Parties to a contract may agree in advance to an amount of money to be paid as damages in the event of a breach – a remedy known as “liquidated damages.”

A paper prepared by Shumaker, Loop & Kendrick and posted on Lexology, discusses the subject in light of some recent litigation involving college coaches and the schools that contracted with them.

“Some coaches succeed in negotiating exclusions to a liquidated damages provision that allow an upward career move (e.g., a coordinator to head coach) or to accept a ‘dream job.’ But even such carve-outs do not necessarily come without controversy,” the Shumaker, Loop authors write.

Read the article.

Experts continue to argue over the rights of states and businesses to access personal data – and who actually owns it, according to a report by ZDNet.

“In the commercial sphere, one argument says the investment by businesses in gathering and exploiting information about individuals gives them a degree of ownership over the data,” the article says.

“That investment should also have a bearing on what happens to the data once the relationship between the consumer and the business ends or the individual want to move that information elsewhere.”

Read the article.

Business Insider offers some advice on how to react when a computer is hit by ransomware. The solution is much clearer when the victim has a good, recent backup stored in a safe place.

“Ransomware, which is a form of malware, works by either holding your entire computer hostage or by blocking access to all of your files by encrypting them,” Business Insider explains. “A person infected with ransomware is typically ordered (via a pop-up window) to pay anything from a few hundred to a few thousand dollars in order to get the key to unlock their encrypted data.”

Hackers are using sophisticated software such as CDT-Locker, which can be hidden in files and overlooked by security programs. Sometimes people to willingly download these dangerous files by using sneaky tricks to make them appear legitimate.

Read the article.

The National Association of Corporate Directors is offering free download of Governance Challenges: 2015, which compiles guidance from leading boardroom experts on challenges that boards will face in the coming year.

The 2015 report covers the following topics:

• Early Engagement: Going Beyond Traditional Board Succession Planning
• On the 2015 Audit Committee Agenda
• Responding to Global Risks: Enhancing Capacity to Assess the Impact of External Threats on Strategic Investments
• Compensation’s Role in Strategy: Elevating the Discussion and Expanding the View
• Current Tensions in Corporate Governance

Download the report.

The 6th U.S. Circuit Court of Appeals recently predicted that the Kentucky Supreme Court would not allow insurers to sue policyholders for the tort of “reverse bad faith,” reports Carlton Fields Jorden Burt in a report posted on JDSupra.

“The court’s analysis drew a distinction between the duty of good faith and fair dealing that is implied by law into contracts and the distinct, common law duty that arises from a ‘special relationship’ between the parties,” the report says. “Only the latter duty gives rise to a tort claim.  The court also found that no other state has recognized a tort of reverse bad faith.  Yet, given recent interpretations of the contractual duty, it’s arguable that ‘reverse bad faith’ is already here — and what we should be asking is whether it can be of any use.”

The case was State Auto Property & Casualty Ins. Co. v. Hargis. It involved an insurance case that included allegations of arson.

Read the article.

From unwanted business partners to burdensome estate taxes, the death of a business co-owner can have negative implications for surviving owners as well as for the estate of the deceased, reports Fox, Shjeflo, Hartley & Babu in a paper posted on JDSupra.

The paper says a well drafted buy-sell agreement can do double duty as an important tool in both business succession and estate planning, helping to ensure the stability of the business and the financial security of the deceased’s loved ones.

The paper covers topics such as “What is a buy-sell agreement?” “How can a buy-sell agreement help my loved ones in the event that I die?” and “How are buy-sell agreements funded?”

Read the paper.

The Oklahoma Supreme Court found that “Terms of Sale,” hidden on a website and not clearly referenced by the sales agreement, were not adequately incorporated, they were not a proper part of the contract, according to a report by McAfee & Taft and posted on JDSupra.

The report says the court, in Walker v. Builddirect. comTechnologies, Inc., provided guidance on how to properly incorporate extrinsic documents. With this new case in hand, businesses should consult with counsel and make sure their agreements pass muster.

“Counsel can assist with ensuring any extrinsic documents are sufficiently identified and easy to find,” the report says.

Read the report.

The long awaited decision from the U.S. Supreme Court in the case of EEOC v. Abercrombie & Fitch Stores, Inc., seems to have left employers in greater darkness than Abercrombie’s customers, writes Primary Opinion in a new paper.

The Supreme Court has simultaneously clarified and muddied employers’ obligations when faced with having to make religious accommodation for job applicants and potential employees. While the Court addressed the issue at hand, it failed to answer some of the more crucial questions as to when failure to accommodate religious expression in the workplace would be unlawful on the basis of disparate-treatment.

The paper offers discussion from some experts on how the ruling can affect religious accommodation in the workplace.

Read the paper.

The U.S. Department of Labor has issued proposed guidance and the Federal Acquisition Regulatory Council has issued proposed regulations requiring government contractors and subcontractors to report regularly on workplace law violations found by administrative agencies, the courts, and arbitrators, reports Jackson Walker in a new paper.

The regulations are part of the implementation of President Barack Obama’s “Fair Pay and Safe Workplaces” Executive Order (E.O. 13673), often called the “Blacklisting” or “Bad Actors” executive order.

“The government would take an employer’s record of violations into account when deciding whether to award future contracts, cancel existing contracts, and potentially demand remedial action to address a pattern of violations,” the authors write in the article posted on Lexology.

Read the paper.

Regardless of whether you are a supplier or purchaser, it is imperative to know whether your contract with your purchaser or supplier is a “requirements contract,” according to a paper published by Greensfelder, Hemker, & Gale.

“Potentially conflicting terms and conditions in purchase orders and invoices exchanged between parties may result in the formation of a ‘requirements contract’ or preclude the formation of such an agreement. And whether you are a supplier or purchaser, a requirements contract will have a material impact on your rights and obligations.” writes Thadford Felton.

The paper defines requirements contracts and gives examples of building protections into contracts.

Read the paper.

The 9th U.S. Circuit Court of Appeals has found that employee agreements to arbitrate may be obtained through written acknowledgments referencing company manuals, reports Pepper Hamilton in a new paper. An employee’s agreement to abide by a company manual is sufficient to send Title VII claims to an arbitrator.

“Arbitration remains a preferred forum for many employers, yet courts are often wary of enforcing arbitration agreements against employee-plaintiffs,” the paper says. “This has often been the case where employees made claims under Title VII of the Civil Rights Act of 1964, which provides for a statutory jury right that potentially conflicts with the Federal Arbitration Act.”

Authors of the paper are partners Jeffrey M. Goldman, Sharon R. Klein, Matthew H. Adler and associate Kevin Crisp.

Read the paper.

by Sean Cronin, ProcessUnity

Regulatory bodies including the Office of the Comptroller of the Currency (OCC) have made clear that when a bank outsources functions to third parties, the bank is still responsible for managing risks associated with those functions. But what if the third party then outsources certain functions to yet another company? Is the bank now expected to manage risks associated with that company, which is now a fourth party vendor to the bank?

In a word, yes, and it so happens bank regulators make the same argument. “A bank’s use of third parties does not diminish the responsibility of its board of directors and senior management to ensure that the activity is performed in a safe and sound manner and in compliance with applicable laws,” says OCC Bulletin 2013-29, issued on Oct. 30, 2013. As one of the factors contributing to the number and complexity of bank relationships with third parties, the same document cites “contracting with third parties that subcontract activities to other foreign and domestic providers.” One of the OCC’s concerns is that banks enter into contracts “without assessing the adequacy of a third party’s risk management practices.”

Banks would do well to share those concerns and for the most part, they do. But the issue is a thorny one because it is indeed a complex task for banks to continually manage risk for all those third- and fourth-party vendors.

The operative word there is “continually,” because risk management is an ongoing process. Any company performs due diligence before contracting with a third-party service provider. But the key to effective risk management is ongoing follow-up, to ensure the controls that were in place when the relationship began remain in place over time, and change as necessary to manage new risks.

This level of risk mitigation requires a repeatable program that includes periodic inspection. “You don’t get what you expect, you get what you inspect,” as the saying goes.

At a minimum, inspection begins by identifying all fourth-party providers that are servicing your bank. You need to understand the type of information and services being outsourced, and what controls are in place to protect the bank’s interests.

The idea is to gain an understanding of the total risk across both third and fourth parties and what contingency plans are in place should an event occur. It makes sense to be proactive in this effort because banks will increasingly be under pressure from regulators and their own boards to prove a program is in place for managing both third- and fourth-party providers.

Such a program involves assessments that take a sampling of the controls that should be in place and asks vendors questions to ensure they are indeed in place and functioning as intended. But as banks continue to outsource more and more functions to cloud providers and others, the inspection process can become unwieldy at best and, at worst, untrustworthy.

To ease the burden, banks need to automate the process of conducting assessments and analyzing results. The program should be set up to follow risk tolerance guidelines and measurements that are well-defined and defensible to senior management and regulators.  It should produce documentation that helps illustrate where you may need to take steps to further reduce risk, such as diversifying to reduce exposure. In general, it should provide plenty of data elements and analytics to improve decision-making.

Besides the main benefit such an automated program provides – reducing your level of risk – this kind of proactive, self-policing program also gives banks a leg up in its meetings with regulators. It’s like taking a test where you know the questions ahead of time and can prepare your answers. The regulators will be asking you the same questions you’ve been asking your third- and fourth-party providers because you’ve, in effect, been regulating them all along.

Automating your vendor risk management program also ensures risk assessments don’t fall through the cracks because of overloaded internal auditors. What’s more, it eliminates the appearance of subjectivity in vendor classifications and ensures the process is repeatable. Automation also brings a new level of intelligence, because an automated system can find trends and the proverbial needle in a haystack that may help you prevent a serious breach.

Being proactive and finding those needles will help any bank prove it’s doing an effective job at regulating all of its service providers, both third and fourth party, all the while reducing its risk of exposure.

Moving to the Cloud: Why now? 

For law firms and financial institutions, questions linger about the transition to cloud-based technology: is it safe? How does it benefit the existing infrastructure? Will new IT personnel need to be hired in order to manage it?

The simple answer is that cloud-based solutions are designed to be easier to deploy and more affordable to manage than comparative on-premise solutions. There is minimal set-up involved in building a cloud database, and it’s managed by the vendor – not the IT department. Therefore, banks  and law firms don’t need to invest in new IT staff to deploy a cloud-based solution, and as needs change, new applications can be deployed as required.

The less time that financial and legal organizations have to spend relying on manual tasks to control risk enables them to better allocate resources to focus on high-risk management activities. Cloud-based solutions augment that approach by simplifying the deployment process and shifting the maintenance onus to the vendor – typically with lower costs and infinite scalability.

Carl Berkowitz, PE, Ph.D., AICP, a transportation and traffic engineering expert has posted the first part of an examination of a broad range of safety issues involving rail activity.

Topics in the paper include safe passenger boarding, pathways for passengers, stairs, handrails, ramps, elevators, escalators, crowding, platform-to-rail-car gap, passengers on the tracks, premature door closing, accidents between the train and platform, in-vehicle falls, jerk rate, operators and safety, applied attention, attention control, stopping distance, speed-distance relationship, emergency braking, derailments, crossing accidents, pedestrians on tracks, and more.

Berkowitz has served as a litigation consultant since 1997.

Read the white paper.

Berkman Solutions has compiled a list of 10 techniques to enhance the value of legal services after a contract is signed.

The list of techniques expands on such points as notifying clients of expiration dates and auto-renewal termination notice dates, and monitoring contract compliance for both parties, provisions, and regulations.

It also discusses assigning contract tasks to client staff, summarizing financial structure, and identifying contract assets.

“As a lawyer, you invest time to understand your client’s objectives, risks, and opportunities. What happens to your carefully drafted contract?” Berkman Solutions asks on its website. “Your contract is filed and forgotten. Your client needs the benefit of your drafting during the entire contract term. Your client’s need is your opportunity.”

Download the list.

CREATE.org, the Center for Responsible Enterprise And Trade, offers a free white paper discussing how to mitigate the risks of counterfeiting, piracy and trade secret theft.

This whitepaper outlines how companies can better safeguard key corporate intellectual property assets and better mitigate risks by integrating intellectual property protection into their Enterprise Risk Management (ERM) programs.

Protecting Intellectual Property Through Enterprise Risk Management, the whitepaper outlines how companies can follow the approach of the major ERM standards and frameworks already in place to address strategic, financial, operational, compliance and reputational risks.

Download the white paper.

The First U.S. Circuit Court of Appeals has ruled in First State Ins. Co. v. National Casualty Co., a case involving reinsurance and retrocessional agreements, that the agreements between the parties contained an honorable engagement provision, which directs the arbitrators to consider each agreement as an honorable engagement, not merely a legal one.

A post by Baker & McKenzie and posted on Lexology discusses the case in detail.

The court hadn’t considered such a clause before, but the clause empowers arbitrators to grant forms of relief not explicitly mentioned in the underlying agreement. “Thus, because the arbitrators were authorized to grant equitable remedies, and because the reservation of rights procedure in the award was such a remedy, there was no basis to vacate the award,” the post explains.

Read the article.

In an article published on Butler Snow’s website, Lauren Patton describes a contract situation in which an executive has signed a contract “on behalf of” the company, but did not sign the contract individually. During the course of the matter, the third party brings claims in court against the executive in his individual capacity, and the executive wants to force those claims to arbitration.

She discusses whether the fact that the executive did not sign the contract containing the arbitration provision in his individual capacity is fatal to enforcement of the provision.

She cites prior cases and common law in her discussion.

Read the white paper.

Gartner’s recently published 2015 Magic Quadrant for E-Discovery Software details the results of the company’s research and analysis of 20 vendors in the e-discovery software field. Exterro has made the report available through its website.

The report analyzes the landscape of the e-discovery software market and factors driving market growth and technology advancement.

It also discusses which vendors were positioned as leaders for their completeness of vision and ability to execute.

Download the report.

The National Association of Corporate Directors (NACD), in collaboration with select, leading boardroom experts, compiles its fourth annual compendium of insights and practical guidance on areas believed to be challenges for directors and boards in the coming year.

The 2015 report stresses the importance of early engagement in discussions of strategy, risks, and succession planning in the boardroom, as well as the need for proactive communication and engagement with shareholders and other key stakeholders.

Get a free copy of the report.

The government’s right to terminate a contract for default carries the underlying principle that a default termination is a drastic sanction that should be imposed or sustained only for good grounds and solid evidence, writes Watson & Associates of Colorado and Washington, D.C.

When appealing the contracting officer’s decision, contractors should make sure that they have sound documentation of communications that could work in their favor on appeal.

“Also included in the limitations on the government to terminate a contract for default, case law requires that that the government bear the burden of proof as to whether a termination for default was justified,” the article continues.

Read the article.