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Anderson and Buck were in a contract relationship, under which Anderson bought gasoline from Buck.  At some point, Anderson notified Buck that it would be buying gasoline from another supplier as well.  Buck sent a cease-and-desist letter to Anderson, claiming that a particular provision of the contract supposedly prohibited Anderson from entering into agreements with other gasoline suppliers.  In response, Anderson filed a declaratory judg­ment action.  In due course the trial court granted summary judgment for Anderson; the state supreme court affirmed.  Ray Anderson, Inc. v. Buck’s, Inc.,  300 Neb. 434 (2018).

From reading the supreme court’s opinion, Buck should count itself fortunate that it wasn’t sanctioned for asserting its interpretation of the contract lang­uage. The supreme court all but accused Buck of selectively reading only the contract provision(s) it liked, while ignoring what the supreme court concluded was clearly-dispositive contrary language. See id. at 442-43.

So why wasn’t Buck sanctioned?  Well, apparently Buck wasn’t the only party to assert a questionable interpretation — Anderson, for its part, claimed that it had the right to terminate the con­tract; but both the district court and the supreme court held that under the con­tract’s clear lang­uage, only Buck had the right to terminate. See id. at 444-45.

Maybe that’s why the supreme court’s opinion says nothing about sanctions: Ap­par­ently, each party advanced untenable interpretations of different pro­vi­sions of the contract, and the courts might have regarded those as canceling each other out as far as sanctions were concerned.

But the fact remains that the courts had to spend time and money on what, judging from the supreme court’s opinion, was needless litigation. Perhaps each party should have been sanctioned, as a warning to others.

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Much contract drafting should be just plumbing

More than one person has noted the similarities between contract drafting and computer programming.  Much of what Karl Hughes has to say in The Bulk of Software Engineering in 2018 is Just Plumbing could apply equally to contract drafting:

… Just like plumbers, we are paid to know our tools and understand how they work together to make a usable piece of equipment, not to reinvent working technology or spend 80 hours optimizing something that 5% of our users will use.

* * *

If an off-the-shelf solution exists, grab it, don’t build it from scratch. 

(Emphasis modified.)

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Mark Anderson’s IP Draughts blog has an excellent write-up of tips for excluding all liability in a contract in the UK; the pointers should help anyone trying to limit liability in other jurisdictions as well. Mark focuses on a recent UK case where the contract drafter seems to have successfully touched all the bases.

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New post: 80 ambiguity exercises

In my contract-drafting course, we do a lot of short, in-class ambiguity ex­er­cises. At the end of one semester, a student came up to me and said, “I hate you.” (He was smiling.) I asked why; he responded, “Because after all the am­bi­guity exercises that we did, now I see ambiguities every­where!”

I did a fist-pump and exclaimed, “Yes!!” I said that this was exactly what I had hoped:  Now, in his law practice, the student would be more likely to spot am­bi­gu­ities in the contracts that he drafted and reviewed.

To use as a reference in a conference paper, I collected the exercises I’ve been using — 80 of them, so far — in a single Web page.

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If your contract indicates that both parties must sign, and it turns out that you didn’t sign it, then you might not be able to enforce it, even if the other side did sign it.  That hap­pened in a Fifth Circuit case:

Kimberly Huckaba, a former employee of Ref-Chem, L.P., appeals the district court’s judgment compelling arbitration.

Because the express language of the agreement at issue requires for it to be signed by both parties

and because it is undisputed that Ref-Chem [i.e., the employer] did not sign the agreement,

we REVERSE and REMAND.

Huckaba v. Ref-Chem, L.P., No. 17-50341, slip op. at 1 (5th Cir. June 18, 2018) (extra paragraphing added).  (Hat tip: Arbitration Info.)

The court explained:

The arbitration agreement at issue here contains: (1) a statement that
“[b]y signing this agreement the parties are giving up any right they may have to sue each other;” (2) a clause prohibiting modifications unless they are “in writing and signed by all parties;” and (3) a signature block for the employer, Ref-Chem. This express language clearly indicates an intent for the parties to be bound to the arbitration agreement by signing.

The agree­ment also identifies the parties in the first line as “[t]he org­an­iza­tion referred to above (‘Employer’) and the Employee, whose signature is af­fixed hereto.” This clause makes clear the parties’ intention that Huckaba would sign the agreement. It does not negate the other ref­er­en­ces to all parties signing.

Ref-Chem is right  when it notes that Texas courts have held that a sig­na­ture block by itself is insufficient to establish the parties’ intent to require sig­natures. But in this case, we have more than a blank signature block that speaks to the parties’ intent. The agreement also contains language that the parties needed to sign the agreement to give it effect or to modify it. Thus, the question of Ref-Chem’s intention is answered by the agreement it drafted.

Id., slip op. at 4-5 (cleaned up; emphasis and extra paragraphing added).

Drafting tips: 

1. When drafting a “canned” contract form such as an employment agreement or a guar­anty, consider including an express waiver of signature, such as in the Common Draft guaranty language.  In the same vein, here’s language that I recently included in a client’s employment-agreement form:

I agree that the Company need not sign this Agreement and waive any right I might have to be notified that the Company has accepted this Agreement.

2. Consider also including a statement that continued employment will cons­ti­tute acceptance of the agreement’s terms — not just that continued em­ploy­ment is consideration for the agreement. See id. at 6-7, dis­ting­uish­ing In re Halliburton, 80 S.W.3d 566, 568-69 (Tex. 2002).

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