General provisions in contracts — Common Draft annotated compendium

[1] Written amendment requirements: Courts do not always give effect to written-amendment provisions; in a given case, a court might conclude that the parties to a contract subsequently made a valid, enforceable, oral agreement to waive or modify the amendments-in-writing requirement itself. Show more

[2] State or clearly indicate that Agreement is being amended: The goal of this language is to make it difficult to claim that “stray” language constitutes an amendment. For an example of why such language might be needed, see Stevens v. Publicis, S.A., 2008 NY Slip Op 02880 [50 AD3d 253]: A New York appellate court held that an exchange of emails, each of which included the typed name of the sender at the bottom of the message, was sufficient to modify an employment agreement.Show more

[3] Amendments, unilateral: Provisions like this are often seen in “mass” contracts that govern on-going relationships, such as consumer-services agreements, reseller agreements, Web site terms of service, and the like. See, e.g., the Facebook Statement of Rights and Responsibilities § 13 (accessed Jan. 23, 2012).

See also the contract provisions discussed in the Harris v. Blockbuster, Inc. and Carey v. 24 Hour Fitness cases summarized below. See generally David Horton, The Shadow Terms: Contract Procedure and Unilateral Amendments, 57 UCLA L. Rev. 605 (2010).

[4] Amendments, unilateral – no retroactive modification of dispute-resolution provisions: This language is a so-called “Halliburton exception,” intended to prevent a unilateral-amendment right from nullifying an arbitration provision on grounds that the parties’ agreement to the arbitration provision is illusory. Show more

[5] Assignment consent requirement: Under U.S. law, most contract rights — but not all — are freely assignable, and most contract duties are freely delegable, absent some special character of the duty, or unless the contract says otherwise. A contractual retriction on assignment could give the non-assigning party a de facto veto over the assigning party’s future strategic decisions; the non-assigning party might extract a high price for its consent to assignment. Show more

[6] Operation of law likewise (assignment-consent option): In some jurisdictions, when two companies merge and form a surviving company, the two original companies’ contracts are automatically transferred to the surviving company by operation of law. That can cause significant problems for the merger or other reorganization if the contract requires consent to an assignment. Show more

[7] Void without consent, or just a breach (assignment-consent option)? What is the legal effect if a company purports to assign its contract in violation of an assignment-consent requirement – is the assignment a nullity? Or is the assignment valid, but a breach of the agreement? Show more

[8] Material breach (assignment-consent option): A non-assigning party asking for this provision probably wants the right to terminate (or perhaps even to rescind) the agreement if the other party were ever to assign the agreement without consent. That would give the non-assigning party leverage to demand money or other concessions as the price of not exercising its termination right — or it would give the non-assigning party an excuse to disavow the contract and take up with someone else. Show more

[9] Consent not to be unreasonably withheld (assignment-consent option): A party wanting to maintain its freedom to assign a contract should consider asking for a provision like this. As noted in the “Show more” discussion below, the law may imply a commercial-reasonableness requirement for assignment consents. But that can’t guarantee that the non-assigning party will give consent when the assigning party needs it. By the time a court could resolve the matter, the assigning party’s corporate transaction could have been blown. Show more

[10] Consent at discretion (assignment-consent option): This is an alternative to the “not to be unreasonably withheld” section above. If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include this option in the contract language; otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law. Show more

[11] Exception for certain asset dispositions (assignment-consent option): This exception is a fairly-common one, and can be crucial to a company that wants to retain control over its own strategic destiny. It also can keep the assignee from having to re-buy and pay again for an IP license that the assigning party already paid for once, as happened in the Cincom case discussed in the “Operation of law” footnote above. Show more

[12] Exception for certain Affiliate transfers (assignment-consent option): This exception to the assignment-consent requirement is not so common, because it might result in bad business consequences for the non-assigning party. Show more

[13] Exception for assignment of rights only (assignment-consent option: Some parties want to be able to assign their rights to payment as a way of financing their operations. This exception allows them to do so.

[14] Termination option after undesired assignment: This provision can sometimes help break a negotiation impasse. A customer negotiating a purchase agreement might want the right to consent to any assignment of the agreement by the vendor. The vendor, on the other hand, likely will want to maintain control over its strategic destiny, for reasons discussed in the footnotes above. A termination right can let both parties have at least half a loaf.

[15] Assignment as delegation: This section is adapted from UCC § 2-210(4). Of course, UCC article 2 applies only to the sale of goods, but drafters often assume the effect of an assignment to be the same for non-sale contracts, so it might not hurt to spell it out.

[16] Assignment – effect of acceptance: This section is adapted from UCC § 2-210(4). Of course, UCC article 2 applies only to the sale of goods, but drafters often assume the effect of an assignment to be the same for non-sale contracts, so it might not hurt to spell it out.

[17] Written assumption by assignee upon request: A non-assigning party might want to get a signed document “proving up” the assignee’s express assumption of the assignor’s contract obligations. That could make life a bit easier down the road for the non-assigning party’s trial counsel if contract trouble with the assignee were to ensue.

[18] Assignment confidentiality: This section would discourage leaks (intentional or otherwise), for example of M&A-related information, and the “complications” that can arise from insider trading.

[19] Attorneys’ fees to prevailing party: This provision overrides the general rule in the U.S. is that each party in a lawsuit must pay its own attorneys’ fees (unless a statute provides otherwise). Show more

[20] Attorneys’ fees – expansive-application option: This option is adapted from an arbitration provision upheld by the Fifth and Eleventh Circuits in two cases involving a mortgage-loan servicing company that was sued by a homeowner. Show more

[21] Attorneys’ fees if settlement offer rejected but then not exceeded: This section is modeled on the offer-of-judgment provisions in Rule 68 of the Federal Rules of Civil Procedure. Its purpose is to create meaningful incentives for parties to accept reasonable settlement offers. Unfortunately, Federal Rule 68 is pretty much toothless: It shifts only subsequently-incurred court costs, which usually don’t amount to a lot of money in the scheme of things, and it doesn’t shift the burden of attorneys’ fees, which can be huge. As a result, many litigators don’t regard Rule 68 as providing much incentive to settle. Show more

[22] Covered dispute (attorneys-fees shifting): The class of disputes covered by this section is intentionally broad, encompassing what could be a wide variety of disputes even between non-parties.

[23] Covered settlement offer (attorneys-fees shifting): The requirement that a settlement offer be expressly identified as covered by this provision is intended to prevent a winning party from ambushing the loser by claiming that one of its earlier communications was an unaccepted “settlement offer.”

[24] Confidentiality of settlement discussions (attorneys-fees shifting): Note that a party making an offer is not required to keep its own offer confidential, but it is required keep confidential any subsequent communications, including its own, about the offer. Cf. Fed. R. Evid. 408 (settlement discussions not admissible into evidence except in limited circumstances).

[25] Contra proferentem principle disclaimed: The contra proferentem rule says that — other things being equal — ambiguities in the language of a contract should be resolved against the party that proffered the language, that is, against the drafter. The basic rationale is that the proffering party had the opportunity to make the language clear, one way or another, and so ambiguities should be resolved in favor of the other side. See generally the Wikipedia article on that subject; see also, e.g., Howard Hughes Corp. Transition Services Agreement § 10.11.

[26] Copies of Agreement deemed originals: This is akin to Fed. R. Evid. 1003, which provides that “A duplicate is admissible to the same extent as the original unless a genuine question is raised about the original’s authenticity or the circumstances make it unfair to admit the duplicate.” See also, e.g., the last paragraph of the IBM NDA.

[27] Representation by counsel: A drafter might want to ask for this provision if the drafter’s client might later be perceived as having enjoyed an imbalance of bargaining power over the other side. If a judge is asked to invalidate an allegedly-onerous contract clause, the judge might well be influenced by whether the parties were represented by counsel when they negotiated the contract. Show more

[28] Disparagement prohibited: This kind of provision is sometimes seen in distribution- or reseller agreements; typically, the manufacturer wants to prohibit the distributor or reseller from making negative comments to end-customers. A distributor or reseller might object to this statement, wanting to preserve its freedom to say whatever it pleases to its own customers.

[29] Early neutral evaluation: When a legal dispute ariese, the parties’ lawyers can sometimes tell their clients what they think the clients want to hear. (In part this may be because lawyers — especially male lawyers — tend to be overly optimistic about whether they’re going to win their cases; see this summary in the ABA Journal of the published research findings.) That can hamper getting disputes settled. Consequently, if a contract dispute starts to get serious, an early, non-binding “sanity check” from a knowledgeable neutral can help the parties and lawyers get back onto a more-productive track before positions harden and business relationships suffer — not to mention before the legal bills start to mount up. That’s a main reason why some courts refer selected cases to mandatory early neutral evaluation (“ENE”), as explained at the Web site of the federal court whose district includes Silicon Valley. (For a longer discussion of ENE, please see this posting of mine.) The early neutral evaluation procedures of the American Arbitration Association are available at the AAA Web site.

[30] Economical Litigation Agreement: The CPR Economical Litigation Agreement (a.k.a. a “litigation pre-nup”) is a relatively new document. Its provisions make a good deal of sense, but they might not make sense for your particular circumstances. Think carefully, therefore, before including this provision in your contract.

[31] Trial to a judge without a jury (Economical Litigation Agreement): This language is in bold to make it conspicuous, which may be appropriate or even necessary for jury-trial waivers in some jurisdictions. (This assumes the relevant jurisdiction even allows pre-dispute waivers of jury trials, which three states flatly do not, as discussed in the footnotes to the “Jury trial waiver” section.)

[32] Dispute escalation: Some lawyers believe that a dispute-escalation requirement can increase the chance of an amicable settlement. Getting new people involved in a dispute can sometimes bypass individual animosities, hidden personal agendas, and other foibles; this can help break an impasse. See generally my post, Drafting for Disputes: Keep individuals’ personal interests in mind (2009). Show more

[33] Executive-level management (dispute escalation): The phrase “executive-level management” is intentionally vague; the idea is to encourage the parties to keep referring the dispute up to higher and higher levels until (1) they resolve the dispute, or (2) one party says “enough!” and declines to continue — at the risk of being branded as intentionally flouting its contractual obligation, which might make a poor impression on a judge or jury.

[34] Whenever requested in writing (dispute escalation): The “whenever requested” phrase should give the other side ammunition with which to respond if one party’s “guy” were to balk at escalating a disagreement up the chain of command. The requesting party can ask the balking individual, “look, are you going to get your boss involved here, like the contract says, or does our lawyer have to call your lawyer about breach of contract?”

[35] Failure to escalate forfeits attorneys’ fees (dispute escalation): This language is modeled on a mediation provision in a standard California residential real-estate purchase agreement, which has been enforced at least twice by courts. See Cullen v. Corwin, No.  C067861 (Cal. App. June 7, 2012) (reversing award of attorneys’ fees to defendant that successfully moved for summary judgment but refused to participate in mediation as required by contract), citing Lange v. Schilling, 163 Cal. App.4th 1412 (2008) (reversing award of attorneys’ fees to successful plaintiff because plaintiff did not attempt to mediate before filing suit as required by contract).

[36] Entire agreement: This is what’s known as an “integration” provision; language like this is extremely common in commercial contracts. Whether a court will enforce such a provision, however, may depend on the jurisdiction and the circumstances. For example, in a 2008 case, a group of Shell gasoline dealers claimed that Shell had orally amended the franchise agreement — this, even though the agreement purported to rule out oral promises. The appeals court affirmed the judgment against Shell. Marcoux v. Shell Oil Prods. Co. LLC, 524 F.3d 33 (1st Cir. 2008). The court quoted the Restatement (Second) of Contracts § 209 cmt. b (1981): “Written contracts, signed by both parties, may include an explicit declaration that there are no other agreements between the parties, but such a declaration may not be conclusive.” (Emphasis added.) See also the discussion in the footnotes to the written-amendments section.

[37] Forum selection – just arising out of, or relating to, too? Some drafters like to say that the specified forum applies, not just to disputes “arising out of” the agreement, but also more broadly to disputes “relating to” the agreement. This broader language could be problematic, however, especially in an exclusive-jurisdiction clause. Show more

[38] Heads-up: Courts “of” a city or state (forum selection): Think carefully before editing the provision to state that exclusive jurisdiction will be in “the courts of Virginia” or other state - doing so could constitute a waiver of the right to remove to federal court. That happened in the Doe 1 v. AOL case: A group of AOL users sued the company in California. The forum-selection clause in the user agreement required all disputes to be heard in “the courts of Virginia.” The district court granted AOL’s motion to dismiss, without prejudice to re-filing in a state or federal court in Virginia. The appeals court reversed, agreeing with other courts that the forum-selection clause required litigation exclusively in the relevant state courts, not federal courts. (The appeals court also ruled that the forum-selection clause was unenforceable as to California residents because of California’s strong public policy favoring class-action relief, which was not available in Virginia state courts.) See Doe I v. AOL, LLC, 552 F.3d 1077 (2009).

[39] Forum selection – compromise location? Typically, each party wants to litigate in its own “home court,” even though that might not always be the best idea, for reasons discussed in the following footnote. If at least one party is a Delaware corporation, then a possible compromise might be to litigate in Delaware — regarded as having an efficient, competent court system — perhaps specifying that the governing law will be that of the home state of one of the parties, or alternatively, New York law, which is generally well-regarded by many businesses. (This comment comes from a lunchtime discussion with my friend and Houston lawyer Gene Tyler).

[40] Heads-up: Exclusive or non-exclusive jurisdiction? (forum selection) Drafters should think very carefully before approving an exclusive-jurisdiction forum selection clause. For a variety of reasons, a party might not want to be forced to litigate in one particular place — not even in its own home jurisdiction. Show more

[41] Specific vs. general jurisdiction (forum selection): See the Wikipedia discussion of the distinction between general jurisdiction and specific jurisdiction.

[42] Right to transfer (forum selection): In a 2008 case, a New Jersey federal district court ordered a case transferred to California, in part on grounds that the exclusive forum-selection provision stated only that any action must be commenced in New Jersey. See Ellis Sports Enters. v. Lococo, 2008 U.S. Dist. LEXIS 67472 (D.N.J. Sept. 5, 2008), summarized by noted New York attorney Gregory P. Joseph in a blog posting at http://www.josephnyc.com/blog/?blogID=694.

[43] Benefits [Party Name] Only (forum-selection option): This provision is modeled on language relied on by a Florida appeals court in reversing dismissal of a case. The court held that an individual defendant, who allegedly controlled a corporate guarantor of a loan, was held not to be entitled to rely on a forum-selection provision in the guaranty agreement, in part because the agreement expressly stated that the provision was for the benefit of the lender only, and that the lender could sue in any court having jurisdiction. See Crastvell Trading Ltd. v. Marengère, No. 4D10-815 (Fla. App. June 20, 2012) (reversing dismissal of complaint).

[44] Applicability to non-parties (forum-selection option): Whether a forum-selection provision will bind, and/or benefit, a non-party seems to depend heavily on the specific circumstances. In a Florida case, an individual who allegedly controlled a corporate guarantor of a loan was held not to be entitled to rely on a forum-selection provision in the loan agreement documents. The court relied in part on the loan agreements’ disclaimer of third-party beneficiaries and the fact that the individual was not a signatory to the agreements. The court also noted that the guaranty agreement had its own forum-selection provision permitting the lender to sue in any court having jurisdiction. See Crastvell Trading Ltd. v. Marengère, No. 4D10-815 (Fla. App. June 20, 2012) (reversing dismissal of complaint). Show more

[45] Governing law: U.S. courts typically enforce choice-of-law provisions in a contract unless the choice would lead to a result contrary to a fundamental public policy of the forum. Show more

[46] Arising out of or relating to the Agreement (governing law): The phrase “arising out of the Agreement” is pretty standard terminology. Court generally interpret the additional phrase “or relating to [the Agreement]” as encompassing matters beyond the contract itself. Tina Stark, a contract-drafting professor (and author of a leading textbook on the subject, which I use in the course I teach), notes that sometimes the parties to a contract want the same body of law to govern all their dealings, even those that strictly speaking do not “arise out of” the contract. (Email exchange with the author, August 10, 2012.)

[47] Exclusion of choice-of-law rules (governing law): Suppose the parties to a contract agreed that State A’s law would govern. But suppose also that, on the facts of the case, State A’s choice-of-law rules would cause State B’s law to apply. Presumably that would not be what the parties wanted. Hence, in this governing-law provision, choice-of-law rules are expressly excluded from the governing-law selection. (See also the Wikipedia discussion of renvoi.

[48] Exclusion of UNCISG (governing law): The UN Convention on Contracts for the International Sale of Goods is somewhat like the (U.S.) Uniform Commercial Code, but with some significant differences, summarized in a Wikipedia article at http://goo.gl/lWsKk. Articles 6 and 12 of the CISG permit the parties to a contract to “opt out” of the Convention’s applicability. See also a UN fact sheet concerning the CISG.

[49] Exclusion of UCITA (governing law): The Uniform Computer Information Transactions Act (“UCITA”) is a controversial proposed uniform law concerning computer software (which at this writing had been enacted only by Maryland and Virginia). This section takes advantage of UCITA § 104, which allows parties to a contract to “opt out” of the statute’s applicability. For more information, see generally:

• the Wikipedia article at http://bit.ly/7Zln8i
• materials at http://goo.gl/ksXzg concerning “bomb-shelter” legislation enacted by Iowa, North Carolina, Vermont, and West Virginia, in essence nullifying any contract provision that adopts UCITA as a choice of law.

[50] Exclusion of ALI Software Contract Principles (governing law): The ALI Principles of the Law of Software Contracts, approved by the ALI in mid-2009, are disliked by many software vendors (for good reason, in my view). Show more

[51] I’ve never been entirely clear why anyone would want this provision — why not just make sure the heading text isn’t inconsistent with the parties’ intentions? — but a lot of agreements seem to include it.

[52] Independent contractors: This type of provision arguably is becoming more important as companies increasingly outsource their work to contractors instead of keeping it in-house. Such a provision, however (or any other like it), might not be enough to do the job if a court were to find that in fact the contractor was an employee. See generally, e.g.: • Is Your Independent Contractor Really Your Employee?, by Jeremy R. Sayre (2007; accessed Oct. 3, 2008); • the Fifth Circuit’s “economic realities” analysis in, e.g., Hopkins v. Cornerstone America, No. 07-10952, 545 F.3d 338 (5th Cir. 2008) (affirming summary judgment of employee status); • the Ninth Circuit’s refusal to apply a Texas choice-of-law clause in holding that a California truck driver was really an employee and not an independent contractor, in Narayan v. EGL Inc., No. 07-16487, 616 F.3d 895 (9th Cir. 2010) (reversing summary judgment in favor of employer). Show more

[53] Unauthorized actions (independent contractors): The laundry list in the text is adapted from a sample provision (with extensive case citations) in footnote 70 of Lisa Bagley Brown and Harold J. Flanagan, Onshore Drilling Contracts: Avoiding the Pitfalls of Form Drilling Contracts (undated; accessed Apr. 4, 2012).

[54] No fiduciary- or agency relationship (independent contractors): This language is a lawyer-repellant clause. It’s intended to deter, say, a customer’s trial counsel from trying to argue that the vendor supposedly had fiduciary obligations to the customer. For an example, see HP CDA § 10.

[55] Jury-trial waiver – will it be effective? Most states permit parties to agree in advance that they waive the right to trial by jury. See, e.g., In re Prudential Ins. Co. of America, 148  S.W.3d 124 at text accompanying nn. 26-33 (Tex. 2004) (citing cases in conditionally granting writ of mandamus directing trial court to enforce contractual jury-trial waiver). California, Georgia, and North Carolina, however, are notable exceptions. Show more

[56] Arising out of or relating to (jury-trial waiver): Some drafters might prefer to change the heading of this section to specify that the jury-trial waiver applies only to disputes arising out of the Agreement, as opposed to all disputes arising out of or relating to the Agreement; the latter is a broader waiver.

[57] Conspicuousness of jury-trial waiver language: The jury-trial waiver language of this provision is in bold, and portions are in all-caps, to make them conspicuous. In some jurisdictions, the fact that a contractual waiver of rights was conspicuous serves as prima facie evidence that the waiver was knowing and voluntary. See, e.g., In re Bank of America, No. 07-0901 (Tex. Feb. 27, 2009) (conditionally granting writ of mandamus directing court of appeals to reinstate trial-court order enforcing contractual jury waiver). Conspicuousness can also help fend off a challenge that the jury-trial waiver was unconscionable.

[58] Limitation period – a real-world example: The Eighth Circuit enforced a provision in an M&A agreement that required certain indemnity claims by the buyer against the seller to be commenced within one year after closing. See Eckert v. Titan Tire Corp., 514 F.3d 801, 804 (8th Cir. 2008) (affirming bench-trial judgment), discussed in this note by Roy Harmon.

[59] Don’t make a limitation period too short: A court might invalidate a contract provision that sets too-short a limitation period for bringing an action. See, for example, UCC § 2-725, which requires a minimum limitation period of one year for sales of goods. Another, typical illustration comes from a holding by a California court of appeals: The court ruled that a contract clause requiring an employee to file suit against the employer within six months after termination was invalid “because plaintiffs’ claims [for overtime pay] were based on unwaivable and fundamental statutory rights, and the [contract] provision … violates section 219 and public policy, and is thus unenforceable.” Pelligrino v. Robert Half Int’l, Inc., No. G039985, slip op. at 11 (Cal. App. 4th Dist. Jan. 28, 2010) (affirming district court’s award of damages to former employees for violation of wage and hour laws).

[60] Mediation: The American Arbitration Association’s Commercial Mediation Rules are at http://goo.gl/Uwnp2. Personally I’m not a fan of mediation. I’ve participated as counsel in several mediations on both the plaintiffs’ and defendants’ sides. My impression from those experiences is that: (1) many mediators tend to be reluctant to do what’s known as “evaluative mediation“ — which I think of as metaphorically grabbing a party by the lapels, so to speak, and saying, “as I see it, you’re very likely to lose, and here’s why,” which is something that the party’s trial counsel is very unlikely to say; and (2) when a defendant agrees to mediate, that fact alone is often interpreted as a concession that the defendant should pay something, and the only question remaining is “how much.” Of course, YMMV. (Disclosure: My wife is an arbitrator-mediator in labor- and employment cases.)

[61] Failure to mediate forfeits attorneys’ fees: This language is modeled on a provision in a standard California residential real-estate purchase agreement, which has been enforced at least twice by courts. See Cullen v. Corwin, No.  C067861 (Cal. App. June 7, 2012) (reversing award of attorneys’ fees to defendant that successfully moved for summary judgment but refused to participate in mediation as required by contract), citing Lange v. Schilling, 163 Cal. App.4th 1412 (2008) (reversing award of attorneys’ fees to successful plaintiff because plaintiff did not attempt to mediate before filing suit as required by contract).

[62] Minitrials are thought to enhance the prospect of settling disputes by getting representatives of the parties’ senior management to work with a neutral advisor in hearing adversarial presentations of the parties’ positions. At this writing, the American Arbitration Association’s mini-trial procedures can be found at http://goo.gl/IVcDy. Show more

[63] No other commitment: This is adapted from a provision I saw at Citigroup NDA § 4.

[64] No recourse against other persons: This provision is adapted from language proposed by a noted corporate-law practitioner. See Glenn D. West & Natalie A. Smeltzer, Protecting the Integrity of the Entity-Specifc Contract: The “No Recourse Against Others” Clause-Missing or Ineffective Boilerplate?, 67 BUS. LAW. 39, 71-72 (2011) (ABA Section of Business Law membership required). In an email exchange with the author on August 8, 2012, Mr. West commented that “I find general acceptance of some version of my clause as long as it’s mutual. Both sides of the transaction have the same general interest in protecting the integrity of the entity-specific nature of the contract; and if they don’t, this clause smokes that out and there is a real discussion about guarantors.”

[65] Notices in writing: Most commercial contracts include a provision requiring notices to be in writing. Query, however, whether a court would give effect to such a requirement if it believed that doing so would be be unjust, or whether instead the court would hold that the parties had orally agreed to waive the requirement. See generally the discussion in the footnotes of the “Amendments must be in writing” and “Waiver – signed writing required” sections.

[66] Effectivness of notices: In this provision, notices are effective upon receipt or refusal — because that can be independently confirmed by delivery services (but see the discussion below about email notices) — as opposed to, say, X days after being mailed. Parties anticipating sending out many routine notices by mail might want to use the “Notices by mail” option.

[67] Notice to organization effective only when received or refused by agent: Here’s a hypothetical situation to illustrate the reason for this provision: Party A sends a late-night messenger to deliver a notice to Party B. The messenger bangs on the door at Party B’s office. A janitor, who works for a janitorial contractor and not for Party B, answers. The messenger hands the notice to the janitor and leaves. The janitor shrugs and throws the notice in the outgoing trash. This provision makes it clear that the notice was not effective.

[68] Notice by mail (option): A notice-by-mail provision is likely to be seen in business-to-consumer (“B2C”) contracts, in which the business wants to be able to give notice via a mass mailing. Such a provision is less likely to be seen in a business-to-business (“B2B”) contract, because the party that anticipates receiving a notice will often not want to roll the dice that the notice will timely get there if sent by mail. Show more

[69] Marked for attention (notices): This language is included because in a corporate setting, hard-copy notices can sometimes go astray if the mailroom people don’t know whom to send it to.

[70] Address-change notice required (notice option): Many contracts require that a party give notice of any change in its address for notice. In an era of modern communications, that seems unnecessary. The main language of this section says simply that permissible addresses for notice include, in addition to the addresses stated in the Agreement, “any other address reasonably communicated.”

[71] No notice by email (notice option): A party might not regard email as reliable enough for receiving notices from the other party about certain subjects such as breach, termination, etc. (Note that a notice sent by email might well be effective even if no one in the addressee’s organization knows the notice has been received by the email system; see § 15(e) of the Uniform Electronic Transactions Act, which states that “[a]n electronic record is received [and therefore an email notice would be effective] … even if no individual is aware of its receipt.”)

[72] Policy statements not to be disputed: Some courts have held that a written-amendments requirement can be eliminated by an orally-agreed amendment, or that a written-waivers provision can be waived orally without a writing. (See the footnotes to the written-amendments and written-waivers sections.) This provision tries to make it an independent breach of contract for a party to make such an assertion. Whether a given court would give effect to this provision is of course another matter. Show more

[73] Prohibitions apply to attempts, etc.: This provision would give, say, a software licensor a weapon to use against a licensee that tried to get around restrictions by having someone else do forbidden stuff. A licensee, however, might be concerned that it might be easy to make, but difficult to refute, an accusation that the licensee “attempted” to something forbidden.

[74] Publicity only when agreed: This is a fairly typical provision when one or another party wants to keep the parties’ relationship confidential, and/or to maintain control over commercial use of its name.

[75] Redlining representation: The main practical purpose of this provision is to allow each party to sign the final version of the contract document without having to read the document cover-to-cover again to be sure the other side didn’t surreptitously make any unagreed changes. For further discussion, please see Part 1 and Part 2 of two 2003 blog posts. (During email exchanges of electronic preliminary drafts, some practitioners prefer to generate their own redlines to see what changes the other side made, as discussed in comments to a 2010 blog post on that subject by Ken Adams. But that practice won’t be of much use when receiving a final hard-copy version for signature.)

[76] Reliance on entire-agreement, written-amendment and written-waiver requirements: Courts will not always give effect to entire-agreement, written-amendment, and written-waiver provisions. This section essentially yells out, “Hey! We really mean it!”

[77] Express, knowing, and voluntary agreement (reliance of written amendment): This provision is in bold to make it conspicuous.

[78] Reliance on external representations disclaimed: This no-reliance clause tries to preclude claims by a party that it was fraudulently induced into signing a contract by misrepresentation, and that it should therefore be allowed to undo (rescind) the contract and/or seek punitive damages. Courts have been known to give effect to no-reliance clauses, especially when the parties are sophisticated (but often not in cases of intentional fraudulent concealment). See, e.g., One Communications Corp. v. JP Morgan SBIC LLC, Nos. 09-1815-cv, 10-0424-cv, slip op. at 4-5 (2d Cir. June 17, 2010) (affirming summary judgment dismissing misrepresentation claim). Show more

[79] Savings clause: This provision tries to reduce the chances that a judge might throw out the whole contract merely because of one problem clause. Drafters should consider, though, whether some provisions of the Agreement should NOT be severable, so that the relevant section or sections are applied on an “all or nothing” basis. For example, suppose that an agreement to arbitrate contained a provision for enhanced judicial review of the arbitration award: It might be that, without such an enhanced right of appeal, a party would prefer to take its chances in court, and not want to arbitrate. In that particular situation, an all-encompassing severance clause might not be especially wise.

[80] As between the parties (savings clause): Suppose that a company used a form contract; suppose also that a court held that a particular provision — for example, a punitive-damages exclusion in an agreement to arbitrate — was invalid. The company might still want to assert the provision against other counterparties who had entered into the same form contract, and wouldn’t want the savings clause itself to implicitly extend the invalidity to all other counterparties. (The company might be barred from doing so by the doctrine of collateral estoppel, but that’s another matter.)

[81] Signers’ authorization to sign: This provision can make signers stop and think — because they are making a personal representation — as to whether they have signature authority, so as to reduce the odds of later problems in that area. What kind of problems? A corporation or other organization might try to get out of the contract by claiming that its signer did not in fact have signature authority (known as actual authority). The other side can repel such an effort by showing that the signer had apparent authority — that is, that it was reasonable for the other side to have concluded that the signer did indeed have signature authority. An explicit representation by the signer can help the other side make its case on that score. (Of course, An individual signer might not want to undertake any liability exposure on the off chance that his or her signature was not authorized.)

[82] Signature in counterparts: The term “counterparts” is simply a fancy way of saying that the parties can (and often will) sign multiple copies of a contract, so that each party can have its own “original.”

[83] Signature in duplicates: This provision allows the parties to sign separate copies, with no one copy being signed by all parties.

[84] Delivery by electronic transmission: It’s now extremely common, and almost standard practice, for parties to FAX signed signature pages to each other, and increasingly, to email scanned PDFs to each other. This practice has been validated by statute in most of the industrialized world; for discussion and citations, see the Wikipedia article, Electronic signature.

[85] Signers’ availability in future proceedings: This provision tries to forestall a dispute like that of Indiana v. IBM Corp. , No. 49S00-1201-PL-15 (Ind. March 21, 2012) (reversing trial court’s order directing governor to testify). In that case, Indiana governor Mitch Daniels personally signed a contract with IBM to modernize and improve the state’s welfare system. He seems to have been personally involved in the negotiation of the contract as well. But he refused to testify in a deposition concerning the contract, citing a statutory provision to the effect that the state’s governor was “privileged from arrest on civil process, and from obeying any subpoena to testify.” The trial court ordered the governor to testify. The state’s supreme court, however, reversed — but it also noted that, if the governor’s refusal to testify would result in unfairness to IBM, then the trial court could take appropriate remedial measures such as adverse inferences or exclusion of certain evidence. See id., slip op. at 6-7.

[86] Status-review conferences: It’s been my impression that many business-contract disputes could be avoided if the participants would just talk with each other regularly about the five G-PP-AA factors listed in subdivision (c). In particular, it’s often extremely helpful to hold such a conference immediately after — or better yet, before — a missed deadline or other potential breach. Sure, this is just Management 101, but it never hurts to be reminded. ¶ Some of the language in this provision isn’t strictly required, but it’s included anyway to reassure the parties that the provision isn’t going to be expensive or burdensome. For example, under this language, if neither party ever asks for a status-review conference, none is required.

[87] Telephone conference calls for status-review conferences: This is an example of language intended to reassure the drafters and their clients that they aren’t committing themselves to potentially-expensive in-person meetings.

[88] Agenda template – G-PP-AA (status-review conferences): This agenda template is, in essence, “here’s where we are, here’s where we seem to be headed, and and here’s where we want to be headed.” Note that this provision doesn’t require the parties to discuss the G-PP-AA factors, but simply reminds them of the list.

[89] Meeting minutes (status-review conferences): Meeting minutes can be especially important in documenting specific to-do assignments. Meeting minutes can can also help litigation counsel reconstruct “what happened, when, and why,” if things go wrong.

[90] Survival provisions like this are not uncommon in contracts of any length; such provisions try to preclude trial counsel for one party or another from trying to argue that a particular contractual right or obligation ended when the contract did. (Drafters should be careful about what rights and obligations would survive termination – see Jeff Gordon, Night of the Living Dead Contracts, at http://goo.gl/n2YSO (2006; accessed Dec. 3, 2010).)

[91] Survival by nature (option): Some contracts, for example IBM NDA § 6, use a generic description like this to indicate which provisions will survive termination.

[92] Third-party beneficiaries disclaimed: As a general rule, for a third party to be able to claim rights as a beneficiary under a contract, the parties must have intended the beneficiary to have such rights (see generally the Wikipedia article on third-party beneficiaries). The disclaimer of this section tries to make it clear that the parties intended just the opposite (except to the extent that the Agreement expressly says otherwise).

[93] Waivers must be in writing: Courts might not give effect to a written-waivers-only provision; the rationale is usually that, in proper circumstances, the parties can orally agree to modify or even waive the writing requirement. As Justice Cardozo stated, “Those who make a contract, may unmake it. The clause which forbids a change, may be changed like any other. The prohibition of oral waiver, may itself be waived. … Whenever two men contract, no limitation self-imposed can destroy their power to contract again ….” Beatty v. Guggenheim Exploration Co., 225 NY 380, 387-88 (1919) (modifying judgment below; citations omitted); see also the discussion in the footnotes to the written-amendments section above.