text:
Syllabus - Contract Drafting (Toedt Fall 2015)
Table of Contents
- 1. Introduction: Check the table of contents
- 2. Course information & policies
- 3. As-taught syllabus (draft – from Spring 2015)
- 3.1. Tues. Jan. 20
- 3.2. Thurs. Jan. 22
- 3.3. Tuesday Jan. 27
- 3.4. Thursday, Jan. 30
- 3.5. Tuesday Feb. 3
- 3.6. Thursday Feb. 5
- 3.7. Week 4: Feb. 10
- 3.8. Week 4: Feb. 12
- 3.9. Week 5: Feb. 17
- 3.10. Class: Feb. 19
- 3.11. No class Feb. 24 or 26 – DCT out of town on business
- 3.12. March 3
- 3.13. March 5
- 3.14. Friday March 6 (make-up day)
- 3.15. Tuesday March 10
- 3.16. Thursday March 12
- 3.17. Week 8: March 24, 26, and 27 [Friday makeup day]
- 3.18. Week 9: March 31 and April 2
- 3.19. Week 10: April 7 and 9
- 3.20. Week 11: April 14
- 3.21. Week 12: April 21
- 3.22. Week 12: April 23
- 3.23. Week 13 (actually 14): April 28
- 3.24. Week 13 (actually 14): Thurs. April 30
- 4. TOPICS (in development)
- 4.1. Business-analysis checklists for contracts (under development)
- 4.2. Confidential Information 1
- 4.3. Narrative theme: Starting and growing a business
- 4.4. Writing
- 4.5. Defined terms
- 4.6. Preambles (Stark Chapter 6)
- 4.7. Recitals (Stark Chapter 6)
- 4.8. General provisions
- 4.9. Representations & warranties
- 5.1. Diet Supplements
- 5.2. A painting contractor's employee steals stuff
- 5.3. Paragraph organization
- 5.4. Numbers
- 5.5. Currency: Tues. Jan. 28
- 5.6. Percentages: Tues. Jan. 28
- 5.7. Use industry-standard terminology (when possible): Tuesday Jan. 28
- 5.8. Don't count on the spell checker: Tues. Jan. 28
- 5.9. D R Y — Don't Repeat Yourself: Tues. Jan. 28
- 5.10. Contract review mechanics: Tues. Jan. 28
- 5.11. Signatures
- 5.12. Post-signature changes to document, exhibits, etc.
- 5.13. Switched-out pages?
- 5.14. The Addams family wants to sign a contract while en route from Hawai'i
- 5.15. This diamond ring doesn't shine for him anymore
- 5.16. Notarizing a document
- 5.18. Warranties: CBS v. Ziff-Davis, Inc.
- 5.19. Generally accepted accounting principles (GAAP)
- 5.20. Representations
- 5.21. Reps and warranties strategy
- 5.22. A sales quotation for keychain split rings
- 5.23. Warranty-of-quality comparison: Honeywell vs. Honeywell
- 5.24. Magnuson-Moss Act
- 5.25. Warranty disclaimers in England
- 5.26. Limitations of liability
- 5.27. Indemnities
- 5.28. Most-favored-customer pricing
- 5.29. Insurance
- 5.30. Ambiguities and vagueness
- 5.31. Amendments and waivers in writing
- 5.32. Amendments - unilateral
- 5.33. Attorneys' fees
- 5.34. Assignment of employment agreement
- 5.35. Assignment of Mickey-Dee franchise agreement
- 5.36. 23. Signed originals of Agreement
- 5.37. 24. Interpretation - contra proferentem rule
- 5.38. 25. Counsel representation
- 5.39. Backdating a contract at the end of the quarter
- 5.40. Competitive statements
- 5.41. Why long paragraphs are best (a satire)
- 5.42. Entire agreement – or not?
- 5.43. The end-of-quarter purchase order
- 5.44. You are a junior in-house counsel for Pet Rocks, Inc., a publicly-traded manufacturer of (wait for it) pet rocks for use as gifts.
- 5.45. Dangers of ambiguity
- 5.46. Early neutral evaluation
- 5.47. Escalation of disputes
- 5.48. Clause numbering can be a good thing (substantive issue: implied covenant of good faith)
- 5.49. [x]. Introductory paragraphs of a contract
- 5.50. Entire agreement / disclaimers
- 5.51. Early neutral evaluation
- 5.52. Independent contractors
- 5.53. Jury trial waiver
- 5.54. Confidentiality agreement
- 6. Cheat Sheet (in progress)
- 6.1. Insurance
- 6.2. Limitations of liability
- 6.3. Term; Termination
- 6.4. Amendments; Waivers
- 6.5. Dangerous Situations
- 6.6. Dispute Management
- 6.7. Business Operations
- 6.8. Payments & Taxes
- 6.9. Audits
- 6.10. Interest on past due amounts
- 6.11. Model employment agreement
- 6.12. Real estate
- 6.13. Real estate
- 6.14. Employment agreements
- 6.15. Numbers
- 6.16. Negotiation Process
- 7. Professor Stark's New Two-Credit-Hour Syllabus Template
- 8. Honeywell Standard Purchase Order Terms and Conditions for Goods and Services
- 9. Honeywell International Inc. Terms & Conditions Conditions of Sale
1 Introduction: Check the table of contents
Please note the summary table of contents at the upper-right corner of your browser window.
I will be posting and updating this syllabus at http://toedtclassnotes.site44.com/.
Last revised June 08, 2015 23:59 (Central) .
2 Course information & policies
CONTACT INFO: E: firstname.lastname@example.com; O: (713) 364-6545 (also forwards to my cell); my About page
MY LAST NAME: "Toedt" is pronounced "Tate"; cf. Speaker of the House John Boehner.
YOUR EMAIL ADDRESS: On the first class day I will be asking for your email addresses; please provide an address that you check regularly.
EXTRA FIVE MINUTES: Because the class period ends just before lunch time, we will meet on Tuesdays and Thursdays from 10:30 a.m. to 11:50 a.m. (vice 11:45 a.m.). The extra five minutes will give us not quite two extra classes worth of lecture time that can be used in lieu of make-up class periods. To the extent that we end up not needing make-up periods, we'll end the course that much earlier.
- Peer instruction: We will work on problem sets done in class by small groups on virtual whiteboard; this is a combination of Socratic method and (in-class) study groups.
- Spaced-repetition: We will do lots of review-type work, on the theory that spaced repetition has been shown to be one of the best ways of retaining information.
- We will study actual "in the wild" contracts such as:
- Sheryl Sandberg's employment agreement with Facebook;
- Tesla's real-estate lease agreement with Stanford University;
- the Continental-United Airlines merger agreement;
- others TBA
- "In the news": We will regularly discuss recent developments of interest, e.g., case holdings and the like.
- Course materials:
- Common Draft clauses and commentary (a work in progress)
- Tina L. Stark, Drafting Contracts, 2d ed.
BOOK: The required text is Tina Stark, Drafting Contracts: How and Why Lawyers Do What They Do, 2d ed. (Aspen Publishers 2013).
- We will not be covering the chapters in order.
- On some issues Prof. Stark's views are not the same as mine, so don't blindly accept what she says (nor for that matter what I say).
- We will also be making extensive use of the materials in (or linked to in) this Web page.
NOTE: Professor Stark has posted downloadable versions of certain parts of the book.
FIRST-DAY READING: Stark chapters 1 and 27.
VIRTUAL WHITEBOARD WRITING; REAL-TIME FEEDBACK: We will do a lot of short, in-class, ungraded writing exercises, often collaborating in small groups, with students doing their writing on a virtual whiteboard; I will offer comments and feedback in real time. Small groups should feel free to delete old content from their group whiteboards (leave each other's individual whiteboards alone). Individuals may use their whiteboard notes as study aids (you should consider periodically copying and pasting your work into a Word document for backup purposes).
GRADING POLICY: Grades for the course will be based on a 1,000-point scale. As required by law school policy for a class this size (under 20 students), grades will be curved so that the average of the final class grades falls between 2.8 and 3.2. The
- 500 points from graded writing assignments throughout the semester (which will be assigned well in advance of the due date);
- 100 points from simple, look-up type homework assignments on the Blackboard system (e.g., "Is an advance waiver of jury trial enforceable under California law?");
- 100 points automatically earned for excellent class attendance;
- 300 points from the final exam, which will be on the Blackboard system, with a combination of multiple-choice and short-answer questions; and
- the possibility of a half-point increase in the final grade for outstanding class participation;
all as discussed below.
GRADED WRITING ASSIGNMENTS are to be turned in not later than the beginning of the announced class periods. I will not accept late writing assignments in the absence of good reason; in that regard, I'm reasonable but not a pushover.
Writing assignments:
- are to include names, not exam numbers
- are to be emailed to me in Microsoft Word format – I will "redline" them and email them back.
I will sometimes indicate that two students may collaborate on an assignment. In those cases, the students should turn in one paper with both names.
We will review each writing assignment in class, in many cases using group discussion (but without identifying the students), but not necessarily immediately after it's turned in.
Students who put significant effort into their writing assignments will learn the most and generally perform well in the course. The reverse is also true.
CLASS PARTICIPATION BUMP: As permitted by law-school policy, I will increase a student's grade by one-half grade level for outstanding class participation, e.g., from a B to a B-plus, assuming that this doesn't cause the class average to exceed the maximum of 3.2. Here's how it works administratively: I send the Registrar a list with the final course grade for each exam number. At the same time, I send the Registrar a list of the names of students who are to get a one-half grade increase for class participation, ranked in order of priority as subjectively and finally determined by me. The Registrar then combines these two lists, implementing as many of one-half grade increases as will not cause the overall class average to to exceed the maximum. I do not reduce grades for sub-standard class participation (as long as you're here).
ATTENDANCE: Because we will be doing a significant number of in-class exercises, in two- to four-person teams, it's important for each student to attend each class, not just for his or her own benefit, but so that his or her team won't be shorthanded. Moreover, ABA accreditation rules and school policy require attendance at 80% of the class meetings for each course. We have 28 class meetings; rounding to the nearest whole number of classes, a student may miss a maximum of six class periods.
ATTENDANCE – GRADE POINTS: A student who attends a minimum number of class periods will automatically earn points out of the 1,000-point total for the course, as follows:
|26 or more
|24 to 25
I circulate a sign-in sheet at the beginning of each class to track who is and isn't there.
This means, of course, that students who miss classes will have to do better on the final exam to make up for the missed grade points.
EXCEPTION: I normally disregard absences for "official" law-school team travel, e.g., for moot-court competitions, etc.
NAME "TENTS" FOR DESKS: At the beginning of the first class period, I will hand out individual paper name signs for each student to display at his or her desk at each class period. (I got the idea when guest-lecturing at the Jones Graduate School of Business at Rice University.)
PREPARATION FOR NEGOTIATIONS: Our first lesson will be on preparing for negotiations by researching "the other side." To illustrate the point, practically the first thing we will do, at the beginning of the first class, will be an oral pop quiz (ungraded) in which I ask the students where I went to law school and what I did between college and law school. Of course, the pop quiz will also identify those students who read this paragraph.
RECORDINGS OF LECTURES: I don't make audio recordings of my lectures, but I have no objection to students doing so and sharing the recordings with other UHLC students.
OFFICE HOURS – AT SUBWAY BY APPOINTMENT: UHLC lecturers don't have offices (or at least I don't), and I've never had a student take me up on my offer to do office hours by Skype video. I'm happy to meet one or more students after class at the Subway in the student lounge on the lower level of the Law Center, as long as you don't mind my eating while we talk.
COMPUTER USE: Computer use in class is not just encouraged but required; you will need in-class Web access for some of the exercises. If this will be a problem, be sure to contact me well in advance.
KNOWN ABSENCES: I sometimes must miss class because of other commitments, e.g., to preside at an out-of-town arbitration hearing. Those will be announced in advance.
COURSE GOALS: The primary goal of this course is to help students prepare for assignments they will likely see throughout their careers: drafting, reviewing, analyzing, explaining, and negotiating contracts for clients, always with an eye on potential business and litigation consequences. We will focus on:
- equipping students to spot important substantive issues in the legal- and business provisions they will see in contracts; and
- style points that serve as the hallmark of a skilled professional.
My informal personal goal is this: When a (former) student gets to a law firm or an in-house law department, I want his or her supervising attorney to be impressed with how un-rookie-like the new lawyer is.
Our main areas of focus will be:
- Substance: The business and legal issues that commonly arise in contract drafting- and negotiation projects.
- Strategy: Thinking ahead a few moves on the chessboard, trying to anticipate what could happen and what the client might want
- Style: The things supervising partners, clients, and the other side's counsel will expect (consciously or otherwise).
- Mechanics: How to move a contract negotiation from start to finish, as smoothly as the circumstances will allow.
- Self-protection: Avoiding career unpleasantness; keeping your firm (and your malpractice carrier) happy.
3 As-taught syllabus (draft – from Spring 2015)
The syllabus below is how the class actually went in spring 2015; I will be updating it this summer. (I write this in early June 2015.)
I'm more interested in trying to make sure that students master the concepts than I am in sticking strictly to a pre-determined schedule. I am very likely to change up the schedule, and to add or delete material, depending on how I think the course is going.
3.1 Tues. Jan. 20
3.1.1 Introduction; housekeeping
- Name signs
- Self-sort into three groups of four each, alphabetically; sit together
- All introduce themselves
3.2 Thurs. Jan. 22
3.2.1 Contracts "in the wild" – Thurs. Jan. 22
- Sheryl Sandberg employment agreement
- Letter agreement
- Rick's Cabaret Purchase & Sales Agreement
- Good introductory paragraph
- Archaic use of "whereas"
3.2.2 What are the minimum requirements for a contract?
3.2.3 What are some of the most important goals of a contract:
- for the client?
- for the lawyer?
3.2.4 What are the main component parts of a contract?
3.2.5 If the client will be doing multiple transactions with another party, how can the "admin" costs be minimized?
3.3 Tuesday Jan. 27
3.3.1 Homework due Tues. Feb. 10
Stark Ex. 8-3 (term of agreement; salary).
3.3.2 Discuss: Chapter 6, Introductory Provisions
In groups, use the virtual whiteboard to address the following (short answers are OK)
- Pages 65-66: Is there any substantive difference between Version 1 and Version 2?
- Pages 65-66: Does your group have a consensus about which of Versions 1 and 2 is easier to read?
- Page 65, first paragraph: How can a preamble bind the wrong party?
- § 6.2: When should a bold font be used? What's the point of doing so?
- § 6.2.1: When should all-caps be used? What's the point of doing so?
- Compare the all-caps name of the agreement in Version 1 on p.65 and the initial-caps ("nitcaps") name of the agreement at the bottom of p.67. Does your group have a consensus about which "looks better"?
- § 6.2.2: When might it be a really bad idea to use an "as of" date?
- Top of p.73: Why specify the state in which a corporate party is incorporated?
- Top of p.74: Think of a reason for reciting the locations of the parties' principal places of business? (Hint: Think litigation.)
3.3.3 Exercise: Stark Ex. 5-1 (selected portions)
First individually, then in groups, use the virtual whiteboard to draft only the following for Stark Exercise 5-1:
- The preamble
- The signature blocks
- The absolute minimum provisions needed to make the contract enforceable.
3.3.4 For Thursday, skim:
- Stark Chapter 9 (reps and warranties)
- Common Draft definitions for representation, misrepresentation, and warranty (be sure to read the notes)
- Warranty disclaimers for UK transactions
- UCC § 2-312, subdivision (2)
3.4 Thursday, Jan. 30
3.4.1 Language; punctuation; grammar: Davos
Discuss in your groups: What's wrong with what John McArthur is quoted below as having said?
"The range of people who are here is quite unique," says John McArthur, slightly out of breath as he walks briskly through the streets of Davos, between meetings with development ministers, World Bank officials, and social entrepreneurs. [From Kate Wheeling, Does Davos Actually Do Anything?, Pacific Standard, Jan. 23, 2015.]
3.4.2 Language; punctuation; grammar: Meiyee Apple's friends
Discuss in your groups: Note the punctuation of the first words of the following quotation. What does it say about the number of friends the author has?
My friend, Meiyee Apple, recently underwent LASIK surgery after decades of wearing glasses. "I felt I was losing part of my identity since I identified myself as a cool glasses person," Apple says. [From Rick Paulas, The Hidden Psychology of Wearing Glasses, Pacific Standard, posted Jan. 27, 2015. Cf. the book Eats, Shoots & Leaves]
3.4.3 Exercises: Warranties
Use the virtual whiteboard to do this exercise. Each student is to do the exercise in his or her individual whiteboard; then each group should develop a consensus.
- As briefly as you can: From a litigator's perspective, what are the basic differences between a representation and a warranty?
- As briefly as you can: From a business person's perspective, what are the basic differences between a representation and a warranty?
- Drafting exercise: How could 1) and 2) be arranged so as to comply with the D.R.Y. principle ("Don't Repeat Yourself")?
3.4.4 Experiment: Students read and explain, in groups
Use the virtual whiteboard to do this exercise. Each student is to do the exercise in his or her individual whiteboard; then each group should develop a consensus.
- In Stark § 19.3.1, briefly explain the difference(s) between the shaded examples on p. 266 (contractor's right to terminate; corporate power and authority)
- In Stark § 19.3.2, briefly explain the difference(s) between the shaded examples on p. 267-68 (developer's representations and warranties; employee sanctions)
- [2015 skipped this one] In Stark § 19.3.2, briefly explain the difference(s) between all three shaded examples on p. 267
- Drafting exercise: Rewrite 1) through 3) to comply with the D.R.Y. principle.
3.4.5 Exercise: Stark Ex. 5-3, paragraph 10 — Governing law is that of Virginia
First individually, then in groups, use the virtual whiteboard to draft a governing law provision as requested by the exercise. Hint: Check out the Common Draft governing-law provision and notes
3.5 Tuesday Feb. 3
3.5.1 Housekeeping
- Makeup classes (if necessary): Friday March 6 and Friday March 27, 10:30 a.m. in this room.
- See the master topic-based course outline, which will:
- list the assigned readings for each topic;
- move existing problem sets to their appropriate topics;
- write new problem sets based on the assigned readings;
- mix-and-match problem sets from various topics into class plans for specific days.
- During each class, we will mix-and-match problem sets from different topics; that will space out the problem sets for each topic, thus providing on-going review as the semester goes on.
3.5.2 In the news: Anti-assignment clause defeats widower-in-all-but-name
Source: Lee Graham Shopping Center, LLC v. Estate of Diane Z. Kirsch, No. 13-2348 (4th Cir. Feb. 2, 2015). In that case:
- A woman owned an interest in a shopping-center limited partnership ("LP"; the form of organization was later changed to an LLC). The woman had inherited the interest from her late father.
- The woman died of cancer; in getting her affairs in order, she arranged for her interest in the LP to be conveyed to a trust for the benefit of her long-time companion.
- The LP sued for a declaratory judgment that the transfer was invalid, because the LP's governing documents prohibited transfers except to family members.
- The trial court granted summary judgment in favor of the LP; the appeals court affirmed.
3.5.3 Preview: Diet Supplements
Next Tuesday, Feb. 10, we will discuss the Diet Supplements problem set, "ripped from the headines" of this morning's New York Times.
3.5.4 Writing
- Serial comma
- "Like" vs. "such as"
3.5.5 Discuss: Governing law; forum selection
First individually, then in groups, use the virtual whiteboard to address the following. Short answers, please. (Hint: See the Common Draft clauses and their associated commentary.)
- Will governing-law clauses generally be enforced? When might they not be?
- Same questions for forum-selection provisions.
3.5.6 Exercise: Stark Ex. 19-1 (tabulation)
Get the Word document from the publisher's Web site. Do the exercise individually on the virtual whiteboard (but feel free to discuss in your groups). Don't worry about indentation, just break up the paragraphs and number the subdivisions accordingly, e.g., (a), (1), (A), (i), etc.
3.5.7 Exercise: Stark Ex. 7-2 defined terms
Use the virtual whiteboard to do Stark Ex. 7-2. Each student is to do the exercise in his or her individual whiteboard; then each group should develop a consensus.
3.6 Thursday Feb. 5
3.6.1 Exercises
Use the virtual whiteboard to do these exercises.
• Stark Ex. 6-2 — draft a preamble to Stark Ex. 5-3.
• Warranties – CBS v. Ziff-Davis
• Stark 18-1 (legalese)
3.7 Week 4: Feb. 10
NOTE: Past class plans have been moved.
3.7.1 Housekeeping
- No class Feb. 24 or 26 (subject to change if my case settles)
- Reading assignments and homework assignments will be separately listed (in response to feedback about student confusion)
- Narrative theme beginning next week: Starting and growing a business
3.7.2 Follow-up: "Like"
3.7.3 Follow-up: Legalese
3.7.4 In-class exercises
Each student is to do the exercise in his or her individual whiteboard, but feel free to work togeter.
3.8 Week 4: Feb. 12
3.8.1 Miscellany
- What if I don't pay the bill from my sprinkler service's service call?
- What's ambiguous about this sentence? "We are praying for those who have lost their lives because of their faith today at our retreat in #EDRI"
3.8.2 In-class exercises
Use the virtual whiteboard to do this exercise. Each student is to do the exercise in his or her individual whiteboard; then each group should develop a consensus.
3.9 Week 5: Feb. 17
3.9.1 Housekeeping
Reading: Posted here
3.9.2 In-class exercises
- What does "net 30 days" mean? (Hint: Look up the Common Draft "net days" entry.)
- What does "2% 10 days / net 30 days" mean? (ditto).
- Confidential information 1
- Reps and warranties strategy
3.10 Class: Feb. 19
3.10.1 Housekeeping
NOTE: Past class plans have been moved.
No class next week — DCT out of town on business.
Reading & homework for March 3-6: Posted here.
3.10.2 In-class exercises
- Indemnities preview (lecture)
- Indemnities exercise, Fact pattern 1
3.11 No class Feb. 24 or 26 – DCT out of town on business
3.12 March 3
3.12.1 Reading & homework
- The following Common Draft provisions:
- Defect Correction
- Expense Reimbursement
- Force Majeure (including optional / other provisions)
- Honeywell terms of sale
- Honeywell terms of purchase
HOMEWORK DUE MARCH 3: Honeywell v. Honeywell: Warranties and remedies
3.12.2 Lecture (brief): Lessons learned from arbitration hearing last week
Notes from a four-day arbitration hearing in a technology purchase agreement:
- Buyer cut short a pilot project even though the "Solution" (electronic devices) had problems
- Hardware with built-in software was purchased by a financing company and then leased to Customer
- Customer signed (1) a lease agreement with the financing company, and (2) a Services Agreement with Seller.
- Here's the entire agreement clause of the Services Agreement: "This Agreement, together with the exhibits and any other documents referenced herein or executed and delivered in connection with herewith (including without limitation any agreement to acquire or lease the Devices …) contains the entire agreement of the parties regarding the purchase or license of the [Seller] Solution …."
- Limitation of liability: "[Seller's] maximum aggregate liability to Customer related to or in connection with this Agreement will be limited to the total amount paid by Customer hereunder." [Emphasis added]
- Warranties: In the Services Agreement, the customer added to the first substantive paragraph: "[Seller] further agrees [sic] that the Devices will conform to the requirements of this Agreement [none were stated] and will be free from defects."
- Problems with Solution: Seller claimed that Buyer didn't have the right personnel to make proper use of the Devices; also claimed tampering was responsible for the problems.
- Proof problems
3.12.3 In-class exercises
- Stark Ex. 19-2 (tabulation); get the Word document from the publisher's Web site.
- Stark § 7.5 (defined terms guidelines)
3.12.4 In-class exercises: Honeywell v. Honeywell
BATTLE OF THE FORMS: The Honeywell terms of sale state, at the beginning of secction 1, that "Unless and to the extent that a separate contract executed between the procuring party ('Buyer') and Honeywell International Inc. ('Honeywell') applies, any purchase order covering the sale of any product ('Product') contained in this Catalog ('Order') will be governed solely by these Conditions of Sale, whether or not this Catalog or these Conditions of Sale are referenced in the Order."
QUESTION: Is it obvious that this clause is enforceable? Is it obvious that the clause is unenforceable?
COURSE OF DEALING: The Honeywell terms of purchase state, at the end of section 1, that "No course of dealing, prior dealings, usage of trade or course of performance will be used to modify, supplement or explain any terms used in, or incorporated by reference into, this Purchase Order." The Honeywell terms of sale don't include course-of-dealings language.
QUESTION 1: Over time, what practical implications might the course-of-dealings clause have for a Honeywell vendor?
QUESTION 2: Why do you think Honeywell didn't include a course-of-dealings clause in its terms of sale?
PAYMENT TERMS: You sell (meaning, your company sells) $1 million worth of widgets (note how the number is written) to Customer, Inc., which that uses payment terms identical to those in section 13 of the Honeywell standard terms of purchase. You invoice Customer on March 3. Assume that Customer's accounts-payable ("A/P") department cuts checks only on the first day of each month.
QUESTION: When should you expect to receive your $1 million payment? (Hint: Be sure to read all the way to the end of section 13.)
3.13 March 5
3.13.1 "Ripped from the headlines"
- Bob agrees to act as Alice's agent. In their contract, Alice agrees to indemnify Bob against certain third-party claims "based upon personal injury or death or property damage or loss …."
- On Alice's behalf, Bob places an order to buy $100K worth of widgets from Carol and tells her to invoice Alice.
- Carol invoices Alice for the widgets, but Alice doesn't pay the invoice, claiming that Bob didn't have authority to place that particular widget order. (That dispute isn't relevant to the question here.)
- Carol sues Bob for the cost of the widgets and wins a judgment for the $100K plus expenses; Bob pays the judgment.
- Bob sues Alice for indemnity under the contract, claiming that the $100K plus expenses is a "loss" covered by the indemnity clause.
- Alice responds that the relevant portion of the indemnity clause covers only property losses, not all losses.
- Who wins, and why? (Hint: See Offshore Marine Contractors, Inc. v. Palm Energy Offshore, LLC, No. 14-30059, slip op. at 6-7 (5th Cir. March 2, 2015) (affirming district court judgment).)
- If Alice had wanted the indemnity clause to cover only property losses, how could she have (re)written the clause's language? (Hint: See id. at 6 n.3.)
3.13.2 In-class exercises from Stark book
- Stark Exercise 8-6: Quarterback-agent contract
- Stark Ex. 19-4 (tabulation; get the Word document from the publisher's Web site)
3.13.3 In-class exercises: Honeywell v. Honeywell
FORCE MAJEURE: Suppose that, due to freakish winter storms, you can't completely fill Customer's widget order referred to in the previous question.
QUESTION 1: Under section 4 of the Honeywell terms of purchase, what are you obligated to do to fill the order?
QUESTION 2: As a practical matter, would Honeywell have any problem enforcing this obligation?
QUESTION 3: What would Honeywell's options be if the delay lasted for six weeks?
QUESTION 4: How would your answers be different if section 9 of the Honeywell terms of sale applied instead of Honeywell's purchase-order terms?
QUESTION 5: Representing the widget vendor, what if any clauses from the Common Draft "Force Majeure" provisions might you want to include?
- Look at the "Performance Assurance Plan" clause in section 5 of the Honeywell terms of purchase. Substantively, does this cause any concerns for enforceability? (Hint: See the Common Draft "Unilateral Amendments" clause as well as UCC § 2-609.)
3.14 Friday March 6 (make-up day)
3.14.1 Style point
3.14.2 In-class exercises from Stark book (each student answer on the virtual whiteboard)
- Stark Ex. 19-2 (drafting errors); get the Word document from the publisher's Web site.
- Short answers: Stark § 16.2, nos. 1-5 – assignment-consent provisions
3.14.3 Lecture / in-class exercises: Honeywell v. Honeywell (continued)
- RISK OF LOSS: Under section 6.2(a) of the Honeywell terms of purchase, where does the risk of loss of the goods pass to Honeywell? How about under section 2 of the Honeywell terms of sale (first grammatical paragraph)?
- MOST-FAVORED CUSTOMER: What time limits apply to the Supplier's most-favored customer ("MFC") obligations in section 12 of the Honeywell terms of purchase,
- PRICING: Under the last paragraph of section 12 of the Honeywell terms of purchase, who can make purchases at the prices stated in the P.O.? For how long? What might your client the widget supplier think about that?
- SET-OFF: Compare section 14 of the Honeywell terms of purchase with section 7 of the Honeywell terms of sale.
ACCEPTANCE: Compare section 15.2 of the Honeywell terms of purchase with section 4 of the Honeywell terms of sale.
QUESTION: How long does the customer have, under each of those provisions, to reject allegedly-defective goods?
SERVICES WARRANTY: See section 16.2 of the Honeywell terms of purchase.
QUESTION 1: Are subdivisions (b) and (c) consistent with each other? (Hint: See the Common Draft definition of "workmanlike performance.")
QUESTION 2: If the contract didn't include any express warranty about the services, might the implied warranties of UCC article 2 apply? (Careful; this is sort of a trick question.)
QUESTION 3: If the contract didn't include any express warranty for the services, what if any standard of performance would apply? (Hint: See the notes to the Common Draft definition of "workmanlike performance.")
PRODUCT WARRANTY: Section 8 of the Honeywell terms of sale states that Honeywell's warranties run to Buyer's customers as well as Buyer (and certain others).
QUESTION: Why do you think Honeywell might have allowed its warranties to run to Buyer's customers, instead of excluding warranty coverage for Buyer's customers?
STOP WORK: On March 2, your widget-manufacturing company gets an order for 100 million widgets from Honeywell for delivery in 30 days. Gasping but excited, your CFO [chief financial officer] arranges to borrow the estimated $500 million that will be needed to buy the necessary materials; your COO [chief operating officer] signs contracts to rent additional manufacturing equipment and to hire temporary workers. But then Honeywell says "uh oh, we need to put the order on hold until July 1."
QUESTION: Who pays your company's on-going expenses during the on-hold period?
QUESTION: What if Honeywell tells you on June 30 that they are cancelling the order?
- INSURANCE - WAIVER OF SUBROGATION: In section 24 of the Honeywell terms of purchase, what does the penultimate grammatical paragraph ("Except where prohibited by law, Supplier will require its insurers to waive all rights of recovery or subrogation …") mean?
IP OWNERSHIP: See section 26.1 of the Honeywell terms of purchase.
QUESTION: From the perspective of a services provider, does it make sense for Honeywell to own everything that the provider might create in the course of performing services? What about "toolkit items" that the provider might develop? What are the companies' respective legitimate business interests in those item?
3.15 Tuesday March 10
3.15.1 Reading
- Subcontractor master agreement form, annotated
- The following Common Draft provisions (and their notes):
- Site- and computer-network access rules
- Personnel background checks
- Subcontractors
3.15.2 Ripped from the headlines (sort of)
Jane works for "Company," which terminates her employment effective April 1 (the "Termination Date"). The parties sign a severance agreement that contains the following clause:
The Company will pay Jane an annual salary in the amount of $56,398.68 (Fifty-six Thousand Three Hundred and Ninety Dollars and Sixty–Eight cents) pro rata (the "Salary Continuation") from April 1 through May 24 [in the same year].
The Company will continue to pay Jane in semi-monthly installments via direct deposit as currently on file and in accordance with the Company's normal payroll practices. …
The Company pays Jane $8,676.72, which it computes by pro-rating the stated annual salary of $56,398.68 over the eight weeks between April 1 through May 24.
Jane sues, claiming she is owed the entire annual salary of $56,398.68.
QUESTION: How could the severance-agreement language be redrafted to avoid this dispute?
3.15.3 Lecture
- Site- and network rules – QUESTION: Should specific rules be attached to the agreement, instead of the way it's done in the Common Draft provision? Why or why not?
- Background checks: QUESTIONS:
- What types of laws might contain land mines for merely doing background checks? (Hint: See the Compliance with Law subsection of the Common Draft provisions.)
- What types of dangers might lurk in using background-check results in making staffing decisions? (Hint: See the Restrictions subsection of the Common Draft provisions.)
- Subcontractors – QUESTIONS:
- Why might a customer want to keep control over the use of subcontractors?
- What danger to the customer might there be in exercising too much control over the use of subcontractors?
3.15.4 In-class exercises from Stark book
- Stark Exercise 7-6: Which "breach" defined term is better — and why?
- Stark Ex. 7-3 – defined terms
3.16 Thursday March 12
3.16.1 Lecture / discussion
3.16.2 In-class exercises – other
3.17 Week 8: March 24, 26, and 27 [Friday makeup day]
3.17.1 Homework due April 14: Stark Exercise 31-1
3.17.2 Homework – due Thurs. April 2
In Microsoft Word:
- How do you adjust the spacing between paragraphs?
- What's the proper way of creating a heading?
- How do you keep one paragraph with the next one? (Hint: Look up paragraph formatting.)
- How do you adjust the line spacing in a paragraph?
- How do you create a table without borders?
3.17.3 Reading
- Stanford-Tesla real-estate lease agreement
- Common Draft audit clauses (and their notes)
- NEW: Microsoft Word: Five Rules You Must Follow, including:
3.17.4 In-class exercise: First-pass analysis of the Stanford-Tesla lease agreement
See Stanford-Tesla real-estate lease agreement (open in a separate tab for reference).
- What are the parties' "wants"?
3.17.5 In-class exercise: Stanford-Tesla real estate lease agreement
See Stanford-Tesla real-estate lease agreement (open in a separate tab for reference).
- Lines 16-18 (Basic Lease Terms in Article I are subordinate to other provisions): What could go wrong? How could this be fixed?
- Lines 19-21 (Glossary) – DCT comments
- Line 26 (addresses for notice): What could go wrong? How could this be fixed?
- Lines 30-40 (premises): Is there any ambiguity in line 38? Is the ambiguity worth taking time to fix?
- Lines 47-49 (Tenant inspection): Does it matter that this doesn't say "Tenant represents [or /represents and warrants/] that it has made a thorough inspection …."? Why might a drafter choose to leave out those particular terms?
- Line 57 (disclaimer of Landlord warranties about structural components): Given the Premises' location (very near the San Andreas Fault), might the Landlord's drafter want to say any more as "cheap insurance"? Why or why not?
- Lines 83-85: Why attach a specific Acceptance Form? Could anything go wrong here? How else could this be approached?
- Line 89 (Term): Note what this is the "term" of.
- Lines 103-11 (Landlord can't deliver premises): Does this clause cause any problems for enforceability of the lease agreement? Would you recommend any changes?
- Lines 116-17 (no further rights): Would you advise either side to sign this? Would you recommend any changes?
- Line 119: Why is this called an "extension" option and not a "renewal" option?
- Lines 164-77 (relating to early termination): Can you think of a better way to present the information? Why might that be useful someday? (Hint: Consider who the future readers might be.)
- Lines 183-84 (alteration requirements): Any thoughts about the drafting "style" of this provision?
- Lines 186-92 (conditions): Redraft this in plain(er) English.
3.18 Week 9: March 31 and April 2
3.18.1 Housekeeping
NO CLASS April 16 (DCT out of town)
3.18.2 Reading for next week
See the class plan for next week.
3.18.3 Homework due April 14: Stark Exercise 31-1 – do individually
Feel free to consult each other, but each student should prepare and submit the assignment separately
3.18.4 Homework – due Thurs. April 2
In Microsoft Word:
- How do you adjust the spacing between paragraphs?
- What's the proper way of creating a heading?
- How do you keep one paragraph with the next one? (Hint: Look up paragraph formatting.)
- How do you adjust the line spacing in a paragraph?
- How do you create a table without borders?
3.18.5 Reading for this week
- Microsoft Word: Five Rules You Must Follow, including:
- Use styles for headings (especially), block quotation, and footnotes
- Don't use blank lines to separate paragraphs (adjust the paragraph spacing instead)
- Strip the formatting when pasting text
- Microsoft Word: Formatting essentials (hat tip: Li Yi)
- Martha Stewart employment agreement
- Sheryl Sandberg employment agreement
3.18.6 Quickie in-class exercise: Hillary Clinton
From Politico: "She's dressed in a blue-collared shirt and wearing bold silver earrings."
1. In the phrase "blue-collared shirt," is this use of the hyphen correct, given the shirt shown in the picture?
2. If yes, is such use optimal?
(Hint: See Purdue's style guide, although this is a subject about which opinions vary.)
3.18.7 Lecture: Employment Contracts — Key Takeaways
- Employment-at-will
- U.S. doctrine
- Exceptions:
- Employment contract (includes CBA)
- Public policy
- Discrimination – age, protected class
- Retaliation for complaining about discrimination, sexual harassment, etc.
- Non-U.S. jurisdictions are different – more protective of workers
- CAUTION for employers: Don't inadvertently blow employment-at-will status by having "contract" language in:
- Offer letters
- Company policies
- Employee handbooks
- Employees' implied obligation of confidentiality
- NLRA, equal-opportunity law might take precedence re wages, working conditions
- An agreement signed by the employee will simplify litigation for the employer
- NEW 4/2/15: Employee confidentiality-obligation clauses should make it clear employees aren't precluded from whistleblowing — SEC imposes cease-and-desist order against KBR and gets $130,000 settlement [SEC press release] [SEC order] [Houston Chronicle article]
- Employees' implied obligation to assign certain inventions; works made for hire
- Some states' laws impose restrictions (link)
- Again, a signed agreement will simplify the employer's litigation efforts
- Compensation
- Salary vs. wages
- Bonuses
- Usually w/in Company's discretion, but not always
- Must employee still be employed when bonuses are paid?
- Stock options, restricted stock
- Vesting
- Acceleration of vesting upon change of control
- Compensation Committee (required for executive comp. in public companies)
- Wage & hour laws
- U.S. Fair Labor Standards Act: $7.25 minimum wage; 1.5X overtime after 40 hours in week
- Exempt vs. non-exempt personnel
- Bonus & sales commission must be included in overtime computation (!)
- Overtime must be paid if company "suffers" overtime to be worked
- State laws – e.g., California $9
- Local ordinances – e.g., San Francisco $11.05; Sea-Tac airport $15
- U.S. Fair Labor Standards Act: $7.25 minimum wage; 1.5X overtime after 40 hours in week
- Severance agreements
- Usually include a release of employee claims against company
- EEOC might sue to void certain types of release
- Workers over 40: Age Discrimination in Employment Act requires release to state the following (or the release is unenforceable):
- 21-day waiting period before signature
- 7-day revocation period after signature
- Additional requirements for multiple workers over 40
- Usually include a release of employee claims against company
- Noncompetition, nonsolicitation covenants
- Reasonable limitations in time, geographic scope, subject matter
- California: Big problems
- Post-employment noncompetes are unenforceable
- Unfair business practice to force employees to sign them
- Exception for sale of business
3.18.8 Experiment: In-class negotiation exercise — employment agreement
See Martha Stewart employment agreement
- Divide up into two pairs of negotiating teams. In each pair of teams, one team represents Martha, the other represents the Company.
- Each pair of teams is to select:
- three different events for which the employment agreement plans;
- what determinations that might need to be made in respect of each event; and
- what actions might be desired in response to those determinations.
- For each event, each negotiating team, working separately (i.e., not with the other team in its pair), is to:
- consult the checklists;
- draft specific proposed changes to the contract as though you were negotiating the contract from scratch on behalf of your client; and
- think of one or more reasons why your proposed changes make sense for the deal (not just for your client).
- Finally, discuss your team's proposed changes with the other team in your pair.
3.19 Week 10: April 7 and 9
3.19.1 Drafting awkwardness
From the Easter Sunday service booklet at St. John the Divine Episcopal Church:
Easter flowers and decorations
are given to the glory of God and
* * *
In memory of [name omitted]
by the [name omitted] Family
* * *
In honor of all Christians,
especially those persecuted
by the [name omitted] Family
3.19.2 Flashback
3.19.3 In the news – botching an M&A-related contract provision in a pre-nup
Buckingham v. Buckingham, 2015 NY Slip Op 2190 (N.Y. App. Div. March 19, 2015)
• Eight days before their marriage, a husband and wife entered into a pre-nup agreement, which was later modified for reasons not relevant here (the "modification agreement").
• The husband-to-be owned a majority interest in a global mobile media company ("MS").
• The pre-nup agreement, as modified, gave the wife certain rights to payment if the company or any of its subsidiaries was sold.
• The agreement was silent, though, as to what would happen if the husband simply sold shares in the company:
After the parties have been married for a period of three (3) years, if MS or any of its subsidiaries or related companies are sold … the following percentage of the proceeds (after payment of any taxes and transactional costs due upon such sale,) shall be paid to Nisha in accordance with the length of the marriage and shall constitute her separate property: [¶] three or more years — twenty (20%) percent; or [¶] eight or more years — twenty-five (25%) percent; or [¶] thirteen or more years — thirty (30%) percent; or [¶] eighteen or more years — forty (40%) percent; or [¶] twenty-three or more years-fifty (50%) percent ….
Id. at __ (Saxe, J., concurring).
• After the couple's divorce, the husband sold $7.2 million worth of his shares in MS. The wife demanded 20% of the proceeds.
The trial court held, and the appeals court affirmed, that the wife was not entitled to any of the proceeds, because the prerequisite of the agreements had not been met:
… The plain and unambiguous language of the parties' modification agreement makes clear that defendant shall make a distribution to plaintiff only if, among other things, MS or one of its subsidiaries or related companies is sold. Plaintiff does not claim, and there is no evidence, that this condition precedent was met. Accordingly, plaintiff is not entitled to a distribution.
Contrary to plaintiff's contention, she was not entitled, under the terms of the modification agreement, to a distribution merely because defendant sold outstanding stock of MS.
Id. (majority opinion) (citations omitted, extra paragraphing added).
Contract-drafting gurus Tina Stark and Ken Adams believe, for different reasons, that the wife's lawyer blew it in negotiating the pre-nup by not knowing how corporate stock ownership works.
… Bottom line: the wife's lawyer didn't know the law. She didn't understand the difference between an asset sale or a stock sale and language embraced only the former.
This is a classic case of a business issue driving the litigation, not unclear, ambiguous drafting.
It was "bad" drafting, but not for reasons of style, lack of clarity, or ambiguity. It was "bad" because it didn't memorialize the parties' intent.
And that's why matrimonial lawyers need to understand business and business law and how drafting sits at the intersection of law and business.
(Extra paragraphing added.)
3.19.4 Reading for week of April 7 and 9
Read all the headings in each of the agreements below, but just skim the text.
The agreements to read are:
- Merger agreement: United Airlines / Continental Airlines
- Asset-sale agreement: BP-Tesero refinery purchase
3.19.5 Lecture: Basics of an asset sale agreement and a merger agreement
- Preliminary due diligence
- Negotiation of terms, especially:
- Warranties
- Disclosure Schedule as exceptions to warranties
- Walk-away conditions – e.g., Material Adverse Change (or Material Adverse Effect)
- Break-up fee – Plan B
- Signature
- Who should sign?
- Full due diligence
- Data room
- Inspections / interviews
- Authorized reviewers
- Opinions of counsel? (Puts risk on law firm & malpractice carrier)
- Closing
- Documents exchanged
- Documents filed w/ state authorities
3.19.6 In-class exercise
In the BP-Tesero refinery purchase agreement, do an "ADD analysis" (see the Checklists for more details):
- The major Actions involved (both "firm" and contingent), especially "5W-PP," that is:
- 5Ws - Who, What, When, Where, and (optionally) Why;
- Payments; and
- Plan B;
- Any Determinations that must be made to trigger those actions, with 5W (Who, What, etc.); and
- Other relevant Dates — think of possible SSS-EL dates:
- Start date
- Stop date
- Sunset date
- Earliest date
- Latest date
3.20 Week 11: April 14
3.20.1 Homework for Tuesday April 28
Draft a general release for the settlement of a dispute, as broad as you can make it; feel free to "load up" with language. Hint: Check the Internet for samples.
3.20.2 Homework to turn in today: Stark Exercise 31-1 – do individually
Feel free to consult each other, but each student should prepare and submit the assignment separately
3.20.3 Housekeeping
- NO CLASS April 16 (DCT out of town – having breakfast with Tina Stark that day)
- QUESTION: Which Common Draft table of contents is "better" — the one up there now (TOC link in the top right corner) or the "old" one (scrollable TOC in the left sidebar).
- QUESTION: If subject-specific lectures were put on YouTube, would you watch them? (Cf. "flipping the classroom.")
3.20.4 Lecture: Reseller agreements - key takeaways
See Reseller Agreement form
- Products / services – limitations
- Reseller responsibilities
- Customer support?
- Training for Reseller personnel?
- Give customer info to Provider?
- Customer feedback
- No authority to commit Provider to extra warranties, etc.
- Payment – contingent? (pay-if-paid or pay-when paid)
- Sales taxes – who collects, reports, remits?
- Marketing rights & responsibilities
- Trademark usage – Provider's obligations to police use
- Franchise laws
- Exclusivity, if any
- Antitrust considerations
- Targets for keeping exclusivity
- Fail to meet targets: Go non-exclusive, or terminate entirely?
- Audits
- Pricing approaches
- Discount from then-current list
- Percentage of sale (w/ minimum payment to Provider)
- Price protection in case of price drops
- Price increases - special terms? Limitations?
- Term
- Extension right
- Opt-out right
- Relationship management
3.20.5 Stanford-Tesla lease agreement - more questions
See Stanford-Tesla real-estate lease agreement (open in a separate tab for reference).
Lines 204 et seq. (right of first offer):
- If you were representing Stanford, would you rather give Tesla a right of first offer, or a right of first refusal (sometimes called "last look")?
- What if you were representing Tesla?
Hint: See this article (the link in the contract PDF is munged).
- Lines 263-81 (interest; administrative late fee): What if any differences are there in the legal implications of charging interest and an administrative late fee?
- Lines 294-96 (prohibited uses): Any issue with prohibiting use of the Premises for immoral purposes?
- Lines 311-13 (no loudspeakers, etc.): Redraft this.
- Percentage rent: List the pros and cons and how the "cons" could be addressed. Hint: Consider the "Determinations" factor.
- Section 7 (net lease): Would this provision be characterized as single net, double net, or triple net? (Hint: Read section 7.3 carefully; check Wikipedia for definitions.)
- Lines 373-74 (carve-out from payment obligation): Redraft this in plain(er) English.
- Lines 429-30 (tax increases as determined by Landlord): Would you agree to this if you were representing Tesla? What alternative(s) might you propose?
- Line 459-60 (disclaimer of landlord obligation to repair): DCT comment re statutory provisions
- Section 8.4 (Tenant's failure to repair): Discuss how Tesla's attorneys might try to negotiate this clause. (Would they try to negotiate it?)
- Lines 500-01 (Landlord unreasonable withholding of consent to alterations):
- How might the parties plan to resolve a dispute on this point quickly and efficiently?
- Given lines 505-13, is the possibility of a dispute a genuine business concern for Tesla?
- Line 520 (additional Rent): DCT comment re inconsistent capitalization
- Line 532 (Landlord approval not to be unreasonably withheld): Could timing be a problem with this clause?
- Line 617 (Tenant covenants and agrees to do X): Suggest a revision.
- Lines 621-22 (Tenant shall take all necessary safety precautions): Any danger of 20-20 hindsight here?
- Lines 2458-2462 (acceptance form – personal rep and warranty of due authorization): Would you sign a document with this language? Why or why not?
3.20.6 Exercise: Stark 18-6 (legalese)
3.21 Week 12: April 21
3.21.1 In the news
Franchise litigation: Nebraska supreme court says noncompete clauses won't be reformed to make them enforceable – http://cases.justia.com/nebraska/supreme-court/2015-s-14-012.pdf?ts=1428674535
Drivers for Uber and Lyft survive summary judgment in their we're-employees-not-independent-contractors case (Bloomberg)
3.21.2 Homework Review - Stark 31-1
- Preamble – date: Careful about reciting the date in the preamble (and then saying at the end that the Agreement is being signed on the date recited in the preamble).
- Preamble – parties' residences: It's always a good idea for the Agreement to recite facts that create a basis for personal jurisdiction and venue.
- Background section (1): You might be able to skip it entirely – the agreement is simple enough, conceptually, that the terms should be pretty obvious.
- Background section (2): But if you're going to include it, it'd be best to include a summary of the inspection- and down-payment provisions.
- Definitions: You might want to include cross-references to the Preamble for Buyer, Seller, and Vehicle – but in this case the Agreement is simple enough that you might not need it.
- Word processing: Use Word heading styles for headings; be sure the heading styles are formatted with "Keep With Next."
- Word processing: Don't use extra paragraph marks for spacing between paragraphs.
- Capitalization consistency is important – in one case I saw, a judge denied summary judgment because there was a fact issue whether the parties meant two different things when a defined term wasn't consistently capitalized.
- [Party name] agrees to do X: You probably don't need "sound bites" for litigation for something like this.
- Payment details: I know I've said "put each issue in a separate paragraph," but for a small deal like this you can collapse some paragraphs together. EXAMPLE:
- Certified checks: The buyer might not want to pay his bank for three certified checks and/or cashier's checks. QUESTION: Would the Seller incur significant risk by accepting personal checks for one or more of the required payments?
- Reps and warranties: The seller might not want to make both representations and warranties.
- Maintenance warranty – active or passive voice? Think through whether the rep and warranty on this issue should read "Seller has maintained the Car …." or instead "the Car has been maintained …."
- Deleting an entire section: Consider replacing the text of the section with "[Intentionally omitted]" so as not to screw up the numbering of subsequent sections.
- Ownership: You'd want to say that Seller was the sole owner of the vehicle, not just that Seller owned the vehicle.
- Conditions of obligations are of the parties' respective obligations to close, not of their respective obligations generally.
- Termination for misrepresentation or breach (1): Termination should always be at the option of the other party, not automatic. (The other party might want to consummate the deal anyway.)
- Termination for misrepresentation or breach (2): Consider a cure period for breaches / inadvertent misrepresentations.
- Manufacturer's warranty review: In the real world, it'd be more practicable for the buyer to investigate the manufacturer's warranty before the Agreement was signed.
- Assignment-consent requirement: Is such a requirement actually appropriate?
- Jury-trial waiver: A good idea.
- Severability clauses always make me nervous.
- Warranty disclaimer: Only one student included a short disclaimer of implied warranties.
3.22 Week 12: April 23
3.22.1 In the news
Sebago v. Boston Cab Dispatch, Inc.: Massachusetts's Supreme Judicial Court says cab company was entitled to summary judgment that cab drivers were independent contractors, not employees (citing statute)
3.22.2 Exercise: Stark 18-7 (legalese)
3.22.3 Lecture: Getting a workable contract to signature sooner
See the notes – this is a "tryout" for a workshop I'll be teaching in May for the Licensing Executives Society ("LES"), an IP professional association.
3.22.4 Exercise: A sales quotation for keychain split rings
See the exercise.
3.23 Week 13 (actually 14): April 28
3.23.1 Homework for Tuesday April 28
Draft a general release for the settlement of a dispute, as broad as you can make it; feel free to "load up" with language. Hint: Check the Internet for samples.
3.23.2 Reading
3.23.3 Scenario planning: TOPSPIN MERIT NORM WHALE
Step 1 – brainstorm possible scenarios: "TOPSPIN"
Make a list of:
- (T)hreats, and
- (O)pportunities, that are presented by
- (P)arties – consider, for example:
- Buyer's remorse
- The Grass-is-Always-Greener effect;
- (S)upply chains in which the parties participate — consider especially the possibility of market changes such as the drastic drop in oil prices;
- (P)eople who work for the parties and their respective supply chains; those individuals will have their own incentives and motivations, and might be tempted not to honor the contract, or even to lie, cheat, or steal;
- (I)ntervenors such as competitors; governmental actors; prospective acquirers; prospective alliance partners; etc.; and finally, of course,
- mother (N)ature.
Step 2 – brainstorm requirements for preparation ("MERIT) and handling ("NORM") for selected scenarios
Step 3 – for each action, brainstorm the following ("WHALE")
- (W)ho
- (H)ow
- (A)utonomy
- None (action is mandatory or prohibited)
- Discretionary
- Sole discretion
- Reasonableness requirement
- Good-faith requirement
- Notification requirement (before / after the fact)
- Consultation requirement
- Consent requirement
- (L)imitations – e.g., minimum-maximum; quantity-quality
- Time
- Place
- People
- Money
- (E)conomics
- Who pays
- Backup funding sources
3.23.4 Lecture: LLC, partnership, and shareholder agreements (Thursday)
See the LLC agreement annotated.
3.24 Week 13 (actually 14): Thurs. April 30
3.24.1 In the news: American Airlines planes grounded because of iPad crashes
See the report.
3.24.2 Homework review: General releases
See the marked-up sample. Also this example of good paragraphing.
- RTFD: The instructions asked only for a general release, not for a complete settlement agreement. In marking up the homeworks I focused mainly on the release language but also made some comments on other provisions.
- Authority: If Party A signs the release "on behalf of" its officers, directors, employees, etc., does that actually effect [note the use of "effect" as opposed to "affect"] the release as to those individuals? What about Party A's affiliates?
- Plain English is good (usually). There are pros and cons, but in the long term the former usually outweigh the latter — especially because it helps to ensure [NOT "insure"] that an individual plaintiff truly understands what he or she is signing, which can pay off later if a subsequent dispute arises.
- Short sentences and short paragraphs are good (usually).
- Mechanics of settlement payment — which comes first: the released party's payment of money or the releasing party's signature and delivery of the release. [Note the non-capitalization of "the released party"]
- Consideration and acknowledgment: Consider "plain English," such as the following (using the releasing party's name): Ms. Doe is signing this release in consideration of the Company's payment to her of the Settlement Amount; she acknowledges that she has received the Settlement Amount.
- Present tense: The release language should be along the lines of By signing this Agreement, each party releases the other party from …. (You really don't want future tense, as in each party will release the other party ….)
- Notarization? Consider including a notary acknowledgement certificate, so that the release document will be self-authenticating.
- Attestation: What exactly does "attest" mean? Is it worth including?
- Separate paragraphs for individual plaintiffs: If an individual plaintiff is signing the release, consider using a separate set of paragraphs that use the plaintiff's name and are in plain English — that will help make sure the plaintiff really understands, and will also make a nice sound bite for the released party if a subsequent dispute arises.
- Giving up forever: As a nice sound bite to help make sure individual plaintiffs understand the release, consider including plain language to the effect that the releasing party is "giving up forever" its claim(s) and the right to seek monetary or other relief for it or them.
- Full settlement: Another nice sound
- Taxes: Consider including a paragraph to the effect that the party being paid is responsible for its own income tax, etc.
- Jury trial waiver? Consider including a waiver of jury trial of any claim of breach of the settlement agreement.
- Wording: It's better to say Each Party releases the other Party, as opposed to The Parties release each other; do likewise for, e.g., each Party represents and warrants to the other, etc.
- All claims must be released: The absolute minimum to be released is "all claims" in question; it's fine to add, for example, lawsuits, proceedings, etc., but be sure to include "claims."
- Competence of counsel: In stating that each party has had an opportunity to consult with counsel, don't make any reference to the competence of counsel. That's because if a party were later to claim that the party got screwed and that its counsel was incompetent, a replacement counsel might try to claim that there was a mutual mistake about the former counsel's competence and that the settlement and release should therefore be set aside. That's OLTTL (One Less Thing to Litigate); or as Mr. O'Farrell said, "that's a conversation I don't want to have."
- No other inducements: Consider including language such as, except as set forth in this [Release], neither [the released party] nor any of [the released party's] agents, insurers, employees, or representatives have made any promise or representation to influence [the releasing party] in making or executing this Release
- Confidentiality: Consider including a confidentiality requirement — as well as specifying specific action to be taken if a party violates confidentiality.
- Non-disparagement: Consider including a non-disparagement clause.
- No admission of liabiity, etc.: This is usually a good thing to include.
3.24.3 Scenario planning: Epilogue
Final acronyms (for now): "TopSpin Timmy Minor: Whaler" (see my LES spring 2015 meeting workshop course materials § 1.13).
3.24.4 Brief lecture: LLC, partnership, and shareholder agreements (Thursday)
See the LLC agreement annotated – we'll pick up at section 7.
3.24.5 Final exam distribution
3.24.6 Student evaluations
The UH course-evaluation Web page is apparently here.
In your comments, please indicate what you think future classes should do:
- more of,
- less of, or
- about the same,
for the following:
- Lookup-type homework (e.g., looking up the Texas statutory rule on attorneys' fees for enforcement of a contract)
- In-class review and discussion of homework assignments (e.g., as we did today)
- Short in-class group drafting exercises
- Short mock negotiations
- Lectures about key points in specific contract types (e.g., lease agreements, employment agreements, etc.)
- In-class review and discussion of annotated actual contracts (e.g., Martha Stewart employment agreement)
4 TOPICS (in development)
4.1 Business-analysis checklists for contracts (under development)
Most important single question: "Anything else?"
Life cycle of every single business relationship
Consider what events (or other status changes) will, or might, occur during:
- Normal operations
- Trouble; big trouble
- Shutdown of the relationship
- Startup of the relationship (intentionally mentioned last)
(See also Determinations)
- SWOT – initial conditions, possible changes:
- Strengths of each party
- Weaknesses of each party
- Threats (competitors, other third parties, environment, economy, government, etc.)
- Opportunities
- One party or another wants to "make a change" in, e.g.:
- Responsibilities
- Compensation
- Everything (complete separation)
(Sometimes epistemology matters.)
- Who makes the determination in question?
- How is that determiner to be chosen?
- What if there's a dispute about that?
- Must the determiner consult with anyone, party or otherwise?
- Information-gathering steps:
- Any specific requirements?
- Any specific rights?
- Types of information-gathering
- Investigation
- Audit
- Outsider comes in
- Deadline for making the determination
- Plan B if the determination isn't timely made
- Reporting of the determination —
- Report to whom?
- Timing?
- How authoritative is the report?
- What standard must the determination meet? E.g.:
- Professional standard
- E.g.: Standard of care (physicians)
- Sole and unfettered discretion
- Commercially-reasonable
- E.g.: Consent is not to be unreasonably withheld, delayed, or conditioned
- This can be expensive and burdensome to litigate (requires discovery, expert witnesses)
- Good faith
- This can also be expensive and burdensome to litigate
- Often fact-intensive
- Can be a roll of the dice as to whom the jury likes
- Custom definition
- Professional standard
- Plan B if the standard for the determination isn't met
- Disputes about the determiner and/or the determination – how to resolve?
- Types:
- Optional (rights)
- Mandatory (obligations)
- Triggers (prerequisites / conditions)
- Events (see also Determinations)?
- Request / demand from another party?
- Notification and/or consultation requirement before taking action
- How much advance notice?
- What if the other side objects to the action?
- What if the other side doesn't object to the action?
Timing of the action – earliest and latest permissible dates for:
- Starting the action
- Completing the action
- Earliest permissible date for:
- Starting
- Completion
- Assistance from others
- Cost (see also Payments)
- Who pays?
- Maximum required spend
- Minimum required spend
- Compensation? (See also Payments)
- Confirmation of compliance (see also Determinations)
- Reports
- Inspection / audit
- Plan B - if mandate or prohibition is violated
- Who chooses among available alternatives? (See also Determinations)
- How are payments computed? (see also Determinations)
- Paid in a lump sum, or over time?
- Deductions / withholding?
- Interest for past-due or spread-out payments?
- Watch out for usury laws – some have large teeth
- Audits / verification
- Repayment / recoupment / clawback?
4.2 Confidential Information 1
- You represent Whizbang LLC, a startup company that has developed some new technology.
- Whizbang is entering into talks with a potential customer that is interested in using Whizbang's new technology as part of the customer's own confidential processes.
- The business people on both sides are wondering whether the parties should enter into a non-disclosure agreement (NDA).
- What's the minimum that an American court likely would require in order to protect a party's information?
- What are some of the pros and cons of entering into a two-way confidentiality agreement in which each party's confidential information is protected?
- How long should the confidentiality agreement last? (Caution: There are two categories of "how long" to be concerned about.)
4.3 Narrative theme: Starting and growing a business
These are Professor Toedt's working notes
- Confidentiality agreements, including:
- What counts as "confidential" information
- Whose confidential information should be protected
- Should confidentiality obligations expire
- What are the limits of the receiving party's permitted use of the information
- Purchase-order fine print, including
- Warranties & remedies
- Indemnities; insurance
- Most-favored-customer provisions
- Services agreements, including:
- Statements of work
- Acceptance testing
- Warranty of "good and workmanlike performance"
- Indemnities; insurance
- Site- and computer-network access rules
- Personnel background checks
- Maintaining independent-contractor status
- Unwinding the relationship
- Real-estate lease agreements, including:
- Term extensions
- Pricing
- Taxes
- Eminent domain
- Indemnities; insurance
- Casualties (fire, storm, etc.)
- Employment agreements, including:
- Employer management rights
- Confidentiality obligations
- Wage- and hour provisions
- The role of employment handbooks
- Post-employment noncompetition provisions
- Reseller / distributor agreements
- Real-estate purchase agreements
- M&A agreements
- LLC operating agreements
- Investment agreements
4.4 Writing
4.4.1 Serial comma (a.k.a. Oxford comma)
• Note the absence of a serial comma in the following, from the New York Times diet-supplements piece:
The authorities said they had conducted tests on top-selling store brands of herbal supplements at four national retailers -— GNC, Target, Walgreens and Walmart – and found that four out of five of the products did not contain any of the herbs on their labels.
• Using the virtual whiteboard, rewrite the following to the extent you think it necessary (these examples are from the Wikipedia entry on the serial comma):
- From an apocryphal book dedication: To my parents, Ayn Rand and God.
- A variation: To my mother, Ayn Rand, and God.
- From a newspaper article: highlights of his global tour include encounters with Nelson Mandela, an 800-year-old demigod and a dildo collector.
4.4.2 "Like" vs. "such as"
• Consider the following:
The tests showed that pills labeled medicinal herbs often contained little more than cheap fillers like powdered rice, asparagus and houseplants …. [From the New York Times diet-supplements piece]
• Guidelines:
- Use like for comparisons, e.g., They don't make cars like they used to. (Perhaps better: They don't make cars the way they used to.)
- Use such as for examples, e.g., Let's paint the house in a cool color such as blue or gray.
Reference: Cliff's Notes (cites the Chicago Manual on Style and the AP Stylebook).
4.4.3 Legalese
Short answers: Stark § 18.2
First individually, then in groups, use the virtual whiteboard to address the following. Short answers, please.
- Page 257: In the middle of the page, do you agree that the "Better" example is in fact better than the "Good" example? Argue each position.
- Page 257: At the bottom of the page, what's the danger in the "Correct" version? (Hint: Think of what might happen in the negotiation process.)
- Page 258: At the top of the page, how could the "Correct" version be rewritten to make it even more readable? (Hint: This has nothing to do with archaic language.)
Short answers: Stark § 18.3
First individually, then in groups, use the virtual whiteboard to address the following. Short answers, please.
- Is represent and warrant an example of a couplet to be avoided? Why or why not?
- Top of page 259, right-hand column: What do you think of the phrase means and includes?
- Last line of page 259: What do you think of Stark's enter into a contract with example?
- Page 260, left-hand column: In Stark's forthwith example, would promptly be a synonym for forthwith or immediately?
Exercise: Stark 18-3 (legalese)
Exercise: Stark 18-4 (legalese)
Exercise: Stark 18-5 (legalese)
Exercise: Stark 18-6 (legalese)
Exercise: Stark 18-7 (legalese)
4.4.4 "Shall cause"
World of Boxing LLC v. King, No. 14-cv-3791 (S.D.N.Y. Oct. 1, 2014): A boxer tested positive for drugs, and so his scheduled title bout in Moscow was called off. The bout's promoter sued the boxer's manager, Don King, for breach of a contract obligation stating that the manager "shall cause" the boxer to appear for the bout. U.S. District Judge Shira Scheindlin granted summary judgment that the promoter breached the contract by failing to cause the boxer to appear in condition to box. (Hat tip: Ken Adams.)
4.5 Defined terms
4.5.1 Short answers: Stark chapter 7 – defined terms
- Page 95: A financing company includes a provision in a loan agreement stating that the borrower will not make any investments other than "Permitted Investments," defined as any non-margined, non-"short" investments as long as the borrower always has at least 35% of the principal amount in "liquid" investments. Why? (Hint: Check the footnotes.)
- Page 95: In Stark's reference to the definition of business day, what might be wrong about her mention of holidays? (Hint: See the Common Draft definition of business day.)
- Page 96: How does § 7.1.2 relate to the D.R.Y. principle?
- Page 97: In Definition 1 of Force Majeure Event, what if any potential events might a party want to (i) add, or (ii) delete? (Hint: See the Common Draft force-majeure definition and notes.)
- Pages 98-100: Name all the places Stark mentions as possibilities for where to put definitions in a contract. At this stage of your experience, which one strikes you as the "best," and why? (I'm interested in your personal, subjective perspective.)
- Page 100, § 7.5.1: When might it be safe to re-use a defined term from an existing contract without modification?
- Page 101, Item #3: Can you think of any circumstances in which it might be useful to have multiple defined terms for a single definition — e.g., using both Purchaser and Buyer in the same agreement. (Hint: Think of how contracts are sometimes drafted in the real world, with parties going back and forth under time pressure and possibly borrowing language from various document sources.)
- Page 101: You are drafting a defined-terms section in a contract. You have already defined the parties' short names, Provider and Customer, in the contract's preamble. Do you include those short names in the defined-terms section? If so, how?
- Page 102: Is there any reason you might want to define a term as having a specified meaning even if it's not capitalized? (See, e.g., the Common Draft definition of affiliate.)
- Page 102, item 8: What term other than means could you use to introduce the meaning of a defined term? (Hint: Look at some of the Common Draft defined terms.)
- Page 104: In the "Wrong" and "Correct" example in the top third of the page, do you agree with Stark's position?
- Page 104, #15: How else could the "Wrong" example be fixed?
- Page 105: What's wrong with the "Wrong" version at the bottom of the page?
- Pages 105, 106-07: Do Stark's guidelines no. 18 and 20 violate the D.R.Y. principle?
- Page 106, #20: Explain this guideline in your own words.
- Page 108, #22: When might you want to "lock in" a reference to a particular version of another agreement, statute, arbitration rules, etc., as opposed to not doing so?
- Page 107, no. 21: What's a danger of defining something in term of an outside reference source?
- Page 107-08, nos. 21 and 22: What do these two guidelines have in common?
- Page 111: What could go wrong with the "permitted successors and assigns" phrase in the wording of sample clause 1.2(d)?
4.5.2 Short answers: Stark § 7.5 (defined terms guidelines)
- Of Stark's enumerated guidelines for defined terms:
- Which one strikes you as most in the "duh" [do people still say that?] category? Why?
- Which one strikes you as the most useful? Why?
- Which one do you think would be the most difficult to comply with? Why?
- Are there any guidelines that you think could be honored in the breach?
- If you're going to define a term "in line" (that is, in the body of the substantive provision and not in a separate definitions section), how can you make it easier for a later reader to find the definition when first delving into the agreement?
4.5.3 Short answers: Stark Chapter 8, action provisions
- Pages 118-19: How can the listed "self-executing" provisions in Examples 1, 2, and 3 (before the beginning of § 8.3) be rewritten as promises of future conduct? (Hint: What's the opposite of action?)
- Page 120: Of Stark's questions about payment in guideline # 2, which ones do you think should always be answered in the contract language?
- Page 122: What is a stub period?
- Page 123: Why did Stark create the table in the middle of the page? (Hint: Which version would a litigator prefer to use as a trial exhibit?)
- Page 124: Buyer pays for a purchase by giving Seller a certified check. Before Seller can deposit the check, all of Buyer's bank accounts are frozen by a court order. QUESTION: Will the bank honor the check? QUESTION: Would the result be different if Buyer had given Seller a cashier's check?
- Page 126: Will a term always begin on the effective date of the contract?
4.6 Preambles (Stark Chapter 6)
4.6.1 Stark Chapter 6 lookups
- Top of p.70: What if the drafter doesn't know the date on which the agreement will be signed? (Hint: See the bottom of p.70 and top of p.71.) Include in the preamble: 'This Agreement is effective on the last date signed as written on the signature pages (the "Effective Date"). (If there's a Definitions section, include a cross-reference to the preamble there.)
- Middle of p.71: In the two versions of dates, where exactly are the two commas?
- Bottom of p.71 and top of p.72: Why would Stark consider "This [Agreement] is made among Smith, Jones, and Doe" to be incorrect usage? I'm not sure I agree with Stark.
- Bottom half of p.73: Stark seems to hold a firm view of the right and wrong way to specify a party's state of incorporation. Do you agree with her? (Hint: Do you know for sure where a contract might be litigated?) I prefer to spell out "incorporated under the laws of Delaware" or whatever — sometimes being more explicit is preferable.
- § 6.4 - which approach to "consideration" do you prefer, and why? (Hint: Consider who and where the parties are.) I like Example 4 — a few extra words can be cheap insurance in case you end up in some court where it's important to recite consideration.
4.7 Recitals (Stark Chapter 6)
4.7.1 Short answers: Stark Chapter 6 – recitals
- Pages 80-81: Name as many reasons as you can why drafters include recitals in contracts.
- Page 82: Should factual representations be included in an agreement's recitals? Why or why not?
- Pages 82 (text accompanying n. 21) and 65-66: Why does the set of recitals on pp. 65-66 go into such detail about the transaction?
- Page 83: Which of Stark's numbered guidelines could be said to be a corrolary to the D.R.Y. principle (Don't Repeat Yourself)?
- Page 84: In the Rick's Cabaret agreement, what would Stark have to say about the specific Whereas recital at lines 47-48?
- Page 85: What's the difference between a premise and a promise? Which does Stark prefer, and why?
4.8 General provisions
4.8.1 Governing law
- Your client is a Texas company based in Houston. It is entering into a contract with a California company based in Los Angeles.
4.8.2 Assignment: Short answers, Stark chapter 16
- § 16.2.1: In Stark's hypothetical example, suppose that Ibrahim delegates his duties to Mark, but then Mark doesn't perform those duties. QUESTION: Is Ibrahim off the hook with Leslie? QUESTION: If not, what would it take for Ibrahim to make that happen?
- § 16.2.2: Suppose that Mark's contract with Ibrahim prohibits Ibrahim from assigning the contract to Mark. Can Ibrahim delegate his duties to Mark?
- § 16.2.2: Why do courts disfavor anti-assignment provisions?
- If a patent license agreement is silent about assignment, can the licensee assign the agreement? (Hint: See the notes to the Common Draft assignment-consent clause.)
- BigCo Corporation has gotten into a lot of lines of business in the course of its ten-year history. For asset protection (and the better to be able to sell off lines of business), it wants to reorganize into a holding company and a group of subsidiaries. QUESTION: What impact might the assignment clauses in its contracts have? (Hint: See the notes to the Common Draft assignment-consent clause.)
4.8.3 Jury waiver: Short answers, Stark chapter 16
- Your client, based in Houston, is entering into a contract to build an office building in Los Angeles for a company there. Your contract form includes a waiver of jury trial because your client's general counsel doesn't like arbitration but doesn't want to take a chance on what a jury might do. QUESTION: What if anything should you say to the GC? (Hint: See the Common Draft jury-waiver notes.)
4.9 Representations & warranties
4.9.1 Epistemology – how do they know?
4.9.2 Knowledge Definition
4.9.3 Inspections, audits
4.9.4 Short answers: Stark chapter 9
- Page 137, § 9.2, example near bottom of page: Why does Party A represent and warrant to Party B?
- Page 138: Stark says that "preventing litigation is one of a drafter's crucial jobs." Is that an absolute rule, or will there be situations in which the parties might be willing to take the risk of litigation in order to get to signature more quickly?
- Page 139, § 9.3.1: Since a representation relates to a present or past fact, why not represent the fact as it "currently" exists?
- Page 140: Name two cases in which a misrepresentation of a future fact might give rise to liability for the misrepresenter.
- Page 141: In example clause 4.6, how could Seller ask to "soften" its commitment to protect itself? How might Buyer respond?
- Page 141, § 9.3.2: Compare and contrast:
- "Bob paid his daughter Alice's college tuition bill"; with
- "The college tuition bill for Bob's daughter Alice was paid."
- Page 144: According to Stark, what is the "essence" of a materiality qualification to a representation or warranty?
Use the virtual whiteboard (for now):
5.1 Diet Supplements
READ: The following excerpts from the NY Times piece, New York Attorney General Targets Supplements at Major Retailers (Feb. 3, 2015)
The New York State attorney general's office accused four major retailers on Monday of selling fraudulent and potentially dangerous herbal supplements and demanded that they remove the products from their shelves.
The authorities said they had conducted tests on top-selling store brands of herbal supplements at four national retailers — GNC, Target, Walgreens and Walmart — and found that four out of five of the products did not contain any of the herbs on their labels.
The tests showed that pills labeled medicinal herbs often contained little more than cheap fillers like powdered rice, asparagus and houseplants, and in some cases substances that could be dangerous to those with allergies.
* * *
Among the attorney general's findings was a popular store brand of ginseng pills at Walgreens, promoted for "physical endurance and vitality," that contained only powdered garlic and rice.
At Walmart, the authorities found that its ginkgo biloba, a Chinese plant promoted as a memory enhancer, contained little more than powdered radish, houseplants and wheat — despite a claim on the label that the product was wheat- and gluten-free.
Three out of six herbal products at Target — ginkgo biloba, St. John's wort and valerian root, a sleep aid — tested negative for the herbs on their labels. But they did contain powdered rice, beans, peas and wild carrots.
And at GNC, the agency said, it found pills with unlisted ingredients used as fillers, like powdered legumes, the class of plants that includes peanuts and soybeans, a hazard for people with allergies.
The attorney general sent the four retailers cease-and-desist letters on Monday and demanded that they explain what procedures they use to verify the ingredients in their supplements.
(Emphasis and extra paragraphing added.)
SCAN: The Common Draft clause headings to get ideas for tools to use in the exercise below.
- You represent NileRiver.com, Inc., a new client. NileRiver is a growing Internet retailer that is competing with, and consciously patterning itself on, Amazon.com.
- The company sells house-brand diet supplements; it uses some of the same (unidentified) supplement suppliers as do GNC, Target, Walgreens, and Walmart (the retailers mentioned in the New York Times piece).
- The company's executives have called your office to ask for an urgent meeting to discuss the New York Times piece.
- You know
QUESTIONS: In your groups, brainstorm and write group answers to the following:
- What players, that is, participants in the business- and legal worlds, might "take an interest" in NileRiver's supplements? (Hint: Consider who might stand to benefit, and how, from discovering deficiences in those supplements.)
- In what general ways might those "interests" of such other participants affect NileRiver.com?
- In general terms, what business practices could NileRiver.com adopt — and require its suppliers to adopt — to protect NileRiver's customers (and itself)? Hint: In this article, search for the term "old nuclear phrase."
- All business practices cost money. What are some sources of money that might be tapped to pay for the business practices that you come up with?
- What are some sources of leverage that NileRiver might use to encourage its existing suppliers agree to adopt such business practices? (Hint: Don't limit your thinking to contract provisions alone.)
- What are some actions that NileRiver could take to increase the company's confidence that its suppliers are in fact conforming to those practices that they agreed to adopt? (Note the use of the term increase the company's confidence, as opposed to ensure, in the previous sentence.)
- What are some actions NileRiver could take if it discovered that one of its suppliers was not conforming to the agreed business practices?
- What might NileRiver want its suppliers(s) to do in the event of a legal investigation like the one referred to in the New York Times piece?
5.2 A painting contractor's employee steals stuff
Suppose that a painting contractor enters into an agreement to paint the interior of the offices of a large company ("customer"). The agreement requires the painting contractor to cause background checks to be performed on any individual engaging in any of the following "Restricted Activities":
- working on-site at any premises of the customer;
- having access (including for example remote access) to the customer's equipment or computer network;
- having access to the customer's confidential information;
- interacting with the customer's employees, suppliers, or customers; or
- the following other activities: [None specified].
Now suppose that:
- A particular employee of the painting contractor engages in more than one of the Restricted Activities.
- The painting contractor's HR people slipped up and neglected to have a background check performed for that employee.
- A background check would have revealed that the employee had been arrested several times for burglary and had served time in prison after one of those arrests.
- The employee steals thousands of dollars' worth of stuff from desks and purses in the customer's offices.
- The customer sues the painting contractor in Texas state court for breach of the agreement's requirement to perform background checks.
- The "Plaintiff's Original Petition" includes a verbatim quotation of the background-check requirement in the contract.
- The painting contractor's trial counsel moves to dismiss the case on the pleadings.
- The motion to discuss argues that, under the literal language of the agreement, a background check wasn't required for that particular employee, because the employee performed more than one of the Restricted Activities.
- Is there any way the italicized parts of the contract language could be revised to negate such an argument?
- Name two other types of contract provision that could offer at least some remedy to the customer for theft by the painting contractor's employees? (Hint: Both start with the letters "in.") Why might the customer insist on including both provisions in the agreement?
- Why did the painting contractor's trial counsel move for dismissal on the pleadings and not for summary judgment? Would the answer have been different if the plaintiff's original petition hadn't included a verbatim quotation? (Don't spend a lot of time on this question; it's for your general edification.)
- Could the criminal-past restriction in the contract cause either the painting contractor or the customer to be challenged by third parties? (Hint: See the discussion in the Common Draft notes.)
5.3 Paragraph organization
- Breaking up paragraphs: Skim this essay. Of the alterantives presented after the real-world example, what would be your preferred way of making the example more readable?
- Stark sections 19.1; 19.2; 19.4; 19.5 (formatting)
- Sheryl Sandberg employment agreement (paragraph organization only)
- Rick's Cabaret Purchase & Sales Agreement (paragraph organization only)
- Continental Airlines-United Airlines merger agreement (paragraph organization only)
5.4 Numbers
Spell out one to ten: There will be four students per negotiating team.
Use numbers for 11, 12, 13, etc.: There are 12 students in the class.
Use all-numbers instead of mixing numbers and spelled-out words.
- Awkward: The quiz will contain ten to 12 questions.
- Better: The quiz will contain 10 to 12 questions.
Spell out "million" for numbers ≥ 1 million. see, e.g., the merger agreement between United Airlines and Continental Airlines, which uses that style.
- Awkward: More than 300,000,000 people live in the United States.
= Better: More than 300 million people live in the United States.
Some partners will insist that you include both spelled-out numbers and parenthetical numerals. By all means follow their instructions in this regard, but that's an archaic and potentially-dangerous practice, because there's a non-trivial chance that an inconsistency will appear during editing and be overlooked.
As one example, the merger agreement between United Airlines and Continental Airlines, which had high-powered law firms on each side of the table, did not use the archaic style, but instead used the better approach below:
- Archaic: Three hundred million dollars ($300,000,000.00)
- Better: $300 million
- Dangerous: Three hundred million dollars ($250,000,000.00) — which is it?
- Instructions will be given orally. [BONUS QUESTION: Are written instructions "verbal"?]
5.5 Currency: Tues. Jan. 28
There's no need to repeatedly say "X amount of money in United States dollars" – put that in the Definitions section (e.g., "all references to dollar amounts are in United States dollars").
If there's any chance of confusion, use the standard abbreviation USD to indicate U.S. dollars, e.g.: Buyer will pay Seller USD $30 million.
Abbreviations for other countries' currencies can be found at Wikipedia
5.6 Percentages: Tues. Jan. 28
Spell out percentages at the beginning of a sentence; otherwise, just use the Arabic numerals.
- Archaic: Thirty percent (30%) of the proceeds will be used to repay the Loan.
- Better: Thirty percent of the proceeds will be used to repay the Loan.
- Alternative: Of the proceeds, 30% will be used to repay the Loan.
- Dangerous: Thirty percent (20%) of the proceeds will be used to repay the Loan — which is it?
5.7 Use industry-standard terminology (when possible): Tuesday Jan. 28
When you're drafting a contract, you'll want to try to avoid coining your own non-standard words or phrases to express technical or financial concepts. If there's an industry-standard term that fits what you're trying to say, use that term if you can. Why? For two reasons:
• First, someday you may have to litigate the contract. You'll want to make it as easy as possible for the judge (and his or her law clerk) and the jurors to see the world the way you do. In part, that means making it as easy as possible for them to understand the contract language.
The odds are that the witnesses who testify in deposition or at trial likely will use industry-standard terminology. So the chances are that the judge and jurors will have an easier time if the contract language is consistent with the terminology that the witnesses use — that is, if the contract "speaks" the same language as the witnesses.
• Second — and perhaps equally important — the business people on both sides are likely to be more comfortable with the contract (and to be better able to spot errors) if you use terminology with which they're familiar.
5.8 Don't count on the spell checker: Tues. Jan. 28
- [Public] company
- [Disk] surgery (in a court filing!)
- Recall of frozen ground-beef panties
5.9 D R Y — Don't Repeat Yourself: Tues. Jan. 28
Suppose you inadvertently cover the same subject in two different provisions in your draft contract. The odds are that at some point in the negotiation process, you'll revise one of the provisions but not the other. So then which provision are the parties supposed to follow — or a judge supposed to enforce?
5.10 Contract review mechanics: Tues. Jan. 28
Stark Chapter 28 (contract review & comment)
Stark Chapter 30 (ethics)
Common Draft, Redlining Representation, with my blog explanation (including linked posts)
- List all the ways you can think of to revise a draft contract in a way that properly alerts the other side to the specific changes you made
5.11 Signatures
- Rick's Cabaret Purchase & Sales Agreement (signature blocks only)
- Note the signature block style
- Line 875: Note the limited-purpose signature block
- Stark Chapter 17 (signatures)
- "Signatures may be electronic" in the Common Draft clause collection (be sure to skim the notes).
- E-SIGN Act, 15 USC § 7001 et seq.
- The following sections of the Texas Uniform Electronic Transactions Act (UETA), Tex. Bus. & Comm. Code ch 322;
- § 322.002 (definitions)
- § 322.003 (scope)
- § 322.005
- § 322.007
- § 322.012
- Texas statute of frauds for sales of goods, Tex. Bus. & Comm. Code § 2-201
- Stark Exercise 17-1 (signature)
- Who should sign a contract, and why?
5.12 Post-signature changes to document, exhibits, etc.
5.12.1 Facts
Yesterday your client and "the other side" signed a contract that included several exhibits.
You have all signed copies of the contract in your possession and are supposed to send one fully-signed copy to the other side today.
You just noticed that one of the exhibits includes a significant typographical error.
5.12.2 Question: Just change it?
Can you just change out the exhibit pages in the various copies before you send the fully-signed copy to the other side? Why or why not?
- Alison Frankel, After Dodgers sale, Bingham question is still open (March 30, 2012), at http://goo.gl/5xb72.
- Andrew Chow, Post Dodgers Sale: Frank McCourt May Still Sue for Botched Pre-Nup (Apr. 3, 2012), at http://goo.gl/SA7Vs.
5.12.3 Question: What other options?
How else could you handle this situation?
5.13 Switched-out pages?
5.13.1 Facts
Your client manually signs two originals of a contract. You mail both originals to the other side with a cover letter asking for one of the fully-executed originals to be returned to you.
A couple of days later, you receive a fully-executed original; per the client's request, you put it in your file.
Months later, a question comes up about the contract. You look at your file copy.
A significant point in the contract isn't drafted the way you remember; it's different from the earlier drafts.
You contact the other lawyer, who says he doesn't know what you're talking about.
5.13.2 Question: Prevention?
How could you have prevented this from arising?
- Write out your own answer
- Compare your answer with those of your nearby "partners"
- Stand by for class discussion
SUGGESTED READING: Stark § 17.6
5.14 The Addams family wants to sign a contract while en route from Hawai'i
5.14.1 Facts
Your client is Addams Investments, L.P., a "family" limited partnership of the very-wealthy Addams clan in Galveston. The sole general partner of the limited partnership is Addams Operations, Inc.
It's 12:00 noon Houston time on March 31. The president of Addams Operations, Ms. Wednesday Addams, is on the phone. It's a bad connection, but she wants to talk about a contract that you and she have been negotiating for Addams Investments, L.P.
Under the contract, will buy a large quantity of widgets from Widgets, Inc., a Houston company that recently went public. (Family patriarch Gomez Addams is convinced the family will make a killing in the widget market.)
Wednesday Addams says that she has talked by phone with her opposite number at Widgets, Inc.; she reports that Widgets, Inc., has agreed to the last contract draft that you sent over, and that everyone is ready to sign.
The Widgets, Inc. people really, really want to get the contract signed and delivered today, March 31. They've told Wednesday Addams that they're willing to make significant pricing concessions to make that happen.
There's a problem, though: As you learn from Wednesday Addams over the bad phone connection, she and the rest of the Addams family are at the end of a rugged backpacking vacation on a small, primitive island in Hawai'i. The island has no Internet service and barely has cell phone service.
The family has just emerged from the back country. The plan is for everyone, smelly as they are, to take a private plane from a dirt landing strip on the island to the Honolulu airport. A shuttle bus will take them to a nearby hotel for a quick shower and change of clothes. The family will then board a United Airlines "redeye" overnight flight that will land in Houston on the morning of April 1.
One more thing, she says: In the interest of traveling as light as possible, no one in the group brought a laptop.
5.14.2 Exercise: Draft the signature block
How should the contract signature block for Adams Investments, L.P., be written?
5.14.3 Question: Sign on April 1?
Why might the Widgets sales rep be so eager to get the contract signed on March 31? Could that pose a problem? What about just signing it on April 1 when the family gets back to Houston?
5.14.4 Question: Signature-delivery mechanics?
Is it possible for you to "make it happen" for the contract to be signed and delivered to Widgets, Inc. today, March 31? If so, how might you go about it?
5.15 This diamond ring doesn't shine for him anymore
5.15.1 Facts
Your client TexBling is a Houston company that sells jewelry on-line, but only to Texas customers. One particular customer is Nick, an individual living in Houston.
On January 17, Nick clicks on "I agree" to buy a $20,000 diamond engagement ring. He wants to pop the question to his girlfriend, Nora, at a Houston Rockets game on January 26. He has arranged with the Rockets to show his proposal on the Jumbotron at the Toyota Center.
The price of the ring would bust out Nick's credit-card limit, so he checks the box to pay C.O.D. instead and borrows the cash from his parents.
TexBling's Web site says that with ground shipping, the ring should arrive in 7 to 10 days, that is, some time between January 24 and January 26. Nick figures that's good enough, so he doesn't pay extra for second-day air.
January 26 arrives, but the ring doesn't. Nick goes ahead anyway with proposing to Nora at the Rockets game.
To Nick's horror, though, Nora turns him down, bursts into tears, and storms out of the arena to get a cab home — live on the Jumbotron and, as it happens, on national TV. (Here's a real-life example — supposedly.)
The next day, the delivery van arrives with the engagement ring from TexBling. The grief-stricken Nick no longer wants it, though. He refuses to take delivery, and he also refuses to pay for it. (Cue Gary Lewis and the Playboys' 1965 hit This Diamond Ring Doesn't Shine for Me Anymore.)
TexBling, the jewelry vendor — heedless of the potential bad publicity — tells you it wants you to sue Nick for breach of contract in failing to pay for the ring.
5.15.2 Question: Statute of frauds defense?
Could Nick assert a statute-of-frauds defense, on grounds that he never signed a contract? Briefly explain your answer.
5.15.3 Question: Hard copy signature needed?
Could Nick assert that TexBling failed to obtain his handwritten, hard-copy signature, agreeing that it was OK to use electronic signatures? Briefly explain your answer.
5.15.4 Question: Paperless records OK?
Back when TexBling consulted you about setting up their on-line sales operation, should you have told them to be sure to save a hard-copy printout of Nick's "I agree" contract form to make it enforceable? Please explain your answer.
5.15.5 Suggested reading
5.16 Notarizing a document
5.16.1 Facts
Your client, Landlord, has negotiated a five-year commercial lease agreement for one of its office buildings. The tenant's lawyer wants the signers to have their signatures notarized. Landlord agrees to have the signatures notarized.
5.16.2 Question: Why ask for notarization?
Why might the tenant's lawyer want the lease agreement to be notarized? Would that be in your client Landlord's best interest?
- J. Allen Smith & Michael R. Steinmark, Tenants' Rights Under Unrecorded Leases, at http://goo.gl/S2prC (May 1, 2010)
- Tex. Prop. Code §§ 12.001, 13.001, 13.002
5.16.3 Question: Notarize without a seal?
5.16.4 Question: Identifying the signer
What must your secretary do before signing the notary certificate to confirm that the signers are who they claim to be?
- Tex. Civ. Prac. & Rem. Code § 121.005(a)
5.16.5 Question: Record of identification
Is the notary's certificate required to say anything in particular about the identity of the signer?
- Tex. Civ. Prac. & Rem. Code § 121.005(b)
5.16.6 Question: What to do after notarizing?
5.16.7 Question: Attorney as notary?
If no notary is around, can you notarize the signatures as an attorney? Should you?
- Tex. Civ. Prac. & Rem. Code § 121.001
- Tex. Discipl. R. Prof. Conduct 3.08 ("Lawyer as Witness").
5.16.8 Question: Notarize remotely?
Surprise! The person who will sign the lease for the tenant has gone on a business trip to Kuwait and will FAX her signed signature page to you. Can your secretary, who is here in Houston, notarize that signature page?
- Tex. Civ. Prac. & Rem. Code § 121.004(a)
5.16.9 Question: Notarizing in California
Another document in the transaction must be signed and notarized by an individual who's in California.
- Is there anything special that's required for the notary certificate?
- What downside risk does the notary have if the notary is asked to sign the certificate in the absence of the individual who's going to sign the document?
5.16.10 Question: Notarization in a foreign country?
Who in Kuwait could "notarize" the signature?
- Tex. Civ. Prac. & Rem. Code § 121.001(c), (d)
Pre-nup voided because the notary certificate for the husband's signature didn't recite that the notary had confirmed his identity – http://law.justia.com/cases/new-york/court-of-appeals/2013/94.html
5.18 Warranties: CBS v. Ziff-Davis, Inc.
Read: CBS, Inc. v. Ziff-Davis Publishing Co., 75 N.Y.2d 496, 553 N.E.2d 997 (1990)
What was the primary warranty that Ziff-Davis supposedly violated, according to CBS?
At what point in the progress of the transaction did CBS conclude that Ziff-Davis wasn't in compliance with the warranty?
What legal options and practical options did CBS have when it discovered what it believed was an accounting problem?
What was Ziff-Davis's position as to whether CBS could assert a claim for breach of warranty?
What was CBS's position?
What did the NY Court of Appeals have to say about Ziff-Davis's position concerning CBS's claim for breach of warranty?
5.19 Generally accepted accounting principles (GAAP)
5.19.1 Question 7.1: Form 10-K
What is a Form 10-K? What kinds of companies care about it, and why?
SUGGESTED READING: The beginning of the SEC's How to Read a 10-K
5.19.2 Question 7.2: Form 10-Q
How does a Form 10-Q differ from a Form 10-K?
- The beginning of the SEC's How to Read a 10-K
- The beginning of the Wikipedia article on Form 10-K
5.19.3 Question 7.3: GAAP and the earnings process
Buyer sends a purchase order for 50,000 widgets to Widget Supplier, Inc. (WSI) at the list price of $1.00 each. WSI has the required number of widgets in inventory.
As previously requested by WSI's sales representative, Buyer wire-transfers a 50% deposit to WSI.
QUESTION: If WMI does its accounting in conformance with GAAP, what percentage of the $50K order can WSI immediately book as revenue?
RESOURCES: Wikipedia
5.19.4 Question 7.4: Significance of GAAP
Why do publicly-traded companies care about GAAP?
SUGGESTED READING: The SEC's How to Read a 10-K (read the beginning, then scroll down to Item 8)
5.19.5 Question 7.5: GAAP in Europe
What if any significance does "GAAP" have in Europe?
- The beginning of the Wikipedia article on GAAP
- The beginning of the Wikpedia article on IFRS
5.20 Representations
5.20.1 Question 8.1: Differences between rep and warranty?
RESOURCES: Reps and warranties
5.21 Reps and warranties strategy
FACTS: You are selling a car to a stranger. You don't know of any mechanical problems.
QUESTION: If the stranger asks you to represent and warrant that the car has no problems, how might you respond?
5.22 A sales quotation for keychain split rings
5.22.1 Facts
Your client is Seller L.P., a Houston-based Texas limited partnership that manufactures novelty items. You're on the phone with one of Buyer's managers, Betty Boop, with whom you've dealt before. Betty says:
- Buyer has a short-notice opportunity to make 10,000 custom-branded novelty keychains for a buyer that wants to use them as giveaways at a Hong Kong trade show.
- This wouldn't be a new product line for Buyer, which often manufactures customized keychains.
- Buyer's keychains typically include the usual metal split rings that can tear your fingernail when you try to add or remove a key.
- Buyer recently used up all of its inventory of split rings; Betty has been tasked with procuring 10,000 of them as soon as possible.
- Betty has found a supplier, Seller Corporation of Galveston, that has enough of the split rings in stock.
- Sam Seaborn, one of Seller's sales representatives, has sent Betty an email that includes a Word document as an attachment. He wants Betty to print, sign, and date the attachment and FAX it back to him.
- Betty has forwarded Sam's email and its attachment to you.
- The text of the Word document attached to Sam's email, in its entirety, is the following:
Buyer: Betty Boop
Product: One-inch metal split rings
Quantity: 10,000.
Price: $1.00 each plus shipping.
Terms: Half up front, balance net 30 days after delivery.
___________
 Betty Boop
____________
 Date
5.22.2 Question 1: "Merchant"?
For purposes of the Uniform Commercial Code (UCC), would a court likely hold that Buyer L.P. is a "merchant" with respect to metal split rings? Explain briefly.
- Texas UCC definition of "merchant," Tex. Bus. & Com. Code § 2.104
- Douglas K. Newell, The Merchant of Article 2, especially text accompanying n.52, 7 Valp. L. Rev. 307, 317 (1973)
5.22.3 Question 2: Sufficient detail?
- One of the parties later wants to challenge the enforceability of the sales quotation as a contract on grounds of "indefiniteness," because the sales quotation supposedly didn't contain enough detail.
- The sales quotation is otherwise enforceable as a contract.
Would such a challenge be likely to succeed? Explain briefly.
- Texas statute of frauds for sales of goods, Tex. Bus. & Com. Code § 2.201
- Contract formation in general, Tex. Bus. & Com. Code § 2.204(c)
5.22.4 Question 3: Formation of a contract?
- The sales quotation contains enough detail to be enforceable as a contract if duly signed and delivered.
- Betty prints out the sales quotation; manually signs it with pen and ink; FAXes the signed document back to Sam Seaborn as he requested; and shreds the signed original.
On these assumed facts, would a court likely hold that a contract was thereby formed? Explain briefly.
- Texas Uniform Electronic Transactions Act, Tex. Bus. & Com. Code §§ 322.005, 007, 008(a), 009
5.22.5 Question 4: Federal E-SIGN Act applicability?
- Federal Electronic Signatures in Global and National Commerce Act (E-SIGN), 15 USC § 7001(a)
5.22.6 Question 5: Delivery location
ADDITIONAL FACTS: Sam Seaborn, having received Buyer's 50% down payment, sends Betty Boop an email saying that the split rings are ready to be picked up at Seller's warehouse in Galveston.
Would Seller likely be found in breach of contract if it did not deliver the split rings to Buyer's Houston offices? Explain briefly.
- Absence of specified place for delivery, Tex. Bus. & Com. Code § 2.308
5.22.7 Question 6: Payment terms
(a) In the "Terms" line, what does "net 30 days" mean?
(b) If the sales quotation hadn't specified payment terms, when would have payment have been due?
- Wikipedia article on Net 10, Net 15, etc.
- Absence of specific time provisions, Tex. Bus. & Com. Code § 2.309
- Open time for payment, Tex. Bus. & Com. Code § 2.310
5.22.8 Question 7: Form of signature
Given that your client is Buyer L.P. and not Betty Boop personally, would you advise Betty to sign the sales quotation in its present form? Explain briefly.
5.22.9 Question 8: Liability for payment
SUPPOSE: Betty sends Sam a check, drawn on a Buyer L.P. account, for the 50% deposit, and takes delivery of the metal split rings. But then Buyer L.P. goes out of business before paying Seller's invoice for the remaining balance. Seller then sues Betty, personally, for the balance.
Betty moves for summary judgment that she is not personally liable because (she says) the contract was with Buyer L.P. Seller cross-moves for summary judgment that Betty is indeed personally liable.
(a) If you were the trial judge, how would you rule? Explain briefly.
(b) What advice would you have given Betty if she had consulted you before signing and
- Summary judgment, Tex. R. Civ. P. 166a(c).
5.22.10 Question 9: Enforcement
ASSUME ARGUENDO: Sam Seaborn tells Betty that Seller Corporation is going to file suit for the 50% balance due.
Will Seller Corp. necessarily have to hire an attorney? Explain briefly.
- Small-claims court, Tex. Gov. Code § 28.003(a), (e)
5.22.11 Question 10: Merchandise quality
- When Buyer L.P.'s people unpack the 10,000 metal split rings, they find that one of them is so defective as to be unusable. The other 9,999 of them are fine.
- Betty Boop contacts Sam Seaborn and asks for the defective split ring to be replaced; Sam refuses, saying that Buyer L.P.'s workers must have broken the defective ring.
- Enraged by Sam's obstreperousness, the CEO of Buyer L.P. decides to sue Seller Corp. for breach of warranty because of the defective split ring.
Given the absence of any warranty language in the sales quotation, is Buyer L.P. likely to recover damages for breach of warranty? Explain briefly.
- Implied warranty; merchantability; usage of trade, Tex. Bus. & Com. Code § 2.314
- Definition of "fungible," Tex. Bus. & Com. Code § 1.201(b)(18)
- Definition of "fair average quality," discussed in Note, Implied and Express Warranties and Disclaimers Under the Uniform Commercial Code, 38 Ind. L.J. 648 (1963), at 656, specifically the text accompanying nn.48-49.
5.22.12 Question 11: Stolen property
- Split Rings, Inc., one of Seller Corp.'s competitors, successfully sues Buyer L.P. for recovery of the 10,000 split rings, on grounds that Seller Corp. stole the rings from Split Rings, Inc.
- The sales quotation also contains the following language: All goods are provided "as is, with all faults."
Does Buyer L.P. have any recourse against Seller Corp.?
5.23 Warranty-of-quality comparison: Honeywell vs. Honeywell
Briefly summarize the differences between the warranty- and remedy provisions that Honeywell sets out in
- its terms of sale, versus those in
- its terms of purchase,
on the following subjects:
- To whom does the seller make the warranty?
- For goods: To what extent is the intended use of the goods relevant?
- For services: To what quality standards will services conform?
- With what laws will the seller comply?
- How long does the Warranty Period last?
- Are the stated warranties the exclusive ones?
- How restricted are the remedies for breach of warranty?
5.24 Magnuson-Moss Act
5.24.1 Question 11.1: "Limited" warranties
Why do so many consumer-product warranty clauses say "Limited Warranty"?
5.24.2 Question 11.2: Warranty statements
Under federal law, what are the three minimum requirements for a warranty statement for a consumer product?
5.24.3 Question 11.3: Implied warranty disclaimers
Does it make sense for a seller of a consumer product to offer a written warranty?
5.24.4 Resources
- Federal Trade Commission, Understanding the Magnuson-Moss Warranty Act (especially What the Magnuson-Moss Act Requires and What the Magnuson-Moss Act Does Not Allow)
5.25 Warranty disclaimers in England
5.25.1 Homework
What should the seller have done differently in the KG Bohminflot case? Include a disclaimer of implied conditions as well as implied warranties.
5.25.2 Exercise: Facts
- Your client, Seller, manufactures widgets.
- Seller's CEO, while on a vacation in London, had the good fortune to make friends with a prominent British industrialist. Seller's CEO landed a big order to deliver 1 million widgets to the industrialist's company in Liverpool.
- Seller's standard terms of sale includes:
- a statement of limited warranties and remedies; and
- the following statement: "ALL OTHER WARRANTIES ARE DISCLAIMED."
(a) Whose law applies? Probably English.
(b) Suppose that English law applies. Will Seller's disclaimer be enough to disclaim all potential liability for implied statements about the widgets? No - need disclaimer of implied conditions too.
(c) Suppose that the U.S. Uniform Commercial Code applies. Will Seller's disclaimer be enough to disclaim an implied warranty of title? (Hint: Look at UCC article 2; search for "title.") Under UCC § 2-312(2), the implied warranty of title must be expressly disclaimed (or the disclaimer must be apparent from the circumstances).
(d) Could Seller's disclaimer language be improved? Yes – see, e.g., the Common Draft warranty disclaimer language.
5.26 Limitations of liability
5.26.1 Facts
Your client, Buyer, ordered a large quantity of widgets from Seller, which uses a standard terms-of-sale form copied essentially verbatim from the Honeywell terms of sale.
Seller, however, was unable to deliver the widgets on time. Your client, Buyer, had to "cover" the purchase by ordering rush delivery from another manufacturer.
To find the substitute widgets, Buyer had to spend a fair amount of time and money on, for example:
- travel expenses to visit the other manufacturer's factory, and
- testing of the other manufacturer's widgets to make sure they would meet Buyer's requirements.
5.26.2 Question 13.1: Reimbursement of cover expenses
Under § 13 of the Honeywell terms of sale and UCC 2-715(1), can Buyer recover the expenses mentioned above from Seller as part of its "cover" damages?
5.26.3 Question 13.2: Carve-outs from limitations of liability
In § 13 of the Honeywell terms of sale, why does the last sentence carve out personal injury or death?
5.26.4 Resources
- Article on limitations of liability under UK law
5.27 Indemnities
5.27.1 Fact Pattern 1
You represent General Contractor ("GC"), which has won a bid to build a skyscraper in the middle of Memorial Park in Houston.
As is customary, GC will hire a number of subcontractors. GC wants your firm to draft a template contract for use with the subcontractors.
The supervising partner at your firm asks you to draft a "knock for knock" indemnity agreement.
- Under Texas law, could a knock-for-knock indemnity agreement even be enforceable on these facts?
- Under Louisiana law, would a knock-for-knock indemnity agreement even be enforceable on these facts?
- Assume arguendo that Texas law permits knock-for-knock indemnities in these circumstances. Are there any particular requirements that the contract language would have to meet to be enforceable?
- Under Texas law, how could you make an indemnity obligation "conspicuous"?
- Assume arguendo that a knock-for-knock agreement would not be per se unenforceable under Texas law. Draft a basic clause to that effect. Feel free to adapt whatever language you encounter in your research.
5.27.2 Fact Pattern 2
Suppose that:
- You draft an indemnity obligation that does not expressly require the subcontractor to defend your client, the general contractor, from claims, but merely obligates the subcontractor to indemnify the general contractor.
- An employee of the subcontractor writes a letter to the general contractor, asserting a claim. Assume for this purpose that the employee's claim comes within the scope of the subcontractor's indemnity obligation.
- The general contractor spends some money on outside-counsel fees investigating the claim.
- The general contractor and the subcontractor employee reach a settlement agreement, with the general contractor paying the employee a nominal sum — but the fees and expenses billed by the general contractor's outside counsel for investigating the claim are not insignificant.
- Must the subcontractor reimburse the general contractor for its outside-counsel fees and expenses?
- Would your answer be different if all of this were taking place in Los Angeles instead of Houston?
5.27.3 Resources
- Notes to the Common Draft Defense Requirement clause
5.27.4 Other resources (read later)
Indemnities and Defense in General
Knock-for-knock indemnities:
- Knock for Knock Indemnity (a good summary)
- Wendy Ng presentation slides
- Paul Dean and Jean Koh, Another victory for knock for knock clauses (2010).
- Wikipedia article on knock for knock agreements (analogous but not directly on point)
- David Gardner, The Hidden Dangers of Knock for Knock Indemnities (2009)
Texas indemnification law:
Anti-indemnity statutes:
- Heather E. Asselin & Sam K. Arora, New anti-indemnity law is a game changer — what you need to know (2011)
- Baker Botts, Texas Anti-Indemnity Statute (2011)
- Meagan E. Messina, Recent Changes to Louisiana's Anti-indemnity Legislation (2012)
Duty to defend:
- California law cheat sheet
- Gilson S. Riecken, The Duty to Defend under Non-Insurance Indemnity Agreements … (search for "Texas")
5.28 Most-favored-customer pricing
5.28.1 Facts
Your client, Seller, has asked you to review a purchase order from Buyer. The PO includes two pricing clauses that appear to have been copied essentially verbatim from sections 12 and 13 of the Honeywell terms of purchase.
5.28.2 Questions
- How might Seller respond to Buyer about the most-favored-customer clause?
- What happened to Oracle when it breached its most-favored-customer clause with the U.S. Government (in its GSA contract)?
- What specifically did Oracle do that brought down the government's wrath on it?
- How much money did the whistleblower get for his trouble?
5.28.3 Resources
- Bloomberg article on Oracle settlement
5.28.4 Other resources (read later)
- Five potential responses to a bigger company's onerous contract demands
- Best Pricing Clauses (from a customer's perspective)
- Most Favored Customer Clauses (from a customer's perspective)
5.29 Insurance
5.29.1 Resources
- Insurance-coverage basics
- Insurance certificate basics
- Additional-insured endorsements
- Honeywell terms of purchase, § 26; see also § 10.2, third-to-last sentence, and § 40.
- Damien Magnuson, Why E&O Brokers Should Approach Additional Insured Requests With Caution (Jan. 2010)
5.29.2 Facts
- You represent ChemCo, which owns and operates a chemical refinery in Pasadena.
- ChemCo has a periodic maintenance shutdown scheduled for some of its equipment scheduled for July. ChemCo is interested in engaging Provider to do some of the maintenance work. Provider's workers would be coming onto ChemCo's site for this purpose.
- Provider has not only commercial general liability ("CGL") insurance coverage, but also professional-liability coverage, also knownn as errors-and-omissions ("E&O") coverage.
- The ChemCo manager with whom you are working wants Provider to designate ChemCo as an "additional insured" on Provider's E&O policy. The manager reasons that this will give ChemCo an independent bucket of money against which it can make claims.
5.29.3 Questions
- What types of insurance coverage should ChemCo ask Provider to carry for this purpose?
- Should ChemCo ask for Provider's policy to be an "occurrence" policy or a "claims-made" policy?
- Should ChemCo ask to be named as an additional insured on Provider's policy? Why?
- Would you expect Provider to push back in response to the additional-insured requirement? Why or why not?
- Would ChemCo actually be able to make claims against Provider's E&O policy?
- How would you advise the ChemCo manager about whether, and how, to proceed with his idea about making ChemCo an additional insured? [Discuss with your partner(s).]
5.29.4 Negotiation strategies
If you represent a seller, should your "standard" T&Cs include an insurance provision? Why or why not? (Discuss)
5.29.5 Certificate
- The contract draft requires Provider to maintain certain levels of insurance.
- Before signing the contract, ChemCo asks Provider for a copy of its insurance certificate.
- Provider's sales manager, Sam, notices that Provider's CGL and E&O insurance have expired. Sam is fairly sure that the Provider finance people are in the process of negotiating new policies with a new carrier. So Sam electronically changes the expiration date on the old certificate of insurance and emails it to his contact at ChemCo.
- After the contract is signed, Provider's finance people put in place new CGL and E&O coverage with a new carrier.
- Subsequently, Provider's workers accidentally injure a visitor to the ChemCo premises.
QUESTION: What are the parties' legal and practical positions?
5.30 Ambiguities and vagueness
These will be done as on-line polls followed by class discussion
- 17.1 "St. Arnold's will ship 1,000 cases of Lawnmower to Labatt's in Ontario for $5 per case."
- 17.2 "St. Arnold's will ship 1,000 cases of beer to Labatt's in Ontario for $5 per case."
- 17.3 "I can't tell you how much I enjoyed meeting your husband."
- 17.4 "Prostitutes appeal to Pope"
- 17.5 "No litigation against Borrower is pending or threatened to Borrower's knowledge"
- 17.6 "The Trust may donate funds only to charitable and educational institutions"
- 17.7 "I will give you and your husband $1 million"
- 17.8 "Contractor's employees may not enter the Premises unless they are 21 years old."
- 17.9 "The judge sentenced the killer to die in the electric chair for the second time."
- 17.10 "Bids may be submitted until March 1"
- 17.11 "The lease expires at 12:00 a.m. on March 1"
5.31 Amendments and waivers in writing
5.31.1 Facts
- Seller, a vendor of widgets, and Buyer have a contract under which Seller will deliver widgets to Buyer whenever Buyer submits and Seller accepts a written purchase order.
- The contract states the pricing of the widgets, and also states that shipping charges are extra.
- The contract contains a clause requiring amendments to the contract and to any purchase order to be in writing.
- The contract contains a similar clause requiring waivers to be in writing.
- During their business together, employees of the parties exchange a lot of emails, instant messages, and cell-phone text messages.
- Buyer submits its purchase order #7833; Seller accepts the PO.
- In a subsequent text-message exchange with a Buyer employee, a Seller employee says "whoops - can't deliver PO # 7833 on Tues – how about Fri?" The Buyer employee responds "np" Seller's employee responds "thx"
- Later, the same employees talk to each other via Skype video about the same purchase order. The Seller employee tells the Buyer employee that Seller's costs have gone up, and that Seller is going to have to charge Buyer a total price that is 3% higher than the (previously-agreed) pricing stated in the P.O. The Buyer employee says "we can live with that if you can throw in free shipping."
5.31.2 Instructions
For this problem set, half of the teams in the class are attorneys for Buyer; the other half are attorneys for Seller.
5.31.3 Questions
18.1 Apropos of the the text-message exchange:
(a) What if any additional facts might you want to find out?
(b) Given only the stated facts, how would you initially advise your client about whether the text-message exchange constitutes a binding amendment? Explain.
(c) What might you say to the other side to try to get past this situation? Explain.
18.2 Apropos of the Skype video conversation:
(a) What if any additional facts might you want to find out?
(b) Given only the stated facts, how would you initially advise your client about whether the Skype video conversation constitutes a binding amendment? Explain.
(c) What might you say to the other side to try to get past this situation? Explain.
- 18.3 Buyer's CFO claims that Buyer is now entitled to free shipping on future orders. Advise the client and deal with the other side.
- 18.4 How, if at all, could the contract drafter have taken advantage of New York state's General Obligations Law § 15-301? (Careful — it's a two-part answer.)
5.31.4 Suggested reading
- Amendments must be in writing
5.32 Amendments - unilateral
5.32.1 Facts
- Your client is Videos Now!, a start-up video streaming service that wants to compete with NetFlix.
- VN! has asked you to draft a set of terms of service for its Web site — the idea is that VN!'s users will be required to agree to the terms of service by clicking on an "I agree" button when they register to use the VN! service.
- VN! wants the terms of service to include, among other things:
- A mandatory arbitration clause that, among other things, prohibits class-action arbitration; and
- A unilateral-amendment clause stating that VN! can modify the terms of service at any time.
5.32.2 Questions
- 19.1 On the facts given, would the terms of service be enforceable? Explain.
- 19.2 How would you advise Videos Now! about its request for these two particular clauses? Explain. Consider (perhaps among other things):
- whether any enforceability problems might arise
- what if anything could be done to modify the clause(s) to give them a better shot at enforceability.
5.32.3 Suggested reading
- Electronic signatures
- Amendments - unilateral
5.33 Attorneys' fees
5.33.1 Facts
- You represent Buyer, which uses a standard purchase order form with lots of fine print on the back.
- The attorneys' fees clause in Buyer's PO form says that if Buyer ever successfully sues Seller, then Seller will reimburse Buyer for its reasonable attorneys' fees incurred in the action.
5.33.2 Questions
- On these facts, if Seller sues Buyer for non-payment and wins, will Buyer have to reimburse Seller for its attorneys' fees for the collection action? (Careful – do you know enough facts to make this determination?)
- Same question, with California law applying.
- Same question, with Texas law applying.
- Same facts, but this time Seller sues Buyer and loses, and Texas law applies.
5.33.3 Suggested reading
- Notes to the Common Draft attorneys' fees clause (scroll down to Texas and California rules)
5.34 Assignment of employment agreement
5.34.1 Suggested reading
- Assignment of Agreement
5.34.2 Facts
A friend of yours is about to start a new job. Her new employer has asked her to sign an employment-agreement form. She has asked you to take a look at it.
- The employment agreement says that the employee may not assign the agreement.
- The employment agreement is silent as to whether the employer may assign the agreement.
5.34.3 Questions
- 21.1 Can your friend assign the employment agreement, that is, hire someone to do her job for her?
- 21.2 If instead the agreement were silent on the employee's right to assign, could your friend assign the agreement?
- 21.3 Can the employer assign the employment agreement, e.g., if the employer decides to sell off, to another company, the division in which the employee works?
- 21.4 What if any changes to the employment agreement assignment language might you suggest that the employee request? (Hint: Put yourself in the shoes of the employer.)
- 21.5 Could your friend sue you or your law firm for malpractice if she didn't like the way things turned out with her employer? What if any steps could you take to reduce that risk to your career and your personal net worth?
5.35 Assignment of Mickey-Dee franchise agreement
5.35.1 Suggested reading
Common Draft assignment commentary (sorry, no time to get a link)
5.35.2 Facts
- You represent Smith, LLC, a family business that operates three Mickey-Dee franchised restaurants in Houston. Smith, LLC owns the land and buildings of the restaurants, which are built to specifications developed by the global franchising firm Mickey-Dee Incorporated.
- The restaurants all use trademarks owned by Mickey-Dee Incorporated, including the signage, logos, the name "Mickey-Dee," uniform styles etc.
- The franchise agreement is silent about assignability of the agreement.
- Smith, LLC wants to sell its three franchised restaurants to Jones, Inc., another family business.
5.35.3 Questions
- 22.1 What if anything could Mickey-Dee Incorporated do if Smith, LLC were to assign the franchise agreement to Jones, Inc.?
5.36 23. Signed originals of Agreement
5.36.1 Facts
- You represent Seller, a software licensor.
- Seller wants your help in suing a renegade customer that is using the software far beyond the scope of its paid-for license.
- The license agreement was signed five years ago, when Seller's administrative systems weren't as good as they are now.
- Seller can't find the signed original of the license agreement.
5.36.2 Questions
- 23.1 In a U.S. federal court, would the absence of the signed original license agreement be a problem?
- 23.2 What might the license-agreement drafter have done to (maybe) avert this problem?
5.36.3 Suggested reading
- Copies of Agreement
- Best-evidence rule
5.37 24. Interpretation - contra proferentem rule
5.37.1 Facts
- You represent Buyer in negotiating a long-term master purchase agreement with Seller.
- You draft a price-increase clause that limits Seller's permissible price increases to no more than the increase in CPI (and no more than once a year as well).
- A year later, Seller says it is increasing its price by the percentage stated in a special CPI published by the U.S. Government specifically for the industry in which Seller and Buyer operate. You didn't know there was such a thing.
- Your client Buyer angrily tells you that Seller's price increase must be limited to the (much-lower) increase in the "regular" CPI, namely CPI-U, US City Average, All Items, 1982–1984=100.
5.37.2 Question
On these facts, how might a court rule on Buyer's claim that Seller's price increases must be limited to the increase in CPI-U and not to the increase in the special CPI?
5.37.3 Suggested reading
- Contra proferentem rule
5.38 25. Counsel representation
5.38.1 Facts
- A partner gives you an assignment to draft a contract, and suggests that you start with a particular prior agreement, which she gives you.
- You change the parties' names and the business terms in the prior agreement to reflect the current deal.
- The parties sign the agreement, but the relationship quickly goes south.
- Your client claims that the other party has breached a particular clause in the contract.
- The other party claims that the clause in question is too hard to understand — a sentiment with which you privately agree — and that your client had told him that the clause meant something entirely different from what your client is claiming now.
- The contract does not include an entire-agreement ("integration") clause.
- The General Provisions section says, among other things, that "Each party has been represented by counsel in negotiating this transaction."
- Your client confirms that the other side actually wasn't represented by counsel.
5.38.2 Question
How might a court analyze this situation?
5.39 Backdating a contract at the end of the quarter
5.39.1 Facts
It's the last week of March. Your client Big Public Software Company ("BPSC") has a calendar-year fiscal year, and its shares are traded on Nasdaq. That means it must file financial reports with the SEC within a certain number of days after each March 31, June 30, September 30, and December 31 (commonly referred to as Q1 through Q4 respectively, or sometimes 1Q through 4Q).
BPSC's sales people are working on a huge deal. If the deal closes, BPSC will "make the number," that is, its earnings will match analysts' expectations; if not, BPSC will "miss," and the price of its stock likely will nosedive.
The BPSC sales people stay late at the office on March 31, hoping to iron out the last negotiation points. But the parties don't actually come to agreement until April 3.
5.39.2 Question: Backdate the signatures?
On April 3, BPSC's vice president of sales calls you with an urgent question: Can the parties backdate their signatures to March 31, so that BPSC can book the sale in Q1 so that it won't "miss"?
SUGGESTED READING: Backdating signatures
5.39.3 Optional question: Personal motivations for backdating?
What personal motives might the VP of sales have for backdating the contract signatures? Consider, for example:
- financial incentives
- non-financial motivations
5.40 Competitive statements
5.40.1 Facts
- You represent Big Box Retailer, Inc., which has a contract with Crabapple Computers, Inc. Under the contract, Big Box carries Crabapple's laptop computers, but it is not an exclusive relationship; Big Box also carries laptops made by Crabapple's competitors.
- The contract says that neither party will disparage the other party or the other party's products or services.
- Crabapple falls on hard times and has to cut its R&D budget. Its competitors start to bring out fancy new ultra-light, ultra-powerful laptops, while Crabapple's laptops begin to seem clunky by comparison.
- You get a call from Big Box. A reporter from Laptops Monthly is doing a story on the laptop model. She wants a quote from a Big Box store manager about how Crabapple's products are "clunky."
- The Big Box people would like to stay on this reporter's good side. They want to know what you think about giving her the quote she wants.
5.40.2 Question
- 27.1 How might this situation play out? Consider:
- Whether the requested "clunky products" statement would be literally true or literally false
- Whether such a statement might be misleading to the public or otherwise deceptive even if literally true
- Whether such a statement might be "disparaging" in violation of the contract's non-disparagement clause.
- 27.2 If you had been involved in negotiating the non-disparagement clause, how (if at all) might you have tried to change it?
- 27.3 Suppose that during the contract negotiation you had asked to revise the non-disparagement clause, which caused Crabapple's then-CEO (now dead) to throw a fit, and in the end the clause was left unchanged. How might that affect your thinking today?
- 27.4 [NEW] Can you think of any situations where this omerta clause might cause significant problems for Big Box Retailer?
- 27.5 [NEW] Suppose that you're negotiating the same clause again in a different deal. From a business perspective, what if any other provisions might you want to ask for to give Big Box Retailer more flexibility and/or business protection?
5.40.3 Suggested reading
- Disparagement prohibition clause
- Lanham Act § 43(a)(1)(B) a.k.a. 15 USC § 1125(a)(1)(B)
5.41 Why long paragraphs are best (a satire)
Make this long paragraph more readable (but don't try to rewrite it substantively). Go for:
- Short sentences
- Short paragraphs
- Short, single-topic paragraphs where possible
5.42 Entire agreement – or not?
5.44 You are a junior in-house counsel for Pet Rocks, Inc., a publicly-traded manufacturer of (wait for it) pet rocks for use as gifts.
- Pet Rocks, Inc. is on a calendar-year fiscal year, which means that its third fiscal quarter ("3Q") will end in three days.
- You've just gotten a call from Sam, one of the company's mid-level sales managers. Sam has just received a very large purchase order from Zall-Mart, a global retailer, in anticipation of an expected Christmas rush for pet rocks. Sam is excited because this order would put Sam's group over the top for its annual sales quota. That would mean that Sam (in addition to the sales rep) would get a big commission check in November — which wouild come in handy for him, because Sam and his wife Sue have been wanting to do some much-needed home remodeling. Moreover, under the Pet Rocks, Inc. sales-compensation plan, a.k.a. "comp plan," any additional sales that Same's group might make in the remainder of the year would have an extra commission "kicker" added — plus, Sam and Sue would get to go on the annual "club trip," which this year will be to Hawai'i. (The term club trip refers to the 100% Club, i.e., those sales personnel who achieve 100% of their annual sales quotas.)
- The general counsel has told all in-house lawyers, in confidence, that Pet Rocks, Inc. is teetering on the brink of "missing" its 3Q number, that is, not meeting the published expectations of the stock-market analysts who follow the company. If that were to happen, Pet Rocks's stock price would almost surely drop significantly, which could trigger a shareholder lawsuit against the company.
- Sam is not the reckless type, and you and he have worked well together on one past deal. To be on the safe side, Sam has asked you to look over the "fine print" on the Zall-Mart purchase order.
- Sam tells you that he previously sent Zall-Mart the standard Pet Rocks sales quotation, which contained a link to the standard Pet Rocks terms of sale. He asked the Zall-Mart purchasing agent ("buyer") to sign and return the sales quotation. Zall-Mart's buyer, however, told Sam that as a matter of policy Zall-Mart does not sign vendor sales quotations, and that all purchases must be on Zall-Mart's purchase-order form alone.
- The Pet Rocks terms of sale are essentially identical to the Honeywell terms of sale.
- Likewise, the Zall-Mart purchase order terms are essentially identical to the Honeywell purchase order terms.
- Both Pet Rocks and the Zall-Mart division placing the order are in Houston.
5.44.1 Questions
Taking into account only sections 1, 18.1, and 33 of the Zall-Mart purchase order terms and sections 1, 11.11, 11.12, and 13 of the Pet Rocks terms of sale:
- 30.1 Suppose that Pet Rocks ships the order to Zall-Mart without any kind of sales-confirmation document. How long would Zall-Mart have to claim that the pet rocks were defective, in breach of the warranty? (Hint: Consider both the applicable warranty period and the applicable statute of limitations.)
- 30.2 Same question as 30.1, except that Pet Rocks ships the order, accompanied by an invoice stating that the Pet Rocks terms of sale applied.
- 30.3 Should you advise anyone else in the company about Sam's situation?
- 30.4 What if any input might you want to get from others in the company?
- 30.5 What action would you recommend to Sam?
5.44.2 Suggested reading
- Brian Rogers, Battle of the Forms Explained (Using a Few Short Words) (blog entry March 1, 2012) — this is a very readable overview of how the (U.S.) Uniform Commercial Code works in this regard.
- Marc S. Friedman and Eric D. Wong, TKO'ing The UCC's "Knock-Out Rule", in The Metropolitan Corporate Counsel, Nov. 2008, at 47.
- UCC § 2-207 (Texas version)
- UCC § 2-725 (Texas version)
- Additional terms
5.45 Dangers of ambiguity
5.46 Early neutral evaluation
5.46.1 Reading assignment
- ENE - Early Neutral Evaluation
5.46.2 Questions
32.1 What do you think the principal benefit of ENE would be?
32.2 Why might a party not want to commit to ENE?
32.3 Name three reasons that a lawyer might not want her client to have to go to ENE. (Cynical thinking is OK here.)
32.4 What is the most important way in which ENE differs from arbitration?
32.5 Is ENE automatic, or must it be triggered by some action?
32.6 In ENE, is it a concern that the trial judge might be influenced by the neutral evaluator's views? Why or why not?
5.47 Escalation of disputes
5.47.1 Reading assignment
- Escalation of disputes
5.47.2 Questions
33.1 Under the sample clause language, must the parties' CEOs get involved in escalating a dispute if lower-level managers can't resolve it?
33.2 When might it not be reasonable to expect the parties' CEOs to get involved?
33.3 How might the sample clause be rewritten with Question 33.2 in mind?
33.4 Is escalation automatic, or must there be some triggering event?
33.5 Under the sample clause language, what happens if a lower-level manager for one party simply folds her arms and says "No, we're not taking this to upper management; I'm the decider here."
5.48 Clause numbering can be a good thing (substantive issue: implied covenant of good faith)
5.48.1 Facts (based on an actual case)
- A hospital and a catering company enter a contract for the catering company to provide various food services, including stocking selected hospital refrigerators with specific food items.
- As a performance incentive, the contract sets up what amounts to a system of fines, under which the company's payment can be reduced for mistakes.
- The hospital reduces the catering company's payment by more than $128,000 when the hospital finds, in one of its refrigerators, a chocolate mousse whose expiration date was the previous day.
- The catering company claims that the hospital has violated its duty of good faith and fair dealing in imposing the payment reduction.
The specific contract language concerning "good faith" is as follows:
3.5 The Hospital and the Contractor will co-operate with each other in good faith and will take all reasonable action as is necessary for the efficient transmission of information and instructions and to enable the Hospital to derive the full benefit of the Contract.
5.48.2 Suggested reading
- Good faith and fair dealing – an implied duty?
5.48.3 Questions
34.1 Under this contract language (and without regard to what the law might say), does the Hospital have:
- a general duty to cooperate in good faith with the Contractor, or
- only a limited, specific duty to cooperate in good faith with the Contractor "as is necessary for the efficient transmission of information and instructions and to enable the Hospital to derive the full benefit of the Contract" ?
34.2 What would the answer be if Texas law applied?
34.3 What would the answer be if the UCC applied?
34.4 What would the answer be if the Restatement (Second) applied?
34.5 What would the answer be if English law applied?
34.6 How might you add internal clause numbering, e.g., (a), (1), (i), etc., to the contract language (but make no other significant changes) to make it clear that the Hospital did have a duty of good faith and fair dealing?
34.7 How might you add such internal clause numbering to the contract language (but make no other significant changes) to make it clear that the Hospital did not have a duty of good faith and fair dealing?
5.49 [x]. Introductory paragraphs of a contract
5.49.1 Question: Minimum information needed?
What do you think is the minimum information needed for the introductory paragraph of a contract? Compare, for example:
- BP and ARCO refinery sale agreement
5.49.2 Question: Benefit to including information?
Is there any actual benefit to including the information you typically see in the introductory paragraph of a contract? Consider, for example, the usual recitations of:
- the state(s) in which the parties are incorporated
- the parties' principal places of business
- Chambers v. Time Warner, Inc., 282 F. 3d 147, 152-54 (2d Cir. 2002) (vacating and remanding Rule (12)(b)(6) dismissal of complaint).
5.51 Early neutral evaluation
5.52 Independent contractors
5.53 Jury trial waiver
5.53.1 Facts
- You are a lawyer at a law firm in Houston.
- A law school classmate, who moved to Atlanta after graduation, has referred one of her Atlanta corporate clients to you. (That's a good reason to get to know, and be on good terms with, the people you meet in school ….)
- Your classmate's Atlanta client is hiring a Houston company to perform certain services. The client has agreed to your classmate's advice that a Texas lawyer should be involved in the negotiation.
- The Houston service provider's contract form says that:
- both sides waive the right to a jury trial
- Texas law applies
- litigation will be Houston
- any action to enforce the contract must be brought within one year after the cause of action accrues.
- Your classmate says that your mutual client would like to preserve its right to a jury trial and to get a longer limitation period.
5.53.2 Questions
40.1 Your classmate asks if the jury-trial waiver would be enforceable in a Texas court. What do you tell her?
40.2 You ask your classmate whether the jury-trial waiver would be enforceable in a Georgia court. What will her answer be?
40.3 Your classmate asks whether the one-year limitation period is enforceable in Texas. What do you tell her?
40.4 Would your answer on the limitation period be any different if the contract were for the sale of goods?
40.5 You ask your classmate whether the one-year limitation period is enforceable in Georgia. What will her answer be?
40.6 As a practical matter, who is more likely to file a breach-of-contract suit in the future — the Houston services company, or the Atlanta customer? What does that suggest about which of the contract provisions in question is, or are, likely to be most important to the Atlanta customer?
40.7 Name up to three changes that you could ask for in the contract to preserve the Atlanta company's right to a jury trial. (Hint: See the suggested reading — and consider what trade-offs you might be making. Also, one possible change could be to delete existing language.)
40.8 If any new language is necessary to implement your proposed changes, draft it.
40.9 Could you use a two-step strategy to try to get at least some of what your client wants? That is, propose Change A, and if you can't get the Houston services company to agree, then propose Change B as a fallback position? What might those two changes be?
(If time permits, we will do a mock negotiation).
5.53.3 Suggested reading
- Jury trial waiver footnotes
- Tex. Civ. Prac. & Rem. Code § 16.051 (residual limitation period)
- Tex. Civ. Prac. & Rem. Code § 16.070 (contractual shortening of limitation periods)
- General Electric Credit Corp. v. Home Indemnity Co., 168 Ga. App. 344, 309 SE2d 152 (1983) (Hint: Search for the sentence beginning, "In fact, the Georgia cases have held: 'A shorter period than the statutable period for the institution of suits ….' ")
- Tex. Bus. & Comm. Code § 2.725 (UCC article 2 limitation period)
- Choice of law cheat sheet
- Governing law
- Forum selection
5.54 Confidentiality agreement
5.54.1 Facts
- You represent Seller, Inc., which is considering signing a confidentiality agreement ("NDA," or nondisclosure agreement) with a potential customer, Buyer, Inc.
5.54.2 Everything is confidential?
The NDA says:
The Receiving Party acknowledges that the Confidential Information is proprietary to the Disclosing Party, has been developed and obtained through great efforts by the Disclosing Party and that Disclosing Party regards all of its Confidential Information as trade secrets.
QUESTION: Are you OK with this?
5.54.3 Whose information should be protected?
The NDA contains blanks to be filled in for who will be the "Disclosing Party" and who will be the "Recipient." QUESTION: What should be filled in?
5.54.4 Time limit on protected disclosures?
QUESTION: Should the NDA include a time limit for when disclosure can be made in confidence? Why or why not?
5.54.5 Subpoenas, etc.
The NDA includes a number of exclusions from the definition of Confidential Information. One of those exclusions is that information subject to a third-party subpoena is not considered Confidential Information.
- Would you object to this? Why?
- What would be a better alternative?
5.54.6 Remedies
The NDA states: "The Receiving Party acknowledges that any breach or threatened breach of this Agreement by the Receiving Party would result in irreparable harm to the Disclosing Party, entitling the Disclosing Party to temporary and permanent injunctive relief against the breach; the Receiving Party waives any requirement that the Disclosing Party post a bond." You remember seeing this sort of clause in a lot of NDAs.
QUESTION: From Seller's perspective, do you see any problem with this clause?
6 Cheat Sheet (in progress)
6.1 Insurance
6.1.1 Reading
6.1.2 Issues
- What types are requested?
- CGL – Commercial General Liability (AI status?)
- E&O – errors & omissions (no AI status)
- Automobile
- Worker's comp
- Employer liability
- Occurrence, or claims-made?
- "Tail" coverage
- Certificates – who provides?
- Certificates
- Plain certificate: No third-party rights
- Endorsement: Additional-insured coverage
- Endorsement: Notification endeavor
- Additional-insured coverage
- Draws down policy limits
- No insured-vs-insured coverage
6.2 Limitations of liability
6.2.1 Reading
6.2.2 Issues
- Consequential damages?
- Damages cap?
- Cap at relevant insurance coverage?
- Exclude "incidental" damages?
- Exclude direct damages as well as indirect?
- Carve-outs
- Negotiate risk-by-risk?
6.3 Term; Termination
- Termination for breach
- Notice & cure period
- Problem phrasing: "Non-breaching party" can terminate?
- Automatic termination?
- Evergreen clauses
- "Extension" vs. "renewal"
- Termination for convenience
- Termination for insolvency, etc.
- U.S. Bankruptcy Code – ipso facto clause unenforceability
- Special case: Employment agreements (Martha Stewart, Sheryl Sandbert)
6.4 Amendments; Waivers
Amendments in writing Unilateral amendment rights
6.5 Dangerous Situations
- No-hire provisions
- Export controls
- Side letters
- Round trip sales transactions
6.6 Dispute Management
- Arbitration (including Baseball)
- Escalation
- Fee-shifting to encourage settlement
- Prevailing party ("loser pays") fee award
- Rejector of settlement offer pays offeror's fees if not bettered at trial
6.7 Business Operations
- Audits
- Advance notice
- Working space
- Cooperation
- Confidentiality
- How often?
- Confidentiality
- Which party has confidentiality obligation?
- Marking requirement?
- Expiration?
- Return or destruction?
- Site rules
- Status-review Conferences
6.8 Payments & Taxes
6.8.1 Reading
6.8.2 Issues
- Invoicing requirements
- Form requirements
- Deadlines
- Net 30 days? Net 45? 2/10 net 30?
- Net from when – invoice date, or invoice-receipt date?
- What if there's a dispute about the amount due?
- COD after late payments?
- Stop work if payments late?
- Pay when paid? Or is the payment obligation independent?
- Offsets – yes, or no?
- Expense reimbursement – compliance with policies required?
- Invoices – required? Why?
6.9 Audits
6.9.1 Reading
6.9.2 Issues
- Record-keeping and -retention requirements
- Sources of record-retention requirments
- How much advance notice of an audit?
- What information is auditable?
- Cooperation & facilities
- Confidentiality of audit report?
- Limited information in audit report?
- Fee-shifting?
6.10 Interest on past due amounts
6.10.1 Issues
- What's the maximum rate? (Usury laws)
- When can it start?
- Is it worth bothering?
- What if usury laws are violated?
6.11 Model employment agreement
1. Definitions
"Company Business" - sets up the noncompete provision (section 10). Note the "demonstrable preparation" for future business.
"Company Group Member" - allows for greater corporate-affiliate flexibility.
"Company Innovation" - drafted to comply with state law in a variety of states; see note 6 on page 2 of this diagram
"Confidential Information" - note the three carve-outs (commercial NDAs have two more).
"Designated Owner" – another provision for greater corporate affiliate flexibility.
"Employment Relationship" – this will come into play in the termination provisions.
"Innovation" – pose a question – Bratz dolls case; correlate with 2(g), "Knowledge."
2. Employee duties
2(a) Position: What if the offer letter says "we're hiring you for X position"? (See also 13(d), "Entire Agreement.")
2(a) What if the employee later claims, "you orally told me I'd be promoted in three months"? (See also 13(d)(2).)
2(b) Best Efforts: Why bother, if it's "employment at will"?
2(c), (d) - work hours, travel: Why include this?
2(e) Compliance: Why?
2(f) Employee wants to write a book in her spare time – can she? (See also 3(b).) Who keeps the royalties, if any? (See 7, Innovations.)
2(g) Bratz dolls case: Mattel employee has an idea while employed, doesn't say anything about it, pitches to a competitor – his Mattel employment agreement talks about "inventions." (See also 7(b).)
Back to 1 - "Confidential Information" – if company doesn't mark information as confidential, can employee do whatever she wants with it? Why or why not?
4(b) Compensation schedule: Maintain flexibility for the company to change its payroll policies (but watch out for legal requirements).
4(b) Note the phrase "comparably-situated employees."
4(d) QUESTION:
- Employee gets fired on December 15.
- Bonuses are to be declared by Board in January and paid after that.
- Employee's target bonus was to be $10K bonus.
Discuss the company's position (use the virtual whiteboard). Consider not just the "legal" position but also the practical and PR aspects (but remember that your job is mainly to give legal advice).
4(g) Expense reimbursement – note the reference to company policies and guidelines to make life easier for the accounts-payable people (customers often impose this on suppliers, too).
6(b) Company policies not contractual.
8. Confidentiality obligations – apply as a matter of law in U.S. jurisdictions.
8(c) Confidential information of others – why include this?
10 Termination. QUESTION: Employee gives 2 weeks notice – can the employer tell the employee, go now?
10(a): QUESTION: Why terminate the Employment Relationship, vice the Agreement?
10(c) Final compensation – statutes might compel immediate payment, without withholding.
10(e): QUESTION: Why require the employee to participate in an exit interview?
11 Noncompetition covenant – Texas, California, Massachussetts, other states (AZ, WA).
11(f) Consent to new employment: QUESTION: Why include this clause?
11(g), investments, etc., is a standard exception.
12 Arbitration: Fed. Arb. Act.; state laws; class action waivers
13(b) Unilateral amendments – dangers
13(e) Equitable relief – common to ask for, but dangerous
13(f) Governing law – enforceable?
13(j) Notices: QUESTION: What's the best address for the company to use to notify the employee by mail?
13(m) Signatures: QUESTION: What if the company doesn't countersign the agreement?
6.12 Real estate
- See the Problem Set
6.13 Real estate
- Reading: Rick's Cabaret Purchase & Sales Agreement.
- Reading: This article
- Look over the Problem Set
6.14 Employment agreements
Look over:
- Model employment agreement provisions (with footnotes)
- Sheryl Sandberg employment agreement (with annotations)
Problem sets 43, 44, and 45
6.15 Numbers
6.15.1 Reading
Stark Chapter 22
6.15.2 Issues
- Don't use both words and numbers. WRONG: "ten (10) days"
- Words for ten or less; numbers for 11 and up.
- $4.95 [cents included]
- $250 [leave off .00]
- $4 million [easier to read than $4,000,000]
- Don't start a sentence with a number. WRONG: "15 days after the Start Date …." RIGHT: "On the date 15 days after the Start Date …."
- Use a non-breaking space, e.g., "section 5.2"
6.16 Negotiation Process
- Formatting for easy review
- Redlining of changes
- Redlining representation
7 Professor Stark's New Two-Credit-Hour Syllabus Template
NOTE FROM DCT: The topics listed below are not the official assignments for our class. They represent Professor Stark's new template syllabus for a two-hour course using the second edition of her book, which were very recently posted in the "Professors" section of the publisher's Web site. (Due to ongoing health issues, Professor Stark has not yet completed a second-edition template syllabus for a three-hour course such as ours.)
Our reading- and homework assignments will largely follow the general progression set forth below, but:
- We will cover some topics in a different sequence than they are listed in the Stark syllabus template.
- I will be inserting other readings and problem sets as the semester goes on.
- I will also attempt to take into account the pace at which our class is progressing, given that every group of students is different.
NOTE ABOUT WRITING IN BOOK: Some of the items in Professor Stark's syllabus template suggest that you write answers in your book. If you prefer to keep your book pristine for possible resale, I won't mind if you make a photocopy of the relevant page(s) and write your answers there instead.
7.1 Class
7.1.1 Reading Assignment
- Chapter 6 – Introductory Provisions.
- Chapter 18 – Legalese.
- Chapter 19, § 19.4 – Numbering Systems.
- Chapter 27, § 27.6.2 – Using a Precedent.
- Chapter 28, § 28.3 (Contract Analysis: How to Read and Understand a Contract Provision) and Appendix (Framework for Contract Analysis Long Form)
7.1.2 Drafting Assignments
- Exercise 5-1. (Use House Purchase Agreement, Document 1, Chapter 32 as a precedent.)
- Finish Exercise 5-2, if not completed in Class 1.
- Exercise 5-4, if not completed in Class 1. (Write answers in textbook.)
- Exercise 6-1. Assume that you will have to draft a preamble without looking at any resource other than this Top Ten List.
7.2 Class
7.2.1 Reading Assignment
- Chapter 7 – Definitions and Defined Terms.
- Chapter 8 – Action Sections.
- Chapter 16, § 16.2.1 – Assignment and Delegation.
- Chapter 32, Document 3 – Assignment and Assumption Agreement. Try to answer questions by notating agreement.
- Chapter 32, Document 4 – The Action Sections of an Asset Purchase Agreement
- Chapter 32, Document 5 – Bill of Sale
- Chapter 19, §19.4 and Appendix. (Overview of numbering systems and tabulation; we'll study in detail later in the semester.)
- Appendix, Escrow Agreements, pp. 555-556.
- Escrow Agreement, pages 91-93. (Read complete agreement and identify the following parts: preamble, recitals, words of agreement, subject matter performance provisions, and endgame provisions.)
7.2.2 Drafting Assignment
- Exercises 6-4 and 6-5.
- Exercises 7-1, 7-2, and 7-4. (Submit Exercises 7-1 and 7-2. Mark the answer to Exercise 7-4 in your book.)
7.3 Class
7.3.1 Reading Assignment
- Chapter 9 – Representations and Warranties.
- Chapter 10 – Covenants and Rights.
- Chapter 11 – Conditions.
- Chapter 12 – Discretionary Authority and Declarations.
- Chapter 13 – Will and Shall.
- Chapter 14 – Drafting the Contract Concepts – A Summary Chart.
7.3.2 Drafting Assignment
- Exercise 8-2.
- Exercise 8-5
- Exercise 10-2. (Note answer in book.)
- Exercise 10-3
- Exercise 11-3, 11-4, and 11-6 (Submit)
- Exercise 12-1. (Note answer in book.)
7.4 Class
Drafting the Action Sections. Continued.
Drafting Representations and Warranties, Covenants and Rights, Conditions, Discretionary Authority, and Declarations. In this unit, we turn to the multiple issues inherent in drafting representations and warranties, covenants, conditions, discretionary authority, and declarations.
7.4.1 Reading Assignment
- Chapter 9 – Representations and Warranties.
- Chapter 10 – Covenants and Rights.
- Chapter 11 – Conditions.
- Chapter 12 – Discretionary Authority and Declarations.
- Chapter 13 – Will and Shall.
- Chapter 14 – Drafting the Contract Concepts – A Summary Chart.
7.4.2 Drafting Assignment
- Exercise 8-2.
- Exercise 8-5
- Exercise 10-2. (Note answer in book.)
- Exercise 10-3
- Exercise 11-3, 11-4, and 11-6 (Submit)
- Exercise 12-1. (Note answer in book.)
7.5 Class
Drafting Representations and Warranties, Covenants, Conditions, Discretionary Authority, and Declarations. Continued.
Drafting the Endgame Provisions and Signatures.
Client Memoranda
7.5.1 Reading Assignment
- Chapter 15 – Endgame Provisions.
- Chapter 17 – Signatures.
- Chapter 32, Document 7 – Drafting Client Memoranda
7.5.2 Drafting Assignment
- Exercise 14-1.
Additional Chapter 14 exercises to be assigned in previous class.
- Exercise 15-4.
- Exercise 15-5.
7.6 Class
Drafting Clearly and without Ambiguity. Articulating the agreement of the parties is the goal of drafting contracts. In this unit, we explore the drafting problems that impede the realization of this goal as well as ways to cure the problems.
7.6.1 Reading Assignment
- Chapter 19 – Clarity through Format.
- Chapter 20 – Clarity through Sentence Structure.
- Chapter 21 – Ambiguity.
7.6.2 Drafting Assignment
- Exercise 19-1.
- Exercise 21-4 (Mark in book.)
Due, Friday, March 7, 2014, no later than 5:00 p.m. - Exercise 31-1. Redraft of the Car Purchase Agreement, along with accompanying memo to the client.
7.7 Class
Drafting Clearly and Without Ambiguity. Continued.
7.7.1 Reading Assignment
7.7.2 Drafting Assignment
- Exercise 19-4.
- Exercise 19-5.
- Exercise 20-2.
- Exercises 21-5, 21-8, and 21-11. (Submit all.)
7.8 Class
Drafting Numbers and Financial Provisions. Drafting financial concepts is critical to memorializing a deal accurately. This unit focuses first on how to draft mathematical formulae, including those that rely on accounting concepts.
A Potpourri of Other Drafting Considerations. Here, we will look at technical drafting points that did not fit neatly into our earlier classes.
Organizing a Contract and its Provisions. Through lecture and in class exercises, you will learn how to organize an agreement for which there is no precedent.
The Drafting Process. Finally, we will consider the drafting process from the initial consultation with the client to the drafting of the final agreement.
7.8.1 Reading Assignment
- Chapter 22 – Numbers and Financial Provisions.
- Chapter 23 – A Potpourri of Other Drafting Considerations.
- Chapter 26 – Organizing a Contract and its Provisions.
- Chapter 27 – The Drafting Process.
7.8.2 Drafting Assignment
- Exercises from Chapter 21, as assigned in class.
- Exercise 31-5.
- Exercise 31-6.
- Exercise 23-2. (Note answers in book.)
7.9 Class
Adding Value to the Deal. This class focuses on the lawyer's role as business counselor. You will learn
• how to look at a deal from the client's business perspective; and • • how to add value to a transaction by identifying business issues that are buried in the principals' deal. •
7.10 Class
Reviewing and Commenting on a Contract. You will not always be the drafter of a deal's contract. Therefore, to protect and advance your client's interests, you must know how to analyze and comment on the other side's drafts. In this class, you will begin work on the Carrie Richards contract, which you will review, comment on, negotiate, and redraft.
7.10.1 Reading Assignment
- Chapter 28 – How to Review and Comment on a Contract.
Materials to be distributed.
7.10.2 Drafting Assignment
- Exercise 21-4.
- Exercise 31-7.
- Exercise 28-1. Complete Steps 1 through 3. Be prepared to discuss the business issues in class.
7.11 Class
Reviewing and Commenting on a Contract. Continued.
7.11.1 Reading Assignment
7.11.2 Drafting Assignment
- Exercise 28-1 – Mark-up the contract from your client's perspective. Prepare both a clean and marked copy. Draft an accompanying memo to the other side.
7.12 Class
Drafting the General Provisions. The general provisions include the following clauses: choice of law, anti-assignment, severability, waiver of jury trial, no oral amendments, merger, and notices. Drafters often give short shrift to these provisions because they are at the end of a contract and thought of as "boilerplate." They are, however, more than mere housekeeping rules. Through class discussion and exercises, you will learn the business terms and legal issues that a drafter must address and analyze when drafting each of these provisions.
Amendments, Consents, and Waivers. In this unit, you will learn how to draft the documents that change or amplify a deal's original terms.
7.12.1 Reading Assignment
- Chapter 29 – Amendments, Consents, and Waivers.
- Chapter 16 – General Provisions.
7.12.2 Drafting Assignment
To be assigned.
7.13 Class
Drafting Ethically. In this class, we will work through a series of exercises that raise ethical issues that can arise when negotiating and drafting contracts.
7.13.1 Reading Assignment
- Chapter 30 – Ethical Issues in Drafting.
8 Honeywell Standard Purchase Order Terms and Conditions for Goods and Services
[Reformatted from the PDF document at http://goo.gl/qF3Wx (Honeywell.com)]
1. Acceptance - Order of Precedence - Modification
This Purchase Order is for the purchase of goods, services, or both as described on the face of this document (collectively, "Goods") and is issued by the member of the Honeywell International Inc. group of companies identified on the face of this document ("Honeywell").
This Purchase Order is deemed accepted when Supplier returns the acknowledgment copy of this Purchase Order or begins performing, whichever is earlier.
Honeywell rejects any additional or inconsistent terms and conditions offered by Supplier at any time.
Any reference to Supplier's quotation, bid, or proposal does not imply acceptance of any term, condition, or instruction contained in that document.
No course of prior dealing or usage of the trade may modify, supplement, or explain any terms used in this Purchase Order.
These terms and conditions together with any previously executed non disclosure agreement (the obligations of which remain in effect) and with the exhibits, schedules, specifications, drawings, or other documents referred to on the face of the Purchase Order, or attached, or any documents incorporated by reference, supersede any prior or contemp oraneous communications, representations, promises, or negotiations, whether oral or written, respecting the subject matter of this Purchase Order.
All contract documents related to this Purchase Order are interpreted together as one agreement;
provided, however, that in the event of any conflict among the provisions of one or more of such contract documents as are validly in effect at the time of such conflict, the following order of precedence applies:
(a) any consignment, stocking or other replenishment agreement; then
(b) any supply agreement; then
(c) any contract for labor services; then
(d) the face of the Purchase Order and any supplemental terms included or incorporated by reference; then
(e) these general Purchase Order provisions; and finally
(f) other contract documents agreed to in writing by the parties.
No change to or modification of this Purchase Order will be binding upon Honeywell unless in writing, specifically identifying that it amends this Purchase Order, and signed by an authorized procurement representative of Honeywell.
If Supplier becomes aware of any ambiguities, issues, or discrepancies between this Purchase Order and any specification, design, or other technical requirement applicable to this Purchase Order, Supplier will immediately submit the matter to Honeywell for resolution.
No course of dealing, prior dealings, usage of trade or course of performance will be used to modify, supplement or explain any terms used in, or incorporated by reference into, this Purchase Order.
2. Delivery, Shipment and Packaging
2.1. Supplier will deliver Goods in the quantities and on the date(s) specified on the Purchase Order or Purchase Order schedule releases.
If delivery dates are not stated, Supplier will offer its best delivery date(s), which will be subject to acceptance or rejection by Honeywell.
Unless otherwise directed, all Goods shipped in one day from and to a single location must be consolidated on one bill of lading or air waybill, as appropriate.
2.2. If the delivery schedule is endangered for any reason other than Honeywell's fault then Supplier will, at its expense, deliver Goods by the most expeditious shipping method required to fulfill the Purchase Order delivery requirements.
Honeywell reserves the right to reject, at no expense to Honeywell, all or any part of any delivery that varies from the quantity authorized by Honeywell for shipment.
Honeywell reserves the right to pursue additional remedies caused by late delivery, including but not limited to:
(a) incremental freight expenses incurred by Honeywell for shipments of Goods to Honeywell and for shipments of Goods or finished product containing or incorporating the Goods from Honeywell to any customer of Honeywell, and
(b) all liquidated damages payable by Honeywell as a result of any such late delivery.
Supplier will not make any substitutions without Honeywell's prior written approval.
All items will be packaged according to Honeywell's instructions or, if none, according to good commercial practice in a manner sufficient to ensure receipt in an undamaged condition.
Honeywell will not be liable for any discharge, spill or other environmental incident or condition (including clean-up costs) involving any Goods shipped under the Purchase Order unless caused by Honeywell and in no event until delivery to the destination designated by Honeywell.
All containers will be properly marked for identification as instructed on Honeywell's Purchase Order and contain a packing slip that details, at a minimum, the Honeywell Purchase Order number(s), product part number, detailed product description, country of origin, total number of boxes in shipment, quantity of product shipped, and final delivery address.
Items shipped in advance of Honeywell's delivery schedule may be returned at Supplier's expense.
For domestic shipments, if requested by Honeywell, and for all international shipments, Supplier will give notice of shipment to Honeywell when the Goods are delivered to a carrier for transportation.
The Purchase Order number(s) must appear on all correspondence, shipping labels, and shipping documents, including all packing sheets, bills of lading, and air waybills.
2.3. All Goods, unless specifically exempted by the destination country's governing authorities, must be marked with the country of origin (manufacture) of the Goods in a conspicuous place as legibly, indelibly, and permanently as the nature of the article or container permits.
2.4. Supplier will provide Honeywell with
(a) the Harmonized Tariff Schedule number, country of origin information or certificates, manufacturer's affidavits, applicable free trade agreement ("FTA") certificates, and any other documents or information Honeywell may require to comply with international trade regulations or to lawfully minimize duties, taxes, and fees, and
(b) FTA certificates for all Goods that qualify under one or more FTAs.
Supplier will provide Honeywell all documents, records, and other supporting information necessary to substantiate the Goods' qualification under an FTA.
Supplier will exert reasonable efforts to qualify the Goods under FTAs.
2.5. Within one business day after Supplier delivers the Goods to the carrier or at such earlier time as Honeywell may request, Supplier will send Honeywell a complete set of shipping documents including but not limited to the commercial invoice, packing list, and air waybill, or three original parts of the combined through-bill of lading, clean without notation, necessary to release the Goods to Honeywell's custody.
3. Notice of Delay.
Supplier must immediately notify Honeywell in writing with all relevant information relating to any delay or threatened delay or the timely performance of this PO.
4. Excusable Delay (Force Majeure)
Neither party will be in default for any delay or failure to perform due to causes beyond its control and without its fault or negligence, but any delay or failure to perform caused by the default of a sub tier supplier of Supplier will be excused only if
(a) it is beyond the control of both Supplier and its sub-tier supplier(s) and without the fault or negligence of any of them, and
(b) the Goods to be furnished cannot be obtained from other sources in sufficient time to permit Supplier to meet the delivery schedule.
Supplier's ability to sell Goods at a more advantageous price or Supplier's economic hardship in buying materials or processing necessary for manufacture of the Goods will not constitute an excusable delay event.
The party affected by an excusable delay will promptly provide written notice to the other, explaining in detail the full particulars and expected duration of the excusable delay, and will use its best efforts to remedy the delay if it can be remedied.
If Supplier's delivery is delayed, Honeywell may cancel deliveries scheduled during the excusable delay period or elect to extend the period of performance to cover the period of delay caused by the excusable delay.
If an excusable delay occurs that affects delivery of Goods to Honeywell, Supplier will allocate its available supply of Goods in a manner that assures Honeywell of at least the same proportion of Supplier's total output of Goods as was allocated to Honeywell before the excusable delay event.
If delivery of any Goods is delayed for more than 30 days, Honeywell may, without liability, cancel all or any part of this Purchase Order.
5. Performance Assurance Plan
If Honeywell, in its sole discretion, determines there is a significant risk that Supplier will fail to meet its performance or delivery requirements under this Purchase Order, Honeywell may require Supplier to perform under a Honeywell Performance Assurance Plan.
The Performance Assurance Plan may include specific reporting and performance requirements reasonably tailored to ensure Supplier's adequate performance under identified provisions of this Purchase Order.
Any failure by Supplier to satisfy the terms of the Performance Assurance Plan is a material breach of this Purchase Order.
6. Shipping Terms, Title and Risk of Loss
6.1. If the Goods will be transported from Supplier's location in the U.S. to Honeywell's designated delivery location in the U.S., unless otherwise specified on the face of the Purchase Order or in a separate signed agreement, the F.O.B. point is Honeywell's designated delivery location.
When the F.O.B. point is Supplier's location, Supplier bears all risk of loss or damage to the Goods and title passes to Honeywell upon delivery of the Goods by Supplier to the carrier designated or approved by Honeywell.
When the F.O.B. point is Honeywell's location, Supplier bears all risk of loss or damage to the Goods and title passes to Honeywell upon delivery of the Goods by Supplier at Honeywell's designated delivery location.
6.2. In all other cases, unless otherwise specified on the face of the Purchase Order or in a separate signed agreement,
(a) Supplier will deliver the Goods DAP (INCOTERMS 2010) at Honeywell's designated delivery location, and
(b) title to Goods passes to Honeywell upon receipt at Honeywell's designated delivery location.
6.3. The foregoing does not relieve Supplier of any responsibility for hidden damages discovered after acceptance of the Goods.
Notwithstanding the foregoing, title and risk of loss to Goods subject to a consignment, stocking or other replenishment agreement pass upon release of the Goods from consigned inventory or at such other time set forth in such consignment, stocking or other replenishment agreement.
Honeywell may direct Supplier to ship the Goods to Honeywell or to any third party designated by Honeywell.
7. Import/Customs Compliance
Supplier assumes all responsibility and liability for any shipments covered by this Purchase Order requiring any government import clearance.
If government authorities declare or otherwise impose countervailing duties, antidumping duties, or retaliatory duties on the Goods imported under this Purchase Order, Honeywell reserves the right to terminate this Purchase Order under the Termination provisions of this Purchase Order.
Supplier will be debited for any duties, fees, or freight incurred by Honeywell due to Supplier's failure to comply with the terms and conditions of this Purchase Order.
8. Drawback
To the extent applicable to any shipment of Goods to Honeywell or Honeywell's designee, all drawback of duties, and rights thereto, related to duties paid by Supplier or Honeywell when the Goods are imported or any materials or components used in manufacturing of the Goods will accrue to the exclusive benefit of Honeywell.
Duty drawback rights include rights developed by substitution and duty drawback rights obtained from sub-tier suppliers related to the Goods.
Supplier will provide Honeywell with all documents, records, and other supporting information necessary to obtain any duty drawback, and will reasonably cooperate with Honeywell to obtain payment.
9. Offset
If Supplier is a non-U.S. entity, Supplier will assist Honeywell in obtaining credit from Supplier's government for the value of relevant Goods purchased to meet any present or future contractual offer or industrial benefit requirements imposed upon Honeywell or its subsidiaries or affiliates.
Assistance includes, but is not limited to, providing upon Honeywell's request evidence of the existence, value, content, and other pertinent information relating to the purchases.
Honeywell reserves the right to claim these credits for itself or third parties.
If Supplier is a U.S. entity that awards any portion of the work under this Purchase Order to any lower tier non-U.S. supplier, Supplier will assign to Honeywell any credits obtained from the lower tier non-U.S. supplier's government relating to this transaction and assist Honeywell in obtaining the earned credits.
10. Honeywell-Supplied Materials, Tooling, Equipment and Technical Data
10.1. Title to any material, components, tooling, equipment, or technical data that Honeywell pays for or provides to Supplier or is responsible for providing to Supplier, including replacements ("Honeywell Property"), will remain or vest with Honeywell.
Supplier will conspicuously label Honeywell Property as such, maintain it in good condition, keep written records of the Honeywell Property in its possession and the location of the property, not allow any liens to be placed upon it, and not change its location without prior written approval from Honeywell.
Supplier is responsible for inspecting and determining that the Honeywell Property is in useable and acceptable condition.
10.2. Supplier will use Honeywell Property exclusively to fulfill Honeywell Purchase Orders unless otherwise authorized in writing by Honeywell's procurement representative.
Honeywell Property is intended for use at the Supplier's site only or as otherwise authorized in writing by Honeywell's procurement representative and, to the extent applicable, is subject to U.S. and other government export or re-export requirements.
Supplier is responsible for any loss, damage, or destruction of Honeywell Property and any loss, bodily injury, damage or destruction resulting from Supplier's use of Honeywell Property.
Supplier will not include the cost of any insurance for Honeywell Property in the prices charged under this Purchase Order and, to the ex tent that any Goods contain any Honeywell Property, will not include in the price of any such Good any mark-up or fee with respect to such Honeywell Property.
Supplier will return Honeywell Property or dispose of it as Honeywell directs in writing.
Honeywell makes no representations and disclaims all warranties (express or implied) with respect to Honeywell Property.
11. Price
Supplier will furnish the Goods at the prices stated on the face of the Purchase Order.
If prices are not stated on the face of the Purchase Order, Supplier will offer its lowest prices subject to written acceptance by Honeywell.
Unless otherwise provided on the face of the Purchase Order, the prices include all packaging and freight to the specified delivery point; applicable taxes and other government charges including, but not limited to, all sales, use, or excise taxes; and all customs duties, fees, or charges.
To the extent that value added tax (or any equivalent tax) is properly chargeable on the supply to Honeywell of any Goods, Honeywell will pay the tax as an addition to payments otherwise due Supplier under this Purchase Order, if Supplier provides to Honeywell a value-added tax (or equivalent tax) invoice.
To the extent Honeywell has not received from Supplier all applicable forms regarding compliance with applicable tax law, Honeywell reserves the right to deduct from any payment to Supplier pursuant to this Purchase Order those amounts that Honeywell, in its sole discretion, deems to be required to be withheld in order to comply with the tax laws of any applicable jurisdiction.
Upon the agreement of the parties to reduced pricing for the Goods, such pricing shall immediately apply to all Goods in consignment, stocking or replenishment arrangement with Supplier, all undelivered Goods, all open and unfilled Purchase Orders, all future Purchase Orders and all unconsumed inventory owned by Honeywell.
12. Price: Most Favored Customer and Meet or Release
Supplier warrants that the prices charged for the Goods delivered under this Purchase Order are the lowest prices charged by Supplier for similar goods.
If Supplier charges a lower price for similar goods, Supplier must notify Honeywell and apply that price to all Goods ordered under this Purchase Order by immediately paying Honeywell the price difference and applying the lower price to all Purchase Orders.
If at any time before full performance of this Purchase Order Honeywell notifies Supplier in writing that Honeywell has received a written offer from another supplier for similar goods at a price lower than the price set forth in this Purchase Order, Supplier must immediately meet the lower price for any undelivered Goods.
If Supplier fails to meet the lower price, in addition to other rights or remedies, Honeywell, at its option, may immediately terminate the balance of the Purchase Order without liability.
As directed by Honeywell, Supplier will provide the Goods at the prices listed on the face of this Purchase Order, subject to these terms and conditions, to other Honeywell divisions and affiliates and any third-party Honeywell sub-supplier or designee.
13. Invoicing and Payment
After each shipment made or service provided, Supplier will submit to the address indicated on the Purchase Order an invoice listing a description of the Goods provided and, as applicable, part numbers, quantity, unit of measure, hours, and the unit and total prices.
This invoice must match the corresponding Purchase Order pricing, quantities, and terms,
and must be sent to the invoice address listed on the Purchase Order.
All applicable taxes and other Government charges including, but not limited to, sales, use, or excise taxes; value added tax, customs duties, fees and all incidental charges including but not limited to royalties, selling commissions, nonrecurring engineering, or other incidental charges must be separately itemized and identified on the invoice.
The invoice must also include the following information in English, or in the destination country's official language if required:
(a) name and address of Supplier and the Honeywell entity purchasing the Goods;
(b) name of shipper (if different from Supplier);
(c) Honeywell's Purchase Order number(s);
(d) country of export;
(e) detailed description of the Goods;
(f) Harmonized Tariff Schedule number;
(g) country of origin (manufacture) of the Goods, or if multiple countries of origin, the country of origin of each part shipped;
(h) weights of the Goods shipped;
(i) currency in which the sale was made;
(j) payment terms;
(k) shipment terms used; and
(l) all rebates or discounts.
The invoice will be accompanied (if applicable) by a signed bill of lading or express receipt evidencing shipment.
Payment of an invoice does not constitute acceptance of the Goods and is subject to appropriate adjustment should Supplier fail to meet the requirements of the Purchase Order.
Payment terms are net 120 days from receipt of a Honeywell-approved compliant invoice unless otherwise stated on the face of the Purchase Order or other written agreement executed by both parties;
provided, however, that in the event that applicable law requires a payment terms period of shorter duration, payment terms shall be the maximum period allowed by applicable law.
Invoices will not be approved unless they accurately reference conforming Goods received by Honeywell or services satisfactorily performed for Honeywell, as well as a valid Purchase Order number, supplier name and address, line description, quantity at line level, price at line level, withholding rates and/or amounts for applicable taxes.
Payment will be scheduled for the next payment cycle following the net terms for the Purchase Order.
14. Set Off.
Honeywell may deduct any amount owing from Supplier to Honeywell as a set off against any amount owing to Supplier under this Purchase Order.
15. Inspection
15.1. All Goods may be inspected and tested by Honeywell, its customers, higher-tier contractors, and end users at all reasonable times and places.
If inspection or testing is made on Supplier's premises, Supplier will provide, without charge, all reasonable facilities and assistance required for the inspection and tests.
Supplier's standard inspection and testing system must be approved by Honeywell in writing.
All inspection and testing records, including sub-tier supplier records relating to the Goods, will be maintained by Supplier and made available to Honeywell during the performance of this Purchase Order, and for such longer periods if specified by Honeywell.
15.2. Final inspection and acceptance by Honeywell will be at destination unless otherwise specified in this Purchase Order.
Honeywell may inspect all or a sample of Goods, at its option, and may reject all or any portion of the Goods if Honeywell determines them to be defective or nonconforming within 90 days of delivery.
If Honeywell performs any inspection (other than the standard inspection) after discovering defective or nonconforming Goods, any additional inspection costs will be paid by Supplier.
No inspection, tests, approval, design approval, or acceptance of the Goods relieves Supplier from responsibility for warranty or any latent or patent defects, fraud, or negligence.
If Goods are defective or nonconforming, Honeywell may, by written notice to Supplier:
(a) rescind this Purchase Order as to the Goods;
(b) accept the Goods at an equitable reduction in price; or
(c) reject the Goods and require the delivery of replacements.
Delivery of replacements will be accompanied by a written notice specifying that the Goods are replacements.
If Supplier fails to deliver required replacements promptly, Honeywell may correct any retained defective or nonconforming Goods at Supplier's expense; replace them with Goods from another supplier and charge the Supplier the cost thereof, including cover, and any incidental costs; or terminate this Purchase Order for cause.
16. Warranty
16.1. Supplier warrants to Honeywell, its successors, assigns, customers, and end users that during the entire Warranty Period specified below, all Goods furnished (including all replacement or corrected Goods or components and regardless of whether all or any part of such furnished Goods or any replacement or corrected Goods was manufactured, distributed or otherwise commercialized by a third party prior to delivery by or on behalf of Supplier to Honeywell) will
(a) be free from defects in material, workmanship, and design, even if the design has been approved by Honeywell,
(b) conform to applicable drawings, designs, quality control plans, specifications and samples and other descriptions furnished or specified by Honeywell,
(c) be merchantable,
(d) be fit for the intended purposes and operate as intended,
(e) comply with all laws,
(f) be free and clear of any and all liens or other encumbrances, and
(g) not infringe any patent, published patent application, or other intellectual property rights of any third party and not utilize misappropriated third party trade secret information.
Goods that fail to meet the preceding standards are collectively called "non-conforming Goods."
Supplier must obtain third party warranties consistent with Section 16 for all raw materials, components, and services required by Supplier to perform under this Agreement ("Components") and Supplier is solely responsible for ensuring that all Components meet these requirements.
Any Component that fails to meet these requirements will be deemed to be a non-conforming Good.
16.2. As to services, in addition to any express or implied warranties, Supplier warrants that
(a) it possesses the requisite expertise, facilities and equipment necessary and appropriate to perform the services,
(b) the services will be performed in a safe and workmanlike manner, and
(c) the services will be performed in accordance with the highest standards in the industry.
16.3. The Warranty Period is 36 months from the date of delivery to the end user or such longer period of time mandated by any longer government requirement covering the Goods.
In addition to the warranties described above, Supplier also warrants all Goods to the same extent and for the same time period (if extending beyond 36 months) as the warranties provided by Honeywell to Honeywell's customers relating to such Goods.
These warranties are for the benefit of Honeywell, Honeywell's customers, and any other person claiming by or through Honeywell.
These warranties will survive any delivery, inspection, acceptance, or payment by Honeywell.
Claims for breach of warranty do not accrue until discovery of nonconformance, even if the Goods were previously inspected.
Any applicable statute of limitations runs from the date of discovery.
If conforming Goods are not furnished within the time specified by Honeywell then Honeywell may, at its election, have the nonconforming Goods repaired, replaced, or corrected at Supplier's expense or credited to Honeywell.
Supplier is responsible for the costs of repairing, replacing or correcting nonconforming Goods or crediting them to Honeywell, and for all related costs, expenses and damages including, but not limited to, the costs of removal, disassembly, failure analysis, fault isolation, reinstallation, re-inspection, and retrofit of the nonconforming Goods or of Honeywell's affected end-product; all freight charges, including but not limited to incremental freight expenses incurred by Honeywell for shipments of repaired, replaced, or corrected Goods to Honeywell and for shipments of repaired, replaced, or corrected Goods or finished product containing or incorporating repaired, replaced, or corrected Goods from Honeywell to any customer of Honeywell; all customer charges; and all corrective action costs.
Unless set off by Honeywell, Supplier will reimburse Honeywell for all such costs upon receipt of Honeywell's invoice.
Any replacement Goods are warranted for the same period as the original Goods.
Additionally, if any services are found not to be performed as warranted within a period of 36 months after the conclusion of the performance of the services by Supplier, Honeywell may direct Supplier to either refund to Honeywell the amount paid for the services, or perform the services again in a proper manner to the extent necessary to provide Honeywell with the result originally contemplated by Honeywell.
The warranties and rights provided are cumulative and in addition to any warranty provided by law or equity.
16.4. If, following delivery, Goods exhibit a substantially similar repetitive root cause, failure mode or defect indicating a common or systemic failure ("Epidemic Failure"), then, without prejudice to Honeywell's rights under Section 22:
(a) the party discovering the failure will promptly notify the other and Supplier will provide to Honeywell a preliminary plan for problem diagnosis within one business day of such notification, which plan Supplier will revise at Honeywell's request;
(b) Supplier and Honeywell will diagnose the problem, plan an initial work-around and effect a permanent solution;
(c) Supplier and Honeywell will agree on a plan for customer notification, replacement scheduling and remediation, including identification of suspect population, field removal, return and reinstallation, work in process ("WIP"), inventory replacement, and repair, or retrofitting, regardless of location or status of WIP completion; and
(d) Supplier is responsible for all costs and damages associated with any Epidemic Failure.
Honeywell and Supplier will work together in good faith to establish and expeditiously implement an Epidemic Failure action plan.
If Supplier or any of its Component suppliers initiate any Product or Component recalls, retrofits, or service bulletins that affect Product quality, Supplier will immediately communicate this information to Honeywell.
16.5. No part of any software or other deliverables delivered by Supplier under this Purchase Order shall contain any software or component licensed or obtained under any Open Source licensing program.
"Open Source" shall mean any software or other material that is distributed as "free software", "open source software" or under a similar licensing or distribution model (including but not limited to the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), and the Apache License)
If Supplier uses Open Source in any software or deliverable, Supplier must first seek written approval from Honeywell and if approved, Supplier must identify each Open Source item along with the applicable license terms.
For any such approved Open Source, Supplier represents that
(a) Supplier is in compliance with the terms and conditions of all applicable licenses for Open Source and
(b) Honeywell's use of such Open Source
(i) will not adversely impact Honeywell's proprietary software
(ii) will not require Honeywell to make available the source code for any Honeywell propriety software
(iii) will not prohibit or limit Honeywell from charging a fee in connection with sublicensing or distributing the software.
17. Changes
Honeywell may, by written or electronic notification, direct changes in the drawings, designs, specifications, method of shipment or packing, quantity, or time or place of delivery of the Goods; reschedule the services; or require additional or diminished services.
Only authorized Honeywell procurement representatives may issue changes to the Purchase Order.
If any change causes an increase or decrease in the cost of, or the time required for, performing this Purchase Order, an equitable adjustment will be made in the Purchase Order price, delivery dates or both, and this Purchase Order will be modified in writing or electronically accordingly.
Any claim by Supplier for adjustment under this provision may be deemed to be waived unless asserted in writing (including the amount of the claim) and delivered to Honeywell within 30 days from the date of the receipt by Supplier of the Honeywell-directed change to the Purchase Order.
If the cost of property made obsolete or excess as a result of a change is paid by Honeywell, Honeywell may prescribe the manner of disposition of the property.
Notwithstanding any disagreement between the parties regarding the impact of a change, Supplier will proceed diligently with its performance under this Purchase Order pending resolution of the disagreement.
18. Design and Process Changes
Supplier will make no changes in the design, materials, manufacturing location, manufacturing equipment, production process, changes between a manual and automated process, or any other processes related to the Goods specified in the Purchase Order or documents referenced in it, or if none, those in place when the Purchase Order is issued, without the advance written approval of Honeywell's procurement representative.
This requirement applies whether or not the change affects costs and regardless of the type of change, including product improvements.
19. Stop Work
At any time by written notice and at no cost, Honeywell may require Supplier to stop all or any part of the work under this Purchase Order for up to 120 days ("Stop Work Order"), and for any further period as mutually agreed.
Immediately upon receipt of a Stop Work Order, Supplier will comply with its terms.
At any time Honeywell may, in whole or in part, either cancel the Stop Work Order or terminate the work under the Termination section of this Purchase Order.
To the extent the Stop Work Order is canceled or expires, Supplier must immediately resume work.
20. Termination
20.1. The nonbreaching party may terminate this Purchase Order if the other party commits a material breach and fails to remedy the breach within 10 calendar days following receipt of written notice specifying the grounds for the breach,
except in the case of breach related to safety, health, or security, Honeywell will have the right to immediately terminate the Order.
A material breach includes, but is not limited to, late delivery or delivery of nonconforming Goods.
If Supplier breaches its obligations to Honeywell and Honeywell terminates this Purchase Order in whole or in part, Honeywell may charge Supplier for any additional cost it incurs in performing Supplier's obligations or in having such obligations performed by a third party.
The solvent party may terminate this Purchase Order upon written notice if the other party becomes insolvent or if any petition is filed or proceedings commenced by or against that party relating to bankruptcy, receivership, reorganization, or assignment for the benefit of creditors.
If a termination by Honeywell for breach by Supplier is determined to have lacked cause, such termination will be treated as a termination without cause under Section 20.2.
20.2. Notwithstanding any firm time period or quantity on the face of the Purchase Order, Honeywell may terminate this Purchase Order in whole or in part at any time with or without cause for undelivered Goods or unperformed services upon 10 days' prior written notice.
20.3. If Honeywell terminates this Purchase Order under either 20.1 or 20.2, Honeywell's sole liability to Supplier, and Supplier's sole and exclusive remedy, is payment for Goods received and accepted by Honeywell before the date of termination.
The payment can be set off against any damages to Honeywell.
Upon termination, Honeywell may require Supplier to transfer title and deliver to Honeywell any completed Goods and Honeywell will pay the Purchase Order price for those Goods subject to set off against any damages to Honeywell.
Honeywell may also require Supplier to transfer title and deliver to Honeywell any or all property produced or procured by Supplier to perform this Purchase Order.
Honeywell will credit Supplier with the reasonable value of the property, but not more than Supplier's actual cost or the Purchase Order value, whichever is less.
20.4. To the extent that any portion of this Purchase Order is not terminated under 20.1 or 20.2 above, Supplier will continue performing that portion.
21. Cessation of Production
If production of any Good is to be discontinued or suspended within 1 year after final delivery under this Purchase Order, Supplier must give Honeywell as much prior written notice as commercially reasonable of the discontinuance or suspension.
For at least 180 days from the discontinuance or suspension, Supplier must accept orders from Honeywell for the Good at the price and on the terms of this Purchase Order.
22. General Indemnification
Supplier will, at its expense, defend, hold harmless and indemnify Honeywell and its customers, subsidiaries, affiliates, and agents, and their respective officers, directors, shareholders, and employees, (collectively "Indemnitees")
from and against any and all loss, cost, damage, claim, demand, or liability, including reasonable attorney and professional fees and costs, and the cost of settlement, compromise, judgment, or verdict incurred by or demanded from the Indemnitee ("Loss")
arising out of, resulting from or occurring in connection with
Supplier's Goods or the performance of the Services by Supplier or its personnel (including any employment-related Loss arising out of, resulting from or occurring in connection with the performance),
the acts, omissions, negligence or willful misconduct of Supplier or its personnel,
Supplier's breach of the terms of this Agreement,
or any theft or other misappropriation of Honeywell's or its personnel's information, property or funds by Supplier or its personnel.
Supplier will not enter into any settlement or compromise without Honeywell's prior written consent, which will not be unreasonably withheld.
If Honeywell is obligated to pay any Loss or any damages pursuant to its contract with a customer, then Supplier will be liable for such Loss any damages to the extent Supplier causes or contributes to such Loss or any damages.
Nothing in this Section limits Honeywell's right to claim all actual damages sustained by Honeywell as a result of Supplier-caused delays.
23. Intellectual Property Indemnification
For Goods provided under this Purchase Order, Supplier will, at its expense, defend and indemnify Honeywell and its customers (Indemnitee) from and against any and all loss, cost, damage, claim, or liability, including reasonable attorney and professional fees and costs, and the cost of settlement, compromise, judgment, or verdict incurred by or demanded from Indemnitee arising out of, or relating to any alleged or actual:
(a) patent, copyright, or trademark infringement;
(b) unlawful disclosure, use, or misappropriation of a trade secret; or
(c) violation of any other third-party intellectual property right, and from expenses incurred by Indemnitee in defense of such suit, claim, or proceeding if Supplier does not undertake the defense thereof.
Supplier will not enter into any settlement without Honeywell's prior written consent, which will not be unreasonably withheld.
Indemnitee may participate in the defense or negotiations to protect its interests.
If any injunction or restraining order is issued, Supplier will, at Honeywell's option and Supplier's expense, obtain for Indemnitee either the right to continue using and selling the Goods or replace or modify the Goods to make them noninfringing; without any loss of functionality.
24. Insurance
Supplier will maintain and carry liability insurance in an amount no less than the greater of
(a) the minimum amount required by applicable law, or
(b) the following coverages:
commercial general liability (including product liability and, for services to be performed, completed operations liability) in a sum no less than $5 million,
automobile liability in a sum no less than $5 million,
worker's compensation in an amount no less than the applicable statutory minimum requirement, and
employer's liability in an amount of no less than $5 million,
all with insurance carriers with an AM Bests rating of no less than A- or equivalent.
In addition, Supplier is responsible for maintaining an adequate level of insurance to cover any potential losses due to damage to Honeywell Property, as defined in Section 10.
All insurance required by this Section must cover Honeywell, its subsidiaries and affiliates, and their respective officers, directors, shareholders, employees and agents as additional insureds.
Before delivery of any Goods or commencement of any services under the Purchase Order, Supplier will provide to Honeywell evidence that Seller maintains the described insurance, and that the coverage will not be changed without 30 days advance written notification to Honeywell from the carrier(s).
Except where prohibited by law, Supplier will require its insurers to waive all rights of recovery or subrogation against Honeywell, its subsidiaries and affiliated companies, and its and their respective officers, directors, shareholders, employees, and agents.
The amount of insurance carried in compliance with the above requirements is not to be construed as either a limitation on or satisfaction of the indemnification obligation in this Purchase Order.
25. Lien Waivers
Supplier will furnish, upon Honeywell's request, waivers by Supplier and all other persons entitled to assert any lien rights in connection with the performance of this Purchase Order
and will indemnify Honeywell against all costs, loss or liability incurred by Honeywell as a result of any failure by Supplier or any other person to comply with this provision.
26. Confidentiality; Intellectual Property; Data Protection
26.1. All information, including without limitation specifications, samples, drawings, materials, know-how, designs, processes, and other technical, business, or financial information, that:
(a) has been or will be supplied to Supplier by or on behalf of Honeywell; or
(b) Supplier will design, develop, or create in connection with this Purchase Order;
as to individual items or a combination of components or both, and whether or not completed, and
all derivatives of (a) and (b) that Supplier has or will design, develop or create
are deemed to be "Confidential Information" of Honeywell.
All Confidential Information is work made for hire and made in the course of services rendered.
All rights to it belong exclusively to Honeywell, with Honeywell having the sole right to obtain, hold, and renew, in its own name or for its own benefit, patents, copyrights, registrations, or other appropriate protection.
To the extent that exclusive title or ownership rights in Confidential Information may not originally vest in Honeywell, Seller irrevocably assigns transfers and conveys to Honeywell all right, title, and interest therein.
26.2. Honeywell's Confidential Information will remain the property of Honeywell.
It may not be used by Supplier for any purpose other than for performing this Purchase Order,
may not be disclosed to any third party, and
will be returned to Honeywell upon the earlier of Honeywell's written request or completion of the Purchase Order.
If, with Honeywell's prior written approval, Supplier furnishes Confidential Information to a sub-tier supplier, Supplier will bind the sub-tier supplier to confidentiality requirements substantially identical to this provision
and Supplier will remain responsible to Honeywell for any breach of this provision by its sub-tier suppliers.
No disclosure, description or other communication of any sort will be made by Supplier to any third person of[:]
the fact of Honeywell's purchase of Goods hereunder,
the terms of this Purchase Order,
the substance of any discussions or negotiations concerning this Purchase Order, or
either party's performance under this Purchase Order.
26.3. "Personal Data" means any information relating to an identified or identifiable natural person; an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity.
Supplier will treat any Personal Data of all Honeywell officers, directors, employees, agents, contractors, customers, and suppliers as Confidential Information.
The Parties agree that the Supplier will be the Data Processor (as defined in the EU Data Protection Directive 95/46/EC or any successor Directive) for the purposes of processing Personal Data pursuant to this Purchase Order.
Supplier will:
(a) take appropriate technical and organizational security measures as are reasonably required by Honeywell to protect Personal Data;
(b) use and permit employees and third parties to use Personal Data pursuant to Honeywell's instructions only for purposes directly related to the provision of Goods or performance of services or related obligations under this Purchase Order;
(c) refrain from transferring Personal Data out of the European Union unless Honeywell has given its prior written consent to the transfer and Supplier has satisfied any further requirements reasonably imposed by Honeywell.
If with Honeywell's prior permission Supplier will process Personal Data that Honeywell transfers from any of its affiliates in the European Union to any of its affiliates in the U.S. pursuant to the U.S. - EU Safe Harbor Framework ("Safe Harbor Personal Data"),
[then] Supplier warrants that either Supplier self-certifies to the U.S. - EU Safe Harbor Framework with respect to the processing of the Safe Harbor Personal Data
and will notify Honeywell immediately if its self-certification terminates for any reason,
or Supplier must provide at least the same level of privacy protection as required by the U.S. - EU Safe Harbor Framework;
(d) indemnify Honeywell against all losses, costs, expenses, damages, liabilities, demands, claims, actions or proceedings which Honeywell may suffer or incur arising out of any breach of this Section; and
(e) promptly notify Honeywell about:
any legally binding request for disclosure of Personal Data by a law enforcement agency (unless otherwise prohibited); any accidental or unauthorized processing of Personal Data; and
any requests received from individuals to whom Personal Data relates,
without responding to that request unless it has been otherwise authorized to do so by Honeywell.
With the exception of Personal Data, this Agreement imposes no obligation upon Supplier if Supplier can demonstrate that the Confidential Information:
(a) was rightfully in Supplier's possession before receipt from Honeywell and was not accompanied by a duty of confidentiality;
(b) is or becomes a matter of public knowledge through no fault of Supplier;
(c) is rightfully received by Supplier from a third party and is not accompanied by a duty of confidentiality;
(d) is disclosed by Honeywell to a third party without a duty of confidentiality on the third party;
(e) is independently developed by Supplier without use of Honeywell's Confidential Information; or
(f) is disclosed under operation of law, provided Supplier notifies Honeywell and upon Honeywell's request and at Honeywell's cost cooperates in all reasonable respects to contest the disclosure or obtain a protective order or other remedy.
27. Audit
27.1. Supplier will maintain detailed records reflecting Supplier's compliance with this Purchase Order for at least 10 years from the date of last delivery.
Supplier will provide, and will cause each of its sub-tier suppliers to provide, access for Honeywell's personnel, auditors, all regulatory authorities and Honeywell's customers to have access at all reasonable times to facilities, books and other pertinent records and any other information as requested by Honeywell or Honeywell's auditors.
Supplier will require each of its sub-tier suppliers to do likewise with respect to their records and materials.
27.2. If any invoice submitted by Supplier is found to be in error, an appropriate adjustment will be made to the invoice or the next succeeding invoice following the discovery of the error and the resulting payment/credit will be issued promptly.
Supplier will, and will cause its sub-tier suppliers to, promptly correct any other Supplier deficiencies discovered as a result of the audit.
28. Limitation of Liability
29. Assignment and Subcontracting
This Purchase Order will be binding on the parties and their respective permitted successors and assigns.
Supplier will not assign this Purchase Order or any rights or obligations under this Purchase Order or subcontract the manufacture of the Goods or performance of any related services without the prior written approval of Honeywell.
Any transfer of this Purchase Order by Supplier by merger, consolidation, or dissolution, or any change in ownership or power to vote a controlling share of the voting stock in Supplier, will constitute an assignment for the purpose of this Agreement.
Any assignment or subcontract without Honeywell's written approval will be voidable at the option of Honeywell.
Honeywell may assign this Purchase Order or any rights or obligations under this Purchase Order to any of its subsidiaries or affiliates or to any purchaser or successor to all or substantially all of the assets of Honeywell without Supplier's consent and upon written notice to Supplier.
To the extent Supplier assigns or subcontracts all or part of the manufacture of the Goods or performance of any related services as permitted under this Purchase Order,
Supplier will be responsible for its assignees and subcontractors (including but not limited to its affiliates) and their personnel to the same extent as if the acts or omissions were performed by Supplier and its employees, agents and personnel.
30. Relationship of Parties/Independent Contractor
Nothing in this Purchase Order will be construed to place Supplier and Honeywell in an agency, employment, franchise, joint venture, or partnership relationship.
Neither party has the authority to obligate or bind the other in any manner, and nothing contained in this Purchase Order will give rise or is intended to give rise to rights of any kind to any third parties.
Neither party will make any representation to the contrary.
The parties agree that Supplier will perform its obligations under this Purchase Order as an independent contractor.
Supplier will be solely responsible for all Employer Obligations with respect to Supplier personnel, even if a court or other body deems the personnel to be Honeywell employees.
"Employer Obligations" means all obligations of any kind imposed customarily or by law or agreement on persons acting in the capacity of an employer, including, without limitation, responsibility for
(a) hiring, assigning, compensating, and terminating personnel;
(b) withholding and paying taxes;
(c) verification of employment eligibility, including compliance with work authorization and immigration laws and export licensing and control requirements;
(d) compliance with all federal, state, and local laws (both common and statutory) and regulations related to employment and the rights of personnel.
Supplier represents and warrants that it and all its subcontractors, if any, comply and will continue to comply with all applicable employment laws and regulations related to personnel working on Honeywell matters, that all personnel working on Honeywell matters are authorized to work in the relevant jurisdiction, and that it does not employ child or forced labor.
31. Compliance with Laws and Integrity
31.1. Supplier will comply with all laws, regulations and ordinances and Honeywell's Code of Business Conduct ("Code") in performing this Purchase Order.
A copy of the Code may be obtained at http://www.honeywell.com/sites/honeywell/codeofconduct.htm.
Supplier agrees to abide by and maintain an integrity and compliance program that encompasses at a minimum the standards of business conduct set forth in the Code and that effectively prevents and corrects ethical violations and maintains compliance with laws.
Supplier will also comply with Honeywell's Information and System Security Supplier Terms and Conditions to the extent deemed applicable by Honeywell.
31.2. Upon request, in form and substance satisfactory to enable Honeywell to meet its compliance obligations with regard to Regulation (EC) No 1907/2006 ("REACH"),
Supplier will provide Honeywell with complete information regarding the chemical composition of any Goods supplied under this Purchase Order,
including all safety information required under REACH and information regarding the registration or pre-registration status of any Deliverables pursuant to REACH
promptly but no later than 30 days of receiving such request.
Supplier agrees that it will include any Honeywell "Identified Use" in its REACH registrations or applications for Authorization, unless Supplier notifies Honeywell that it rejects the Identified Use in order to protect human health or the environment and specifies the reason for the rejection.
In this case Honeywell will have the right to terminate this Purchase Order without incurring any damages.
31.3. Absent Honeywell's prior written consent, no Goods will contain any of the substances identified in
(a) Article 4(1) of the European Parliament Directive 2011/65/EU (the "RoHS Directive") as the RoHS Directive may be updated from time to time and as such Directive is implemented in any country,
but only to the extent that the Directive applies to the commercialization, sale or use of such Goods, or
(b) similar applicable laws or regulations, restricting the use of hazardous materials in such other jurisdictions to the extent that any such law or regulation applies to the commercialization, sale or use of such Goods .
31.4. Goods will comply with the restrictions set forth in the Montreal Protocol on ozone-depleting substances.
31.5. Supplier will be responsible for all costs and liabilities for or relating to the recycling of Goods pursuant to the most current version of European Parliament Directive 2012/19/EU (the "WEEE Directive") as the WEEE Directive may be updated from time to time and as such Directive is implemented in any country.
31.6. To the extent applicable, this Purchase Order is subject to the requirements of 41 CFR 60-1.4, 41 CFR 60-250.5 and 29 CFR part 471, Appendix A to Subpart A, which are incorporated into this Purchase Order by reference.
In addition, to the extent applicable, this Purchase Order is subject to the requirements of 41 CFR 60-300.5(a) and 41 CFR 60-741.5(a), which are incorporated herein by reference.
The latter two U.S. regulations prohibit discrimination against qualified individuals on the basis of protected veteran status and disability and, if applicable, require affirmative action to employ and advance in employment protected veterans and qualified individuals with disabilities.
31.7. In accordance with applicable "Conflict Minerals" laws, Honeywell must determine whether its products contain tin, tantalum, tungsten or gold ("3TG") originating in the Democratic Republic of the Congo and adjoining countries ("Conflict Minerals").
To the extent Supplier supplies Goods containing 3TG to Honeywell under any Purchase Order, Supplier commits to have a supply chain process to ensure and document a reasonable inquiry into the country of origin of the 3TG minerals incorporated into such Goods.
If requested, Supplier will promptly provide information or representations that Honeywell reasonably believes are required to meet its conflict minerals compliance obligations.
32. Applicable Law and Forum
32.1. United States
If Honeywell is a legal entity formed in the United States, then the construction, interpretation, performance, and enforcement hereof, all transactions hereunder and the parties relationship in connection therewith or any related claims whether founded in contract, tort or otherwise, will be governed by the laws of the State of New York, U.S.A. without regard to or application of its principles or laws regarding conflicts of laws,
and excluding the United Nations Convention on the International Sale of Goods of 1980 (and any amendments or successors thereto),
and the federal or state courts in New York, New York will have exclusive jurisdiction of any dispute.
32.2. China
If both parties are legal entities formed in The People's Republic of China, then the construction, interpretation, performance, and enforcement hereof, all transactions hereunder and the parties relationship in connection therewith or any related claims whether founded in contract, tort or otherwise, will be governed by the laws of The People's Republic of China without regard to or application of its principles or laws regarding conflicts of laws, and excluding the United Nations Convention on the International Sale of Goods of 1980 (and any amendments or successors thereto).
Any dispute not resolved by the parties through consultations will be subject to binding arbitration in accordance with the rules of the China International Economic Trade Arbitration Commission (CIETAC).
In any arbitration there will be three arbitrators.
Each Party will select and appoint one arbitrator within 30 days after the date of a request for arbitration.
The third arbitrator will be jointly selected and appointed by the Parties.
If the Parties fail to select and appoint the third arbitrator, the Chairman of CIETAC will select the third arbitrator.
If a Party does not select and appoint an arbitrator within 30 days after the selection and appointment of the first arbitrator, the relevant selection and appointment will be made by the Chairman of CIETAC.
The place of arbitration will be Shanghai.
If Honeywell is a legal entity formed in The People's Republic of China and the Supplier is not a legal entity formed in The People's Republic of China, then the construction, interpretation, performance, and enforcement hereof, all transactions hereunder and the parties relationship in connection therewith or any related claims whether founded in contract, tort or otherwise, will be governed by the laws of England and Wales without regard to or application of its principles or laws regarding conflicts of laws, and excluding the United Nations Convention on the International Sale of Goods of 1980 (and any amendments or successors thereto).
Any dispute not resolved by the parties will be subject to arbitration in accordance with the rules of the Singapore International Arbitration Centre.
32.3. Korea, Hong Kong, Malaysia, Singapore, Indonesia, Vietnam, Australia, and New Zealand
If Honeywell is a legal entity formed in Korea, Hong Kong, Malaysia, Singapore, Indonesia, Vietnam, Australia, and New Zealand, then the construction, interpretation, performance, and enforcement hereof, all transactions hereunder and the parties relationship in connection therewith or any related claims whether founded in contract, tort or otherwise, will be governed by the laws of the country under which the Honeywell entity is formed, excluding the UN Convention on Contracts for the International Sale of Goods of 1980 (and any amendments or successors thereto), and any dispute arising out of or relating to this Purchase Order, including the breach, termination or validity thereof, will be finally resolved in accordance with the rules of arbitration as noted below.
Judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.
The place of arbitration will be selected by Honeywell.
" Singapore, Indonesia, Vietnam, Australia, New Zealand, - in accordance with the arbitration rules of the Singapore International Arbitration Center
" Korea - in accordance with the arbitration rules of the Korean Commercial Arbitration Board
" Hong Kong - in accordance with the arbitration rules of the Hong Kong International Arbitration Center " Malaysia - in accordance with the arbitration rules of the Kuala Lumpur Regional Arbitration Centre
" Taiwan - in accordance with the arbitration rules of the local Arbitration Act
32.4. Europe, Middle East, Africa
If Honeywell is a legal entity formed in India or in a European, Middle Eastern and African country or formed in a country not identified in Section 32.1, Section 32.2 or Section 32.3 above, then the construction, interpretation, performance, and enforcement hereof, all transactions hereunder and the parties relationship in connection therewith or any related claims whether founded in contract, tort or otherwise, will be governed by the laws of England and Wales without regard to or application of its principles or laws regarding conflicts of laws, and excluding the United Nations Convention on the International Sale of Goods of 1980 (and any amendments or successors thereto).
Any dispute arising out of or relating to this Purchase Order, including the breach, termination or validity thereof, will be finally resolved by a panel of three arbitrators in accordance with the Rules for Arbitration of the International Chamber of Commerce.
Judgment upon the award rendered by the arbitrators may be entered by any court having jurisdiction thereof.
The place of arbitration will be London, England.
32.5. Additional Rules Applicable to Arbitration
Any award will be payable in the currency of this Purchase Order.
Either party may apply to the arbitrators seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved.
Either party also may, without waiving any remedy under this Purchase Order, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights or property of that party, pending the arbitrators' determination of the merits of the controversy.
The language of the arbitration will be English.
Pending settlement or final resolution of any dispute, Supplier will proceed diligently with the performance of this Purchase Order in accordance with Honeywell's directions.
33. Remedies
All Honeywell remedies set forth in this Purchase Order are in addition to, and will in no way limit, any other rights and remedies that may be available to Honeywell at law or in equity.
34. Notices
Notices relating to this Purchase Order must be in writing and may be delivered personally, by overnight courier, or by certified first class mail, postage prepaid (each to the respective addresses appearing on the face of this Purchase Order; or sent by fax to the respective fax number provided by Honeywell or Supplier.
Notice will be deemed given on the date delivered if delivered personally; three business days after being placed in the mail as specified above; or upon confirmation receipt that it was transmitted satisfactorily if transmitted by fax.
35. Publicity
Any news release, public announcement, advertisement, publicity or any other disclosure concerning this Purchase Order to any third party except as may be necessary to comply with other obligations stated in this Purchase Order requires prior written approval of Honeywell.
Supplier will not use Honeywell's name or marks or refer to or identify Honeywell in any advertising or publicity releases or promotional or marketing materials without Honeywell's prior written approval.
Furthermore, Supplier will not claim or suggest, implicitly or explicitly, that Honeywell's purchase of its Goods use of its services or deliverables constitutes Honeywell's endorsement of its Goods, services or deliverables.
36. Headings and Captions
Headings and captions are for convenience of reference only and do not alter the meaning or interpretation of any provision of this Purchase Order.
37. Waiver
The failure or delay of either party to enforce at any time any of the provisions of this Purchase Order will not be construed to be a continuing waiver of those provisions, nor will any such failure or delay prejudice the right of the party to take any action in the future to enforce any provision.
38. Severability
If any provision of this Purchase Order (or portion thereof) is held to be illegal, invalid, or unenforceable by a court of competent jurisdiction, the parties agree that the court will construe the provision in a manner that renders the provision valid and enforceable to the fullest extent possible under the law of the applicable jurisdiction and that the remaining provisions will remain in full force and effect.
39. Supply Chain Security
Supplier will implement the Business Partner Criteria of any Supply Chain Security Program that the country of import for the Goods may adopt such as the U.S. Customs-Trade Partnership AgainstTerrorism (C-TPAT) or the Canadian Partners in Protection (PIP) Program.
40. Survival
All provisions of this Purchase Order which by their nature should apply beyond its term will remain in force after any termination or expiration of this Purchase Order including, but not limited to, those addressing the following subjects: Import/Customs Compliance, Drawback, Offset, Honeywell-Supplied Materials, Tooling, Equipment and Technical Data, Price, Price: Most Favored Customer and Meet or Release, Invoicing and Payment, Set Off, Warranty, Cessation of Production, General Indemnification, Intellectual Property Indemnification, Insurance, Lien Waivers; Confidentiality/Data Privacy and Intellectual Property, Audit, Relationship Between the Parties/Independent Contractor, Applicable Law and Forum, Publicity, Waiver, and Survival.
Honeywell Standard PO Terms and Conditions for Goods and Services ACS Revision 01/03/2014
9 Honeywell International Inc. Terms & Conditions Conditions of Sale
Unless and to the extent that a separate contract executed between the procuring party ("Buyer") and Honeywell International Inc. ("Honeywell") applies, any purchase order covering the sale of any product ("Product") contained in this Catalog ("Order") will be governed solely by these Conditions of Sale, whether or not this Catalog or these Conditions of Sale are referenced in the Order.
Except as provided in the "Buyer's Orders" section below, all provisions on Buyer's Order and all other documents submitted by Buyer are expressly rejected.
Honeywell will not be deemed to have waived these Conditions of Sale if it fails to object to provisions submitted by Buyer.
Buyer's silence or acceptance or use of Products is acceptance of these Conditions of Sale.
Any modification or addition to these Conditions of Sale must be in writing and signed by an authorized representative of Buyer and Honeywell.
Any irreconcilable conflict among these Conditions of Sale, the General Terms section and the Supplier CAGE Code Information section of this Catalog will be resolved by giving precedence in the following order from highest precedence to lowest: (1) Supplier CAGE Code Information, (2) General Terms, and (3) Conditions of Sale.
This Catalog and price list is not an offer.
Honeywell reserves the right to reject any Order submitted for its acceptance.
Orders should specify: (1) Purchase Order number; (2) Honeywell.s part number; (3) requested delivery dates; (4) price; (5) quantity; (6) location to which the Product is to be shipped; and (7) location to which invoices will be sent for payment.
Buyer's Orders are subject to Honeywell's minimum order requirements, if any, and Honeywell's acceptance.
Honeywell reserves the right to limit order quantities for certain Products.
Honeywell's order acknowledgment will not constitute acceptance.
Any additional or conflicting terms on an Order will not apply unless specifically agreed to in writing by Honeywell.
Delivery terms are EXWORKS (Incoterms 2000), Honeywell's facility.
Honeywell will schedule delivery in accordance with its standard lead-time unless Buyer's Order requests a later delivery date or Honeywell agrees in writing to an earlier delivery date.
Buyer will pay all transportation costs (including insurance and customs duties) and for any claims to be filed with the carrier.
If Honeywell prepays transportation charges, Buyer will reimburse Honeywell upon receipt of an invoice for those charges.
Title and risk of loss or damage will pass to Buyer when Honeywell places Product at Buyer's disposal at Honeywell's facility,
except that title and risk of loss or damage to all Product shipped via air freight directly to Buyers located outside of the United States of America will pass to the Buyer immediately after such time as the Products first leave the overlying airspace of the United States.
Honeywell reserves the right to impose additional charges for any special routing, packing, labeling, handling or insurance requested by Buyer.
Products are presumed accepted unless {1} Honeywell receives written notice of rejection from Buyer explaining the basis for rejection within 10 calendar days after delivery and {2} Buyer dispositions the Product to Honeywell in accordance with Honeywell's written instructions.
Honeywell will have a reasonable opportunity to repair or replace rejected Product, at its option.
Subject to the terms of the article titled "Taxes", Honeywell assumes shipping costs in an amount not to exceed actual reasonable direct freight charges to Honeywell's designated facility to return properly rejected Products.
Buyer will provide copies of freight invoices to Honeywell upon request.
Following initial delivery, the party initiating shipment will bear the risk of loss or damage to Products in transit.
If Honeywell reasonably determines that rejection was improper, Buyer will be responsible for all expenses caused by the improper rejection.
Honeywell may, without notice to Buyer, incorporate changes to Products that do not alter form, fit or function of the Products.
Honeywell may, at its sole discretion, also make such changes to Products previously delivered to Buyer.
Prices for each Product are set forth in this Catalog, stated in United States currency, and valid for products shipped from January 1, 2010 through December 31, 2010, unless stated otherwise.
Honeywell reserves the right to correct any inaccurate invoices and to change Catalog prices.
Payment must be received by Honeywell 30 calendar days from date of invoice.
Payment(s) must be made in United States currency and must be accompanied by remittance detail containing at a minimum the invoice number and amount paid per invoice.
Payments must be in accordance with the "Remit To" field on each invoice.
Honeywell may without notice to Buyer, modify or withdraw credit terms including, but not limited to, requiring advance payment, guarantees, or other security.
If Buyer is delinquent in its payment to Honeywell, then until all delinquent amounts are paid:
(1) Honeywell will be relieved of its obligations with respect to guarantees, including without limitation, turnaround times, spares support and delivery lead times; and
(2) refuse to process any credit to which Buyer may be entitled;
(3) set off any credit or sum owed by Honeywell to Buyer against any undisputed amount owed by Buyer to Honeywell;
(4) withhold future shipments to Buyer;
(5) declare Buyer's performance in breach and terminate any Order;
(6) repossess Products for which payment has not been made;
(7) deliver future shipments on a cash-with-Order or cash-in-advance basis;
(8) charge interest on delinquent amounts at a rate of 1.5% per month or the maximum rate permitted by law, if lower, for each month or part thereof;
(9) charge storage or inventory carrying fees on Products;
(10) recover all costs of collection including, without limitation, reasonable attorneys' fees;
(11) if Buyer is delinquent on a payment schedule, accelerate all remaining payments and declare the total outstanding balance then due and owing; or
(12) combine any of the above rights and remedies as may be permitted by applicable law.
The above remedies are in addition to all other remedies available at law or in equity.
Buyer will not set off or recoup invoiced amounts or any portion thereof against sums that are due or may become due from Honeywell, its parents, affiliates, subsidiaries or other divisions or units.
"Nonconformance" means failure to comply with, or failure to operate due to noncompliance with, applicable Honeywell drawings or having defects in workmanship or material.
Normal wear and tear and the need for regular overhaul and periodic maintenance do not constitute a Nonconformance.
For the purposes of this section the term Product includes end items, including its line replaceable units and components, including those returned for exchange.
Products that are normally consumed in operation or which have a normal life inherently shorter than the foregoing warranty period including, but not limited to, consumables (e.g. flashtubes, lamps, batteries, storage capacitors) are not covered under this warranty.
Honeywell warrants that at time of shipment to Buyer its Products will comply with applicable Honeywell drawings, and for a period of the earlier of 6 months from first use or 12 months after shipment of the Products will be free from defects in workmanship and material.
These warranties run to Buyer, its successors, permitted assigns, and customers.
Buyer must notify Honeywell in writing during the warranty period of a Nonconformance and, within 30 calendar days of discovery of the Nonconformance, disposition the Product in accordance with Honeywell's written instructions.
Honeywell's obligation and Buyer's sole remedy under this warranty is repair or replacement, at Honeywell's election, of any Product Nonconformance.
All Products repaired or replaced are warranted only for the unexpired portion of the original warranty period.
Honeywell assumes round trip shipping costs for Nonconforming Products in an amount not to exceed actual reasonable direct freight charges to and from Honeywell's nearest warranty repair facility for such Products.
Buyer will provide copies of freight invoices to Honeywell upon request.
Round trip shipping costs expressly exclude freight forwarding charges, taxes, duties and tariffs.
The party initiating transportation bears the risk of loss or damage to Products in transit.
If Honeywell reasonably determines that a Nonconformance does not exist, then Buyer will pay all expenses related to the improper return including, but not limited to, diagnostic and shipping charges.
Honeywell will not be liable under this warranty if the Product has been exposed or subjected to any:
(1) maintenance, repair, installation, handling, packaging, transportation, storage, operation or use that is improper or otherwise not in compliance with Honeywell's instruction;
(2) Product alteration, modification or repair by anyone other than Honeywell or those specifically authorized by Honeywell;
(3) accident, contamination, foreign object damage, abuse, neglect or negligence after shipment to Buyer;
(4) damage caused by failure of a Honeywell-supplied product not under warranty or by any hardware or software not supplied by Honeywell;
(5) use of counterfeit or replacement parts that are neither manufactured nor approved by Honeywell for use in Honeywell-manufactured Products;
Honeywell has no obligation under this warranty unless Buyer maintains records that accurately document operating time, maintenance performed and the nature of the unsatisfactory condition of Honeywell's Product.
Upon Honeywell's request, Buyer will give Honeywell access to these records for substantiating warranty claims.
Honeywell will not be liable to Buyer for any failure to meet its obligations due to any cause beyond its reasonable control
including, but not limited to: government embargoes or any other government acts that interfere with performance; blockades; seizure or freeze of assets; delays or refusals to grant an export license or the suspension or revocation thereof; fires, floods, severe weather conditions; any other acts of God, quarantines or regional medical crisis; labor strikes or lockouts; riots, strife, insurrection, civil disobedience, armed conflict, terrorism or war, declared or not or impending threat of any of the foregoing, if reasonably expected to cause injury to people or property; and shortages or inability to obtain materials or components.
The due date of any performance affected by such an event will be extended by the period of time that Honeywell is actually delayed.
If the inability to perform continues for longer than 6 months, either party may terminate the affected Order by providing written notice to the other party.
Buyer may cancel any Order or portion of an Order by giving Honeywell written notice specifying the detailed reason for the cancellation only if:
(1) Honeywell fails to correct a breach of these Conditions of Sale within 90 calendar days of written notice from Buyer of the breach; or
(2) any insolvency or suspension of Honeywell's operations or any petition filed or proceeding commenced by or against Honeywell under any state or federal law relating to bankruptcy, arrangement, reorganization, receivership or assignment for the benefit of creditors.
Any dispute arising out of or relating to these Conditions of Sale, including the breach, termination or validity thereof ("Dispute"), will be finally resolved by arbitration.
The arbitration will be conducted in English.
If Buyer is incorporated in the United States, a single arbitrator will apply the Center for Public Resources Institute for Dispute Resolution Rules for Non-Administered Arbitration then currently in effect to finally resolve the Dispute.
The arbitration will be governed by the Federal Arbitration Act, 9 U's.C. secs. 1-16, and judgment upon on the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.
The place of arbitration will be New York City, New York.
If Buyer is not incorporated in the United States, a panel of three arbitrators will apply the International Chamber of Commerce ("ICC") Rules for Arbitration to finally resolve the Dispute.
The place of arbitration will be Brussels Belgium.
Any award will be payable in U's. dollars, and judgment on the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof.
Either party may apply to the arbitrator seeking injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved.
Either party also may, without waiving any remedy under these Conditions of Sale, seek from any court having jurisdiction any interim or provisional relief that is necessary to protect the rights or property of that party, pending the arbitrator's determination of the merits of the controversy.
If any dispute, or response to any dispute, includes an allegation that potentially concerns whether any intellectual property right owned, controlled or licensable by either party is invalid, unenforceable or infringed or misappropriated, or is otherwise limited in scope or application, then either party may, in its sole discretion, elect to have that dispute adjudicated before a court of competent jurisdiction and this section will not be binding on either party with respect to that dispute in its entirety or any related dispute, including any portions of a dispute that do not concern intellectual property rights.
These Conditions of Sale will be governed by the laws of the State of New York, U.S.A. without regard to conflict of law principles.
The United Nations Convention on Contracts for the International Sale of Goods, 1980, and any successor thereto, will not apply.
HONEYWELL's LIABILITY FOR DAMAGES ARISING OUT OF OR RELATED TO THIS ORDER IS LIMITED TO THE ORDER PRICE FOR THE SPECIFIC PRODUCT THAT GIVES RISE TO THE CLAIM.
14. NONDISCLOSURE AND NON-USE OF HONEYWELL's CONFIDENTIAL DATA AND INFORMATION
These Conditions of Sale do not supersede any confidentiality agreement executed by Buyer and Honeywell that otherwise applies to products, services, technical data or other information delivered in connection with an Order.
In the absence of such an agreement, Buyer may use Honeywell's confidential information only in the normal operation of Honeywell's Products.
Further, Buyer may disclose Honeywell's confidential information only on a need-to-know basis, will protect against inadvertent disclosure, and will not disclose such information to any third party without Honeywell's prior written consent.
Honeywell will defend Buyer against any suit arising out of any actual or alleged patent or copyright infringement of a valid patent or copyright, to the extent based on the Product as delivered by Honeywell, and indemnify for any final judgment assessed against Buyer resulting from such suit
provided that Buyer notifies Honeywell as soon as it is aware of the third-party claim,
and agrees to give sole and complete authority, information and assistance (at Honeywell's expense) for the defense and disposition of the claim.
Honeywell will not be responsible for any compromise or settlement made without Honeywell's prior written consent.
Honeywell will have no obligation or liability with respect to:
(1) Products provided pursuant to Buyer's designs, drawings or manufacturing specifications;
(2) Products used other than for their ordinary purpose;
(3) claims of infringement resulting from combining any Product furnished hereunder with any article not furnished by Honeywell; or
(4) any modification of the Product other than a modification by Honeywell.
Because Honeywell has exclusive control of resolving infringement claims hereunder, in no event will Honeywell be liable for Buyer's attorney fees or costs.
Further, Buyer agrees to indemnify and defend Honeywell to the same extent and subject to the same restrictions set forth in Honeywell's obligations to Buyer as set forth in this "Indemnity Against Patent and Copyright Infringement" section for any suit against Honeywell based upon a claim of infringement resulting from (1), (2), (3), or (4) of the preceding paragraph.
If a claim is brought or if Honeywell believes that a claim is likely, Honeywell may, at its option, and at its expense,
(1) procure for Buyer the right to continue using the Product;
(2) replace or modify the Product so that it becomes non-infringing; or
(3) accept return of the product or terminate Buyer's license to use the allegedly infringing Product and grant Buyer a credit for the purchase price or license fee paid for such Product, less a reasonable depreciation for use, damage, and obsolescence.
Further, Honeywell may cease shipping the subject Products without being in breach of these Conditions of Sale.
Any liability of Honeywell under this "Indemnity Against Patent and Copyright Infringement" is subject to the provisions of the "Limitation of Liability" section of these Conditions of Sale.
This "Indemnity Against Patent and Copyright Infringement" section states the parties.
entire liability, sole recourse and their exclusive remedies with respect to infringement.
All other warranties against infringement of any intellectual property rights, statutory, express, or implied are hereby disclaimed.
"Licensed Software" means software, including all related updates, changes, revisions and documentation, if any, that Buyer is entitled to use under these Conditions of Sale and which is not subject to a separate software license between the parties.
Subject to Buyer's compliance with these Conditions of Sale, Honeywell grants to Buyer and Buyer accepts a nontransferable, nonexclusive license, without the right to sublicense, to use the Licensed Software in the ordinary and normal operation of the Product on which it is installed or with which it is intended to be used under this license.
Honeywell (and its licensors, if applicable) retains all title to the intellectual property related to all material and software provided under these Conditions of Sale.
Buyer may transfer its license to use the Licensed Software to a third party only in conjunction with Buyer's sale of any Honeywell or Buyer Product on which the Licensed Software is installed or with which it is used.
Buyer's transfer of the Licensed Software as authorized herein must be under terms consistent with and no less stringent than the terms set forth in these Conditions of Sale.
Except as specifically permitted in these Conditions of Sale, the Licensed
Software may not be sublicensed, transferred or loaned to any other party without Honeywell's prior express written consent.
Unless specifically authorized by Honeywell in writing, Buyer is prohibited from making copies of Licensed Software except for backup purposes.
Buyer will reproduce and include all Honeywell proprietary and copyright notices and other legends both in and on every copy made.
Buyer may not directly or indirectly make any effort to deconstruct the software provided, including, but not limited to: translating, decompiling, disassembling, reverse assembling, reverse engineering, creating derivative works or compilations, or performing any other operation to obtain any portion of its contents.
Buyer will take all reasonable actions necessary to prevent unauthorized access, disclosure or use of the software provided.
Notwithstanding the warranties provided elsewhere herein, Buyer acknowledges that Licensed Software may be product, aircraft, or sensor specific and, as such, may require reasonable adjustment or refinement to suit Buyer's specific requirements.
Subject to the receipt of adequate written notice and reasonable aid from Buyer, Honeywell will make reasonable, commercial efforts to accomplish reasonable adjustments or refinements for up to 90 calendar days after initial delivery of the Licensed Software.
Except as expressly granted herein, no license or right, including sublicensing rights, either expressly, implicitly, by estoppel, conduct of the parties, or otherwise, is granted by Honeywell to Buyer.
Honeywell owns all rights to all specifications, drawings, engineering instructions, data, material, equipment, software, processes, facilities and tooling, including, but not limited, to jigs, dies, fixtures, molds, patterns, taps, gauges, test equipment, manufacturing aids and replacements items, now existing or hereafter created, except to the extent that title is specifically transferred in writing from Honeywell to Buyer.
Honeywell will apply for United States Government export authorizations required for delivery of any goods, services or technical data under an Order.
Buyer will promptly provide all information required by Honeywell to complete the authorization application.
Buyer will apply for all other necessary import, export or re-export approvals.
Buyer will comply with all applicable export and import control laws and regulations, including the United States Export Administration Regulation (EAR) and the United States International Traffic in Arms Regulations (ITAR), and will retain documentation evidencing such compliance.
Buyer is aware that U's. export law may impose restrictions on Buyer's use of the goods, services, or technical data, or on their transfer to third parties.
Buyer will immediately notify Honeywell and cease distribution activities with regard to the transaction in question if Buyer knows or has a reasonable suspicion that the products, technical data, plans, or specifications may be redirected to other countries in violation of export control laws.
Honeywell will not be liable to Buyer for any breach resulting from government actions which impact Honeywell's ability to perform, including but not limited to:
(1) refusal to grant export or re-export license;
(2) cancellation of export or re-export license;
(3) any subsequent interpretation of United States export laws and regulations, after the date of Honeywell's acceptance of an Order, that limits or has a material adverse effect on the cost of Honeywell's performance under an Order; or
(4) delays due to Buyer's failure to follow applicable import, export, transfer, or re-export laws and regulations.
If Buyer designates the freight forwarder to be used for export shipments from the United States, then Buyer's freight forwarder will export on Buyer's behalf and Buyer will be responsible for any failure of Buyer's freight forwarder to comply with all applicable export requirements.
Honeywell will provide Buyer's designated freight forwarder with required commodity information.
Honeywell's pricing excludes all taxes (including, but not limited to, sales, use, excise, value-added or other similar taxes), duties and charges (collectively, "Taxes").
Buyer will pay all Taxes resulting from an Order or Honeywell's performance, whether imposed, levied, collected, withheld or assessed now or later.
If Honeywell is required to impose, levy, collect, withhold or assess any Taxes on any transaction under an Order, then in addition to the purchase price, Honeywell will invoice Buyer for the Taxes unless, at the time of Order placement, Buyer furnishes Honeywell with an exemption certificate or other documentation sufficient to verify exemption from the Taxes.
If any Taxes are required to be withheld from amounts paid or payable to Honeywell under an Order:
(1) such withholding amount will not be deducted from the amounts due Honeywell as originally priced;
(2) Buyer will pay the Taxes on behalf of Honeywell to the relevant taxing authority in accordance with applicable law, and
(3) Buyer will forward to Honeywell within 60 days of payment proof of Taxes paid sufficient to establish the withholding amount and the recipient.
In no event will Honeywell be liable for Taxes paid or payable by Buyer.
Every notice between the parties relating to an Order will be made in writing and, if to Buyer, to Buyer's authorized representative or, if to Honeywell, to Honeywell's authorized representative.
Notices will be deemed received when delivered either:
1. Two (2) calendar days after mailing by certified mail, return receipt requested and postage prepaid; or
2. One (1) business day after deposit for next day delivery with a commercial overnight carrier provided the carrier obtains a written verification of receipt from the receiving party.
All notices must be addressed as follows:
To Honeywell: Honeywell International Inc.
Address: See the Supplier CAGE Code Information section of this Catalog for complete addresses.
To Buyer: Address: Buyer's address on the Order or to Buyer's purchasing representative.
Buyer will not assign any rights nor delegate any obligations under an Order or any portion thereof without Honeywell's advance, written consent which will not be unreasonably withheld.
Honeywell may assign an Order in connection with the sale or transfer of all or substantially all of the assets of the business to which it pertains.
Any attempt to assign or delegate in violation of this section will be void.
Failure of either party to enforce at any time any of the provisions of these Conditions of Sale will not be construed to be a continuing waiver of any provisions hereunder.
If any provision of these Conditions of Sale is determined to be illegal, invalid, or unenforceable by an arbitrator appointed in accordance with the Disputes section of these Conditions of Sale or court of competent jurisdiction, the remaining provisions will remain valid and enforceable and, in lieu of the illegal, invalid, or unenforceable provision, there will be added as part of these Conditions of Sale one or more provisions as similar in terms as may be legal, valid and enforceable under applicable law.
Third Party Beneficiaries.
Except as expressly provided to the contrary in these Conditions of Sale, the provisions of these Conditions of Sale are for the benefit of the parties to these Conditions of Sale only and not for the benefit of any third party.
Independent Contractor.
The parties acknowledge that they are independent contractors and no other relationship, including without limitation partnership, joint venture, employment, franchise, master/servant or principal/agent is intended by these Conditions of Sale.
Neither party has the right to bind or obligate the other.
Headings and captions are for the convenience of reference only and do not alter the meaning or interpretation of these Conditions of Sale.
Commercial Use.
Buyer represents and warrants that all purchases of Products hereunder will not be used in the performance of a contract or subcontract with any government in a manner so as to affect Honeywell rights to data, technology, software or other intellectual property supplied by Honeywell.
All rights, duties and obligations which by nature should apply beyond the term of Honeywell's obligations under an Order including, but not limited to, Sections 6, 8, 12, 13, 14, 15, 16, 17, 20, and 21 will remain in force after the acceptance and complete performance of any Order.
Entire Agreement.
The terms contained in these Conditions of Sale, together with General Terms section and Supplier CAGE Code Information section of this Catalog, is the entire agreement between Buyer and Honeywell with respect to an Order and supersede any prior agreements and representations, oral or written, and all other communications between Buyer and Honeywell relating to an Order.
Honeywell reserves the right to require a $500 minimum order amount for each line item, per delivery, in response to orders unless waived by Honeywell in writing.
Honeywell reserves the right to limit order quantities for certain parts.
Cancellation of an order, for any reason except those contained in the "Standard Conditions of Sale", will be allowed only upon written approval by Honeywell.
In the event Buyer cancels an order, Honeywell reserves the right to invoice Buyer for costs incurred due to the cancellation up to the price of cancelled part.
An order may be canceled only upon receipt of written acceptance of the cancellation fees from Buyer in the form of a purchase order in the amount of assessed cancellation fees.
The minimum cancellation fee for an order will be subject to is fifteen percent (15%) of the order value or $300 whichever is greater.
Buyer has a maximum of seven calendar days to cancel an Order for items not specifically listed in Honeywell's current catalogs or electronic commerce media ("Non Catalog Items").
Cancellation must be received by Honeywell in writing within seven calendar days following the date of Order placement by Buyer.
Failure by Buyer to cancel an Order within seven calendar days of the date of Order placement will result in Honeywell completing the Order within the agreed upon period and Buyer assuming the obligation to pay the full amount of the invoiced price in accordance with the Conditions of Sale.
Buyer Orders requesting delivery of parts in less than catalog lead time are subject to review and acceptance, based on material availability.
In circumstances when parts are not available from stock, Honeywell may offer alternate delivery dates, not to exceed catalog lead time commitments (if any). In such cases, Honeywell will advise Buyer of the new request date in the Order acknowledgement.
Catalog lead times are based on the most current, available information, and unexpected demand may affect Honeywell's ability to meet these lead times.
Unusually large order quantities will be filled from available material; the balance of the requested delivery quantities and delivery dates may change based on material availability.
This policy is not applicable to AOG Orders.
Except for standard repairs (including warranty), the return of cores, quality and errors in shipment, returned materials will not be accepted.
Return of material to Honeywell must have prior approval or returned materials will not be accepted.
Requests for returns must be submitted within 30 days after original receipt of hardware by Buyer.
Requests for returns received by Honeywell beyond the 30 day period may not be accepted.
Credit may be issued upon return of new, unused, undamaged parts in the original packaging; however, Honeywell reserves the right to apply a restocking fee of 15% of the Item price or $250.00, whichever is greater.
If original packaging is opened a re-test fee could apply.
If the material was acquired on an AOG status order, the buyback will be subject to a restocking fee of 25% of the item price or $500.00 whichever is greater.
Return shipments to Honeywell without proper authorization and documentation may be returned at Buyer's expense.
For approved RMA's Honeywell must receive the product within 30 days of the RMA issue date.
Honeywell reserves the right to return the Product received beyond the 30 day window at Buyer's expense.
Written notification of any short shipments or receipt of incorrect material against an order must be received by Honeywell within 30 calendar days after receipt of the shipment.
If Buyer has exceeded its credit limit and partial payment is received, Honeywell reserves the right to release order shipments on a part availability aged order basis.
If Buyer has not maintained acceptable credit practices, Honeywell reserves the right to review, adjust prices(s) and delivery schedules or cancel existing orders.
If Buyer's credit terms are Payment Prior to Shipment (PPS) and payment is not received within 30 days after order placement, Honeywell reserves the right to cancel order as stated in Honeywell's Terms and Conditions of Pro-forma Invoice.
Honeywell will consider the invoice correct and payable in accordance with its terms unless Buyer notifies Honeywell within 14 days of any suspected disputes or errors.
All credit limit arrangements are made through Honeywell Aerospace Credit & Collection (ACC).
Standard payment terms are Net 30 days from invoice date, subject to credit worthiness and the attached Standard Conditions of Sale.
Other possible payment terms are Payment Prior to Shipment, Credit Card, or Letters of Credit.
Honeywell may, without notice to Buyer, change Buyer's credit terms based on Buyer's payment practices or any other identified risk factors.
Additionally, if Honeywell does not receive Buyer's payment in accordance with the Catalog Conditions of Sale and General Terms, Honeywell may change Buyer's credit terms and credit limit without notice, and Honeywell may impose stop shipment, or PPS.
Honeywell may also review or amend price and delivery or cancel existing orders.
Payment Method:
Wire transfers are the preferred and requested method of payment for our Buyers, as they assure prompt and accurate credit to the Buyer's account.
Please contact ACC to obtain wire transfer instructions and the remittance address to which payments to Honeywell must be directed.
Remittance Advice:
It is critical for that all payments to Honeywell are supported by a detailed Remittance Advice.
Please send your remittance info by email to "GCTS firstname.lastname@example.com". The remittance advice will include Buyer identification number, as well as reference numbers of invoices and credit memos being paid or applied.
Remittance Advise must be sent with, or prior to, payment to ensure accurate and timely application.
Please contact ACC to obtain further remittance and wire transfer instructions.
Orders will be priced in the year of confirmed delivery.
Except for Service Parts, orders for delivery beyond current year must be revised by Buyer at year end with next year's pricing to ensure delivery in the following year.
Honeywell reserves the right to arrange for partial or drop shipments directly from its supplier's facilities in order to comply with FAA requirements.