of the arrangement, the parties may also enter into a collaboration agreement covering certain development activities of the target during the option period, with the achievement of the developments functioning as milestones to the buyer’s ability to exercise its option to buy. The collaboration agreement is usually separate from the option and acquisition agreement. Sometimes, the specific terms of the option may also be set forth in a standalone option agreement that is separate from the acquisition agreement.”

While options to acquire are fairly common in the medical device and life sciences industries, the option also provides attractive opportunities for funds and companies in other industries as well, as a way to get an inside track on new technology, the firm writes.

Read the article.

Contractual provisions for liquidated damages, indemnification, or other limitations on liability are a few of the most commonly used “damage control” tools, points out Theresa Y. Kananen for Arnall Golden Gregory LLP.

“In too many cases, however, drafting errors transform the very provisions intended to provide for clear-cut remedies, or clear-cut limitations on remedies, into sources of prolonged and expensive litigation,” she writes.

She lists and discusses three of the most common pitfalls to avoid when using one of these “damage control” provisions in a contract, including liquidated vs. actual damages, indemnity clauses and conspicuous limitations.

Read the article.

Contract drafting is one of those subjects that just doesn’t get the attention it deserves, write Edward J. Hansen and Christopher C. Archer of Morgan Lewis, in the firm’s Sourcing@MorganLewis blog.

“Contracts for complex sourcing deals are problematically big and often written in a style that doesn’t speak to the people who should be reading them,” they write. “The language may be great if the reader is a judge, but there is a very small probability that a judge will ever see the contract. So, the challenge is to write a contract that can work for a judge but that primarily works for a business user.”

They offer some of their favorite tips for drafting a readable contract.

Read the article.

A new article published by Ken Adams, president of Adams Contracts Consulting LLC, explains how to reduce the chances of the confusion that results when a judge or litigator without a grounding in the subject analyzes ostensibly ambiguous contract language.

The article is posted on Thomson Reuters’ Legal Solutions Blog.

“A problem with resolving disputes over ambiguous, or allegedly ambiguous, contract language is that ambiguity is a complex topic—it arises in different ways, many of them far from obvious. So when a judge or litigator without a grounding in the subject analyzes ostensibly ambiguous contract language, confusion often results,” he writes.

His article cites some examples of courts resolving disputes over the meaning of contract language in ways that don’t make sense, including how the Second Circuit Court of Appeals invoked a principle of interpretation that’s markedly at odds with English usage, how the Third Circuit Court of Appeals opted for an unreasonable interpretation of an or, and how the Federal Circuit misanalyzed the phrase at least one of X and Y.

Read the article.

Timeliness is critical when submitting claims to the government, or any contracting party, for that matter — public or private, writes Brian Dobbs for Bass, Berry & Sims PLC. But, as a ruling in Kellogg Brown & Root Services, Inc. v. Murphy demonstrates, the law does not compel contractors to bring claims prematurely. The key is recognizing when the claim has ripened and the clock has begun to tick.

Dobbs writes that Kellogg Brown & Root Services filed a claim with the Army to recover costs associated with a subcontractor’s work on a dining facility in Iraq. The Army denied the claim and KBR appealed to the Armed Services Board of Contract Appeals. On the Army’s motion, the Board dismissed the claim, finding the six-year statute of limitations under the Contracts Dispute Act (CDA) had expired.

Read the article.

ContractRoom has posted a free eBook on Building a Transformative Contract Management Practice that can be downloaded.

Machine learning is a field of computer science that allows computers to recognize patterns and learn from them, the company says on its website. With machine learning algorithms are used to learn from and make predictions on data. Arthur Samuel, a pioneer of the tech industry with a background in electrical engineering, was the first one to label this field of computer science as machine learning and defined it as “Field of study that gives computers the ability to learn without being explicitly programmed” in 1959.

The book discusses how machine learning and Natural Language Processing could be applied to B2B contracting in the future.

Download the free eBook.

In an article posted on their firm’s website, Matthew T. Furton  and Julie L. Young, partners in Locke Lord, discuss some recent rulings on arbitration by the U.S. Supreme Court, particularly as they apply to insurance and reinsurance.

The questions and answers discuss why the court has taken on more cases involving arbitration, which arbitration cases are currently under consideration by the court, why it matters that the circuits are split as to whether to stay or dismiss an action after compelling arbitration, and what the current state of the “manifest disregard” standard is.

Read the article.

Banks’ interest in smart contracts could lead them to beef up their legal departments in the near term, as the financial industry and regulators alike continue to wrestle with the implications of blockchain technology, writes Brian Patrick Eha of American Banker.

In his article Eha explains that “a smart contract is a piece of software that executes its terms automatically and encodes rules agreed upon by all parties. Smart contracts are decentralized — living on a blockchain — and transparent, viewable by all parties. They can be used to transfer value, and that transfer is triggered in response to certain events.”

“What if smart contracts were to catch on? Ideally, the code would be reusable in the form of templates, cutting down on legal busywork. Just not all legal work,” according to the article.

Read the article.

Narrowly interpreting a policy’s breach of contract exclusion, a federal court judge in California ruled that the exclusion applied only to actual breaches of contract and that an alleged breach in the underlying complaint against the policyholder was insufficient to eliminate coverage, according to an article written by Amy B. Briggs, Christine Spinella Davis, Stephen T. Raptis,Robert H. Shulman and Susan P. White of Manatt, Phelps & Phillips, LLP.

Their article described the case:

A competitor filed suit against the insured, charging the policyholder with making disparaging comments so that its offer of employment would appear more attractive and “to solicit [the competitor’s] employees in breach of a written and implied contract.” The insurer rejected the policyholder’s request for defense, relying on a breach of contract provision in its commercial liability policy. But the court said the allegation was just that—an allegation—and not an actual breach of contract. Other policy exclusions used the term “actual or alleged,” the court noted, implying that the insurer knew how to include and elected not to use such language for the breach of contract provision.

Read the article.

CIOs, CISOs, CTOs, and other risk and security professionals should familiarize themselves — or refresh their recollections — around Price and Payment, Proprietary & Confidential Info, Changes in Scope and Deliverables, Termination and Remedies, Disclaimers and Indemnifications, advises David Adler in CIO.

“Several obstacles affect and often limit successful negotiations in this area,” he writes. “The risk itself can be a moving target. For example, in the acquisition of an IT services subscriber base (regardless of industry), how will customer attrition, revenue projection revisions, and loss of key personnel affect the price paid (value)?”

“One way to prepare for and better engage in such negotiations is to develop a contract negotiation playbook,” he adds. “While each set of tactics and strategies will necessarily reflect the internal business rules of the individual company, the five areas discussed here should form a part of any playbook.”

Read the article.

ContractWorks has published a complimentary white paper designed to aid in the selection and implementation of a contract management solution.

The company says it interviewed hundreds of companies and compiled a guide to help with the determination of what type of solution best fits a company’s needs and tips on how to find it .

The white paper covers:

1. A simple framework for understanding if you need a contract management solution.

2. How to understand your organizations goals and the corresponding contract management features that will have the greatest impact on your process.

3. Ways to narrow down your search for a solution.

Download the white paper.

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The 9th U.S. Circuit Court of Appeals ruled in Ocean Beauty Seafoods v. Pacific Seafood Acquisition Company that the doctrine of equitable extension can be used to tack on a non-compete period to an employment agreement after the original period had run, according to an article by Michael Arnold and Robert Sheridan of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

They write that the case illustrates what can happen when: “employee disregards a non-compete and joins a competitor; former company calls foul and initiates a lawsuit; parties fight it out, but by the time litigation has run its course, the non-compete period in the underlying contract has expired.”

Read the article.