CONTRACT DISPUTES: WINNING FROM THE BEGINNING

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1 Friday, January 27 th, 2017 CONTRACT DISPUTES: WINNING FROM THE BEGINNING Presented By Kimberly Gosling and Christian Andreu-von Euw Senior Associates, Morrison & Foerster, LLP ACC 14th ANNUAL GC ROUNDTABLE AND ALL DAY MCLE

2 The Beginning: Creation

3 Drafting Considerations All provisions are important Do not rely on forms, prior contracts, etc. Use defined terms Make clear Unless choose otherwise

4 Drafting Considerations Litigation-related clauses to consider Jurisdiction / venue Choice of law Know the law Adequate connection Assignability Warranty limitations Damage limitations / liquidated damages Prior litigation / claims Attorneys fees Indemnification Jury waiver

5 Drafting Considerations Litigation-related clauses to consider E-Discovery Statutory schemes Consumer protection Franchise Securities Employment Usury Licensing requirements for performance Cannot contract away liability for fraud or violation of law. Civ. Code Sec Arbitration

6 Arbitration Considerations Enforceable? Faster/cheaper/safer? Forum selection Rules selection Arbitrator selection Equitable relief? Discovery Admissibility of evidence Following the law Appealability

7 Creating and Preserving Evidence Ability to create and preserve evidence during negotiation and performance Good evidence and not-so-good evidence Document retention/destruction policy? Keep drafts and s re negotiation? Attorney-client privilege and work product Duty to preserve in litigation context Litigation hold

8 Contractual Remedy Limitations Damage limitations Lost profits Consequential Punitive Repair or replace Damage cap (e.g., per diem, cost incurred) Liquidated damages

9 Litigators and Contract Drafting Take advantage of litigation experience Revise contracts in light of litigation challenges Arbitration and attorneys fees clauses Troubleshoot Ambiguity, etc.

10 The Middle: Implementation

11 Performance Issues Inform all necessary personnel of contract obligations Calendar key performance dates Comply Require compliance by other party Document compliance and any deviations by other party Respond Amend as necessary Retain

12 The End: Litigation

13 Initial Considerations in Contract Disputes May be able to create the evidence / establish the breach Opportunity to control what the evidence will be and when case will proceed Plaintiff or defendant Sue for declaratory relief, anticipatory breach, etc? Venue Arbitration or court? Waive arbitration? Which court? State of federal? Judge or jury?

14 Avoiding Trial Motion to dismiss / demurrer Allegations versus contract terms Contract interpretation is a legal question Summary judgment No material facts in dispute No breach as a matter of law

15 Trying the Case: Issues of Law or Fact If material facts in dispute, ambiguity or allegations of fraud, jury decides as issues of fact Court should decide issues of law

16 Trying the Case: Seeking Favorable Rulings In limine motions Evidence Contract interpretation Trial motions: Non-suit, directed verdict, new trial motion Jury instructions

17 Trying the Case: Was a Contract Formed? Conditional offers Requirement for approval and signature Letters of intent/mous Title not determinative Binding? Action in reliance Conditional acceptance / counteroffers Meeting of the minds

18 Trying the Case: Common Defenses to Contract Formation Fraud in inducement / concealment If fraudulent, term need not be material If negligent, must be material Mistake of fact Subject to rescission

19 Trying the Case: Contract Interpretation Issue: meaning of contract terms Goal: determine intention of the parties Problems Ambiguity Inconsistent use of term in document Inconsistent course of dealing / enforcement Issues arise in performance / dispute that were not anticipated in contract drafting

20 Trying the Case: Contract Interpretation How to determine intention of parties In general: written terms of contract control In reality: other evidence likely to be admitted in trial Parol evidence Negotiations, drafts, notes, correspondence/ s, oral testimony (internal and external) Custom and practice Course of dealing Risk: No contract formed

21 Proving Meaning of Contract: Parol Evidence Rule Prior and contemporaneous oral and written evidence is generally inadmissible to contradict, vary, alter, or add to the terms of an integrated written contract or to offer an intent contrary to the written terms. Significant legal exceptions to the rule Is the contract integrated? Is the extraneous evidence prior or contemporaneous or subsequent? California law may use parol evidence to prove meaning to which contract is reasonably susceptible (i.e., to establish ambiguity that is not on face of contract) May use parol evidence to establish fraud

22 Proving Meaning of Contract: Parol Evidence Rule Significant practical exception to the rule Judges routinely allow parol evidence Common parol evidence negotiating history Conversations, drafts, notes, memoranda, correspondence, Integration clauses Make sure integration clause is properly drafted Include integration clause in amendments Not bullet proof

23 Proving Meaning of Contract: Course of Conduct Course of parties conduct may be used to interpret the contract May also give rise to arguments of waiver, estoppel, and / or amendment

24 Proving Meaning of Contract: Custom and Practice Custom and practice in industry or locale may be used to interpret contract terms Expert witnesses may be used to prove May explain term not reasonably understood by layperson

25 Proving Meaning of Contract: Witnesses Witnesses Matter $319M Verdict Plaintiff's lawyer said: "We only had one live witness and one witness on video. All the rest of the witnesses we were calling to tell our story were defense witnesses. $75M Verdict Plaintiff's lawyer said: "It all came down to the credibility of two key contract negotiators. Their testimony was consistent and persuasive on some very difficult contract issues. Our witnesses really carried the day." Who will testify? Consider during drafting/negotiation process for important contracts Lack of witness problem The lawyer witness Avoid or minimize lawyer as key witness Asserting privileges may look evasive and limit proof Waiving the privileges may be dangerous

26 Trying the Case: Implied Covenant of Good Faith and Fair Dealing Implied in every contract A covenant by each party not to do anything which will deprive the other parties thereto of the benefits of the contract Cannot alter an express term of the contract Separate breach cause of action? Effect of instruction to jury

27 Trying the Case: Cross-Claims Carefully consider whether to assert, even if mandatory crossclaims Consider appearance to jury Consider insurance coverage issues Consider prevailing party issue

28 Limitations on Contract Enforceability Illegality Statutory / public policy / unconscionability Particularly in consumer and employment contracts Waivers in settlement agreements/releases?

29 Plaintiff's Performance Material failure or breach may excuse defendant s performance Consider when creating record in advance of litigation

30 Remedies Compensatory Damages What is the proper legal measure? Punitive Damages Not in contract case unless also a tort E.g., fraud Injunction Specific performance Unique circumstances such as real estate

31 Duty to Mitigate Plaintiff must consider Tool for defense

32 Settlement Parties often know each other May be acceptable business solution Who releases whom for what? General releases? Assigns and successors? Enforcement

33 Friday, January 27 th, 2017 THANK YOU CONTRACT DISPUTES: WINNING FROM THE BEGINNING Presented By Kimberly Gosling and Christian Andreu-von Euw Senior Associates, Morrison & Foerster, LLP ACC 14th ANNUAL GC ROUNDTABLE AND ALL DAY MCLE

TYPES OF MONETARY DAMAGES

TYPES OF MONETARY DAMAGES A breach of contract entitles the non-breaching party to sue for money damages, including: Compensatory Damages: Damages that compensate the non-breaching party for the injuries