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Massachusetts non-compete restrictions take effect

See this analysis at the Trading Secrets blog by Dawn Mertineit, Erik Weibust and Katherine Perrelli.

In case you wondered what notwithstanding really meant ….

In an October 1 decision, the Seventh Circuit provided helpful citations sup­port­ing the common understanding of the term notwithstanding as meaning:

… without prevention or obstruction from or by; in spite of, despite, and it implies the presence of an obstacle … notwithstanding, in essence wipes out anything to the contrary[.]

Soarus L.L.C. v. Olson Mat’ls Int’l Corp., No. 18-1144, slip op. at 5 (7th Cir. Oct. 1, 2018) (cleaned up), citing, inter alia, N.L.R.B. v. SW General, Inc., 137 S. Ct. 929, 939 (2017) (in the context of interpreting a statute).

What it takes for a forum selection provision to be exclusive

A recap from the U.S. district court in Oregon:

 If the text of the forum selection clause is mandatory, courts must enforce the clause, absent exceptional circumstances, and venue will lie in the chosen forum only.

To be mandatory, a forum selection clause must contain wording suggest­ing that the parties intended to designate the specified forum as the ex­clu­sive forum. When the forum selection clause specifies only one permissible jurisdiction, however, the clause [i.e., exclusivity] will generally not be en­forced without some further language indicating the parties’ intent to make jur­isdiction exclusive.

In other words, a forum selection clause is permissive when it merely shows that the parties have consented to jurisdiction in a particular locale, but does not preclude litigation elsewhere.

Summit Foods, Inc. v. Viking Packaging Technologies, Inc.,  No. 3:18-cv-1470-SI, slip op. at 4 (D. Ore. Sept. 28, 2018) (denying defendant’s motion to dis­miss or transfer venue) (cleaned up).

The forum-selection provision in question was the following:

The courts of Sheboygan County Wisconsin will have jurisdiction to en­ter­tain and determine all disputes and claims both at law and in equity arising out of or in any way connected with the validity, existence, enforceability, con­­struc­tion, breach or alleged, threatened or anticipated breach of this Con­tract, to which the parties admit to having personal jurisdiction over them.

Id. at 6. The court held that this language didn’t go far enough to require that litigation be held in Sheboygan County.


In May of this year, the UK Supreme Court rejected the old “Cardozo Rule,” which held that, even if a contract contained an amendments-in-writing or waiv­ers-in-writing clause, a party to the contract would still be free to claim that the writing requirement was orally waived and therefore an oral variation was enforceable. [1]  The court’s holding might embolden contract drafters to choose English law to govern an am­end­ments-in-writing or waivers-in-writing clause while ex­press­ly- or im­pli­cit­ly choosing a different law for the rest of the contract.

[1] Rock Ad­ver­t. Ltd v MWB Bus. Ex­ch. Ctrs. Ltd, [2018] UKSC 24 (Sump­ton, L.), dis­agree­ing with Beatty v Gug­gen­heim Ex­plor­a­tion Co., 225 N.Y. 380, 387-88 (1919) (Cardozo, J.).  Hat tip: Rachael Clem­ents and Aimee Donaldson, No Oral Modification Clauses – Firmly Set In Stone (Sept. 27, 2018).

The old Cardozo Rule: “No oral modification” clauses don’t count

Courts have sometimes held that at common law, parties are free to orally amend or waive a con­tract provision (subject to any applicable requirements of the Statute of Frauds), even if the contract expressly states that all amend­ments and waivers must be in writing.  Courts sometimes quote something that then-Judge (later Justice) Cardozo said in a 1919 New York case:

Those who make a contract, may unmake it. The clause which forbids a change may be changed like any other. The prohibition of oral waiver may itself be [orally] waived. Every such agreement is ended by the new one which contradicts it … What is excluded by one act, is restored by another. You may put it out by the door, it is back through the window. Whenever two men contract, no limitation self-imposed can destroy their power to contract again.

Beatty v Guggenheim Exploration Co., 225 N.Y. 380, 387-88 (1919), quoted in Israel v. Chabra, 12 N.Y.3d 158, 163-64 (2009) (emphasis added, internal citations and quotation marks omitted).

(Some statutory provisions expressly validate no-oral-variation clauses; see the commentary to the Common Draft amendments-in-writing clause.)

The UK Supreme Court rejects the Cardozo Rule

In Rock Advertising, the UK Supreme Court quoted the Cardozo Rule in its sur­vey of laws governing no-oral-variations clauses in contracts. Id. at ¶¶ 7-9.  The court concluded, however, that “the law should and does give ef­fect to a con­tractual pro­vi­sion requiring spe­cified formalities to be ob­served for a var­iation.” Id. at ¶ 10 (emphasis added). Lord Sumpton branded as “a fal­la­cy” the rat­ionale that the importance of party autonomy precludes parties from “validly bind[ing] them­selves as to the man­ner in which future chan­ges in their legal relations are to be achieved”; he noted that:

  • by entering into a contract in the first place, the parties are limiting their future autonomy to a certain extent; and
  • “There are many cases in which a particular form of agreement is pre­scribed by statute …. There is no principled reason why the parties should not adopt the same principle by agreement.”

Id. at ¶ 11.

The judge explained why no-oral-variation clauses can make business sense:

There are at least three reasons for including such clauses.

The first is that it prevents attempts to undermine written agreements by in­form­al means, a possibility which is open to abuse, for example in raising de­fen­ces to summary judgment.

Secondly, in circumstances where oral discussions can easily give rise to mis­­understandings and crossed purposes, it avoids disputes not just about whe­ther a variation was intended but also about its exact terms.

Thirdly, a measure of formality in recording variations makes it easier for corp­­orations to police internal rules restricting the authority to agree them.

These are all legitimate commercial reasons ….  I make these points be­cause the law of contract does not normally obstruct the legitimate in­ten­tions of businessmen [sic], except for overriding reasons of public policy. Yet there is no mischief in No Oral Modification clauses, nor do they frustrate or contravene any policy of the law.

Id. at ¶ 12 (emphasis and extra paragraphing added).

For additional com­men­tary on the Rock Advertising case, see Glenn D. West, Cognitive Dissonance in the Common Law of Contracts: Oral Mod­i­fi­ca­tions to Written Agreements that Purport to Invalidate Oral Modi­fi­ca­tions  (May 29, 2018).

So: Choose English law to govern no-oral-variations clauses?

A bold American contract drafter might want to try to take advantage of the Rock Advertising holding by using a targeted, single-clause choice of law, per­haps along the lines of the following language:

The parties expressly agree that this provision [OP­T­IONAL: but no other] is to be interpreted and applied in ac­cord­ance with English law as announced in Rock Ad­ver­t. Ltd v MWB Bus. Ex­ch. Ctrs. Ltd, [2018] UKSC 24.

After all: Choice-of-law clauses are widely used and readily enforced in the United States (unless the choice of law offends some public policy of the forum state), as discussed in the commentary to the Common Draft gov­ern­ing-law provision.

It might seem strange for a contract to specify different choices of law to gov­ern dif­fer­ent clauses of the contract.  But conceptually this isn’t unheard of:

  • In the 1988 update to the Restatement (Second) of Conflicts of Laws, comment i to § 187 states in part that “the parties may choose to have different issues involving their con­tract governed by the local law of dif­fer­ent states.”  The comment cites  Kronovet v. Lipchin, 288 Md. 30, 415 A. 2d 1096 (1980), in which loan docu­ments for a real-estate project ad­opt­ed local Maryland law for interest- and usury issues but New York law for others.
  • In its Akorn decision earlier this week, the Delaware chancery court ob­served: “At­ten­t­ive readers will have noted that none of the parties to the Mer­ger Agree­ment is a Delaware entity. … The parties nevertheless chose Delaware law to gov­ern the Mer­ger Agreement (excluding internal affairs matters gov­erned by Lou­i­si­a­na law) and selected the courts of this state as their ex­clu­sive forum for litigation.” Akorn, Inc. v. Fresenius Kabi AG, No. 2018–0300–JTL, slip op. at 11 n.14 (Del. Ch. Ct. Oct. 1, 2018).
  • The EU’s Rome I Regulation on contractual obligations states in Article 3.1 that “… By their choice the parties can select the law applicable to the whole or to part only of the contract.”
  • An international contract might specify that it is to be governed by the laws of, say, Brazil, but that any arbitration is to be “seated” in England, which might well mean that the arbitration pro­ceed­ings would be gov­erned by Eng­lish law.  That was precisely the holding of an English court in Sul­america CIA Nacional De Seg­ur­os SA & Ors v Enesa Engenharia SA & Ors, [2012] EWCA Civ 638, dis­cussed in Sherina Petit and Marion Edge, The gov­ern­ing law of the arb­i­tra­tion agree­ment Q&A, in Norton Rose Ful­bright, Int’l Arbitr. Rpt. 2014 – issue 2.  I also seem to re­member seeing (but can’t lay my hands on) at least one contract that ex­press­ly speci­fied one country’s law to govern the contract but another country’s law to govern arbitration proceedings.
  • Domestic contracts often specify that the substantive law of a particular jur­is­dic­tion will apply — which implicitly leaves in place the procedural law of the for­um state — or they might specify a jurisdiction to provide both sub­stantive and procedural law, although a court might not honor a choice of procedural law.   See generally (the extremely-useful) John F. Coyle, The Canons of Con­struc­tion for Choice of Law Clauses, 92 Wash. L. Rev. 631, 648-55 (2017).  When a contract requires that amendments and waivers be in wri­ting, it like­wise amounts to a choice of procedural rules.

What grounds might exist for disregarding such a choice of law?

A clause-specific choice of law is unlikely to work when the clause in question offends a public policy of the forum state.  See the examples in the com­ment­ary to the Common Draft governing-law clause.  As the Rock Ad­ver­ti­sing court notes, however, it’s not as though a no-oral-variation clause would offend pub­lic policy.

One more possible concern:  What if neither the parties, nor the subject of the con­tract, had anything to do with Eng­land — would that dissuade a U.S. court from applying English law?  Probably not:  The parties’ joint desire for a neu­tral, well-established law such as that of New York, Delaware, or England would likely be honored as an “oth­er rea­son­able basis for the parties’ choice.” Restatement (Second) of Con­flicts of Laws, § 187(2)(a) (1971).

Compare the related subject of choice of forum, where the Supreme Court said:

Not surprisingly, foreign businessmen prefer, as do we, to have disputes re­solved in their own courts, but if that choice is not available, then in a neu­tral forum with expertise in the subject matter. Plainly, the courts of Eng­land meet the standards of neutrality and long experience in admiralty litiga­tion. The choice of that forum was made in an arm’s-length negotiation by ex­per­i­enced and sophisticated businessmen, and absent some com­pel­ling and countervailing reason it should be honored by the parties and en­forced by the courts.”

The Bremen v. Zapata Off-Shore Co., 407 US 1, 11-12 (1972).  Similar con­sid­er­ations would seem to favor allowing parties to choose a neutral, established law to govern their contract, even when they have no other connection to the jurisdiction of that law.

Proving oral waiver of the choice of English law could be tricky

Suppose that a contract chose English law for the amendments- and waivers-in-writing clauses.  Even so, a contracting party, following Beatty, might still try to claim that the parties had orally agreed to amend or waive, not just the par­tic­­u­lar pro­vision in dispute, and not just the writing requirement, but also the English choice of law.  Imagine the opening statement at trial:  Ladies and gen­tle­men of the jury, the landlord and my client, the tenant, orally agreed to three things:  That the landlord would reduce the monthly rent; that the lease’s no-oral-modifications clause was waived; and the lease’s choice  and the lease’s choice of English law for that requirement was also waived.”  Many judges and jurors would rightly be skeptical of such an argument.

Question to readers: What other contract clauses might benefit?

I’d welcome any suggestions as to any other contract provisions that might benefit from a clause-specific choice of law.


Many thanks to Professor John F. Coyle and noted corporate lawyer Glenn D. West for their input; any errors and/or inanities are of course mine alone.


I’ve been having issues with the email plugin that I use to let subscribers know about new posts. I tried an alternative but it’s not especially satisfactory, so I’ve switched back to the old plugin.  (I think the issues might be fixed now; apologies to any subscribers who were inconvenienced.)

Anyway, I published a post today that didn’t have an email announcement; it’s on how patent-infringement warranties and indemnity obligations are like hurricane insurance, with pro tips for negotiators.


I’ve been helping a software company to negotiate a license agreement under which a Very Large Company customer would use my client’s software. The cus­tomer, of course, wants to use its own contract form.  Not un­usu­al­ly for cus­tomer paper, the Very Large Company’s contract form provides, among other things, that:

  • The supplier warrants that its products — and the cus­tom­er’s use of the products — will not infringe any third party’s pat­ent; and
  • The supplier will indemnify the customer against any third-party claims of patent infringement.

My client, the software-company supplier, wanted to know whether it could safely un­der­take this obligation for its software.

A warranty is essentially an insurance policy

I explained to the client that, whenever you sign a contract with a warranty or an indemnity obligation, in effect you’re giving that other party an insurance policy:  You prom­ise that, if Events X, Y, or Z should occur, then you will re­im­burse the other party for any (foreseeable?) resulting losses that it might suf­fer.  In fact, in­sur­ance policies often use the very word indem­ni­fy.

Someone else’s patent can be as destructive as a hurricane

One type of warranty and indemnity obligation should be of particular con­cern: A warranty that your product and its use won’t infringe someone else’s patent, and an obligation to indemnify the customer against third-party in­fringe­ment claims.  Agreeing to those things is not unlike giving the customer a hurricane-insurance pol­­i­cy, because:—

First: Both hurricanes (also known as typhoons or cyclones in some regions) and third-party patents can cause costly dam­­age and even destruction. As a famous example, in the 1980s Pola­roid successfully sued East­man Kodak for patent infringement, which essentially wiped out Kodak’s instant-camera business; as one of Polaroid’s lawyers later wrote in a history of the litigation, “Polaroid’s ultimate victory, as a result of which Kodak was forced to re­move its instant cameras and film from store shelves, and to pay almost $1 bil­lion in damages to Polaroid, stands as the most severe pun­ish­ment in the patent field ever meted out by a court of law.”

Second: For both storms and third-party patents, it’s an expensive prop­os­i­tion to find and assess potential threats.   To scan for hurri­canes, you need a weather-satellite net­work, and you almost certainly want to consult an ex­per­ienced meteor­ol­og­ist.  Like­wise, to scan for third-party patents, you need patent-search facilities, and you might very well want to consult an ex­per­i­enced pat­ent counsel.

ThirdYou can never be sure that you’re free from threats. A third party’s pat­ent ap­pli­ca­­tion can re­main pend­­ing, and secret, for years, then suddenly make an expensive appearance on the scene.  It can be like the way that a dan­ger­ous storm might devel­op with surprising speed, or in surprising places; see, for ex­am­ple, 2001’s Trop­ic­al Storm Allison, which suddenly formed in the northern Gulf of Mex­i­co and caused devastating flood­ing in Houston and elsewhere.

A would-be warranting party should consider asking for a “policy limit” on its patent-indemnity liability

Insurance policies always include limits on how much money the insurance carrier will pay out if a covered event should occur. These limits are known colloquially as the “policy limits.”  Not so with many everyday business contracts:  In­dem­ni­ty ob­li­gations often en­tail potentially-unlimited liability. In fact, when a contract contains a lim­i­ta­tion of a party’s liability, the limitation language often expressly excludes any amounts that the party must pay under its in­dem­­ni­ty obligations.  That could subject the indemnifying party to enor­mous economic risk.

So when a customer asks a supplier to give an open-ended, unlimited war­ran­ty and indemnity against patent infringement, the supplier should seriously con­sider asking for economically-appropriate “policy limits.” (The policy limits might be in a different amount than other limitations of liability, as discussed in my post, Negotiating contractual limitations of liability: Do it risk by risk, not one-size-fits-all.)

The sweet spot: (a) A representation of no known patent infringe­ment, plus (b) a warranty with a limited indemnity obligation

As a negotiating stance, the customer is likely to argue: Aren’t you willing to stand behind your product? An appropriate supplier response might be: I’m certainly willing to represent that — so far as I know, and without having done any particular investigation — my product doesn’t infringe anyone else’s patent. But for what I’ll be charging you, I can’t afford to provide you with a no-limits insurance policy against an event that might be as devastating as a hurricane. 

If the customer insists on unlimited indemnity liability for patent infringement, the supplier could respond: Fine, but I’m going to have to hire a patent at­tor­ney to do a freedom-to-operate patent search and render an opinion; that will take time and it will be expensive, which means the price I quoted you will have to go up.  (Of course, the customer is likely to push back about a price increase, but at least the discussion will be about money, and the parties can make a business decision how much risk to take on.)

Footnote: Copyright- and trade-secret warranties are different

The risk analysis is somewhat different when a supplier is asked to warrant that its product (and/or its use as directed) does not infringe a third party’s copyright or trade secret.  In those cases, persuasive proof of independent creation will usually be a strong defense for both copyright and trade-secret claims — in contrast to the situation in patent law, where you can infringe a patent without even knowing it.

So if a supplier is rea­sonably comfortable that it can show that its people did their own work without copying from others, then the supplier might well be willing to give copyright- and trade-secret war­ran­ties, even without “policy limits” on the supplier’s indemnity obligation (although such limits would still be a good thing to ask for, of course).


In a patent-infringement dispute, a federal district court relied on a “For clarity” provision in a license agreement to resolve an ambiguity in the agree­ment license grant: The court concluded that the license grant did indeed extend to certain patents in dispute; consequently, the court granted the accused infrin­ger’s motion for summary judgment. See TQ Delta, LLC v. Adtran, Inc, No. 1:14-cv-00954-RGA, slip op. at part I and part III-A (D. Del. May 21, 2018).

(Hat tip: John Paul, Brian Kacedon, Cecilia Sanabria, and Sonja Sahlsten, Clarifying Provisions Avoid Ambiguity in Patent License Agreement, in a Licensing Executives Society USA/Canada electronic newsletter, Sept. 26, 2018.)

A similar term, for the avoidance of doubt, seems to be used frequently in Brit­ish contracts.  Ken Adams once described the term as “a turkey,” saying, “How’s this for a categorical statement: Never use for the avoidance of doubt.”  (Ken’s injunction illustrates something I’ve said from time to timeAll categorical statements are bad, including this one.)

Willem Wiggers was more restrained on this subject; at his WeAgree contract-drafting site, he said that the term for the avoidance of doubt should only be used in limited circumstances.

My own view is that drafters should use terms such as for the avoidance of doubt — or in case of doubt, or for clarity — when they want their client’s litigation counsel to have a “sound bite” to use in a lawsuit or arbitration, e.g., by quo­ting it in a brief or showing it on a PowerPoint slide or poster board. As seen in the TQ Delta case, using such a term can pay big dividends.

(The Common Draft handbook of contract terms includes a definition of the term for the avoidance of doubt, stating that the term signifies the parties’ agreed guidance concerning the intended meaning of a provision.)