Duty to Read

When you sign a contract, the law presumes that you’ve read it and understand its contents. This is commonly known as the “duty to read.” The duty to read is one of the concepts that tripped up plaintiff Victoria Major in this case about a browsewrap “contract”; although Major never read the website’s terms of use, she was held responsible for agreeing to them.

In the words of one Missouri court, the law “presumes that a party had knowledge of the contract he or she signed; and those who sign a contract have a duty to read it and may not avoid the consequences of the agreement on the basis that they did not know what they were signing.” Grossman v. Thoroughbred Ford, Inc., 297 S.W.3d 918, 922 (Mo. App. W.D. 2009).

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Post image for Why I Started My Own Law Firm

I announced Wednesday that I’m launching Blue Maven Law, LLC, a boutique law firm that will focus exclusively on small business mergers and acquisitions, while remaining with Evans & Dixon, L.L.C.

This post explains why I decided to start my own firm and what I hope to accomplish.

It’s no secret that the legal services industry is undergoing significant changes. The prevailing law firm model is under tremendous pressure: A number of well-known firms have folded. Experienced and effective lawyers have found themselves out of a job and looking for work. Equity partners have been de-equitized. Non-equity partners and associates have been fired. Secretarial ranks have been thinned. This is the result of the recent deep recession; it’s also the result of business reality forcing itself upon a reluctant profession.

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Post image for Did You Miss My Best Stuff in 2013?

Well, it’s the first day of the year, and I’m excited to see what 2014 has in store. I’m looking forward to more blogging about contracts and the business of law here, as well as working on Blue Maven Law, LLC, my new project that I’m launching today.

One of the best decisions I’ve made in recent years was pulling the trigger on launching this blog three years ago. I’ve met a ton of great people through the blog and other web 2.0 platforms. My life–both professional and private–is much more full than if I’d remained in the shadows. Since I launched the blog, I’ve averaged a little under one post per week, although I’ve been pretty silent for the past several months as I’ve focused much of my energy on my new law firm concept.

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Attorneys' Fees!A recent Missouri court case has prompted me to revisit attorneys’ fees provisions in contracts I draft and negotiate. The case, Midland Property Partners, LLC v. Watkins, doesn’t break any new ground, but it reminded me how important the language can be.

Even before reading Midland Property, I’d had attorneys’ fees provisions on my mind. Under the “American Rule,” which is followed by courts in Missouri and most of the rest of the U.S., the parties to breach of contract suits have to pay their own attorneys’ fees — even when they win the case. As a practical matter, this means that it’s often uneconomical for a party to enforce its contract because it’ll still have to foot the bill for its lawyers. I’ve advised a number of clients who’ve had to make the decision to sue or not to sue, and the inability to recover enforcement costs really affects the calculus. [click to continue…]

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document comparisonIt’s important not to lose control when you’re negotiating a contract. I’m not talking about losing your cool, but staying on top of contract versions. Here’s an example from my professional youth:

I was negotiating a contract for a large company during my first or second year of practice. There was a lot of back and forth between the lawyer on the other side and me with contract drafts being sent both ways over a period of weeks. Suddenly, I realized that I’d completely lost track of which draft was current and that I’d made revisions to the wrong draft some point along the way, creating a confusing mash-up of old, intermediate, and new contract language. I had to call opposing counsel for help — a bit embarrassing, to be sure.

Documents, documents, everywhere

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simple asset purchase agreement

I uploaded a simple asset purchase agreement to Docracy and thought I’d share it here. I drafted it with very small businesses in mind.

It’s structured as a bill of sale and assumption agreement to make it easy for do-it-yourselfers to use (in many cases there’ll be no need for a separate bill of sale, it doesn’t require closing certificates, and it’s otherwise largely a fill-in-the-blank document). Although it’s always best to have a professional help with important legal issues, most people do these deals without a safety net, so it makes sense to provide documents that’ll increase their chances of documenting their deals adequately.

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Battle of the Forms ChartWhat better way to end my summer hiatus from blogging than to improve the blog’s most-read post? Back in March 2012 I hit “publish” on Battle of the Forms Explained (Using a Few Short Words). It’s a brief primer on section 2-207 of the Uniform Commercial Code–one of the more complicated areas of contract law–and it’s received about three times the traffic of my next most-popular post.

I included in the post an attractive flowchart illustrating the law and was recently informed by the chart’s creator, Todd Feldman, that he’d created a new and improved chart. I’ve incorporated the new chart into my original post and you can also find Todd’s handiwork on his website at picjur.com. Just click on the chart on his site to get a full-sized version.

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anti-assignment provisions

A company’s key contracts represent a valuable business asset. Thus, it’s crucial that the contracts remain in force as a business changes hands from the seller to the buyer when the business is sold.

Asset sales and equity sales

Although deal lawyers generally describe their practice as involving “mergers and acquisitions,” the sale of a small or medium-sized business is usually structured as either an equity sale or an asset sale. In an equity sale, the buyer buys the equity from the owner(s) of the target company — stock in the case of a corporation and membership interests in the case of a limited liability company. The business is transferred to the new owners, corporate or limited liability company entity and all, and the target becomes a wholly-owned subsidiary of the buyer. There is no change in the status of the target entity itself, and its contracts, assets, and liabilities remain with the entity.

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Imagine a world where continuous improvement is the norm. Where ideas are tested and only the best ones adopted. Where inferior practices are discarded in favor of better methods.

This is Ken Adams’s vision of the world of contract drafting.

Ken is the author of The Structure of M&A Contracts as well as numerous contract-drafting articles that have been published in prominent legal journals and magazines. He also publishes the popular blog Adams on Contract Drafting (previously published as The Koncise Drafter, which I reviewed in The Reading List). Plus, he lectures at Penn Law School, conducts seminars around the world, testifies as an expert witness, and is the founder and president of Koncision Contract Automation, which I reviewed in Koncision: One Giant Leap. Readers of this blog know that I’m a big fan.

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The Missouri Court of Appeals recently upheld the denial of the Kansas City Chief’s motion to compel its former employee to arbitrate an age discrimination claim. The purported arbitration agreement at issue was not binding because it was not supported by consideration.

The employee had signed an arbitration agreement on her first day of work. However, the Chiefs didn’t present the agreement to her until her first day of work — after she had accepted employment. In Missouri, continued employment on an at-will basis isn’t sufficient consideration to support an arbitration agreement, so the agreement failed for lack of consideration.

The appellate court rejected the Chiefs’ argument that the Chiefs’ mutual agreement to arbitrate constituted consideration because the agreement bound only the former employee, not the Chiefs. Here’s a link to the case, if you’d like to know more.

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