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Contract Drafting Class 19 Tues. Mar. 27

Contract Drafting Class 19 Tues. Mar. 27

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Contract Drafting Class 19 Tues. Mar. 27

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  1. Contract DraftingClass 19Tues. Mar. 27 University of Houston Law Center D. C. Toedt III

  2. In the news

  3. Bulletproof a limitation of liability • Abacus Fed. Svgs. Bk. v. ADT Security Serv., Inc., summarized in this blog posting • Diebold’s magic formula: • Limitation of liability • Customer must buy insurance • Customer waives subrogation

  4. Subrogation Party A must buy insurance Party B is an “additional named insured” Party A waives subrogation Waiver is binding on insurance carrier So even if Party B is at fault, insurance carrier can’t sue Party B to recoup payout (See this blog posting for cites)

  5. Z&B Chapter 5ALoan Agreement A guided tour (continued)

  6. Loan Agrmt § 4.1(a) – p. 326 DISCUSSION QUESTION: How can Borrower “cause” its Subsidiaries to comply with the Borrower’s covenants? (Note the definition of “Subsidiary.”)

  7. Loan Agrmt § 4.1(a) – p. 326 DISCUSSION QUESTION: CanBorrower make the reps and warranties about all Subsidiaries? (Note the definition of “Subsidiary.”)

  8. Loan Agrmt DISCUSSION QUESTION: What’s the “nuclear” option for Lender? (Hint: See p. 354, 372-73)

  9. Loan Agrmt DISCUSSION QUESTION: Why might Lender want, or not want, to exercise its “nuclear” option?

  10. Z&B Chapter 5BSecurity Agreement

  11. SPG Agreement – Z&B p. 384 QUESTION: How could these definitions have been structured to reduce the risk of inter-agreement inconsistency?

  12. SPG Agreement QUESTION: Generally speaking, how would Lender perfect its security interest in the Collateral? (Hint: See Z&B p. 376)

  13. SPG Agreement QUESTION: Is it worth the Lender’s while to go through the motions of perfecting its security interest in the Collateral? Not really – perfecting a security interest often isn’t worth the trouble Yes – perfecting a security interest can provide the Lender with benefits

  14. SPG Agreement FACT: Borrower files for bankruptcy protection. QUESTION: What can Lender do with the Collateral? (Hint: See - scroll down to the “XXX in Chapter 11” heading.)

  15. SPG Agreement § 2.07(a) QUESTION: Why is Borrower required to keep its chief place of business and chief executive office and records in a specific address? (Hint: See UCC § 9.401, Tex. Bus. & Comm. Code § 9.501.)

  16. SPG Agreement § 3.01(b), (c) QUESTION: Must Lender successfully sue Borrower and obtain a judgment before it can proceed against a Guarantor or its assets? Yes No Maybe

  17. SPG Agreement § 3.01(b), (c) QUESTION: If Borrower could successfully defend against a collection suit by Lender, would that stop Lender from collecting from a Guarantor? Yes No Maybe

  18. SPG Agreement § 3.01(b), (c) FACTS: 1) Borrower files for bankruptcy protection. 2) The trustee in bankruptcy success-fully forces Lender to return a payment Borrower previously made, on grounds that it was a “preference.” QUESTION: Can Lender collect the returned payment from a Guarantor? Yes No Maybe

  19. Preferences in bankruptcy FACTS: 1) Supplier fills an order from Customer under a longstanding Master Purchase Agreement. 2) Customer pays Supplier’s invoice. 3) Customer files for bankruptcy protection 89 days later. QUESTION: Will Supplier have to return Customer’s payment? (Hint: See this article.) Yes No Maybe