Transaction Agreement Template Engineering
TATECompendium™ community library
of business contract clauses
Development draft adam,* 20090924
www.TATECompendium.org
Copyright © 2009 D. C. Toedt III
Member of the Texas and California bars
www.linkedin.com/in/dctoedt
* The current plan is to name successive TATE Compendium versions alphabetically, like hurricanes.
Comments and suggestions for revisions and additional clauses are welcome – please email them to the author at the address above.
TATECompendium™ VERSION adam - ii -
DON'T RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE— ASK YOUR LAWYER IF IT'S RIGHT FOR YOU.
Contents
Introduction 1
Clause titles are, in essence, editable summaries 1
Curly brackets indicate variable text that can be changed as needed 1
Daggers in a clause title are alerts for drafters 1
Negotiation categories indicate how controversial a clause might be 1
Tends-to-favor indicators suggest what the name says 1
Passive voice and other deliberate awkwardness 1
ARB Arbitration 2
ATT Attorneys' fee-shifting to encourage settlement† 7
AUD Audit rights 9
BAC Background checks 13
BRE Breach (see also Termination) 14
COM Compensation 16
CON Confidential information 18
DEF Definitions & usages 27
DIS Dispute management processes 32
EXP Export controls 33
FOR Force majeure 35
GEN General provisions 37
GRA Gramm-Leach-Bliley Act provisions 47
HIP HIPAA business-associate provisions 49
IND Indemnity defense general provisions 50
INF Infringement warranty 53
INS Insurance 57
INT Intellectual property rights 60
LIM Limitation of liability 65
PAY Payments 68
PER Personnel – certain matters 72
PRI Pricing adjustments† 75
REL Relationship management 77
SER Services 78
SIT Site visits 83
STA Staffing † 84
SUB Subcontractors 86
TAX Taxes 89
TER Termination (see also Breach) 91
UNI Unilateral amendments † 95
WAD Warranty against defects 97
WAG Warranties – general provisions & disclaimer 99
WAI Warranty against infringement – see "Infringement indemnity" 101
Revision history 102
Version ADAM 102
Version ABIGAIL 103
Version AARON 103
Creative Commons license 104
TATECompendium™ VERSION adam - ii -
DON'T RELY ON THIS AS A SUBSTITUTE FOR LEGAL ADVICE— ASK YOUR LAWYER IF IT'S RIGHT FOR YOU.
Introduction
Clause titles are, in essence, editable summaries
Most provisions in this Compendium take the form of: (i)a clause title, generally written as a complete sentence, so that it can do double duty as a short-form clause; (ii)long-form language; and (iii)one or more commentary paragraphs, with yellow background, as explained below.
Curly brackets indicate variable text that can be changed as needed
Many clauses below include text in {curly brackets}, signifying terms (for example, names, amounts, etc.) that a drafter may well wish to edit to fit the situation. In that case, the edited text takes precedence over the curly-bracketed text below.
Daggers in a clause title are alerts for drafters
Some clauses below are marked with daggers† to indicate that some drafters might view them (i)as entailing potentially-troublesome business- or legal commitments, or (ii)as otherwise inappropriate for their particular situations. NOTE: NOT ALL SUCH CLAUSES are necessarily so marked.
Negotiation categories indicate how controversial a clause might be
In their comments, some Compendium clauses are tagged to indicate how well they're generally received by negotiators, at least in my experience— of course, your mileage may vary:
On the green "No-brainer" provisions, usually agreed to without serious objection.
On the fairway Often agreed to, but sometimes a point of contention in negotiations.
In the rough Often objected to, sometimes strenuously, by one party or another.
Tends-to-favor indicators suggest what the name says
In their comments, some Compendium clauses indicate which party the clause tends to favor. Of course, users and their lawyers should determine whether the clause is right for their particular situation.
Passive voice and other deliberate awkwardness
To make it easy for a reader to quickly see what a clause is about, I've used passive voice in some clause titles, as well as certain language choices that might otherwise be awkward.
The rationale: That way, the main subject of the clause can be close to the beginning of the sentence (where I can bold-face it for easier scanning).
ARB Arbitration
ARB1 All disputes {arising out of or relating to} this Agreement {or any transaction or relationship resulting from it} will be resolved by binding arbitration.† [ARB1]
(1)All disputes, claims, and controversies (i)arising out of this Agreement, including for example concerning its interpretation, performance, or breach— and if so specified, all disputes, claims, and controversies (ii)relating to this Agreement, including for example any tort- or statutory claim, or (iii)arising out of or relating to any transaction or relationship resulting from this Agreement— will be resolved by binding arbitration under the U.S. Federal Arbitration Act and the law governing this Agreement.
(2)Any resulting arbitration award will be enforceable in any court of competent jurisdiction.
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See thesenotes.
ARB2 Other claims, of whatever nature, that may arise between the parties are also covered by this agreement to arbitrate.† [ARB2]
In the interest of promoting consistency in their business relationship, the parties intend for this agreement to arbitrate to encompass any other claims, of any nature, that may arise between them.
NEGOTIATION CATEGORY: In the rough — see this note.
ARB3 The arbitration rules will be {the Commercial Arbitration Rules of the American Arbitration Association (AAA)}. [ARB3]
The arbitration will be conducted in accordance with the specified rules, to the extent not inconsistent with this Agreement.
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See this note.
ARB4 The arbitration panel will consist of {a single arbitrator}. [ARB4]
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See this note.
ARB5 Disputes about arbitrability are to be decided by {the arbitration panel}{, as well as disputes about the enforceability of the agreement to arbitrate}. † [ARB5]
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See this note.
ARB6 Arbitrator qualifications: An arbitrator must {be a member of the bar of any jurisdiction who has experience in the general field of the dispute}. [ARB6]
Any person serving as an arbitrator, in addition to meeting any relevant requirements of applicable arbitration rules, must meet the specified qualifications.
NEGOTIATION CATEGORY: On the green.
ARB7 The place of the arbitration will be {as agreed by the parties, or if not agreed, as determined by the AAA}.† [ARB7]
NEGOTIATION CATEGORY: On the fairway.
ALERT: The place of arbitration can affect things like the law governing the arbitration proceedings and the court(s) in which an award can be enforced — see this note.
ARB8 Administration: Unless otherwise agreed by the parties in a particular case, the arbitration will be administered by {the parties themselves}. [ARB8]
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See this note.
ARB9 Temporary relief: A party may apply to any court of competent jurisdiction for temporary, interim, or preliminary injunctive relief, without waiver of its right to arbitration. † [ARB9]
NEGOTIATION CATEGORY: On the green.
COMMENT: See this note.
ARB10 Standard of decision: The arbitration panel shall decide the dispute in accordance with this Agreement and applicable law (including for example statutes of limitation or repose) and not asamiable compositeurorex aequo et bono. [ARB10]
NEGOTIATION CATEGORY: On the green.
COMMENT: See this note.
ARB11 Standard of decision: The arbitration panel may apply the principles ofamiable compositeurandex aequo et bono.† [ARB11]
NEGOTIATION CATEGORY: In the rough.
COMMENT: See this note.
ARB12 Streamlined proceedings: The arbitration panel should streamline the proceedings to the extent reasonably possible. [ARB12]
(1)The arbitration panel is authorized and directed to take reasonable measures to streamline and expedite the arbitration proceedings at all stages.
(2)For the avoidance of doubt, the parties, by agreement, may overrule any particular procedural decision of the arbitration panel.
NEGOTIATION CATEGORY: On the green.
ARB13 The arbitration hearing should be conducted on consecutive days. [ARB13]
In the interest of reducing inefficiencies and the attendant extra expense, the arbitration hearing should be conducted on consecutive days if at all practicable.
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See this note.
ARB14 Multiple arbitrators shall stay together until they render an award. [ARB14]
In any arbitration involving a multi-arbitrator panel, in the interest of reducing potential delays and inefficiencies and the attendant extra expense, after the conclusion of the hearing the panel members are to remain together, at the hearing location or other agreed location, until they have rendered the award.
NEGOTIATION CATEGORY: On the fairway.
COMMENT: See this note.
ARB15 Enhanced appellate review of the award is agreed to.† [ARB15]
(1)The arbitration panel's powers do not include the power to render an award based:
(A)on errors of law or legal reasoning, nor
(B)on findings of fact not supported by substantial evidence.
(2)The parties agree that any award that is so based, in whole or in part, shall be appealable to a court of competent jurisdiction on grounds, that the arbitration panel thereby exceeded its agreed powers.
NEGOTIATION CATEGORY: On the fairway.
ALERT: A clause like this might not be enforceable — see this note.
ARB16 Findings of fact and conclusions of law are to be included in the award. [ARB16]
Unless otherwise agreed, the arbitration panel shall set forth written findings of fact and conclusions of law in its award.
NEGOTIATION CATEGORY: On the fairway.
COMMENT: Requiring the arbitration panel to provide findings of fact and conclusions of law and a transcript may sound like it would increase the expense of the proceeding. As a practical matter, however, arbitration awards typically contain an explanation of the underlying reasoning anyway— if for no other reason than that the arbitrator(s) want the parties and their lawyers to think well of them, so that they’ll have a shot at being hired again someday for another case.
ARB17 A transcript of oral testimony is to be provided. [ARB17]
Unless otherwise agreed, the arbitration panel shall provide the parties with a court reporter's transcript of all oral testimony.
NEGOTIATION CATEGORY: On the fairway.
COMMENT: As a practical matter, in many arbitrations a court reporter will transcribe the hearing in any case, so the transcript will already be available..
ARB18 Joint arbitration expenses are to be shared equally unless the award specifies otherwise. [ARB18]
Unless otherwise agreed:
(1)Each party will bear its own expenses of the arbitration.
(2)All other expenses of the arbitration will be borne equally by the parties unless the arbitration panel duly assesses some or all of such expenses against one or more specified parties (for the avoidance of doubt, this clause does not in itself give the arbitration panel the power to do so).
NEGOTIATION CATEGORY: On the green.
COMMENT: The agreed The agreed arbitration rules may well contain similar expense-sharing provisions. See, for example, Rule R50 of the AAA's Commercial Arbitration Rules, on which some of the language in this clause is modeled..
ARB19 Survival: The arbitration provisions of this Agreement will survive any termination or expiration of the Agreement in respect of any arbitrable matter that arose before such event. [ARB19]
NEGOTIATION CATEGORY: On the green.
ARB-20 Arbitration proceedings are confidential except for enforcement purposes. [ARB20]
ARB21 Third-party participants in transactions under this Agreement {may} enforce these arbitration provisions against a party.† [ARB21]
(1)The parties anticipate that one or more individuals or organizations in addition to themselves— that is, non-parties to this Agreement— may participate in one or more transactions or relationships arising out of this Agreement.
(2)If so specified, each such non-party will have the right to enforce the arbitration provisions hereof, as a third-party beneficiary of those provisions, against any party to this Agreement.
NEGOTIATION CATEGORY: In the rough.
COMMENT: This clause allows a third party, finding itself in a dispute arising out of an agreement containing an arbitration requirement, to force a signatory to the agreement to comply with the arbitration requirement, even though the third party itself did not enter into the agreement.
In May 2009 the U.S. Supreme Court held that, as long as state law permits the third party to enforce the requirement, doing so is permissible under the Federal Arbitration Act: "[A] litigant who was not a party to the relevant arbitration agreement may invoke §3 [of the Act, permitting a stay of litigation] if the relevant state contract law allows him to enforce the agreement." Arthur Andersen LLP v. Carlisle, No. 08146, slip op. at8 (U.S. May9, 2009) (reversing and remanding appellate court affirmance of denial of stay).
ATT Attorneys' fee-shifting to encourage settlement†
ATT1 Applicability: This section applies to written settlement offers that conspicuously invoke this section and set forth an acceptance deadline of at least {10 business days}. [ATT1]
(1)The intent of this section is to create incentives for the parties to make and to accept (as the case may be) reasonable offers to settle any disputes that may arise between them.
COMMENT: This entire section is adapted from Rule 68 of the Federal Rules of Civil Procedure, and from New Jersey Court Rule 4.58. See this note for additional discussion.
(2)This section applies to any written offer, by a party to an adverse party, to settle a dispute, but only if the offer:
(i)is made in accordance with this Agreement’s notice provisions;
(ii) expressly and conspicuously states that failure to accept the offer by a stated deadline could result in an award of attorneys' fees and expenses against the adverse party pursuant to this section; and
COMMENT: The "conspicuous statement" requirement in subclause (2)(ii) is intended to avoid ambushes by a winning party, claiming that one of its previous communications was an unaccepted 'settlement offer' and that it therefore is entitled to its attorneys' fees.
(iii)is not accepted by the adverse party by the stated deadline.
ATT2 The non-settling party is liable for the offeror's post-offer expenses If the final result of litigation and/or arbitration is not more favorable to a non-settling party than an unaccepted settlement offer. † [ATT2]