Professional Documents
Culture Documents
Enforceable or Unenforceable?
Examining Commonly Used Contract Provisions
Keith Gregory
Snell & Wilmer
Jim Scheinkman
Snell & Wilmer
Josh Schneiderman
Snell & Wilmer
Tina McKnight
Power-One, Inc.
A.
B.
C.
D.
Enforceability of AS IS language
Ned Stark is in the market to buy a house and, after viewing a
property owned by Tywin Lannister, decides to purchase it.
Tywin knows that the house has been condemned by the
government but assures Ned that there are no government
actions against the property. Ned and Tywin sign a purchase
and sale contract that contains an as is clause. One week
after moving into the house, Ned discovers the condemnation
notice stuck to a fence post. Ned sues Tywin for various
claims, including breach of contract and fraud, and Tywin
cites the as is clause as a defense.
Enforceability of AS IS language
A.
B.
C.
D.
Enforceability of AS IS language
Correct Answer: C
Unenforceable because Tywin concealed from Ned the
existence of the condemnation action by intentionally
misrepresenting that the house had no government action
against it
International Arbitration
Any dispute, controversy or claim arising out of or relating to
this contract, including the validity, invalidity, breach, or
termination thereof, shall be finally settled by binding arbitration
[administered by the AAA or ICC or some other arbitration
commission], and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction. The
arbitration shall be conducted in English in [name of city, state,
United States] in accordance with [the chosen arbitration rules,
e.g., the United States Arbitration Act or the ICC Rules of
Arbitration] and [the chosen governing law, e.g., the
substantive law of the state of California]. There shall be [one
to three] arbitrators, named in accordance with such rules.
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International Arbitration
A.
United States
B.
China
C.
D.
All Jurisdictions
2013 Snell & Wilmer L.L.P.
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International Arbitration
Correct Answer: C
Any country that has signed the United Nations New York
Treaty
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B.
C.
D.
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B.
C.
D.
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However, existing California case law suggests that best efforts and
reasonable efforts are essentially interchangeable. Although
California has declined to provide a clear definition of best efforts,
the courts have ruled that best efforts means that the promisor must
use the diligence of a reasonable person under comparable
circumstances.
California Pines Prop. Owners Assn. v. Pedotti, 206 Cal. App. 4th
384, 387, 795 (2012).
2013 Snell & Wilmer L.L.P.
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Venue Selection
An agreement between Penguins, Inc. and Kings, Co. contains
the following clause:
This Agreement shall be governed by and construed in
accordance with the laws of the State of California, and the
parties hereto agree to submit to personal jurisdiction by and
venue in the State of California, County of Alpine.
After a dispute arises, Penguins, Inc. objects to the venue
selection clause, stating that it violates the California statute
regarding venue selection.
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Venue Selection
A.
B.
C.
D.
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Venue Selection
Correct Answer: B
Enforceable, only if Alpine County is a statutorily permissible county.
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Mandatory Mediation
Before any legal action is filed between the parties,
except for an ex parte application that seeks either
injunctive relief or a pre-judgment remedy such as a
temporary protective order, the parties agree to
participate in a mediation before a neutral mediator
that will last a minimum of four hours unless the
matter is resolved in less than that amount of time.
The parties further agree to equally share in all of
the costs associated with the mediation.
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Mandatory Mediation
A.
B.
C.
D.
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Mandatory Mediation
Correct Answer: D
All of the above
Once litigation is filed, most parties to a contract stop
talking with each other and leave most of their
communications to their lawyers. A mediation before the
litigation will bring the parties together and give them an
opportunity to try to figure out if they have any ability to
compromise so as to allow their business relationship to
continue. Also, if the parties choose a creative mediator
that mediator might be able to develop ideas that the
parties have not considered before the mediation.
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Liquidated Damages
Money Bags Bank, Co. (MBB) sued Give Me Cash, Co.
(GMC) for breach of contract. MBB alleged GMC failed to
pay $100K under a contract for financial advisory
services. GMC disputed the claim, countering that MBB
had breached the contract. The parties entered into a
Settlement Agreement calling for GMC to make three
payments of $20K each. If GMC missed a payment, MBB
would immediately be entitled to $100K plus interest and
attorneys fees.
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Liquidated Damages
A.
B.
C.
D.
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Liquidated Damages
Correct Answer: D
Unenforceable, because the damages are not reasonable and
proportional to MBBs damages
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B.
C.
D.
E.
A and B
F.
B and C
2013 Snell & Wilmer L.L.P.
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Contractual Limitations on
Bringing Claims
An agreement between Draper Partners, Inc. and Olson
Company states that the representations and warranties
contained in the agreement survive the Closing for a
period of one year.
Olson Company discovers a that breach of the
representations and warranties by Draper Partners, Inc.
was made within the first year after the Closing, but does
not bring a claim for the breach until after the expiration
of the one year period.
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Contractual Limitations on
Bringing Claims
A.
B.
C.
D.
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Contractual Limitations on
Bringing Claims
Correct Answer: C
The claim would be barred if the agreement also stated that no claim for
indemnification may be made more than one year after Closing.
The Ninth Circuit has held that, because California law does not favor contractual
stipulations to limit a statute of limitation, that such stipulation must be clear and
explicit. It held that a clause similar to the one in the example was ambiguous and
served only to specify when a breach of the representations and warranties may
occur, not when an action must be filed. Western Filter Corp. v. Argan, Inc., 540
F.3d 947 (2008).
Thus, if parties wish to limit the period of time within which legal action must be
commened, they should use specific language, such as that used in Answer C.
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Joint Drafting
The agreement has been prepared and negotiations in
connection therewith have been carried on by the joint
efforts of the respective parties. This Agreement is not to
be construed strictly for or against any of the parties
since both parties have jointly drafted it.
An ambiguity exists in a contract entered into between
ABC Corp and XYZ LLC regarding when certain goods
are supposed to be delivered. XYZ claims that the
ambiguity should be construed against ABC, because
ABC prepared the contract and all XYZ did was sign it.
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Joint Drafting
A.
B.
C.
D.
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Joint Drafting
Correct Answer: A
No, because the parties agreed in the contract that it
was jointly drafted
While Civil Code Section 1654 typically governs
when an ambiguity exists in a contract, that
ambiguity will not be construed against the drafting
party if the parties have agreed that the contract was
jointly drafted by them.
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Who wins?
2013 Snell & Wilmer L.L.P.
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B.
C.
D.
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Contract Management
Discussion
Tina McKnight
Secretary & General Counsel
Power-One, Inc.
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Plain English
Alternative choices
Update
-
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Page 1
www.ocbj.com
APRIL 1, 2013
P l a n B f o r R ul e 1 0 b5 -1 Pl a n s ?
by James J. Scheinkman and Lulu Chiu, Snell & Wilmer LLP
Snell & Wilmer is a full-service business law firm with more than 400
attorneys practicing in nine locations throughout the western United States and
in Mexico, including Orange County and Los Angeles, California; Phoenix and
Tucson, Arizona; Denver, Colorado; Las Vegas and Reno, Nevada; Salt Lake
Jim Scheinkman
CORPORATE COMMUNICATOR
Editor
Jeff Beck
602.382.6316
jbeck@swlaw.com
SPRING 2012
Negotiating Investment Banking M&A
Engagement Letters:
Keeping the Investment Bank Incentivized
While Protecting Your Interests
By Marshall Horowitz and Joshua Schneiderman
Authors
Marshall Horowitz
213.929.2519
mhorowitz@swlaw.com
Joshua Schneiderman
213.929.2545
jschneiderman@swlaw.com
Angela Perez
602.382.6354
alperez@swlaw.com
PAGE 3 | CC
the
Definition
of
PAGE 4 | CC
PAGE 6 | CC
to
Conclusion
While it is no doubt important for a
company to maintain a positive and
collaborative
relationship
with
its
investment banker, that does not mean
the company should simply accept the
initial draft of the engagement letter that
its investment banker serves up without
negotiating certain fundamental points. In
fact, discussing the points set forth above
prior to signing of the engagement letter
will help the parties avoid disputes during
the course of the engagement, which
should help foster a productive working
relationship. An investment banker can
add tremendous value to a sale process
by helping to demonstrate a companys
value, identifying and engaging potential
buyers and assisting with negotiations;
however, before engaging an investment
banker, it is important that a company
do so on reasonable terms that strike an
appropriate balance between incentivizing
the banker and protecting certain of
the companys legitimate interests. A
reputable banker will understand and
appreciate the companys needs for
many of the protections discussed in this
article, and will probably even respect the
company more as a client if the company
recognizes and can articulate its need for
these protections.
PAGE 7 | CC
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3. Keep Organized
Given the regulatory controls placed
on companies in the pharmaceutical
industry, the threat of an audit by the
FDA or another governmental agency
is real. Companies should prepare
for this reality by using technology
that
automatically
archives
all
communications in a way that makes
them easily accessible in the event of
an audit.
4. Other Important Tips
Security measures always should
be taken to protect confidential
information.
If social media communications include
a disclaimer, remember that per FDA
guidance, the public should be able to
access all related information easily
with only one click.
We expect the FDA to provide additional
guidance in the future related to social
media. In the meantime, FDA-regulated
companies should be careful with their
approach and apply existing laws to
social media communications just as one
would to other forms of media governing
the industry. Above all, remember that
social media can be an incredible asset
PAGE 11 | CC
Notes:
_______________
Note that while the FDA has not provided
guidance related to social media, other
government agencies such as the U.S.
Federal Trade Commission, the National
Labor Relations Board and the Securities
and Exchange Commission have provided
guidance that may be applicable to a
companys social media communications.
[1]
[2]
Las Vegas
Pat Curtis
pcurtis@swlaw.com
702.784.5226
Sam McMullen
smcmullen@swlaw.com
702.784.5221
Zach Redman
zredman@swlaw.com
702.784.5261
Los Angeles
Susan Grueneberg
sgrueneberg@swlaw.com
213.929.2543
Marshall Horowitz
mhorowitz@swlaw.com
213.929.2519
Joshua Schneiderman
jschneiderman@swlaw.com
213.929.2545
Gregg Sultan
gsultan@swlaw.com
213.929.2555
Orange County
Katy Annuschat
kannuschat@swlaw.com
714.427.7410
Anthony Ippolito
tippolito@swlaw.com
714.427.7409
George Ng
gng@swlaw.com
714.427.7444
William Pedranti
wpedranti@swlaw.com
714.427.7445
Jim Scheinkman
jscheinkman@swlaw.com
714.427.7037
Mark Ziebell
mziebell@swlaw.com
714.427.7402
Phoenix
Jeffrey Beck
jbeck@swlaw.com
602.382.6316
Anne Bishop
abishop@swlaw.com
602.382.6267
Brian Burke
bburke@swlaw.com
602.382.6379
Brian Burt
bburt@swlaw.com
602.382.6317
Jon Cohen
jcohen@swlaw.com
602.382.6247
Melissa Sallee
msallee@swlaw.com
602.382.6302
Jeff Scudder
jscudder@swlaw.com
602.382.6556
Michael Detro
mdetro@swlaw.com
602.382.6697
Garth Stevens
gstevens@swlaw.com
602.382.6313
Michael Donahey
mdonahey@swlaw.com
602.382.6381
Bianca Stoll
bstoll@swlaw.com
602.382.6236
Matthew Feeney
mfeeney@swlaw.com
602.382.6239
Nicholas Varela
nvarela@swlaw.com
602.382.6237
Cheryl Ikegami
cikegami@swlaw.com
602.382.6395
Richard Katz
rkatz@swlaw.com
602.382.6142
Eric Kintner
ekintner@swlaw.com
602.382.6552
Daniel Mahoney
dmahoney@swlaw.com
602.382.6206
Joseph Miller
jmmiller@swlaw.com
602.382.6738
Angela Perez
alperez@swlaw.com
602.382.6354
Terry Roman
troman@swlaw.com
602.382.6293
Tucson
Lowell Thomas
lthomas@swlaw.com
520.882.1221
2012 All rights reserved. The purpose of this newsletter is to provide our readers with information on current topics of general interest and nothing herein shall
be construed to create, offer, or memorialize the existence of an attorney-client relationship. The articles should not be considered legal advice or opinion, because
their content may not apply to the specific facts of a particular matter. Please contact a Snell & Wilmer attorney with any questions. The Corporate Communicator
is published as a source of information for our clients and friends. This information is general in nature and cannot be relied upon as legal advice. If you have
questions regarding the issues in this newsletter, you may contact a Business & Finance professional or your regular Snell & Wilmer contact.
PAGE 12 | CC
Page 1
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Non-competes in California
California has a strong public policy protecting each persons right to pursue his or her
chosen lawful occupation. This public policy is codified in California Business and
Professions Code Section 16600 and provides that generally every contract by which
anyone is restrained from engaging in a lawful profession, trade, or business of any kind is
to that extent void.
The California Legislature has provided an exception to permit non-competes entered
into in connection with business sales. Business and Professions Code Section 16601
allows that any person who sells the goodwill of a business may agree with the buyer to
refrain from carrying on a similar business within a specified geographical area in which the
business has been carried on for so long as the buyer carries on a like business. This
exception is available in transactions structured as a sale of substantially all of the
operating assets of a company or its division or subsidiary, or the sale by a shareholder of
his or her stock in a company. As part of an enforceable non-compete, courts will also
enforce non-solicitation covenants barring the seller from soliciting the sold businesss
employees and customers.
In allowing this exception, California has recognized the important commercial purpose in
protecting the value of an acquired business, recognizing that, when a seller is paid for the
goodwill of a business, it is unfair for the seller to engage in competition which diminishes
the value of the sold business.
However, courts have emphasized that this exception is limited and have declared that,
in order to uphold a non-compete pursuant to Section 16601, the contract may not
circumvent Californias deeply rooted public policy favoring open competition and must
clearly fall within this limited exception.
w w w. s w l a w. c o m
Reprinted and/or posted with the permission of Daily Journal Corp. (2012).
Electronic components are essential to our daily lives. They are
incorporated into medical devices as well as cell phones, our
automobiles and MP3 players. Also, electronic components are
incorporated into sophisticated military and aerospace items.
Unfortunately, the number of counterfeit electronic parts
being produced and sold by unscrupulous manufacturers has
exploded in the last 10 years, flooding the military, aerospace
and commercial markets. This flood of counterfeit electronic
parts was abrupt and unanticipated. By the time government
and commercial contractors, distributors, and the federal
government began to recognize the scope of the problem,
millions of counterfeit parts had entered the supply chain.
Keith M. Gregory
213.929.2547
kgregory@swlaw.com
DENVER | LAS VEGAS | LOS ANGELES | LOS CABOS | ORANGE COUNTY | PHOENIX | SALT LAKE CITY | TUCSON
Thank You!
2013 All rights reserved. Notice: As part of our effort to inform you of changes in the law,
Snell & Wilmer L.L.P. provides legal updates and presentations regarding general legal
issues. Please be aware that these presentations are provided as a courtesy and will not
establish or reestablish an attorney-client relationship or assumption of responsibility by Snell
& Wilmer to take any action with respect to your legal matters. The purpose of
the presentations is to provide seminar attendees general information about recent changes
in the law that may impact their business. The presentations should not be considered legal
advice or opinion because their individual contents may not apply to the specific facts of a
particular case.
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