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Announcement: The Common Draft desk book of contract clauses and templates, with extensive research notes and commentary, is posted (in draft). If you’d like to be notified of significant developments in the project, please subscribe to updates at right, because I’ll be posting announcements on this blog. See also my first e‑book, Signing a Business Contract? A Quick Final Checklist for Greater Peace of Mind.

A contract without a "sunset clause" might become a millstone for one of the parties. For example, the Dairy Queen restaurant chain is still having to deal with franchised restaurants under contracts signed in the 1940s that restrict the chain's ability to impose uniform standards far more than modern-day contracts do. See Martha Neil, Decades-old contract lets historic Dairy Queen apply 'rogue ice-cream rules' (ABAJournal.com 2015).

Of course, even a sunset clause might not help if the contract has an "evergreen" automatic-extension clause and the opt-out date rolls by unnoticed:

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The Department of Labor has released an Administrator's Interpretation asserting that, in determining whether someone is an independent contractor or an employee (for Fair Labor Standards Act purposes), what matters is the "economic reality"; the Interpretation de-emphasizes the traditional common-law test (used by the IRS), which focuses on who has the right to control the means and manner of the work.

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See this summary by Prof. Nancy Kim, who says in part:

Under the law, effective July 1, a "technology business" is defined as a "trade or business that derive the majority of its gross income from the sale or license of products or services resulting from its software development or information technology development, or both."

It excludes businesses that are part of the broadcast industry or any telecommunications carrier.

There are exceptions, such as when the restrictive covenant is in connection with the sale of a business or partnership.

Furthermore, agreements to protect trade secrets are still valid.

(Extra paragraphing added.)

Arbitration streamlining

This post provides additional annotations and commentary for the Common Draft arbitration-streamlining clause.

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Ken Adams reports on a Houston court of appeals case: A bank sued to recover $1.7 million from defaulting borrowers and their guarantor and won on summary judgment. Unfortunately for the bank, though, the loan documents referred to the amount borrowed as "one million seven thousand and no/100 ($1,700,000.00) dollars" (capitalization modified, emphasis added). Reversing in part and remanding, the appeals court said that the words, not the numbers, controlled. See Charles R. Tips Family Trust v. PB Commercial LLC, 459 S.W.3d 147 (Tex. App.–Houston [1st Dist.] 2015).

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