BoyarMiller - Review of Boilerplate Contract Provisions: Say What You Mean and Mean What You Say

Download BoyarMiller - Review of Boilerplate Contract Provisions: Say What You Mean and Mean What You Say

Post on 17-Jul-2015

104 views

Category:

Business

2 download

Embed Size (px)

TRANSCRIPT

<ul><li><p>Review of Boilerplate Contract Provisions: </p><p>Say What You Mean and Mean What You Say </p><p> Presented by: </p><p>Chris James &amp; Jon Goch </p><p>BoyarMiller 713.850.7766 </p><p>cjames@boyarmiller.com jgoch@boyarmiller.com </p><p>HYLA - Houston Young Lawyers Association March 4, 2015 </p></li><li><p>1. Arbitration Clauses </p><p>2. Representation Clauses </p><p>3. Choice of Law / Venue Clauses </p><p>4. Jury Waiver Clauses </p><p>5. Limitations on Liability Clauses </p><p>6. Reformation Clauses </p><p>7. Clauses Regarding the Recovery of Attorneys Fees </p><p>8. Clauses Regarding Injunctive Relief </p><p>CONTRACTUAL CLAUSES TO COVER </p></li><li><p> ARBITRATION CLAUSES CLAUSE NO. 1 </p><p> Generally, not recommended. Useful if counterparty is a foreign entity, particularly in a </p><p>commercial contract. </p><p> If used, a broad clause with language such as arising out of or in connection with the agreement will ensure that the arbitration touches all matters related to the agreement. </p></li><li><p> ARBITRATION CLAUSES CLAUSE NO. 1 </p><p>Narrow vs. Broad Arbitration Clauses Narrow clauses limit the scope of arbitration to specifically identified </p><p>matters. Broad clauses widen the scope of arbitration to all disputes that </p><p>touch matters related to the contract. Broad clauses use language such as: any and all claims, arising out of, </p><p>relating to, or in connection with the agreement. </p><p>Who is subject to an Arbitration Clause Signatories to the agreement. Any other party who meets the agreements definition of party. </p><p> In re Rubiola, 334 S.W.3d 220 (Tex. 2011) </p></li><li><p> ARBITRATION CLAUSES CLAUSE NO. 1 </p><p>Example: If Buyer is an entity formed under the laws of a foreign country, or is a foreign person, and a dispute arises between the parties relating to this Agreement, the parties agree that such dispute may also be resolved by binding arbitration under the International Arbitration Rules of the American Arbitration Association, by one arbitrator appointed in accordance with such rules (Arbitration). </p><p>The Arbitration proceedings shall be held in Houston, Texas, United States of America, and the laws of the country where Buyer was formed (or where such foreign person resides, as applicable) shall apply. The Arbitration proceeding shall be conducted and the award shall be granted in the English language. All costs and expenses incurred with respect to any Arbitration shall be allocated to a party or the parties as determined by the arbitrator. </p></li><li><p> REPRESENTATION CLAUSES CLAUSE NO. 2 </p><p> Who do you represent? More importantly, who do you not represent? When to use: </p><p> Limited Liability Company Agreement Partnership Agreement </p><p> Shareholder Agreement </p></li><li><p> REPRESENTATION CLAUSES CLAUSE NO. 2 </p><p>Example: The parties hereto agree that in connection with the negotiation and execution of this Agreement, Hamlin, Hamlin &amp; McGill has only represented the interests of Madrigal Electromotive GmbH and Herr Herzog and not the individual interests of any other Member of the Company. </p><p>The parties hereto acknowledge that they have been advised to consult with each such partys own counsel regarding legal and tax related matters concerning this Agreement and have been afforded the opportunity to consult with counsel that such party deems advisable in connection with the negotiation and execution of this Agreement. </p></li><li><p> CHOICE OF LAW / VENUE CLAUSES CLAUSE NO. 3 </p><p> Who has home court advantage? How do you compromise? Forum selection clauses are generally enforceable, </p><p>absent fraud, undue influence, or other extreme inequities. </p><p> There are some exceptions, e.g., non-competition agreements with Texas residents that purport to use another states laws. </p><p> Venue selection clauses are not presumably valid, and clauses that conflict with statutes are void as a matter of public policy. </p></li><li><p> CHOICE OF LAW / VENUE CLAUSES CLAUSE NO. 3 </p><p>Example (Drafting Party): (Drafting party and its attorney are in Houston, TX) </p><p>This Agreement and all claims or causes of action arising hereunder shall be governed by and construed in accordance with the laws of the State of Texas, excluding its conflicts of laws provisions, and in the event of a dispute arising under this Agreement, the Parties hereby submit to exclusive jurisdiction in the federal or state courts located in Harris County, Texas, and agree that venue is proper and convenient in such forum. </p></li><li><p> CHOICE OF LAW / VENUE CLAUSES CLAUSE NO. 3 </p><p>Example (Other Party): (Drafting party and its attorney are in OKC, OK) </p><p>This Agreement and all claims or causes of action arising hereunder shall be governed by and construed in accordance with the laws of the State of Oklahoma, excluding its conflicts of laws provisions, and in the event of a dispute arising under this Agreement, the Parties hereby submit to exclusive jurisdiction in the federal or state courts located in Oklahoma County, Oklahoma, and agree that venue is proper and convenient in such forum. </p></li><li><p> CHOICE OF LAW / VENUE CLAUSES CLAUSE NO. 3 </p><p>Example (Compromise): This Agreement and all claims or causes of action arising hereunder shall be governed by and construed in accordance with the laws of the State of Texas, excluding its conflicts of laws provisions, and in the event of a dispute arising under this Agreement, the Parties hereby submit to exclusive jurisdiction in the federal or state courts located in Dallas County, Texas, and agree that venue is proper and convenient in such forum. </p><p>This Agreement and all claims or causes of action arising hereunder shall be governed by and construed in accordance with the laws of the State of Delaware, excluding its conflicts of laws provisions, and in the event of a dispute arising under this Agreement, the Parties hereby submit to exclusive jurisdiction in the federal or state courts located in Dover County, Delaware, and agree that venue is proper and convenient in such forum. </p></li><li><p> JURY WAIVER CLAUSES CLAUSE NO. 4 </p><p>Jury waivers are valid in Texas If: They are made Knowingly and Voluntarily </p><p>Conspicuous and crystal clear. Conspicuous written or displayed such that a reasonable person ought </p><p>to have noticed i.e. capital letters and bold print. Prima facie evidence of knowing and voluntary. </p><p>Burden on party opposing to rebut the presumption. </p><p> Not procured through fraud Alleged fraud must relate specifically to the jury waiver and not </p><p>the entire contract. </p></li><li><p> JURY WAIVER CLAUSES CLAUSE NO. 4 </p><p>Example: EACH PARTY HERETO EXPRESSLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING ARISING IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY. </p></li><li><p> LIMITATIONS ON LIABILITY CLAUSES CLAUSE NO. 5 </p><p> At what point can you say, Okay, but I dont have to pay for it? </p><p> Direct versus Consequential Damages Direct damages are those that flow naturally and necessarily from a </p><p>breach of contract. Consequential damages are that result naturally, but not necessarily, </p><p>from a breach of contract. </p><p> Limitations clause are generally enforceable, although courts will look at the bargaining power of the parties. </p><p> Clause must be conspicuous. </p></li><li><p> LIMITATIONS ON LIABILITY CLAUSES CLAUSE NO. 5 </p><p>Standard Clause: NOTWITHSTANDING ANY PROVISON HEREIN OR IN ANY WORK ORDER TO THE CONTRARY, IN NO EVENT SHALL COMPANY A BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL (INCLUDING LOST PROFITS), SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION WITH AND SERVICE PROVIDED HEREUNDER, EVEN IF NOTICE WAS GIVEN OF THE POSSIBILITY OF SUCH DAMAGES AND EVEN IF SUCH DAMAGES WERE REASONABLY FORESEEABLE. The provisions of this Section 12(a) shall survive termination or expiration of this Agreement. </p></li><li><p> LIMITATIONS ON LIABILITY CLAUSES CLAUSE NO. 5 </p><p>Further Protection: In no event shall World Wide Cup, Inc.s liability to Frank the Tank Enterprises, LLC for loss or damage under this Agreement exceed the aggregate amount actually paid to World Wide Cup, Inc. under the Agreement. The provisions of this Section 12(b) shall survive termination or expiration of this Agreement. </p></li><li><p> REFORMATION CLAUSES CLAUSE NO. 6 </p><p>Reformation clauses can hurt you Section 15.51 provides, in part, that [i]f the covenant is found to be ancillary to or part of an otherwise enforceable agreement but contains limitations as to time, geographical area, or scope of activity to be restrained that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee, the court shall reform the covenant to the extent necessary to cause the limitations contained in the covenant as to time, geographical area, and scope of activity to be restrained to be reasonable... </p><p>However In Sentinel Integrity Solutions, Inc. v. Mistras Group, Inc ., the Houston First Court of Appeals found that such a right to reform provision served as evidence that the employer knew the covenant was overly broad at the time it was written and allowed the award of attorneys fees to the former employee. </p></li><li><p>Fleming &amp; Assocs., L.L.P. v. Barton, 425 S.W.3d 560 (Tex. App.--Houston [14th Dist.] 2014, pet. filed) Dispute between law firms involved in the Fen-Phen pharmaceutical </p><p>litigation over what expenses could be charged to a referring lawyer under the parties letter agreement </p><p> Fleming &amp; Associates is a limited liability partnership Trial court awarded Barton Group its attorneys fees under section </p><p>38.001(8) Court of appeals reverses award of attorneys fees against Fleming </p><p>&amp; Associates because it is not a individual or corporation </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>A person may recover reasonable attorneys fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for: rendered services: performed labor; furnished material; freight or express overcharges; lost or damaged freight or express; killed or injured stock; a sworn account; or an oral or written contract </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>PERSON Chapter 38 does not include any definitions. Section 1.002 of the CPRC provides that the Code Construction Act </p><p>applies to the construction of each provision in the CPRC, except as otherwise expressly provided by the CPRC </p><p> Code Construction Act defines the term person to include corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>INDIVIDUAL AND CORPORATION Individual and corporation are not defined in the Code </p><p>Construction Act or in Chapter 38 of the CPRC The courts research did not reveal a definition of individual or </p><p>corporation that included any type of partnership Section 38.001s predecessor statute provided that any person, </p><p>corporation, partnership, or other legal entity could recover fees from a person or corporation </p><p> [W]hen, as here, specific provisions of a non-substantive codification and the code as a whole are direct, unambiguous, and cannot be reconciled with prior law, the codification rather than the prior, repealed statute must be given effect </p><p> Thus, under the plain language of section 38.001(8), a person may not recover attorney's fees against a partnership </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>BUTPrevailing party provisions are counter-productive with regard to non-competes Section 15.52 Preemption of Other Law. The criteria for enforceability of a covenant not to compete provided by Section 15.50 of this code and the procedures and remedies in an action to enforce a covenant not to compete provided by Section 15.51 of this code are exclusive and preempt any other criteria for enforceability of a covenant not to compete or procedures and remedies in an action to enforce a covenant not to compete under common law or otherwise. </p><p>An employer enforcing a 15.50 covenant will not be entitled to an award of attorneys fees. </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>BUTPrevailing party provisions are counter-productive with regard to non-competes In Glattly v. Air Starter Components, Inc., the Houston First Court of Appeals upheld the trial courts decision refusing to award attorneys fees in favor of the employer enforcing the non-compete even where the employment agreement at issue contained a prevailing party provision. </p><p>The First Court of Appeals made three important conclusions regarding Section 15.52: It does not contain a provision that allows employers to recover attorneys fees; It expressly states the remedies in the Act are the exclusive remedies; and It expressly states that it preempts any other remedies in an action to enforce </p><p>a covenant not to compete. </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>BUTPrevailing party provisions are counter-productive with regard to non-competes An employee defending against enforcement of a 15.50 covenant may be entitled to an award of attorneys fees if successful in such defense in three ways: Under the statute, if the employee shows that the employer knew at the time of </p><p>execution of the agreement that the covenant did not contain restrictions that were reasonable and the employer sought to enforce the covenant to a greater extent than was necessary to protect the goodwill or other business interest of the employer; or </p><p> Pursuant to a declaratory judgment action seeking a declaration that the covenant is not enforceable. </p><p> Potentially, in defending against an action to enforce a covenant, where the agreement itself has a prevailing party provision. </p><p>THE RECOVERY OF ATTORNEYS FEES CLAUSE NO. 7 </p></li><li><p>Lasser v. Amistco Separation Prods., ___ S.W.3d ____(Tex. App.--Houston [1st Dist.] Feb. 6, 2014, no pet. h.) The First Court of Appeals dissolved a temporary injunction order </p><p>that sought to enforce contractual non-compete and non-solicitation obligations because the order was both not specific enough and overbroad </p><p> The order failed to identify, define, explain, or otherwise describe what constituted confidential information that Lasser was prohibited from disclosing. Thus, these provisions did not provide adequate notice to Lasser as to what conduct he was restrained from performing and left him to speculate what conduct might satisfy or violate the order. </p><p> The Court also found that Part (c) was impermissibly overbroad under Rule 683 because it enjoined activities that Lasser had a legal right to perform, such as deleting electronic records and files unrelated to the subject of the lawsuit. </p><p>CLAUSES REGARDING INJUNCTIVE RELIEF CLAUSE NO. 8 </p></li><li><p>Also keep in mind that liquidated damages can negate your request for injunctive relief. An applicant must prove there is no adequate remedy at law, </p><p>meaning damages cannot be calculated. vs. Liquidated damages that specify the amount of damages that one </p><p>party will receive if the other party breaches the agreement. </p><p>CLAUSES REGARDING INJUNCTIVE RELIEF CLAUSE NO. 8 </p></li><li><p>Example letter when hiring new employees: We are pleased to offer you the opportunity to work for [EMPLOYER] as set forth in the attached offer letter. However, we are requiring that y...</p></li></ul>