If you’re an employee of a company, and you sign a company contract as just “John Doe,” you might end up being held personally liable for the company’s obligations. (If you’re the owner of the company as a sole proprietor, or the general partner of a partnership, you probably will be personally liable in any case.)

A better way to sign a company contract is to have the signature block:

• clearly indicate that it’s the company, not you personally, that is agreeing to the contract, and that you’re simply signing on its behalf; and
• stating your title.

The wrong way to sign a company contract

A better way

Further reading

• Protecting the Deal Professional from Personal Liability for Contract-Related Claims, by Glen D. West, of the Weil Gotshal firm.

See also: (list is automatically generated)

• Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for
• Clients seem to like Webcam video conferences, with on-line document sharing, better than traditional on-site meetings
• An oral understanding might not get you off the hook for a written contractual obligation

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Chances are that at some point in your career, a lawyer — yours, or someone else’s — will want to review notes you took at a meeting or during a phone conversation. So thinking ahead to that possibility, whenever you take notes, you should routinely do as many of the fol­low­ing things as you can remember, especially the first three things, to increase the odds that a later reviewer will get an ac­cur­ate picture of the event. It will help you stay out of un­de­served trouble and save money on legal fees

1. Indicate who said what you’re writing down.  Unless you want to risk having someone else’s statements mistakenly attributed to you, indicate in your notes just who has said what.  EXAMPLE:  Suppose that John Doe says in a meeting that your company’s off­shore oil-well drilling project can skip certain safety checks. Re­mem­ber­ing the BP drilling disaster in the Gulf of Mexico, you don’t want anyone to think you were the guy who sug­ges­ted this. So your notes might say, for example, "JD: Let’s skip safety checks,"; if you omitted John Doe’s initials, it wouldn’t be clear that you weren’t the one who made his suggestion.
2. On every page, write the meeting date and time, the subject, and the page number. The rea­son: Your lawyer will probably want to build a chronology of events; you can help her put the meeting in­to the proper context by “timestamping” your notes. This will also reduce the risk that an unfriendly party might try to quote your notes out of context.
3. If a lawyer is participating, indicate this.  That will help your lawyer sep­ar­ate out documents that might be protected by the attorney-client privilege. EXAMPLE:  “Partici­pants:  John Doe (CEO); Ron Roe (ABC Consulting, Inc.); Jane Joe (general counsel).”
4. Start with a clean sheet of paper.  When copies of documents are provided to opposing counsel, in a lawsuit or other investigation, it’s better if a given page of notes doesn’t have un­re­la­ted in­for­ma­tion on it.  This goes for people who take notes in bound paper note­books too: It’s best to start notes for each meeting or phone call on a new page, even though this means you’ll use up your note­books more quickly.
5. Write in pen for easier photocopying and/or scanning, and also because pencil notes might make a reviewer (for example, as an opposing counsel) wonder whether you might have erased anything, and perhaps falsely ac­cuse you of having done so.
6. Write “CONFIDENTIAL” at the top of each page of confidential notes. That will help preserve any applicable trade-secret rights; it will also help your lawyer segregate such notes for possible special handling in the lawsuit or other investigation.
7. List the participants. Listing the participants serves as a key to the initials you’ll be using, as discussed in item 1 above.  It can also refresh your recollection if you ever have to testify about the meet­ing. If some people are participating in an in-person meeting by phone, indicate that. Indicate each participant’s role if isn’t ob­vi­ous or well-known – remember, you might know who someone is, but a later reader likely won’t.  EXAMPLE:  “Partici­pants:  John Doe (CEO); Ron Roe (ABC Consulting, Inc.); Chris Coe (marketing).”
8. Indicate the time someone joins or leaves the meeting, es­pe­ci­al­ly if it’s you (so that you’re not later accused of having still been there if something bad happened after you left).
9. Write down the stop time of the meeting. This usually isn’t a big deal, but it’s nice to have for completeness.

See also: (list is automatically generated)

• How to sign a company contract without incurring personal liability
• Clients seem to like Webcam video conferences, with on-line document sharing, better than traditional on-site meetings
• Forget short contracts – focus instead on short clauses

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In one of those smack-your-forehead moments, I realized that there’s an obvious fifth ques­tion to be added to yesterday’s list of four ques­tions that should be asked at every business meeting (which as a re­sult would now have the acronym GPPPA):

• Goals: What are we trying to achieve in this project or relationship, and why? [In some circumstances, Toyota's Five Whys drill-down analysis might be helpful.]

I’ve updated the original posting accordingly.

See also: (list is automatically generated)

• G-PP-AA: Five questions to ask at every business meeting you ever attend

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Legal-writing guru Wayne Schiess has some great examples to illustrate how not to write a topic sentence.  Excerpt:

Don’t do this:

In Williams v. Tulsa Motels, 958 P.2d 1282, 1284 (Okla. 1998) a business invitee brought a negligence action against hotel owners seeking recovery for injuries sustained in a slip and fall. Williams, 58 P.2d at 1284. The Oklahoma Supreme Court held that “It is clear that the danger of the wet floor was open and obvious and Williams knew of the danger when he chose to walk on the wet floor.” Id. at 1285 (emphasis added). Thus, the Supreme Court held that the wet floor that the business invitee slipped on was an open and obvious danger that hotel owners had no duty to protect against. Id. at 1284-85.

[¶ ¶]

Do this:

A property owner has no duty to protect an invitee against a danger the invitee knows about. Dover v. W.H. Braum, Inc., 111 P.3d 243, 246 (Okla. 2005). In Dover, the court affirmed summary judgment, holding that a store owner had no duty to warn a patron who slipped and fell on ice while leaving the store. Id. The patron had admitted seeing the ice when entering the store. Id.

Read the rest.

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[Updated 2010-08-19] It’s been my impression that many business-contract disputes could be avoided if the participants would just talk with each other regularly about five things. This makes me think that in almost any business meeting concerning a project or re­la­tion­ship, it’s a good idea to ask about those five things, with the acronym G-PP-AA:

• Goals: What are we trying to achieve in this project or relationship, and why? [In some circumstances, Toyota's famous Five Whys drill-down analysis might be helpful.]
• Progress: What have we accomplished so far in achieving the goal(s)?
• Problems encountered or anticipated: What if anything has gone wrong,and why? What could go wrong in the future? [The Five Whys might be helpful here, too.]
• Action plans for the future: What is going to be done, by whom, when, to continue progress, and/or to address problems?
• Assumptions: What are we implicitly or explicitly assuming, that might not be true?

This is just Management-101 stuff, to be sure. But it’s often over­looked, especially when things get busy or stressed.

That’s why, when I’m helping to negotiate contracts for on-going projects or re­la­tion­ships, I like to ask for a provision for periodic status-review con­fer­en­ces, with a reminder that these five GPPPA factors should be part of the agenda.

Here’s one version of such a contract provision, with extra para­graph­ing added for readability:

Notes:

• Some of this language isn’t strictly required, but is included to re­assure the parties that the provision isn’t going to be expensive or burdensome.  For example, under this language, if neither party ever asks for a status-review conference, none is required.  As another example, under clause 1, all conferences are by phone unless the parties agree otherwise.
• Clause 2 intentionally doesn’t require the GPPPA factors to be dis­cussed; the reminder of those factors should be helpful.
• Clause 4 provides for written minutes if requested. Meeting minutes can be especially important in documenting specific to-do as­sign­ments. Meet­ing minutes can can also help litigation counsel re­con­struct "what hap­pened, when, and why," if things go wrong.
• In clause 4, the term seasonably is taken from section 1-204 of the Uniform Commercial Code, which defines the term thusly: An action is taken "seasonably" when it is taken at or within the time agreed or if no time is agreed at or within a reasonable time.

See also: (list is automatically generated)

• A fifth question to ask at every business meeting you attend
• Six tips for negotiating best-efforts obligations

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A problem for vendors: Customer claims of oral misrepresentation

I recently wrote about why, when complex technology deals go bad and everyone starts pointing fingers, fraud claims are a weapon of choice for customers’ lawyers against vendors. 

(In a nutshell, often the easiest way for a customer lawyer to win over a judge or jury is to persuade them that the vendor lied, and/or in­ten­tion­al­ly concealed facts that the customer now says would have been important.)

Customers who make such fraud claims often allege that the vendor made oral misrepresentations or omissions. That kind of allegation can be tough for a vendor to beat without an expensive, full-blown trial, where the jury listens to witnesses and decides whom to believe.

Vendors sometimes include ‘no-reliance clauses’ in their contracts in an effort to preclude such fraud claims, but those don’t always work.

Cheap insurance: Provide written disclosure of what could go wrong

An easy way for a vendor to discourage customer fraud claims – and/or to win them on summary judgment without the need for a trial – is to demonstrably disclose ‘bad’ facts before closing the deal. 

One way to do that is to provide the customer with a “Risk Factors” disclosure sheet, as an exhibit to the sales contract (and possibly as a slide in the sales pitch), listing as many things that could go wrong with the deal as the vendor can think of, even the obvious ones.

Such a disclosure sheet might have helped SAP defend against Waste Man­age­ment’s accusation that SAP affirmatively misrepresented “that its software was an ‘out-of-the-box’ solution that would meet Waste Management’s needs without any customization or enhancements," according to a Waste Management press release.  The disclosure sheet might have confirmed things such seemingly-obvious things as:

• SAP’s proposed software solution had previously been implemented only in Europe;
• Customization of the software would be needed;
• Time estimates for implementation are subject to uncertainty;
• Not every problem can be foreseen;
• Etc., etc. 

This isn’t a new idea.  One obvious precedent is the side-effects warn­ings that pharmaceutical companies include in their television com­mer­ci­als. Another example comes from public offerings of securities in the United States:  SEC regulations require that a discussion of risk factors be provided to prospective buyers as part of the prospectus.  (To see an excruciatingly-detailed example of securities risk factors that ought to be obvious to just about any investor, scroll down to the “Cautionary notes” list in BindView Corporation’s final annual report on Form 10-K, starting on page 19, which I drafted.)

Disclosure of risks may actually boost sales

Some sales execs will respond to the idea of a risk-factors disclosure sheet by screaming (maybe just in their heads), "Are you nuts? Are you trying to kill my deal?  Why the [expletive] would I call the customer’s attention to what could go wrong?"

The answer is:  Because you might improve your odds of closing the deal.  Recent research has shown that a disclosure of negative in­for­ma­tion can helps to enhance customer trust.  As reported today in a posting at the Harvard Business Review blog:

… In fact, Xu says, research has shown that when people com­mu­ni­cate positive and negative information, rather than just positive information in, say, job interviews, they gain higher trust.

Xu asks, "Does this translate to advertising?" Maybe. She’s watching an interesting case in the field right now: Domino’s Pizza current, decidedly un-puffy ad campaign. Domino’s is admitting its previous faults; telling consumers negative things about itself and its product.

"And it appears it’s increasing their sales," Xu says. "Why is that?"

Scott Berinato, The Power and Perils of Puffery, Harvard Business Review Blog Network, May 11, 2010 (emphasis added).

This thinking is in line with some sophisticated received wisdom in the sales community:  While it’s true that good sales people know how to overcome customer objections, great sales people pro­mote confidence through ‘completed staff work,’ proactively identifying possible problems for the customer and explaining how the vendor will address them.

(It works this way in the law, too:  A great advocate, "selling" his client’s case to a judge or jury, will take the initiative to point out any major problems in his own position, and will explain how his client should win all the same. If the advocate doesn’t confront the problems in his case, the other side will throw it in his face – and the problems will loom larger in the minds of the judge and jury than if the first advocate had candidly dealt with them in the first place.)

Brainstorming risks can increase the odds of a successful project

A successful project is the best defense against potential customer claims.  One powerful way to promote a successful project is to spend time brainstorming what could go wrong and provide the customer with a list of risk factors.  Ideally, the customer’s reaction to the risk factors will help refine the project planning.

And if the customer gets cold feet and decides to walk away as a result of seeing the risk-factor disclosure sheet, it’s entirely possible that the vendor is better off – there are worst things in life than losing a deal that ought to be lost.

Related posts

• Why the fraud claim is the lawyer’s weapon of choice in lawsuits over failed technology projects
• Vendors, consider a no-reliance clause for your sales contracts, to help forestall claims of fraudulent misrepresentation
• Lawsuit-defense tip for software vendors: Clearly label demos and mock-ups as such

See also: (list is automatically generated)

• Vendors, consider a no-reliance clause for your sales contracts, to help forestall claims of fraudulent misrepresentation
• Lawsuit-defense tip for software vendors: Clearly label demos and mock-ups as such
• Why the fraud claim is the lawyer’s weapon of choice in lawsuits over failed technology projects

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When technology deals go bad and everyone starts pointing fingers, claims of fraudulent misrepresentation are often a weapon of choice for customers’ lawyers in suing vendors. We saw that in two recent cases involving world-renowned software- and services vendors.

To help preclude such customer claims, vendors should consider in­clu­ding a ‘no-reliance clause’ in their contracts. Such clauses typically say that the customer is not relying, and will not rely, on any rep­re­sen­ta­tions by the vendor or its personnel outside the four corners of the con­tract and the materials referenced by the con­tract.

In theory, such a no-reliance clause should kill a customer’s ability to claim fraudulent misrepresentation. That’s because, to succeed in such a claim, the cust­om­er normally must prove, not only that the vendor made a material misrepresentation or omission, but that the customer justifiably relied on the misstatement. If the customer represented in the contract that it was not so relying, and promised that it would not so rely, then it’d be tough for the customer later to claim fraud without being guilty of mis­rep­re­sen­ta­tion itself.

Courts have often upheld such clauses. But if it looked like the vendor lied or cheated, a court might very well look for ways to disregard the no-reliance clause. See generally Allen Blair, A Matter Of Trust:  Should No-Reliance Clauses Bar Claims for Fraudulent Inducement of Contract?, 92 Marquette L. Rev. 423 (2009).

Related posts

• Why the fraud claim is the lawyer’s weapon of choice in lawsuits over failed technology projects
• Why tech vendors should consider providing a written risk-factors disclosure sheet
• Lawsuit-defense tip for software vendors: Clearly label demos and mock-ups as such

See also: (list is automatically generated)

• Lawsuit-defense tip for software vendors: Clearly label demos and mock-ups as such
• Why tech vendors should consider providing a written risk-factors disclosure sheet
• Nonreliance

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In making a sales pitch, it’s not uncommon for a software vendor to put together a non-working demo or mock-up of what the customer might see in the final, customized software imp­le­men­ta­tion.

Such demos can be great sales aids. But they can also give rise to fraud allegations if the customer later claims, "you never told us it was just a demo!"

Strange as it may sound, this does happen in real life; when tech proj­ects blow up, customers’ lawyers almost always look for op­por­tu­ni­ties to make fraud claims against the vendor. As Chris Kanar­a­cus reported in 2008 about the recently-settled Waste Man­age­ment, Inc., vs. SAP lawsuit:

"At that meeting, SAP AG executives and engineers represented that the software was a mature solution and conducted a dem­on­stra­tion consisting of what they represented was the actual SAP Waste and Recycling software," the complaint states.

The company later discovered [sic] that the software was a "mock-up version of that software intended to deceive Waste Management," according to the complaint.

SAP has admitted to this in "internal documents," the complaint states.

SAP also demonstrated the "fake software" at subsequent sales presentations, according to the complaint.

[Emphasis and extra paragraphing added.]

If you’re a vendor, you can easily give your lawyers ammunition to shoot down this particular type of fraud al­leg­a­tion: Clearly label every screen of your demo as such.

The label could read something like this, in a footer: Note: Some significant features shown in this demo are not currently implemented.

That kind of label could help dissuade the customer from making a fraud claim at all, or perhaps allow the vendor to move for summary judgment dismissing the claim without a trial.

Related posts

• Why the fraud claim is the lawyer’s weapon of choice in lawsuits over failed technology projects
• Why tech vendors should consider providing a written risk-factors disclosure sheet
• Vendors, consider a no-reliance clause for your sales contracts, to help forestall claims of fraudulent misrepresentation

See also: (list is automatically generated)

• Vendors, consider a no-reliance clause for your sales contracts, to help forestall claims of fraudulent misrepresentation
• Why the fraud claim is the lawyer’s weapon of choice in lawsuits over failed technology projects
• Why tech vendors should consider providing a written risk-factors disclosure sheet

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Two recent examples

When a big technology implementation proj­ect fails, the cust­om­er’s law­yers will pretty much always try hard to find opportunities to ac­cuse the vendor of having lied.

Why do customer lawyers do this? Because it can work, sometimes spectacularly well.

We see an example in a case I blogged about a few weeks ago: British Sky Broad­casting contracted with EDS to de­vel­op a customer rela­tion­ship management (CRM) soft­ware system, and eventually filed suit when the project went seriously awry. The judge con­clu­ded that EDS made fraudulent mis­rep­re­sen­ta­tions when one of its senior UK executives lied to Sky about EDS’s analy­sis of the amount of elapsed time needed to complete the initial delivery and go-live of the system. After the de­ci­sion was handed down, Sky announced that it expected the damage award against EDS to be at least £200 million.

Another example is Waste Management, Inc.’s lawsuit against SAP over a failed enterprise resource planning (ERP) software implementation, re­por­ted earlier this week to have settled for an undisclosed sum. At the heart of Waste Management’s case was its allegation, not just that SAP had breached the contract, but that it was guilty of fraudulent in­duce­ment, fraud, and negligent mis­rep­re­sen­ta­tion.

"They lied!" is an easier sell in court

Litigation counsel know that jurors typically won’t un­der­stand whatever tech­nol­o­gy is involved.  (In fact, the customer’s lawyers might well try to exclude any prospective juror who knows even a little about the technology.)

That can make it hard for customers to win such cases on garden-variety ‘technical’ grounds such as breach of contract or breach of warranty.

Judges and jurors absolutely do get it, on the other hand, when it appears some­one lied or cheated. 

The threat of punitive damages raises the stakes

If a customer’s lawyers can prove fraud by the ven­dor, then the cust­om­er may be able to recover not just ‘benefit of the bargain’ contract dam­ag­es, but possibly punitive damages as well.  This is important because “punis” ordinarily aren’t available in garden-variety contract cases. 

For that reason, even when evidence of fraud is weak, the mere threat of punitive damages can give the customer more leverage in making set­tle­ment demands.

Related posts

• Why tech vendors should consider providing a written risk-factors disclosure sheet
• Vendors, consider a no-reliance clause for your sales contracts, to help forestall claims of fraudulent misrepresentation
• Lawsuit-defense tip for software vendors: Clearly label demos and mock-ups as such

See also: (list is automatically generated)

• Lawsuit-defense tip for software vendors: Clearly label demos and mock-ups as such
• Vendors, consider a no-reliance clause for your sales contracts, to help forestall claims of fraudulent misrepresentation
• Misstatements during contract talks might cost EDS an extra $270 million

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Companies often don’t have the bargaining power to get their way in contract negotiations. When that’s the case, they have to think of other ways to help protect their business interests. Imagine, for example, that a customer is negotiating a master purchasing contract with a vendor.

• The customer would love to flatly prohibit the vendor from raising prices without the customer’s consent. But the vendor’s negotiators won’t go along with such a prohibition.
• The vendor would love to have the unfettered discretion to raise the customer’s prices whenever it wants. But the customer’s negotiators insist on at least some protection on that score.

What to do? In no particular order, here are three possible approaches that the parties could consider trying.

Non-discrimination language

A non-discrimination requirement at least brings a bit of overall-market discipline into the picture.

EXAMPLE: Vendor will not increase the prices it charges to Customer except as part of a non-targeted, across-the-board pricing increase by Vendor, applicable to its customers generally, for the relevant goods or services.

COMMENT: Vendor might want to qualify this language, so as to limit how general a price increase must be before it can be applied to Customer.

Advance-warning requirement

An advance-warning requirement can buy time for its beneficiary to look around for alternatives (assuming of course that the contract doesn’t lock in the beneficiary somehow, for example with a minimum-purchase requirement or a “requirements” provision).

EXAMPLE: Vendor will give Customer at least X [days | months] advance notice of any increase in the pricing it charges to Customer under this Agreement.

Transparency requirement

Requiring a party to provide information justifying its action, upon request, can force that party to think twice about doing something, even though it technically has the right to do it.

EXAMPLE [UPDATED]: If requested by Customer within X days after notice of a pricing increase, Vendor will seasonably provide Customer with documentation showing, with reasonable completeness and accuracy, a written explanation of the reason for the increase, including reasonable details about Vendor’s relevant cost structures. relevant to the pricing increase. Customer will maintain all such documentation in confidence any nonpublic information in such explanation, will not disclose the nonpublic information to third parties, and will use it only for purposes of making decisions about potential purchases under this Agreement.

COMMENT: Note the if-requested language, which relieves Vendor from the burden of continually managing this requirement — although a smart vendor would plan ahead and have the required documentation ready to go.

The above examples are specific to price increases, but the concepts can be adapted to a variety of needs.

See also: (list is automatically generated)

• How to sign a company contract without incurring personal liability
• Note-taking in meetings and phone calls: Three easy habits your lawyer will love you for
• Six tips for negotiating best-efforts obligations

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