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Reproduced below is an astonishing wall-of-words provision from an asset-purchase agreement among a BP company and others, as the sellers, and a Tesoro company as the buyer.  (The agreement is part of the course materials I use in my contract-drafting class.) The pro­vis­ion runs for more than a page and a half in the PDF that I print­ed from the SEC’s Web site.

The drafter’s goal should have been quick, accurate reading comprehension

Clearly whoever drafted the wall-of-words provision below gave a low priority to helping readers — such as clients, judges, law clerks, and jurors — to comp­re­hend the text quickly.

I’m surprised that the drafter’s client tol­er­a­ted such work, and that the other par­ties let the drafter get away with it.

A contract reviewer can break up a wall of words …

It’s generally considered bad form to revise someone else’s draft contract on stylistic grounds alone. But when I’m reviewing a draft that was prepared by another party, I pret­ty much always break up long provisions like the one below into shorter paragraphs and sentences. I do this for two reasons:

  • First, breaking up wall-of-words provisions helps me to make sure that I really understood what the provisions actually say; and
  • Second, with shorter paragraphs and sentences, my client will be better able to spot possible problems that I might have missed.

When I do break up a wall of words, I usually include a brief com­ment to the effect that I’m doing it to help my client review the provision. I’ve never had a drafter complain about it.

… or just delete it entirely and ask for a rewrite

I might try a different approach next time:  If a wall of words seems to benefit the other side and not my client, then perhaps I’ll just delete the provision entirely (red­lining it, of course) and add a com­ment to the effect of, “This provision is too long for me to ask my client to read, but we’d be happy to con­sider one with shorter para­graphs and sentences.”

The BP-Tesoro wall of words

Here’s the wall-of words provision in the BP-Tesoro agreement.  As an exercise, try counting the number of sentences in the provision.(The agreement has several other provisions that are nearly as long.)


7.2.1 Non-Assignability of Purchased Assets. Notwithstanding anything to the contrary set forth in this Agreement, this Agreement shall not constitute an agreement of the Sellers to transfer or assign any Purchased Asset (including any lease of a Leased Real Property or Assigned Contract, but excluding any Permits), if the attempted transfer or assignment of the same, as a result of the absence of the consent or authorization of a Third Party or the failure of the notice period to expire under a right of first refusal, right of first offer or other similar preemptive right, would constitute a breach or Default under any such agreement; or would violate any applicable Law. Buyer and Sellers shall jointly use all Reasonable Efforts to take all necessary actions before Closing to permit the Purchased Asset to be transferred or assigned to Buyer, including obtaining any required Third Party consent or authorization for such transfer, assignment or waiver of any applicable right of first refusal, right of first offer, or similar preemptive right.  If any such consent, authorization, or waiver is not obtained, or if an attempted transfer, assignment or assumption would be otherwise ineffective, with respect to any such Purchased Asset (or Purchased Asset that is otherwise deemed to constitute an Excluded Asset pursuant to Sections 2.2.8 and 2.2.10, but excluding Permits, any assets and matters governed by the provisions of Article 6), so that the Buyer would not, in fact, receive all Sellers’ rights, or assume all Sellers’ obligations relating to any such period on or after the Effective Time with respect thereto as they exist prior to such attempted transfer, assignment or assumption, then (i) provided that Buyer has satisfied the Leased Real Property Conditions where required under Section 7.9, the Sellers and Buyer shall enter into such supplemental agreements (including subleases, licenses, operating or transportation agreements, the transfer of a Purchased Asset to an Affiliate of Sellers followed by the transfer of such entity to Buyer, etc., as applicable) on reasonable terms and conditions that may be necessary (including enforcement at the shared cost of the Parties of any and all rights of the Sellers against any involved Third Parties) to provide the Buyer with the same benefits of such Purchased Asset as possessed by Sellers immediately prior to Closing, and, notwithstanding anything herein to the contrary, any such Purchased Asset shall be deemed to constitute an Assumed Liability and (ii) the Sellers and Buyer shall enter into such supplemental agreements on reasonable terms and conditions that may be necessary to provide to Sellers the right to purchase certain fuel and petroleum products from Buyer in order to perform Sellers’ sales obligations under such fuel and petroleum product sales contracts to Third Parties; provided that all fuel and petroleum products purchased by Sellers from Buyer under all such supplemental agreements shall be at the same price as such fuel and petroleum products are sold by Sellers to Third Parties under such fuel and petroleum product sales contracts with Third Parties. Notwithstanding the execution of any supplemental agreements, the Parties shall continue to seek the relevant consents, authorizations or waivers and if and when such consents, authorizations or waivers, the absence of which caused the deferral of transfer of any Purchased Asset pursuant to this Section, are obtained, such Purchased Asset shall no longer be an Excluded Asset under Section 2.2.8. The Parties’ obligations under this Section, including with respect to the term of the supplemental agreements entered into pursuant to the above, with respect to the Carson Logistics and Marketing Terminals Assets and the Wilmington Calciner Assets, shall expire on the same date that Sellers’ underlying rights and obligations in connection therewith would expire, and with respect to all other Purchased Assets, shall expire on the date that is the twenty-four (24) month anniversary of the Closing Date; provided, that, with respect to all such other Purchased Assets, if, following such twenty-four (24) month anniversary of the Closing Date Buyer reasonably demonstrates to Sellers that any such other Purchased Assets are necessary for the operation of the Business (excluding any aspects of the Business related to the Excluded Assets other than those subject to the requirements of this Section 7.2.1) in the manner in which it is currently being operated and the expiration of the Parties’ obligations under this Section would have a material adverse effect, then the Parties’ obligations hereunder shall continue to survive; provided, further that any disputes with respect to the continuation of such obligations shall be resolved pursuant to Section 19.10. Subject to (i) above, in the event Sellers are unable to transfer to Buyer that certain Lease dated December 17, 1969 by and between the City of Long Beach, acting by and through its Board of Harbor Commissioners, as lessor, and Atlantic Richfield Company (predecessor-in-interest to BP West Coast Products LLC), as lessee, as amended, supplemented or assigned (the “Barn Lease”) on or before the date that any option to extend the term of the Barn Lease must be exercised then BPWCP shall, pursuant to the terms of the Barn Lease exercise its option to extend the term of the Barn Lease and BPWCP shall exercise Reasonable Efforts to achieve commercially reasonable lease payment rates thereunder. The Parties shall comply with the terms of the Technology Agreement with respect to the identification, assignment and transfer of Third Party Licenses of Third Party IT Systems and other contemplated Third Party license agreements. If any such license cannot be transferred or assigned to Buyer within a reasonable time, the Parties shall comply with the terms of this Section 7.2.1 with respect to such license and, pending resolution of the issue, Buyer shall use Reasonable Efforts to provide, either directly or through a Third Party, any transitional services that are necessary in lieu of that license, and if Buyer is not able to provide such necessary transitional services, Sellers shall use Reasonable Efforts to provide such services, if practicable, subject to the terms and conditions in Transition Services Agreement.


A possible rewrite (partial)

Here’s one way to rewrite the wall-of words provision in the BP-Tesoro agreement. I’ve only done part of the provision, but it should be enough to illustrate the approach. Bold-faced type indicates specific noteworthy language.


7.2.1 Non-Assignability of Purchased Assets.

(a) Except as provided below, the parties do not intend for this Agree­ment to be interpreted as an agreement of the Sellers to trans­fer or assign (“Assign“; likewise, “Assignment” and “Assigned”) any Purchased Asset, if the attempted Assignment:

(1) would constitute a breach or Default under any agreement due to:

(A) the absence of a consent or authorization of a Third Party; or

(B) the existence of a right of first refusal, right of first offer or other similar preemptive right; or

(2) would violate any applicable Law.

[DCT NOTES: (A) The exceptions in the original text have being moved to separate paragraphs in subdivisions (1) and (2). (B) In subdivision (a), the phrasing, “the parties do not in­tend” is better than the original language, which pre­sump­tu­ously in­struct­ed future judges that “This Agreement shall not be interpreted ….”] 

(b) For clarity, subdivision (a):

(1) applies, by way of example and not of limitation, to (i) lease agree­ments for Leased Real Property, and (ii) Assigned Cont­racts; but

(2) does not apply to Permits.

(c) Buyer and Sellers will jointly use all Reasonable Efforts to take all necessary actions before Closing to permit the Purchased Asset to be Assigned to Buyer; such actions are to include, as applicable, seeking any required Third Party consents or authorizations.


(1) This subdivision (d) applies in any circumstance in which:

(A) an Assignment (i) would not be effective, and/or (ii) is prohibited by another applicable agreement; and/or

(B) for any other reason, Buyer would not, in fact, (i) receive all Sellers’ rights, or (ii) assume all Sellers’ obligations re­la­ting to, a Purchased Asset.

(2) IF: Buyer has satisfied the Leased Real Property Conditions where required under Section 7.9, THEN: Sellers and Buyer shall enter into such supplemental agreements, on reasonable terms and conditions, as may be necessary to provide the Buyer with the same benefits of the Purchased Asset in question, as pos­sessed by Sellers immediately prior to Closing.

[DCT NOTE: In subdivision (d)(2), notice the use of all-caps “IF: … ; THEN: ….,” with colons and semicolons, as eye-catching signals of where the different sub­clauses begin and end.]




See also:  Why you should draft contracts with long, run-on paragraphs (a satire).


It was surprising to see the following in the Verizon-Yahoo stock purchase agreement:

[1.03] (b) At the Closing, each Seller RSU Award, or portion thereof, that is held by [a Seller] Employee … shall … be sub­sti­tu­ted for [sic] a cash-settled restricted stock unit award with respect to Purchaser Common Stock …. [Emphasis added.]

That, though, is the reverse of what (presumably) is actually going to happen, namely that existing unvested RSUs held by Yahoo em­ploy­ees are to be replaced by Verizon RSUs.  See generally, e.g., the Merriam-Webster online dictionary, which de­fines the verb sub­sti­tute as “to put or use in the place of another … to take the place of: REPLACE.”

I assume this was drafted by the highly-regarded Wachtell Lipton firm, which apparently is serving as counsel for Verizon.

Unfortunately, I see this exactly-backwards usage of substitu­t­ed fairly regularly. Kids these days ….


(If you’re reading this on the front page of this Web site, click on the post title to see the post with a table of contents.)

Sign up for LES Houston chapter negotiation workshop

  • What: “The Art of Negotiation and Dealing with Unexpected Surprises” – a workshop by the Licensing Executives Society’s Houston chapter. I’ll be one of the speakers; we’ll be leading a short panel discussion followed by small-group mock negotiations of a specific issue.
  • When: Tuesday October 18, 2016, 5:00pm to 7:30pm
  • Where: Houston Technology Center, 410 Pierce.
  • CLE credit: 1.25 hours, with 0.5 hours of ethics.
  • Cost: As low as $10 for early-bird LES members.

Sign up here.

Terminating a contract might not terminate all rights under the contract

Drafters should keep in mind that terminating a contract — assuming that an agreement can be terminated* — might not terminate specific rights created by the agreement.

* Tom Arnold, my late senior partner, mentor, and friend, espoused the view that a contract was an historical fact and therefore could not be “terminated”; he maintained that only specific rights and obligations created by the contract could be terminated.

A case in point is Smith v. Barnesandnoble.com, LLC, No. 15?3508-cv (2d Cir. Oct. 6, 2016). In that case:

  • An author entered into an online publishing agreement with Smashwords, a distributor of digital books. Smashwords, as authorized by its agreement with the author, in turn authorized Barnes & Noble to sell the digital book on the BN.com Web site and to provide free samples to prospective buyers.
  • The book did not sell a single copy, and in fact only one Barnes & Noble customer even signed up to access a free sample from the BN.com Web site. Disappointed, the author terminated his agreement with Smashwords, but BN.com did not immediately take down the free sample.
  • On two occasions after termination, the same Barnes & Noble customer re-accessed the free sample of the book on the BN.com Qeb site. The author’s widow sued Barnes & Noble, claiming that this violated the author’s copyright in the book.

The Second Circuit affirmed summary judgment in favor of Barnes & Noble. The court held that while the author had terminated his agreement with Smashwords, that did not have the effect of terminating the Barnes & Noble customer’s right to access the free sample.

Drafting lesson: When drafting an agreement-termination provision, consider what if any rights and obligations will, and/or should, “survive” the termination.

Mark Cuban lawsuit lesson: Simplicity often works

The following quote is from a highly-successful litigator who filed what’s been described as “the world’s greatest summary-judgment motion” (see below); what he says is equally true of many transactional lawyers and other contract professionals:

Trial lawyers are creatures of habit. Despite big talk about how creative or groundbreaking one litigator or another might be, in reality we have a strong tendency to fall back on what has worked for us already. Success breeds repetition. If an approach or technique helped us before, then we’re likely to try it again. And if something we tried failed, it will be a long time before we try it again.

Thomas M. Melsheimer, Litigating Against the Grain, LITIGATION, vol. 42, no. 3, p. 37 (americanbar.org 2016). Melsheimer successfully defended billionaire Mark Cuban, owner of the NBA’s Dallas Mavericks team, against a lawsuit by Ross Perot, Jr. and other minority investors in the team. The lawsuit alleged that Cuban had mismanaged the team, but the team won the NBA championship. Melsheimer filed his summary judgment motion just a few days after the final game in the championship series. The argument portion of the motion consisted, in its entirety, of the following:

On June 12, 2011, the World Champion Dallas Mavericks defeated the Miami Heat to claim the franchise’s first NBA championship. A true and correct photo of one of the many victory celebrations is incorporated herein:

[half-page photo of joyous Mavericks holding the trophy aloft]

Under [plaintiff’s] ownership, the team was deemed the “worst franchise” in all of professional sports. Under [defendant] Cuban’s stewardship the Mavericks have become one of the league’s most successful teams and are now NBA champions. Accordingly, there can be no genuine question that [plaintiff’s] claims of mismanagement lack merit and [plaintiff’s] claims should be disposed of on summary judgment.

The court granted the motion; the appellate court affirmed.


(If you’re reading this on the front page of the blog, click on the post title to see the post with a table of contents.)

Save the date: LES negotiation workshop

  • What: “The Art of Negotiation and Dealing with Unexpected Surprises” – a workshop by the Licensing Executives Society’s Houston chapter.
  • When: Tuesday October 18, 2016, 5:00pm to 7:30pm
  • Where: Houston Technology Center, 410 Pierce.

More information to come.

Bound by an unsigned contract draft

Suppose that:

  • Alice sends Bob a draft of a contract so that Bob’s attorney can review the draft.
  • Bob signs the draft, without modifying it, and returns it to Alice.
  • The parties perform their obligations under the contract.
  • Later, in litigation, the parties are unable to find any copy of the contract that was signed by Alice.

Under classic offer-and-acceptance doctrine, Alice might very well be bound to the terms of her contract draft anyway, even if she never did sign the contract. Consider this real-world example:

  • A party to a lawsuit drafted a settlement agreement and sent it to the other party, which signed the draft as-is and returned it.
  • In a later, unrelated lawsuit, the parties could not find any copy of the settlement agreement that had been signed by the drafting party itself; the parties, though, had complied with the terms of the settlement agreement.
  • In the later, unrelated lawsuit, a court held that the settlement agreement was binding on the drafting party — even though the drafting party itself had not signed that agreement — and so the drafting party’s unrelated claims against the other party were barred by the sweeping release language in the settlement agreement.

See Baker Hughes Inc. v. S&S Chemical, LLC, No. 15-2413, slip op. at 9-11 (6th Cir. Sept. 2, 2016). The result might have been different if the draft contract itself had expressly stated that Alice’s offer in the draft was conditioned on both parties’ signing the document. See id., slip op. at 10.

Oops: A sweeping release kills a confidentiality agreement

A Sixth Circuit case illustrates the sweeping effect that might be given to a broad general-type release:

  • Bruce Stevens worked for Baker Petrolite Corporation and its predecessor for approximately seven years. When his employment ended, Stevens signed a contract in which he promised to maintain the confidentiality of Baker Petrolite’s trade secrets.
  • Baker Petrolite and its parent company, Baker Hughes Incorporated (collectively, Baker), sued Stevens 18 years after the contract was signed, alleging a breach of their confidentiality agreement.
  • Stevens’s defense, and the outcome of this case, hinges on the validity of a broadly worded settlement agreement that was purportedly reached in the interim as a result of an unrelated lawsuit between the parties [about unpaid compensation].
  • Relying on this settlement agreement, the district court entered judgment in favor of Stevens. For the reasons set forth below, we AFFIRM the judgment of the district court.

Baker Hughes Inc. v. S&S Chemical, LLC, No. 15-2413, slip op. at 2 (6th Cir. Sept. 2, 2016) (extra paragraphing and bullets added). The release language quoted by the court was the following:

Except for the obligations set forth in this Agreement, Baker hereby fully and forever remises, releases and discharges Stevens and his attorneys, agents, heirs, executors, administrators, predecessors, successors and assigns (collectively referred to as the “Stevens Release Parties”),

of and from any and all claims, demands, agreements, contracts, covenants, suits, actions, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, losses and liabilities,

of whatever kind or nature, in law, equity or otherwise,

whether known or unknown, concealed or hidden,

against any of the Stevens Released Parties which Baker has had, may have had or now has, to and including the date of this Agreement.

It is the intention of the parties to this Agreement that the foregoing general releases shall be effective as a bar to all actions, causes of action, suits, claims or demands of every kind, nature or character whatsoever, known or unknown, suspected or unsuspected, fixed or contingent, referred to above. …

Id., slip op. at 3 (paragraphing edited, emphasis added, ellipsis marks by the court).

Oops: Subcontractor’s quotation, by being mentioned in contractor’s purchase order, is deemed incorporated by reference

In a California case:

  • A prime contractor issued a purchase order to a subcontractor. The purchase order mentioned, but did not expressly incorporate by reference, a sales quotation that the subcontractor had previously sent to the prime contractor.
  • Further down in the purchase order, though, the P.O. language referred to “the contract documents described above or otherwise incorporated herein ….” (Emphasis added.)
  • Applying the contra proferentem rule of contract interpretation — and therefore construing the quoted term against the prime contractor — the court held that the “described above or otherwise incorporated” term had the effect of incorporating the subcontractor’s sales quotation by reference into the purchase order.

See Watson Bowman Acme Corp. v. RGW Construction, Inc., No. F070067, slip op. at 18, 21-22 (Cal. App. Aug. 9, 2016) (affirming, in pertinent part, judgment on jury verdict awarding damages to subcontractor).

Ambiguity: The Fifth Circuit causes a double-take

From a Fifth Circuit’s opinion:

We reject this [argument] as either an accurate characterization of the current state of preemption law or, if viewed as an original matter, as something that should make a difference in the equivalency analysis.

GlobeRanger Corp. v. Software AG United States of America Inc., No. 15-10121, slip op. at 13 (5th Cir. Sept. 7, 2016) (affirming $15 million judgment on jury verdict of trade-secret misappropriation).

PROBLEM: At first glance, the first part of this sentence seems to be saying that the court rejects the appellant’s argument because the argument accurately characterizes the current state of the law. That, though, would of course make no sense.

POSSIBLE REWRITE: This sentence might have been rephrased (and streamlined) as, for example:

This argument mischaracterizes preemption law and does not justify changing the equivalency analysis.

Ambiguity: A startling discovery in the Mexican desert

From the Wall Street Journal:

Two years ago, a California aluminum executive commissioned a pilot to fly over a Mexican town at the foot of the Sierra Gorda mountains, and snap aerial photos of a remote desert factory. He made a startling discovery.

(Emphasis added.)

QUESTION: Who made the startling discovery — the California aluminum executive, or the pilot? It likely was the latter, but not necessarily (the executive might have flown with the pilot as a passenger).

In a contract, such an ambiguity might be undesirable, not least because it likely would be construed against the drafter under the contra proferentem principle.

In any case, as drafters, that’s a conversation we don’t want to have (as one of my students put it a few semesters ago).

Achieving crisper prose

See LawProse Lesson #261: Tinkering for tightening, which offers some excellent suggestions and examples of things you can do to tighten up your prose.


Contract drafting tips: Sept. 2, 2016

(If you’re reading this on the front page of the blog, click on the post title to see the post with a table of contents.)

Verizon-Yahoo fail: Don’t use “substituted for” if you mean “replaced by”

Many young drafters incorrectly use sub­sti­­tu­ted for instead of re­placed by.  As an ex­ample, look at section 1.03(b) of the stock pur­chase agree­ment un­der which Verizon is to acquire Yahoo’s op­er­a­ting business (which I’m reviewing in the course of drafting some new sections for the Common Draft contract deskbook):

  • That section of the Verizon-Yahoo contract makes it clear that Yahoo’s employees are to have their existing restricted-stock unit awards, or “RSUs,” replaced by Verizon RSUs.
  • But the contract language erroneously says that each Yahoo RSU is to be “substituted for” a Verizon RSU (emphasis added).

Unfortunately, what this contract language says is exactly the op­pos­ite of what’s supposed to happen in the deal.  The Merriam-Webster on­line dict­ion­a­ry defines substitute as: “1 to put in the place of an­oth­er[;] 2 to take the place of another <Honey can substitute for sugar in the recipe.>” So section 1.03(b) is back­wards; it should say instead that a Ver­i­zon RSU is to be substituted for each Yahoo RSU, not the other way around.  Or even better:  The section could say that each Yahoo RSU is to be replaced by (or re­placed with) a Veri­zon RSU.

According to the press release, the parties were represented by top-flight law firms:  Wachtell; Gibson Dunn; Covington; Winston & Strawn; Skadden; Wilson Sonsini; and Cravath.

Trump campaign fail: Give some thought to how the contract might read if made public

From Vox.com (with extensive excerpts): Apparently if you want to volunteer for the Donald Trump campaign, you must electronically sign a really-egregious nondisclosure agreement that prohibits you from criticizing Trump, his family, his business, etc., for the rest of your life. The NDA seems to have been drafted by lawyers wearing horse blinders who myopically considered only the purely-legal issues, with nary a thought to the likely real-world political- and public-relations consequences.


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