Archive for Contracts

Can I Save Money by Preparing a Contract for My Lawyer to Review?

Logo for Quora, where Dana Shultz answered a question about whether a client can save money by preparing a contract for lawyer reviewThis post is inspired by a Quora question that I answered. Q. Can I save money by preparing a contract for my lawyer to review?

A. No. Here is an explanation of why not.

Clients sometimes think that if they do the work to prepare the first draft of an agreement, they can save money because a lawyer will need less time to complete the agreement.

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How Should I Use a Fictitious Business Name?

Logo for Quora, the source for a question about fictitious business names

This post is adapted from my answer to a Quora question about use of a fictitious business name (FBN): Q. Must an LLC with a fictitious business name display the LLC name on its website?

A. In my opinion, an entity’s proper name and complete identification should be provided in every agreement. Agreements include website terms of service. Example showing how to include both the entity name and the FBN:

[Company Name], LLC, a California limited liability company doing business as [Fictitious Business Name], with a place of business at [address]

Of course, the proper name will be required in various governmental filings, too.

In other routine business activities, the fictitious business name (also called a “DBA” for “doing business as’) typically is used on its own. After all,? that is why the fictitious business name exists!

Check out all posts about fictitious business names.

Dana H. Shultz, Attorney at Law  +1 510 547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Limitation of Liability and Confidentiality Provisions in Tech Contracts

Logo for Quora, where Dana Shultz abswered a question about limitation of liability

This post is based on a question about limitation of liability that I answered on Quora.

Q. Why do technology contracts often carve breach of confidentiality out of the limitation of liability?

A. I’m going to start by broadening the discussion, a bit.

First, the carve-outs typically modify both limitation of liability and limitation of damages. So, whereas an agreement might include provisions both limiting? the total (dollar) amount of liability and liability for consequential damages, such limitations will not apply to the carved-out subject matter.

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When a Handshake Deal Isn’t Really a Handshake Deal

Logo for Y Combinator, which announced The Handshake Deal Protocol

Last week Y Combinator announced The Handshake Deal Protocol. A “handshake deal” is an oral commitment to a funding transaction between a startup’s founders and an investor. The handshake deal is necessary in Silicon Valley because, in the world of startups, one must move quickly.

As Y Combinator notes, however, a handshake deal can create problems:

Unfortunately, things don’t work as smoothly in Silicon Valley as among diamond dealers. This is not a closed community of pros who deal with one another day after day. Many participants in the funding market are noobs, and some are dishonest.

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What are “Best Efforts”?

Picture of a reservoir

Contracts sometimes require that a party use its “best efforts” (in contrast to, for example, “commercially reasonable efforts”) to carry out its obligations. Last month, in California Pines Property Owners Assn. v. Pedotti, the California Court of Appeal for the Third District provided a definition of “best efforts”.

The case involved water diversion rights, specifically, Pedotti’s obligation to use “best efforts” to maintain a full reservoir. The court held [emphasis added]:

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How Can I Make Sure I Receive My Full Royalty?

Curled paper tape from a calculator

Intellectual property license agreements often include a provision by which the licensor is paid a royalty that is calculated as a percentage of the revenue received by the licensee from licensed products. Given that licensees have a financial incentive to reduce the amount of revenue that is reported*, the prudent licensor includes an audit provision in the license agreement.

The audit provision typically:

  • Specifies the frequency and nature of audits that may be conducted;
  • Provides that the licensee will pay any underpayment amount that is discovered plus interest; and
  • Obligates the licensor to pay for the audit unless the underpayment exceeds X% of the royalty that was due, in which case the licensee must reimburse the licensor for the cost of the audit.

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Why Does the Other Party Want to Apply NY Law?

This post is based on a question that I answered on OnStartups. Q. I’m in the process of closing a deal with a new client, and the only sticking point is the choice of applicable law. I am located in state A, the client in state B. My contract says it will be governed by the law of state A. The client wants to change this to New York. Why? Would doing so open my company up to any unintended side effects/liabilities (e.g., taxes)?

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New Feature: Ridiculous Contract Provisions

Businessman wearing a dunce cap

With this post I am inaugurating a new feature that I expect will appear from time to time: Ridiculous contract provisions that I have run across. Today’s post is based on an agreement that I recently reviewed for a client.

The agreement provides standard terms and conditions by which a large utility in the Eastern United States works with its suppliers of products and services. The sentence in question says:

No change, amendment or modification of any of the provisions of this Contract will be binding unless in writing that identifies itself as an amendment to this Contract and that is issued by Company.

In other words, the Company apparently believes that the only requirement for an amendment should be that the Company issued it – irrespective of whether the supplier agrees to the change! Enough said….

Photo credit: iStockphoto

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

What is a Letter of Intent?

Quora logo

Today I answered a Quora question about what a letter of intent is and what it should contain. The question and my answer (each edited slightly) are reproduced below.

Q. What is a letter of intent? What are the legal implications of a letter of intent? What is the purpose? Which elements minimally comprise a letter of intent?

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Here’s an Arbitration Provision I Like!

Second Life logo

I’m not a big fan of mandatory arbitration clauses in contracts: Although arbitration is likely to proceed more quickly than litigation (other than small-claims cases), it is not necessarily less expensive. However, I recently saw an arbitration clause that I like quite a bit.

Linden Research, Inc., developer of the Second Life multi-user online service, includes the following in its Terms of Service (emphasis added):

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