Contract Negotiation

Business relationships are kind of like marriages. In the beginning, everyone’s excited, and life is fresh and full of promise. “Things are really going to change around here,” you think. You know that you’re going to need to make some adjustments, some compromises, but it’s all going to be worth it. You ignore small warning signs, such as the fact that your partner sometimes seems to spend a lot on discretionary items. (But at least he only bought nine pairs of Prada shoes during the trip to Italy instead of the 23 he really wanted.)

Then, as you settle into a routine, you may find that, well… things aren’t exactly as you had expected. There are minor annoyances — things that make working together take more time, communication, and effort than you had thought.

And unfortunately, like some marriages, one or more parties figure out that the benefits of the relationship don’t outweigh the negatives, and decide to part ways. You decide that 18,000 pairs of designer shoes is definitely an indication of a problem. Sometimes, the decision to separate is fairly mutual. Other times, one partner is desperately clawing out from under a pile of fancy footwear that the other only continues to build up.

Also like many marriages, at the start of the business relationship, nobody wants to think about how it will end. Ninety-nine percent of engaged couples won’t touch a prenuptial agreement with a ten-foot pole because they absolutely KNOW that they’re truly in love, and no way are they in the group of the more than 50% of married couples who will part before death.

Similarly, nobody likes to think about the business “prenup” (i.e., the termination/transition provisions in a contract) for more than a few microseconds. For example, there’s the uber-lazy version of a catchall survival provision that makes it into some contracts. It basically says as follows: “Everything in this agreement that’s intended to survive termination will survive”….

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I had today’s column dealing with confidentiality provisions all set to go. However, given the Baylor Law School fiasco, I changed topics to another very contentious issue in business-to-business terms and conditions negotiations: data security. I will take some liberties with the factual scenario of the Baylor data release in order to make the issue more relevant to those of us in-house.

Let’s assume that instead of an employee of Baylor’s admissions office allegedly being responsible for the data release, it was an outside contractor who had been hired to perform data collection for Baylor. Let’s further assume that the contractor acted negligently in releasing the information. Finally, let’s assume that Baylor’s legal counsel vetted the Agreement and Statement of Work (“SOW”) between Baylor and the contractor, and included a data security provision. What should happen now that prospective students’ personal information, including LSAT scores and GPA, are in the public domain? I would begin by stanching the bleeding and assessing the damage….

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By the time I made the switch to in-house work, I was burned out on litigating. Some of my friends and colleagues live for the fight, or as Wallerstein recently said, “have a fire in their belly.” In my case, I just couldn’t draft yet another motion to compel, interrogatory, etc. I had been doing it so long that it had become mundane. Appearing in court was always a kick, and depositions could be entertaining, but the day to day fun had dissipated.

Due to the economy and firm billing practices, I found myself at times resorting to noting “.1s” on my time sheets. So, when my bio says I don’t miss litigation, I really don’t. And what I don’t miss most of all is the bluster of the powerful down to the less leveraged.

In litigation, bluster can begin as soon as the adversary reads your bio and decides that you are not quite a peer. This inappropriate elitism only worsens when one side gains the upper hand for whatever reason; the bluster ends, and the bludgeoning begins….

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I’m writing this wearing my new bifocals. They take some getting used to after years of regular glasses and contacts. But, after watching me examine small print like I was Mr. Magoo, my wife convinced me that it was time to take a symbolic plunge toward middle age. I admit to no small amount of trepidation at the prospect of wearing “old folks” glasses. But the risk of not seeing properly finally outweighed my vanity, and a change had to be made.

And so it goes with some legal decisions in-house. When faced with a dilemma, you weigh the risks versus rewards, and pull the trigger on what you hope is the right decision.

In a company the size of mine, people have performed risk/reward analyses on legal issues for years, down to the proper placement of semicolons in contract clauses. To borrow from the iPhone ads, yep, there’s a committee for that. We have Lean Six Sigma belts of all colors who are subject matter experts in every facet of our business. There are folks with many years of experience, who own any number of policies from which I am to draw when making decisions. It sounds on paper like filling in the blanks will get you where you need to go, but that is far from reality.

In a perfect world, for my job anyway, a Customer would receive a proposed agreement, see the inherent fairness in the document (and the work that went into carefully crafting all those clauses and semicolons), and sign on the dotted line. But sadly, life isn’t perfect, and I have yet to receive a contract back without so much as a redline….

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He gave His only begotten Son, that whoever believes in Him shall not perish, but have eternal life.

It’s playoff time in the National Football League. Fun times. This year’s playoffs are more intense than usual, since Tim Tebow is probably the only conservative who can challenge Obama this fall.

I’m a Tim Tebow convert. Sure, if Tim Tebow were black, he’d be a back-up tight end, but that’s not a reason to hate on Tebow. He wins football games. What more do you want from him? There aren’t a lot of elite quarterbacks in the NFL. Tebow’s not elite, but he wins games. Wouldn’t you rather roll the dice with the Tebow show than going with the practiced mediocrity of Kevin Kolb, or Colt McCoy, or David Garrard? I honestly think that Tebow gets a lot of hate because so many people passed on Tebow to go with guys like that.

Jacksonville did. Tebow is a god in Florida (I mean, Tebow threw for 316 prophetic yards last night, so I do not rule out the possibility that he’s a God everywhere), and he was sitting there in the draft when Jacksonville was starting David Garrard and they passed on him. Now, the Jacksonville Jaguars have a new owner. Coincidence?

In fairness, the Jaguars seem to be a terribly run organization. It appears that even the Jags’ lawyers can’t get it together. The new owner reportedly removed the team’s general counsel for something that looks like an unforgivable error for a lawyer to make….

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Admittedly, I take on some large issues in this column. But this is neither a treatise on contract law, nor the forum to attempt one. I am simply attempting to give some pointers for negotiating commercial contracts. I do very much appreciate the emails that I receive that suggest where I missed some salient information, or that offer critiques to some of my strategies. I’ve even used some of them and credited the authors, to the extent they’d allow. Funny thing about this site, most people don’t want to be identified. It’s almost end of year, so here goes:

Let’s say you’re in the heat of a commercial lease negotiation and the customer says to you: “What are these payments in the event of default? Why should I be penalized if your product doesn’t work as it should? Are you telling me that I have no remedies? Don’t you stand behind your products?”

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Caveat: I did not write the following dialogue. It is from the “comments” section of one of my columns where I mentioned I’d be writing about HIPAA and GLBA. Unfortunately, I cannot attribute the comments to the persons who wrote them, as they are anonymous; however they are quite apropos of today’s subject:

1) “I wish vendors would get it into their heads that indemnity for being sued on a confidentiality basis doesn’t cut it for financial institutions and other customers/clients that have affirmative obligations without being sued in the event of a breach of confidentiality.”

2) “I wish financial institution customers would get it into their heads that the ‘customer information’ they’re obligated to protect is not the sort of thing they would ever disclose to the vast majority of their vendors, and stop using their ‘affirmative obligations’ as a tool to cram unnecessarily restrictive confidentiality terms down the throats of vendors.”

Perfect. Those two comments capture the schism between vendors and customers when dealing with private financial or personal confidential information….

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Close, Lindsay, but no cigar.

* Rajabba is appealing his insider trading convictions and prison sentence, but someone needs to suffer for this outrage. Where are Solo and the Wookiee when you need them? [Bloomberg]

* PETA is suing SeaWorld on Thirteenth Amendment grounds for enslaving killer whales. Oh, so the only marine animals you’ll help have to be black and white? Racists. [Washington Post]

* It’s not just black Biglaw associates who get called “token,” but now it’s law professors, too. Kellen McClendon is suing Duquesne Law for race discrimination. [Courthouse News]

* Lindsay Lohan is getting a full spread in Playboy’s January issue, but won’t be doing any spreading of her own. Contract negotiation just ain’t what it used to be. [Los Angeles Times]

* When you sue for age discrimination, you probably shouldn’t discriminate against your judge, no matter what his age. At least this violinist can play his own sad song. [New York Daily News]