Quizzes

FACTS: 1. You're a second-year associate. Your client, Buyer, is negotiating a contract to buy 1 million widgets from Seller. 2. A summer associate in your firm is reviewing and redlining the first draft of the contract, which was prepared by Seller's counsel. 3. The summer associate notices that, while Seller's draft includes some express warranties, there is no disclaimer of implied warranties. On her own initiative, the summer associate inserts the following text into the draft (with redlining, of course): Seller DISCLAIMS all other warranties, conditions, and terms of quality. QUESTION: Which — if any — of the following is true? Could be zero or more.) a. When Buyer's counsel is reviewing -Seller's- draft, It's not the job of Buyer's counsel to insert a provision to protect Seller if Seller didn't think to include the provision. b. If you and the summer associate were preparing the draft (i.e., not Seller), then you'd want to check with the partner before including this warranty disclaimer in the draft. c. If the facts were different, and it were you and the summer associate who were preparing the draft, then it might make sense to include this warranty disclaimer, to help get the contract to signature sooner. d. If you and the summer associate include this warranty disclaimer, it'd be a good idea to flag it in the draft for discussion with the partner and possibly the client before sending the draft to Seller.

A. B. C. D.

Which of these is an acceptable way to make a contract term "conspicuous"? a. Putting the term in its own, short paragraph with a border around it b. Rendering just a few words in ALL CAPS to call attention to the term c. Putting a border around an entire "wall-of-words" paragraph that has one particularly-important term d. Putting the term in its own, short paragraph with gray shading e. Rendering an entire "wall-of-words" paragraph in ALL CAPS f. Using gray shading for an entire "wall-of-words" paragraph that has one particularly-important term

A. B. D.

FACTS: (1) Alice wants to sell her car to Bob. (2) Bob wants the contract to include a representation by Alice that the car has no significant defects. QUESTION: In most circumstances, which language below for the representation would Alice prefer? a. Alice represents that, so far as she is aware, the car has no significant defects. b. Alice represents that, to her knowledge, the car has no significant defects.

A. If Alice were to make a no-significant-defects representation "to her knowledge," then later on an aggressive trial counsel for Bob might try to argue that Alice had implicitly represented that she was in fact knowledgeable about the car's condition.

Pick the best answer: "Alice is tall" is an example of what kind of statement? a. vague b. ambiguous

A. The statement is vague.

What does Professor Toedt mean by "A.T.A.R.I."? (Omit all punctuation) (Hint: Search for this term in the reading materials, including the periods.)

Avoid The Argument — Rewrite It!

FACTS: (1) Customer Corporation negotiates a master purchase agreement with Vendor Inc. The agreement specifies the pricing that Vendor will honor, during the agreement term, for Customer's orders for particular goods and/or services. (2) Customer wants its various "Affiliates" (defined in the agreement) to be able to place orders at the specified pricing. QUESTION: To accommodate Customer's desire, which of the following would be the best drafting approach? a. Any of the answers here b. In the preamble, recite that the parties are Vendor Inc. and Customer Corporation, but state in the body of the agreement that Customer's Affiliates are entitled to place orders at the agreed pricing. c. In the preamble, recite that the parties are "(i) Vendor Inc. ... and (ii) Customer Corporation ... and its Affiliates (defined below)." d. None of the answers here

B.

TEXT: "By notice to Bob, Alice may terminate this Agreement at will if Bob materially breaches this Agreement and does not cure the breach within 30 days after receiving Alice's notice of breach." CHOOSE THE BEST ANSWER for assessing whether this provision is likely to be workable: a. Most contracts include cure periods of different duration for different categories of breach. b. Termination at will does not require that there be a breach, nor a cure period. c. Most contracts have cure periods of longer than 30 days. d. The cure period should be written as "thirty (30) days."

B.

Choose the BEST phrasing: a. The price is $10 thousand. b. The price is $10,000 [i.e., the zero cents is omitted] c. The price is $ten thousand. d. The price is $10,000.00.

B. Don't spell out "thousand" even though you'd spell out "million" and "billion." And don't put a dollar sign before a spelled-out number, e.g., don't write "$ten."

FACTS: You are reviewing a draft of a merger agreement between two billion-dollar companies. CLAUSE TEXT: Any notice required or permitted by this Agreement will be effective three (5) days after being deposited in the U.S. Mail in a sealed envelope that has first-class postage affixed and is addressed to the notified party as follows: To Buyer: Buyer Corporation, 1600 Pennsylvania Avenue, Washington DC 20500. To Seller: Seller LLC, First St SE, Washington, DC 20004. QUESTION: Which — if any — of the following statements is true? (Could be zero or more.) a. The digit "5" would be given precedence over the word "three" b. The address for notice to an organization should specify an "attention:" line. c. A notice should be effective upon receipt (or refusal, or after reasonable unsuccessful attempts at delivery) d. In this context, it's OK to have notice be effective X days after being mailed by first class mail because the two addresses are in the same city

B. C. 1. D.R.Y. — notice the mismatch between the "three" and the "(5)." 2. In a business-to-business contract, effectiveness X days after mailing is not a good idea. 3. A notice should be effective upon receipt (or refusal, or after reasonable unsuccessful attempts at delivery) no matter what address is used. 4. A notice address should have an attention line.

FACTS: 1. You represent Alice in negotiating a contract with Bob. 2. Texas law applies. 3. Bob's draft contract states that Alice must use her best efforts to get X done by a specified date. 4. "X" is something that's quite important to Bob. 5. Alice tells you in confidence that she can "give it a try" to make X happen by the specified date, but she isn't at all sure she'd succeed, because succeeding might require her to spend far more money than she can afford. QUESTION: In considering whether it's likely to be an acceptable business risk for Alice to go along with the best-efforts obligation, choose the CORRECT answers below (could be zero or more): a. Under Texas law, a best-efforts obligation requires the obligated party to "leave no stone unturned" in seeking to achieve the stated objective. b. Under Texas law, a best-efforts obligation doesn't require success. c. Under Texas law, a best-efforts obligation can be satisfied by making a reasonable attempt. d. Under Texas law, it's not entirely clear what level of effort would satisfy a best-efforts obligation.

B. D. If "X" were not an especially big deal in the scheme of things, then a best-efforts obligation might be safe. But on these facts, Bob is likely to be highly perturbed if Alice makes anything less than what Bob himself regards as a satisfactory effort — and Bob's hindsight will be 20-20 and influenced more than a little by his disappointment at the outcome.

FACTS: 1) You represent Alice, who is negotiating a contract under which she will perform certain Web development services for Bob, who has drafted the contract. 2) Bob's contract draft calls for Alice to perform the services in a "workmanlike" manner. 3) Texas law applies. QUESTION: If Alice were to agree to this requirement, to what would she be committing herself? Choose the BEST answer a. Proficient work, as judged by experts b. Proficient work, as judged by successful practitioners c. First-rate work, as judged by successful practitioners d. First-rate work, as judged by experts

B. Per the Texas supreme court, "workmanlike" generally refers to work that would be considered proficient by those who regularly and successfully engage in the relevant trade or business.

According to Professor Toedt, in most circumstances, the best way to state the date of a contract is: a. Typed in (or just before) the signature blocks: "Date: [DATE]." b. In the preamble: "This Agreement is entered into on the latest date signed as written in the signature blocks below." c. In the preamble: "This Agreement is entered into on [DATE]." d. None of the above.

B. Professor Toedt is of the view that the "last date [hand]written in the signature blocks" is best because (1) it's most likely to be accurate, (2) the blank spaces in the signature blocks will help prompt the signers to fill in the dates they sign, and (3) it removes one possible opportunity for error or inconsistency.

If a contract is going to define "material breach," how would that BEST be done in terms of being useful for the parties and (if necessary) litigation counsel and judges? a. Cite to the Restatement of Contracts definition. b. If a particular type breach is to be deemed "material" (e.g., late payment), then say so in the contract. c. Paraphrase the Texas supreme court's definition of "material." d. Paraphrase the Restatement of Contracts's definition of "material."

B. Trying to define "material breach" as an abstract concept would be dangerous, because it's VERY hard to know in advance what a party might regard as a material breach by the other party.

If a contract is going to define "material breach," how would that BEST be done? a. Include a definition for "material breach" in the termination-for-breach section b. Specify that particular breaches are to be deemed material. c. Include a definition for "material breach" in the Definitions section. d. Cite to the Restatement of Contracts definition.

B. Trying to define "material breach" as an abstract concept would be dangerous, because it's VERY hard to know in advance what a party might regard as a material breach by the other party.

Choose the BEST phrasing: a. The price is $ten billion. b. The price is $10,000,000,000 [i.e., the zero cents is omitted] c. The price is $10 billion. d. The price is $10,000,000,000.00.

C.

TRUE or FALSE: When drafting an entire-agreement provision, you should normally include a provision stating that each party is waiving (or disclaiming) reliance on representations by the other party that are outside the four corners of the contract and its attachments.

False. 1. You might want to include a reliance disclaimer if you think your client might be hit with a claim of fraudulent inducement. 2. Conversely, you might not want to include a reliance disclaimer if you think your client might later want to make a claim of fraudulent inducement.

TRUE OR FALSE: Under article 2 of the Texas Uniform Commercial Code, a breach of contract action can be brought against a seller if the seller delivers the contracted-for goods BUT the goods do not measure up to the seller's warranties for the goods.

False. "Breach of contract and warranty claims are distinct causes of action under Texas law and provide for different remedies, and Texas law forbids conflating breach of warranty and breach of contract."

FACTS: A contract between Alice and Bob allows Alice to terminate both for cause and (only during a specified time frame) without cause; either form of termination written notice. TRUE OR FALSE: If Alice wants to terminate without cause, her notice of termination must state the reason for termination, so as to be clear that the termination was not for cause.

False. "[W]hen a party properly terminates a contract pursuant to a without-cause provision, the reason for the termination is irrelevant." Community Health Sys. Prof. Servs. Corp. v. HansenLinks to an external site., No. 14-1033, slip op. at 13 n.6 (Tex. June 16, 2017) (extensive citations omitted).

TEXT: A termination section says in part: "Alpha may terminate this Agreement if Beta files a petition in bankruptcy." Both Alpha and Beta are in Houston. TRUE OR FALSE: In the U.S., this should be unobjectionable, but not in the UK.

False. A termination-for-bankruptcy provision is unenforceable under the (U.S.) Bankruptcy Code — assuming, of course, that the Code applies.

FACTS: A lease for a retail store provides in part that past-due rent payments will be subject to a monthly administrative fee of 5% of the past due amount. TRUE OR FALSE: This provision will probably be enforceable in most U.S. jurisdictions.

False. An "administrative fee" that is a percentage of the past-due amount is in danger of being characterized as an interest charge — especially if it's charged each month — and 5% per month is 60% per year, which likely will be usurious just about anywhere.

TEXT: "If a party becomes insolvent, then the solvent party may terminate this Agreement upon 30 days' written notice." TRUE OR FALSE: This is an acceptable form of drafting. (Assume that the ipso facto termination prohibition of the U.S. Bankruptcy Code does not apply.)

False. Both parties might be insolvent, in which case neither party might be able to terminate.

FACTS: (1) Your client ABC Inc. has asked you to review a contract drafted by XYZ Corporation. (2) The preamble of the contract states that the parties are (i) ABC Inc. and (ii) XYZ Corporation and its Affiliates. (3) In the definitions section, the contract defines the term Affiliate. TRUE OR FALSE: This contract structure is unobjectionable.

False. For a variety of reasons, affiliates of a signatory party normally should not be listed as parties themselves unless (i) their rights and obligations are clearly spelled out, and (ii) they also sign the agreement.

TRUE or FALSE: Once an NDA is in place, it's generally safe for the parties to switch roles — for example, the initial receiving party could later safely disclose its own confidential information to the initial disclosing party under the NDA.

False. If the NDA is a one-way NDA that protects only one party's information, and the parties later switch roles — unthinkingly assuming that their existing NDA is "fit for purpose" under the new circumstances — it could lead to an unpleasant surprise for someone.

TRUE or FALSE: It's typically OK for a party receiving confidential information under an NDA to agree (in the NDA) that upon termination of the NDA, the receiving party will return, or destroy, all copies of the confidential information that it received or made.

False. In today's era of electronically-stored information ("ESI"), it could be quite burdensome and costly to try to track down and purge another party's confidential information upon termination of an NDA.

TRUE or FALSE: Professor Toedt thinks it would normally be OK for an in-house counsel in a company's legal department to sign a contract on behalf of another department in the company.

False. Let the business people sign their own contracts! (Of course, the in-house counsel might well be the appropriate one to sign a contract for the Legal Department.)

True or False: Professor Toedt thinks it would normally be OK for an in-house counsel in a company's legal department to sign a contract on behalf of another department in the company.

False. Let the business people sign their own contracts! (Of course, the in-house counsel might well be the appropriate one to sign a contract for the Legal Department.)

TRUE OR FALSE: Professor Toedt regards it as acceptable practice to draft a certification that states that a particular document is "true and correct."

False. Professor Toedt's strong preference is to say "complete and accurate."

True or false: "Good faith" has a widely-accepted definition in the U.S. but not necessarily in other jurisdictions.

False. See the discussion of "good faith" in the reading materials.

EXPLAIN IF FALSE: In Texas — but not in California — an employer can run whatever background checks it wants on a prospective employee, and then use the results in making a hiring decision, without having to say anything to the prospective employee,

False. The FCRA (Fair Credit Reporting Act) states that: "... a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless— (i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing ... the procurement of the report by that person." Therefore, in Texas, a disclosure must be made with regards to credit checks and the consumer must authorize it.

True or False: In DCT's view, to make things easier on the parties' signers, it's normally OK to pre-type in the expected signature date above the signature blocks, e.g., "Signed on December 25, 20xx."

False. The agreement might not actually get signed then, which could cause problems — including possibly prison time if the parties were backdating the agreement for deceptive purposes.

FACTS: Manufacturer wants Reseller to agree to charge Reseller's customers in accordance with a price schedule that Manufacturer will promulgate from time to time. You represent Reseller. TRUE OR FALSE: This is probably unobjectionable.

False. This could create "resale price maintenance" issues, a.k.a. "vertical price fixing," which could entail problems under U.S. antitrust law or EU competition law.

FACTS: Another party asks your client to commit to using its "best efforts" to accomplish a challenging task on or before a particular deadline. The circumstances are such that if the client is unsuccessful in timely accomplishing the task, then the other party could incur significant financial loss. TRUE OR FALSE: Under these circumstances, it's probably OK for the client to agree to the best-efforts commitment.

False. Under these circumstances, the business risk to the supplier-client could be significant: If things go badly, the customer's people will be motivated to look for somewhere to point the finger and shift the blame away from themselves — and "best efforts" clauses can be tricky to litigate.

FACTS: Bob breaches his contract with Alice. She gives him notice of the breach per the contract's termination provision. Bob doesn't cure the breach within the cure period stated in the contract. Alice terminates the contract as permitted by the termination provision. TRUE OR FALSE: By terminating the contract, Alice has elected her remedy and so has waived her right to sue Bob to recover her damages arising from the breach.

False. Unless the contract's termination provision says otherwise, terminating the contract will not affect Alice's right to sue Bob for damages she sustained as a result of his breach.

Adapted from language in an actual contract: "Seller will notify Buyer at least 30 (THIRTY) days before the effective date of any price increase." TRUE OR FALSE: This is an acceptable drafting style.

False. Use just the digits — and, incidentally, it's really unusual to put the words in parentheses.

1. Your client ABC LP is a Texas limited partnership. 2. Your contact at ABC is one of ABC's investors (limited partners), Annie Alpha. 3. ABC is to enter into a contract with XYZ Corporation. 4. Annie has asked you to review XYZ's draft of the contract. 5. In the draft contract, ABC's signature block says "Annie Alpha, limited partner." QUESTION: Is this signature block OK?

False/no. False is correct, for two reasons: 1) A limited partner, acting in that capacity, does not have authority to bind a limited partnership; only a general partner or an employee with actual- or apparent authority may do so. 2) If Annie were to sign the contract in her capacity as a limited partner, she might be putting herself in jeopardy of being held personally liable under the contract, the same as a general partner.

TEXT: "By notice to Bob, Alice may terminate this Agreement at will if Bob materially breaches this Agreement and does not cure the breach within 30 days after receiving Alice's notice of breach." QUESTION: Does this provision make sense?

False/no. Termination at will does not require that there be a breach, nor a cure period.

TRUE or FALSE: It's not unusual to backdate a sales contract to make it effective as of an earlier date. (Careful — be sure to read this closely.)

False: The seller might be trying to make it falsely appear that the sale was completed in an earlier financial-reporting period, which might be illegal.

FACTS: Alpha Corp. and Beta Inc. are negotiating a $100 million contract. The notices provision states: "Any notice under this Agreement will be effective three days after mailing by first class mail." QUESTION: What do you think?

Notices-by-regular-mail provisions are not a good idea in business-to-business contracts — it's far better to require notice by certified mail return receipt requested or some other form of trackable delivery. First Class Mail does NOT provide a receipt -- that requires certified mail, return receipt requested.

In contracts, Professor Toedt prefers to use "may" for _____ and "might" for _____ (hint: each begins with the letter P).

Permission; Possibility

TRUE OR FALSE: It's normally worthwhile to "fix" ambiguities in a draft contract.

TRUE. It's almost always worth the time and trouble to fix ambiguous contract language, i.e., language with two or more possible meanings.

EXPLAIN IF FALSE: In the U.S., a court will generally enforce an arbitration provision (unless it's unconscionable).

True.

FACTS: A Texas company competes in a global (geographic) market. TRUE OR FALSE: For that company, a post-employment noncompetition covenant might be enforceable even if the (former) employee is prohibited from taking a job with a competitor anywhere in the world, as long as the time period and the scope of what the employee is prohibited from doing are reasonable.

True.

TRUE OR FALSE: It might NOT be worthwhile to "fix" vague language in a draft contract (as opposed to ambiguous language).

True. It's almost always worth the time and trouble to fix ambiguous contract language, i.e., language with two or more possible meanings.

TRUE OR FALSE: Other things being equal, it's normally worthwhile to "fix" ambiguities in a draft contract.

True. It's almost always worth the time and trouble to fix ambiguous contract language, i.e., language with two or more possible meanings.

FACTS: (1) A contract states that breach of a certain obligation will be considered a "material" breach that will allow the other party to terminate the contract by notice. (2) The obligated party breaches the obligation, whereupon the other party duly terminates the contract and sues for damages. (3) In court, the obligated party admits its breach, but it claims that the breach wasn't material and so the other party shouldn't have terminated the contract. TRUE OR FALSE: The breaching party might have a very difficult time persuading a court that the breach wasn't material.

True. The material-breach statement referred to in the facts might have the same effect as an acknowledgement.

TRUE or FALSE: An officer of a limited partnership who also owns a limited-partnership interest in the limited partnership can sign a contract on behalf of the limited partnership

True. The officer will want to be explicitly clear, in his or her title in the signature block, that he or she is signing as an officer and NOT as a limited partner.

It's not unusual to backdate a confidentiality agreement to make it effective as of an earlier date. (Careful — read this closely.)

True: The parties might be legitimately memorializing a previous oral agreement in written form.

This one-word term is used when "interest" charges (i) exceed a legal maximum, and/or (ii) are started before the legally-allowed date:

Usury. Usury laws can be draconian, sometimes leading to forfeiture of principal for even a penny overcharge.

FACTS: 1. Your client, Buyer, is negotiating a contract to buy 1 million widgets from Seller. 2. A summer associate in your firm is reviewing and redlining the first draft of the contract, which was prepared by Seller's counsel. 3. The summer associate notices that, while Seller's draft includes some express warranties, there is no disclaimer of implied warranties. On her own initiative, the summer associate inserts the following text into the draft (with redlining, of course): Seller DISCLAIMS all other warranties, conditions, and terms of quality. QUESTION: From Buyer's perspective, what if anything is wrong with this provision?

When Buyer's counsel is reviewing Seller's draft, It's not the job of Buyer's counsel to insert a provision to protect Seller if Seller didn't think to include the provision. (It'd be a different matter if Buyer's counsel was doing the drafting and — to help get the contract to signature sooner — inserted language that gave reasonable protection to Seller.)

An agreement can be amended by setting out the entire agreement anew, as modified; this is referred to as a (or an) "_____ and _____" agreement

amended; restated

FACTS: (1) Customer Corporation negotiates a master purchase agreement with Vendor Inc. The agreement specifies the pricing that Vendor will honor, during the agreement term, for Customer's orders for particular goods and/or services. (2) Customer wants its various "Affiliates" (defined in the agreement) to be able to place orders at the specified pricing. QUESTION: To accommodate Customer's desire, which of the following would be the best drafting approach? a. In the preamble, recite that the parties are "(i) Vendor Inc. ... and (ii) Customer Corporation ... and its Affiliates (defined below)." b. Neither of the above. c. Both of the above. d. In the preamble, recite that the parties are Vendor Inc. and Customer Corporation, but state in the body of the agreement that Customer's Affiliates are entitled to place orders at the agreed pricing.

d. In the preamble, recite that the parties are Vendor Inc. and Customer Corporation, but state in the body of the agreement that Customer's Affiliates are entitled to place orders at the agreed pricing.

Which is the best way to write the number below (in Prof. Toedt's view)? a. Payment is due 30 (thirty) days from the date of this Agreement. b. Payment is due thirty (30) days from the date of this Agreement. c. Payment is due thirty days from the date of this Agreement. d. Payment is due 30 days from the date of this Agreement.

d. Payment is due 30 days from the date of this Agreement.

If a contract provision gives Alice the right to unilaterally amend the contract but does not put certain limits on that right, then the entire contract might be unenforceable because it is "ill" in this way:

illusory

Paying parties typically want to be invoiced for amounts they owe under a contract because they want to comply with _____ _____ requirements imposed (typically) by accounting standards.

internal control

QUESTION: In addition to a blank line for the actual signature, a proper contract signature block should include: ____, ____, and ____ in the order in which you'd see them when reading the signature block

name, title, date signed

FACTS: Gigunda wants MathWhiz to obtain Gigunda's prior written consent before assigning a contract between the two companies. FILL IN THE BLANKS: MathWhiz is willing to agree to the assignment-consent requirement, but it proposes revising the provision to say: "Gigunda will not unreasonably _____, _____, or _____ its consent."

withhold, delay, condition

Name one type of agreement that, under U.S. law, generally cannot be assigned without the other party's consent, even if the agreement is silent on the subject.

1. Intellectual-property (IP) license agreements 2. Agreements where it's important who the party is that will be providing services or other performance (e.g., Kanye West replacing Willie Nelson at the Houston Livestock Show & Rodeo)

What are two areas of (federal and/or state) citizen-rights law that parties conducting background checks on individuals should keep in mind?

1. The federal Fair Credit Reporting Act includes specific requirements if credit checks will be used for employment decisions. 2. Federal- and state antidiscrimination laws might limit what companies can do with adverse information — for example, "ban the box" laws in some states that prohibit blanket refusals to employ someone just because of criminal convictions. See, e.g., http://www.commondraft.org/#BkgdChkPersAssmtRestrCmtLinks to an external site.

QUESTION: What if anything is wrong with the following provision? (Assume that other issues are satisfactorily addressed elsewhere, and that you haven't been told which side you're representing.) Buyer represents that it will pay Seller's invoices net 10 days.

1. We don't know which side we're representing, so we don't know whether ten days is enough time. (Incidentally, it's customary to use digits for "net X days," even if ten or less.) 2. Net 10 days from when? 3. This should be a covenant, not a representation — "Buyer will pay Seller's invoices net 10 days from [whatever]."

From the perspective of a manufacturer, which of the following is a potential advantage of the manufacturer's granting a reseller an exclusive territory? (Could be more than one.) a.Manufacturer has more leverage during negotiation to demand that Reseller commit to achieving specific performance targets. b. Reseller won't have to worry about competition from other resellers of the same (branded) goods c. If Manufacturer gets the idea that Reseller isn't diligently pursuing sales, then Manufacturer might get impatient, which could lead to disputes, which wouldn't be good for the brand. d. If Reseller slacks off, Manufacturer doesn't have the right to make a substitution.

A (only)

Briefly explain why paying parties typically want to be invoiced for amounts they owe under a contract.

A paying party wants to keep track of which invoices have been paid and which invoices are past due and might need follow-up. Paying parties might even be legally required to receive an invoice as part of their internal financial controls to help detect and prevent fraud. Also, paying parties want to see what exactly what they are being charged for, and how long they will have to make the payment (net x days discussion). An invoice allows for both of these things. "Internal controls" is the phrase you want to remember in this context.

TEXT: A termination section says in part: "Alpha may terminate this Agreement if Beta files a petition in bankruptcy." Both Alpha and Beta are in Houston. QUESTION: What do you think about this?

A termination-for-bankruptcy provision is referred to as an "ipso facto" clause and — and in the U.S. it would be not just unenforceable under the Bankruptcy Code, but doing such a termination would be a violation of the automatic stay.

Choose the BEST phrasing for the following contract term: a. Thirty days after termination, Customer must forward a final list of its users to Supplier. b. 30 days after termination, Customer must forward a final list of its users to Supplier. c. Thirty (30) days after termination, Customer must forward a final list of its users to Supplier.

A. 1. D.R.Y. 2. Use words, not digits, for numbers at the beginning of a sentence — but large numbers, consider rewriting the sentence so that the large number goes inside the sentence.

FACTS: 1. After oral sales discussions, Alice, in Houston, sends Bob, in the Houston office of a company based in Phoenix, Arizona, a "quote sheet" offering to sell Bob's company 1,000 widgets at USD $100 each, for delivery in two weeks. (Assume Alice and Bob have actual authority to bind their respective companies.) 2. Alice's quote sheet incorporates Alice's standard terms of sale by reference from Alice's Web site and includes a link to those terms. (Assume that this has the same effect as setting forth the terms of sale within the quote sheet.) 3. Alice's terms of sale document on the Web states that: A) Alice objects to any additional or different terms proposed by Bob, and B) any dispute between Alice and Bob must be litigated in Houston. 4. Bob responds to Alice's quote sheet with a purchase order whose fine print states that: A) Bob objects to any additional or different terms proposed by Alice, and B) all disputes arising out of the parties' contract must be litigated in Phoenix. 5. Alice doesn't sign or return Bob's purchase order, but she does ship 1,000 widgets to Bob in Houston and sends Bob an invoice for the USD $100,000 price. Bob's company pays the invoice in order to get an early-payment discount. 6. When Bob examines the widgets a few weeks after accepting the shipment, he concludes that Alice shipped him the wrong type of widgets. Alice disagrees, saying, in effect, this is what you ordered. 7. Alice files suit in Houston against Bob, seeking a declaratory judgment that she is not liable for breach of contract. Bob files a motion to dismiss on grounds that the forum-selection provision in his company's purchase order requires litigation to be in Phoenix. (Assume that this would be a valid grounds for dismissing Alice's lawsuit.) QUESTION: What should the court do? a. Deny Bob's motion to dismiss because of the drop-out rule of UCC § 2-207 b. Grant Bob's motion to dismiss: His purchase order was the "last shot" and therefore establishes Phoenix as the proper forum for litigation. c. Deny Bob's motion to dismiss, because Alice's quote sheet was first (Alice is "master of the offer") and therefore that document prevails in its forum selection of Houston d. Grant Bob's motion to dismiss because of the drop-out rule of UCC § 2-207

A. 1. This is a contract for the sale of goods, so article 2 of the UCC applies. 2. Each party's "paper" objected in advance to additional or different terms. 3. But the party's conduct recognized the existence of a contract (Alice shipped widgets, Bob's company paid the invoice). 4. So, under the drop-out rule of UCC § 2-207(3), both forum-selection provisions are dropped out of the parties' contract. 5. On the facts here, Bob's company can properly be sued in Houston because it has an office here and essentially all the relevant actions took place in Houston. Conclusion: The court should deny Bob's motion to dismiss.

FACTS: 1. Gigunda wants MathWhiz to sign a special confidentiality agreement to protect some super-secret Gigunda information. 2. Gigunda's draft agreement says that if it appears that MathWhiz will be disclosing or using Gigunda's information without permission, then Gigunda can seek a preliminary injunction, AND that MathWhiz waives any requirement that Gigunda post a bond. CHOOSE THE BEST ANSWER: How do you respond? a. Delete the bond waiver, redlining it. b. Delete the bond waiver but don't bother redlining the change - the waiver is illegal so the deletion needn't be redlined c. Leave the bond waiver alone - it's unenforceable so don't spend scarce negotiation time and -capital on it. d. Leave the bond waiver alone - it's no big deal.

A. A bond waiver can be a big concession, and will usually be enforceable. (Never change someone else's draft [or markup] without redlining the change or otherwise calling attention to it.

FACTS: 1. You represent Alice in negotiating a contract with Bob. Texas law applies. 2. Bob's draft contract states that Alice must use her best efforts to get X done by a specified date. 3. "X" is something that's not really a big deal to Bob. 4. Alice tells you in confidence that she can "give it a try" to make X happen by the specified date, but she isn't at all sure she'd succeed, because succeeding might require her to spend far more money than she can afford. QUESTION: Is it likely to be an acceptable business risk for Alice to go along with the best-efforts obligation? a. Yes: A best-efforts obligation doesn't require success, and Bob isn't likely to be terribly upset if Alice doesn't succeed. b. No: Under Texas law, a best-efforts obligation requires the obligated party to "leave no stone unturned" in seeking to achieve the stated objective. c. No: Under Texas law, it's not entirely clear what level of effort would satisfy a best-efforts obligation. d. Yes: A best-efforts obligation can be satisfied by making a reasonable attempt.

A. Because "X" is not an especially big deal to Bob, then a best-efforts obligation might be safe. But if X were a big deal to Bob, then he'd likely be highly perturbed if Alice makes anything less than what he, Bob, regarded as a satisfactory effort — and Bob's hindsight will be 20-20.

FACTS: 1. A seller normally deals exclusively in widgets. But for one transaction, a new salesperson, working for seller, mistakenly accepts as a trade-in a batch of gadgets — a totally-different product — even though no one at the seller knows much about gadgets. 2. The seller checks online to find out what gadgets sell for, and places a for-sale ad on Craigslist to sell the gadgets. QUESTION: Under these circumstances, and under the Uniform Commercial Code, does seller count as a "merchant"? CHOOSE THE BEST ANSWER. a. No, because UCC rules do not apply to sales in "private" contexts such as Craigslist. b. Yes, because the seller can go online to learn about gadgets. c. Yes, because the seller is in business selling products and chose to acquire and then sell the gadgets. d. No, because the seller does not regularly deal in gadgets and gadgets are very different from the widgets that the seller normally deals in.

D.

TEXT: "Consultant agrees to indemnify and hereby does indemnify, defend and hold harmless Atari, its affiliates, and their respective officers, directors, employees, distributors, agents, customers and licensees from and against any liability, damage or expenses (including without limitation attorneys' fees) based on the untruth or breach of any representation, warranty or covenant contained in this agreement." QUESTION: Does "and hereby does indemnify" belong here? Pick the BEST answer. a. No; it's redundant b. Yes: "Agrees to indemnify" and "hereby does indemnify" are Latinate and Old English versions respectively. c. Yes; this is an example of a deed-by-contract d. No (unless Consultant is paying off his/her indemnity obligations in advance)

D.

The nuclear Navy, in which Professor Toedt served, has a saying: You get what you inspect, not what you [BLANK].

EXpect/expect

In DCT's view, to make things easier on the parties' signers, it's normally OK to type in the expected signature date above the signature blocks, e.g., "Signed on December 25, 20xx."

FALSE. The agreement might not actually get signed then, which could cause problems — including possibly prison time if the parties were backdating the agreement for deceptive purposes.

True or False: Representation and warranty are basically synonyms; while they're not quite the same, they're close enough that they can be used interchangeably in a contract.

False

FACTS: 1. Your client, Alpha LLC, is being asked by Bravo Corporation to sign a services agreement drafted by Bravo. The intent is for Alpha LLC to perform services for Bravo. 2. The payment provisions cover payments made by either party. PICK THE BEST ANSWER - TRUE OR FALSE: Assuming that the payment provisions were the only concern, it likely would be OK for your client to sign the agreement "as is," because the payment provisions apply equally to each party.

False.

TRUE or FALSE: California will allow a non-California company to enter into an employment agreement with a California employee, with the agreement containing a post-employment noncompetition covenant, as long as: (i) the covenant is reasonable in time, geographic scope, and market scope, and (ii) the employment agreement states that the agreement will be governed by the law of a state that permits such covenants.

False.

True or false: New York law gives effect to usury-savings clauses.

False.

FACTS: A manufacturer is negotiating a reseller agreement with a prospective reseller. The reseller has asked for exclusivity in a stated geographic territory and market segment. QUESTION: From the manufacturer's perspective, what would be the preferred approach, of those that are listed below? a. The reseller must achieve concrete sales goals and payments on a quarterly or annual basis, failing which the manufacturer can terminate the reseller relationship b. The reseller must achieve concrete sales goals OR pay specified minimum payments on a quarterly or annual basis, failing which the manufacturer can terminate the reseller relationship c. The reseller must use its best efforts to promote sales, failing which the manufacturer can terminate the reseller's exclusivity d. The reseller must achieve concrete sales goals OR pay specified minimum payments on a quarterly or annual basis, failing which the manufacturer can terminate the reseller's exclusivity

A. The manufacturer will want the reseller not only to pay minimums, but also make actual sales to promote the brand and achieve "market penetration," rather than have the reseller be able to "warehouse" the territory. If the reseller fails to achieve the required targets, the manufacturer will want the right to terminate the entire reseller relationship, because that will give the manufacturer the flexibility, — if it so desires — to offer a new exclusive deal to another reseller. (In that event, the manufacturer might bargain with the reseller to terminate just the exclusivity, but the manufacturer will want to have the upper hand on that.) A best-efforts obligation might be quite problematic for the manufacturer, because there's so much opportunity for disputes about whether the reseller actually used "best" efforts.

FACTS: 1. Your client MathWhiz (based in Texas) and Gigunda (in California) are negotiating a contract for MathWhiz to perform services for Gigunda. 2. For this particular contract, Gigunda wants MathWhiz to send people to Gigunda's California headquarters to work with Gigunda's people. 3. The draft contract is silent about choice of law and choice of forum, because Gigunda rejected specifying Texas law and forum. 4. MathWhiz plans to sign the contract at Gigunda's California headquarters. 5. MathWhiz asks you whether you should add a waiver of jury trial to the contract. CHOOSE THE BEST ANSWER: What do you advise MathWhiz? a. Not a great idea - on these facts, any litigation would likely be filed in (or transferred to) California, and California law would apply; under California law, pre-dispute waivers of the right to jury trial are unenforceable. b. You could do it but it'd probably be unenforceable. c. A great idea - jury trials are expensive, and a California jury would likely be unsympathetic to a Texas company. d. A great idea - jury trials are always a roll of the dice, especially when technical subjects are involved. e. A great idea - courts favor bench trials over jury trials, which take longer and require more judicial effort.

A. 1. With no forum-selection or choice-of-law clause, a court would look to the facts to decide which state's law would apply AND whether jurisdiction and venue are proper. 2. On these facts, a California court would: a. have personal jurisdiction over MathWhiz; b. probably conclude that California law applied; and c. probably conclude that California was the proper place for a lawsuit. 3. If a lawsuit was filed in a Texas court, Gigunda would probably move to transfer to California, and the Texas court likely would grant the motion for the reasons stated in 2.b and 2.c above. 4. In California, pre-dispute waivers of the right to jury trial are unenforceable.

TEXT in a contract draft: "Buyer represents that it will pay Seller's invoices net 10 days." QUESTION: Which of the following — if any — is true? (Could be zero or more.) Assume that other issues are satisfactorily addressed elsewhere. NOTE: You haven't been told which side you're representing. a. If this is a "representation," it could leave the door open for Buyer to argue that it needn't pay. b. Net 10 days should be "net ten days" (spelled out) c. The provision is OK because it uses "Buyer" and "Seller" instead of party names, so the provision doesn't favor either party. d. "Net 10 days" is a standard payment-terms provision. e. Under the UCC, the payment period will start on the date of Seller's invoice.

A. As long as Buyer didn't know (and didn't have reason to know) that it wasn't going to pay, then it wouldn't be liable for negligent misrepresentation if it didn't pay.

FACTS: Manufacturer wants Reseller to agree to charge Reseller's customers in accordance with a price schedule that Manufacturer will promulgate from time to time. You represent Reseller. Which of the following answers is CORRECT? (There could be more than one.) a. This could create "resale price maintenance" issues, a.k.a. "vertical price fixing," which could entail problems under U.S. antitrust law or EU competition law. b. Reseller would likely object to this because Reseller likely will have made at least some investment in being able to sell Manufacturer's product line, and Reseller will want to be able to recoup that investment. c. This is OK from Reseller's perspective, because Reseller can always elect not to sell Manufacturer's product line.

A. B.

FACTS: 1. You represent ABC LLC, a manufacturer of highly-specialized oil drilling equipment. You're helping ABC negotiate a major master purchase agreement with Gigunda Energy; ABC is hopeful that this agreement could represent significant business. 2. Gigunda's lawyer has drafted the contract; it includes a provision requiring ABC to obtain Gigunda's prior written consent before assigning the agreement. ABC has informed you — in confidence — that it is discussing a possible agreement with a private-equity firm, Delta Tau Chi L.P., in which ABC will "spin off" one of ABC's product lines by selling the business assets of that product line to a new company to be formed by Delta. Your contact at ABC cautions you that ABC isn't yet ready for anyone else to know about its discussions with Delta. QUESTION: What is probably sensible advice to suggests to ABC? (There could be multiple correct answers.) a. "Consider asking Gigunda to sign an NDA and then telling them you're considering spinning off a product line." b. "Ask Gigunda to delete the assignment-consent provision BUT state that Gigunda may terminate the Agreement within X days if it doesn't like the new owner." c. "Ask Gigunda to include an exception to the assignment-consent requirement for asset dispositions." d. "Make the consent requirement apply to assignments by either party." e. "Don't worry about the assignment-consent provision - the law requires consent not to be unreasonably withheld." f. "Reject the assignment-consent provision."

A. B. C.

Which of the following is true (it could be zero or more): a. Schedules are used in contracts to state exceptions to reps and warranties b. Schedules are sometimes used as an easily-edited means of memorializing deal-specific information (e.g., price, dates, etc.) c. A schedule in a contract will typically have the same number as the contract section where the schedule is principally referenced - e.g., "Schedule 4.5" is principally referenced in § 4.5 of the body of the contract.

A. B. C.

FACTS: You represent MathWhiz, which has asked you to draft a contract under which MathWhiz will engage in seismic data analysis for Gigunda Energy to use in looking for petroleum deposits. You and MathWhiz are concerned that seismic data analysis is an imprecise science, and so you want to include some serious warranty disclaimers, because Gigunda will be sinking (no pun intended) hundreds of millions of dollars into its drilling efforts. Gigunda is willing to agree to including your proposed disclaimers, but asks that MathWhiz commit to using its "best efforts" to produce an accurate map showing the best areas for Gigunda to drill wells. QUESTION: In these circumstances, would it probably be OK for MathWhiz to agree to Gigunda's request for a best-efforts commitment? a. Probably OK, because the warranty disclaimers will take precedence over the best-efforts commitment. b. Probably OK, because a best-efforts commitment is not an absolute commitment. c. Not a great idea, because a best-efforts clause can mean different things in different jurisdictions. d. Not a great idea, because a best-efforts commitment will usually take precedence over a warranty disclaimer.

C. A best-efforts clause can be dangerous because: 1. The distinction between best efforts, commercially-reasonable efforts, and reasonable efforts can be muddy, depending on the jurisdiction, if those terms aren't defined in the agreement. 2. If MathWhiz is obligated to use "best efforts," and something goes wrong, then Gigunda's trial counsel will have motive and opportunity to have an expert witness testify about Things A, B, and C that MathWhiz could have done but didn't and therefore (supposedly) did not comply with its obligation to use best efforts.

FACTS: A draft contract between MathWhiz and Gigunda Energy states in part: "The parties agree and acknowledge that Gigunda's liability for breach of any of its obligations, other than its obligations to pay MathWhiz's invoices when due, will be limited to USD $100." QUESTION: In Professor Toedt's view, which of the following will be true about the "agree and acknowledge" wording? (Ignore the business- and legal substantive issues arising from the provision.) a. This drafting style should pretty much always be avoided. b. This will normally be an appropriate drafting style for "everyday" use. c. This drafting style could be used sparingly if desired for "sound bites."

C. The phrase, "The parties agree ..." should be used very sparingly when needed to create a sound bite. The phrase, "The parties agree and acknowledge that Gigunda's liability will be limited" isn't a good way to put it — just say "Gigunda's liability will be limited ...."

FACTS: 1) You represent Alice, who is negotiating a contract under which she will perform certain Web development services for Bob, who has drafted the contract. 2) Bob's contract draft calls for Alice to perform the services in a "workmanlike" manner. QUESTION: If Alice were to agree to this requirement, to what would she be committing herself? a. The highest level of professional competence b. Work that professionals would (grudgingly) consider acceptable c. Work that would be considered competent work by practitioners

C. "Workmanlike" generally refers to work that would be considered proficient by those who regularly and successfully engage in the relevant trade or business.

FACTS: Alice bought $1 million of widgets from Bob. She is suing him for breach of warranty and for misrepresentation because he allegedly statements about the widgets that allegedly turned out not to be true. QUESTION: Of the following causes of action, which (if any) require Alice to prove that she reasonably relied on Bob's alleged statements? (Hint: Look up "Hill of Proof" in section 13.3 of the Notes on Contract Drafting reading materials.) a. both breach of warranty and misrepresentation b. breach of warranty c. misrepresentation

C. Misrepresentation. To prove misrepresentation, the plaintiff must show that it reasonably relied on the false or misleading representation. (That will often be more-or-less a given, and it likely will be up to the defendant to prove that the plaintiff's reliance was unreasonable.) No such proof is needed for proof of breach of warranty.