1. Contract DraftingClass 7Tues Feb 7 University of Houston Law Center D. C. Toedt III

2. In the news …

3. Common contract f***-ups

4. Common contract f***-ups “10. The contract that is signed with an illegible signature and no information is given as to who has signed or their position within the organisation.” [From “Top 10 howlers when preparing contracts for signature,” by the IP Draughts blog at http://goo.gl/Km6Dw.]

5. Drafting exercise: Stark 18-5

6. Microsoft NDA – general provisions

7. Assignment of K – Port of NY & NJ

8. Section 4(g) – assignment of K • QUESTION: Are most contracts ordinarily assignable if K doesn’t say otherwise? • Yes • No • Yes, with some exceptions • IP licenses • Special situations (e.g., unique capabilities / personal trust & confidence)

9. Assignment of K (Z&B pp. 23-26) QUESTION: Why might a party want to restrict the other side’s assignability? (Think of both business reasons and “because I can” reasons.)

10. Assignment of K (Z&B pp. 23-26) • QUESTION: Why might a company wantto refuse to agree to an assignment-consent requirement in a draft contract? • Don’t want to have to get consent to spin off a division or other future M&A deals • Requirement would cause tax problems • Might want to move contract rights to affiliate • Requirement would cause antitrust problems

11. Assignment of K (Z&B pp. 23-26) • QUESTION: Why might a software vendor want its customers to be able to assign their license agreements? Hint: If a customer had to pay a large fee for consent to assign, what might it decide to do instead? Would the vendor’s competitors have anything to “contribute” to the customer’s thinking process?

12. Assignment of K (Z&B pp. 23-26) • FACTS: You’re entering into a contract with an agency of the State of New York. • QUESTION: Is there any way around the state-law assignment-consent requirement? Hint: See NYState Finance Law art. 9, § 138

13. Assignment of K (Z&B pp. 23-26) CONTRACT PROVISION: “Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendor’s prior written consent.” [Questions follow on subsequent slides]

14. Assignment of K (Z&B pp. 23-26) CONTRACT PROVISION: “Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendor’s prior written consent.” QUESTION: If Customer merges with another company without consent, is the merger void?

15. Assignment of K (Z&B pp. 23-26) CONTRACT PROVISION: “Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendor’s prior written consent.” QUESTION: What if the contract provision were like Microsoft NDA § 4(g) [Z&B p. 20]?

16. Assignment of K (Z&B pp. 23-26) CONTRACT PROVISION: “Customer may not assign this Agreement, including for example by operation of law (for example, as the result of a merger), without Vendor’s prior written consent.” QUESTION: What additional language might Customer want to negotiate, and why? (Hint: See the subheading “Assignment with transfer of business assets” at http://goo.gl/26MEx.)

17. Third-party beneficiaries (Z&B p. 20 § 4(b); pp. 27-28) FACTS: 1. Sam signs a contract to sell Betty his car for $2,000. 2. Betty fails to pay. 3. As a result, Sam can’t pay his rent. 4. Sam’s landlord sues Betty as 3PB. [Questions follow on subsequent slides]

18. Third-party beneficiaries (Z&B p. 20 § 4(b); pp. 27-28) FACTS: 1. Sam signs a contract to sell Betty his car for $2,000. 2. Betty fails to pay. 3. As a result, Sam can’t pay his rent. 4. Sam’s landlord Larry sues Betty as 3PB. QUESTION: Betty files MSJ - what result? MSJ denied – Larry was a 3PB MSJ deferred for further discovery Betty wins – Larry was only incidental 3PB

19. Third-party beneficiaries (Z&B p. 20 § 4(b); pp. 27-28) FACTS: 1. Sam signs a contract to sell Betty his car for $2,000. 2. Betty fails to pay. 3. As a result, Sam can’t pay his rent. 4. Sam’s landlord Larry sues Betty as 3PB. QUESTION: What result if K said “Betty will pay $500 to Larry to take care of Sam’s back rent and the remaining $1,500 to Sam ….”?

20. Review: No-oral-modification provisions (Z&B pp. 70-71) QUESTION: In a contract under NY law for the sale of 1,000 widgets, will a court enforce a no-oral-modification provision? No – past contract can’t prevent parties from agreeing to an amendment Yes – NY statute expressly validates Maybe, if no proof of estoppel

21. Review: Signature line How would the signature block for Microsoft be written?

22. End of class