Boilerplate Blurb: Electronic Agreements

Happy Cyber Monday everyone! I am sure you all are hard at work after Thanksgiving, trying to secure the best deals you can. So I will keep this brief and let you get back to your online shopping, but I will make it relevant to what you are doing. Today’s Boilerplate Blurb is all about Electronic Agreements.

Are Electronic Agreements just as Valid as Paper Ones?

Yes, thanks to the Electronic Signatures in Global and International Commerce Act (the E-sign Act) and Uniform Electronic Transactions Act (UETA) you can electronically “sign” for electronic documents. Thus when you send a draft of a contract offer and ask the opposing side to “sign” it and e-mail it back the electronic contract and the electronic signature are as legal and enforceable as traditional pen and paper contracts.

What about “Click to Agree”?

Yes, an e-contract can also be formed when you “Click to Agree” (I will talk about “clickwrap” agreements on another Boilerplate Blurb). So when you are on a website or installing new software on your computer your action suffices to form a contract. Therefore, when you log on and download new software or online game, and you scroll really fast, ignoring the terms and conditions or end-user license agreement (EULA), just so you can get to downloading new media or playing your game sooner, you are giving your agreement to the company’s e-contract.

But There was No Way for Me to Sign it, is that a Valid Signature?

Yes, in fact you can indicate your acceptance via “e-signature” through a variety of methods that will legally bind you to the contract. If you shop online, as much as you are doing so today, then you have seen them. The “I Accept” button, using the “scrambling” technology where you have to type in the funky looking text that spells out random things, or typing your name in the signature box, or even pasting your scanned signature in are all valid methods.

Must I use the Company’s Electronic Agreement?

I know someone there is curious, even though it strikes me as odd that you are reading a blog and your question is how to opt out of electronic agreement even though you are probably using the Internet to read it. Anyway, short answer, no, you don’t have to, as you are and businesses are given the right to choose to continue to use paper. However, when a company gets a consumer’s consent for electronic use, they must give prior notice telling you whether paper contracts will be available and if you change your mind later, and what that paper agreement what are the costs.  The notice also needs to tell you if your agreement is for the one-time transaction OR applies to a larger group of transactions. Therefore, you might have to agree more than once if you continue to interact with them or you agree once, but have signed off on a whole bunch of future transactions.

Are there Times that I Cannot Use an Electronic Agreement?

Yes, certain types of documents MUST be in paper format. They include some of the following:

  1. family-related documents (such as wills, adoption and divorce papers);
  2. safety, health, or specialized industry situations (such as insurance, product recalls, or hazardous material transportation); and
  3. legal and real estate matters (such as court orders, notice, foreclosure, and eviction).

Good luck with your cyber shopping, and if you get dizzy from the sales take a break and read what you are agreeing to when you click and buy! If you enjoyed this post or any of my others please “Subscribe” to this blawg.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Boilerplate Blurb: Interpretive Clauses

Hey everyone I hope you are ready for Thanksgiving (and for fowl talk, as I will be talking chickens today), and because I will be so stuffed with stuffing I will not be doing a Draw the Law this Friday. However, let’s get to some provisions that you see all the time, interpretive clauses.

What are They?

These clauses provide the reader some indication on how to read the agreement. The point of these is to pigeonhole the interpretation, and to insure that there is only one preferred method of enforcement. Why?

The Rule: Contra Proferentem

The goal, and it is usually the drafter, wants to avoid certain court rules. There is one in particular the drafter is trying to get out of, and that is ambiguity is construed against the drafter. When there is a dispute, a court will find a contract term ambiguous if it is interpreted as to have more than one meaning. In those situations, the ambiguity cuts against the drafter. The rationale is that the party preparing the agreement is deemed to have more knowledge of the intent of the parties.

For example, if you said “I want to get chickens from the country.” Most people would assume probably that would be out in agricultural lands where there are a lot of farms. However, a lot of people who have English as a second language would ask “Which country?” meaning another foreign state. If you are a parent, and your child says, “I want that one” while pointing to balloons, and you grab any balloon thinking that will satisfy their desire, but in actuality they wanted the red one, you have seen (and heard) what ambiguity does when they start crying.

Types of Interpretive Clauses

So what do you do if you are drafting the contract?  You turn to interpretive clauses. These clauses tells a reader, which may include a court if there is dispute, that there is only one way to read the terms in the agreement.  Here are some types of interpretative clauses:

  • Headings – whenever you get a long contract, drafters like to make it easy for you to read, so they include headings. However, the headings are merely reference guide and the drafter uses some language to say that the headings are not intended to affect the interpretation of the agreement.
  • Defined Terms – why do contracts read like an encyclopedia or dictionary? It might be because often times in the beginning the drafter has laid out the meaning of every word. In a lot of complex and abstract industries, drafters like to tell the other side what trade terms mean because it tries to clear the ambiguity. Therefore, in a marketing services contract it might be understandable to see that the term “social media” is defined, and it may be limited in a contract to mean only “Twitter, Facebook, and Linkedin.”
  • Person – this really belongs under “Defined Terms”, but I want to touch upon it specifically to get people in business to realize that if they have a LLC or corporation that is a separate entity, and that is because this clause usually state that the word “person” means persons in the singular and plural, is not gender specific and includes companies, unincorporated associations and partnerships. Therefore, in an agreement, where that is defined “person” may not be referring to a living, breathing human, but the corporate entity.
  • Gender-neutral – speaking of gender, many drafters would like to avoid sexist overtones or making it so that the agreement only applies to one gender, so if they use “he” or “she”, they may include a statement that says use of a specific gender, really means both.
  • Mutual Drafting – this provision is used to deal with the rule that ambiguities are construed against the drafter by making it seem that both parties had a hand in the contract. In those cases they will throw in a mutual drafting clause, like this one:

The parties are sophisticated and have been represented (or have had the opportunity to be represented) by their separate attorneys throughout the transactions contemplated by this Agreement in connection with the negotiation and drafting of this Agreement and any agreements and instruments executed in connection herewith. As a consequence, the parties do not intend that the presumptions of laws or rules relating to the interpretation of contracts against the drafter of any particular clause should be applied to this Agreement or any document or instrument executed in connection herewith, and therefore waive their effects.

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Boilerplate Blurb: Disclaimers

Ready for more disclaimer talk? Today’s post talks about disclaimers and their use in contracts. It fit in nicely with all the Draw the Law’s talk on warranties.

Disclaimers are Exculpatory Clauses

In contract lingo a disclaimer is apart of group of clauses that are known as exculpatory. Exculpatory clays not only include disclaimers, but indemnification and waivers as well. I will cover those eventually, but just know that exculpatory works by reliving one or both parties to a contract from liability in certain circumstances.

Generally, an exculpatory clause will not be enforced by a court if the offending clause is extremely unfair (“unconscionable”) or it is against public policy. Sorry, there are just some liabilities that cannot be waived. This goes back to what I say a lot to clients and in this blog, an attorney can put down whatever you want, but that does not mean it is going to be enforced if there is a dispute.

However, this situation is usually in a one-sided agreement where one party was not able to negotiate the terms of the deal. This type of contract is known contract of adhesion. You are basically stuck with the terms of the deal because the other side has too much leverage in the negotiation. Typically, this situation is an average consumer versus a large corporation.

More on Disclaimers and an Example

Disclaimers are great contracting tools for limiting risk for a company when it is putting a product or service out there. Often times, when you do not know what the end results may be, such as behavior or actions by a consumer with a new product, you may want to limit damages, in particular a certain type, consequential damages. I will talk about damage types in another post. For now, just understand that a disclaimer can limit the amount of damage for injuries that might indirectly stem from the main harm in a breach of contract situation.

An example of a disclaimer is as follows:

Although the information and recommendations at this internet site are presented in good faith and believed to be correct, COMPANY X makes no representations or warranties as to the completeness or accuracy of the information.

Information is supplied upon the condition that the persons receiving same will make their own determination as to its suitability for their purposes prior to use. In no event will COMPANY X be responsible for damages of any nature whatsoever resulting from the use of or reliance upon information from this site or the products to which the information refers.

COMPANY X does not warrant the accuracy or timeliness of the materials on this site and has no liability for any errors or omissions in the materials.

THIS SITE IS PROVIDED ON AN “AS IS” BASIS. NO REPRESENTATIONS OR WARRANTIES, EITHER EXPRESS OR IMPLIED, OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER NATURE ARE MADE HEREUNDER WITH RESPECT TO INFORMATION OR THE PRODUCTS TO WHICH INFORMATION REFERS.

I took this off a company’s website, and just kept the name out, as to focus on the disclaimer itself. Notice that it accomplishes several things. It tells the reader the information is only presented on a “good faith” basis and there is no warranty for “accuracy.” Also it is indicating to the reader if you rely on the information on the website you do so at your own risk. Lastly, it uses the disclaimer I talked about on Friday’s post, “as is.” Notice it disclaims the warranties that I discussed.

Anyway, why don’t you take a peek at some of your products, websites, marketing materials, etc . . . and see what disclaimers are on those. You might be surprised. Finally, you can take a peek at my disclaimer at the end of this and every post.

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

 

Boilerplate Blurb: The Governing Law Clause

What is it?

The governing law or choice of law clause usually can be found combined with or near the jurisdiction provision (that I discussed last week). Why? Well, the choice of law provision allows the parties to the agreement that a particular state’s laws apply to the agreement when interpreting it.

Doesn’t that mean the same thing as the jurisdiction provision?

No. Jurisdiction is about where the lawsuit must be settled, but governing law is what state’s laws will be used to settle the dispute. Here is a local example to help you think about this concept. Let’s say you argue with your sibling. You have to go to your aunt’s house to be punished (jurisdiction), but your mom’s rules set the punishment (governing law).

Is it possible to have the choice of law state be different than the jurisdiction state?

Yes. Absolutely. It is possible to have the contract to force the parties to settle their suit in Hawaii, but be decided under California law. In fact, many of the large corporations set their contracts governing law clause to Delaware; the reasons are the state’s laws are favorable and the predictable.

Can I do that in my agreement?

As I tell people all the time, an attorney can put whatever you want in a document, but the real question is whether a court will enforce the terms of the contract if a dispute arises.

For example, if you are on Oahu and decided that North Dakota had some favorable laws if your business was there, but you do no business or have any connection to North Dakota, the court is unlikely to enforce the provision. In fact, there are industries that choice of law provisions are barred, such as insurance. However, most general laws are not so great in difference from state-to-state to make clause a negotiating point for most parties. However, you want to check with your attorney if that is the situation for your business.

Finally, here is a simple example of this clause may look like:

The laws of the state of Hawaii govern this agreement.

That’s your boilerplate blurb for this week. Next week I will cover disclaimers in conjunction with Draw the Law. Don’t forget to “Subscribe” to this blawg!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

Boilerplate Blurb: The Jurisdiction Provision

Welcome to the first “Boilerplate Blurb” post! I know long contracts can be scary (more frightening then going out for Halloween on a school night), but there are these provisions or clauses you keep seeing over and over in various agreements you sign. Well, I am here to provide you a quick understanding why we attorneys use these same clauses and wording time and time again.

The Jurisdiction Provision

Today’s boilerplate is the jurisdiction provision (aka forum selection provision).  This type of provision looks something like this:

The Parties (a) consent to the exclusive jurisdiction and venue of the federal and state courts located in the state of Hawaii in any action arising out of or relating to this Agreement; (b) both Parties waive any objection they might have to jurisdiction or venue of such forums or that the forum is inconvenient; and (c) agree not to bring any such action in any other jurisdiction or venue to which either party might be entitled by domicile or otherwise.

What is Going On?

A family attorney once told me that a good lawyer looks at divorce before marriage. While, that might be a little pessimistic, an attorney would rather be thorough then blamed for the grief that a divorcing couple has to go through. The same is said for transactional attorneys: our question is what happens if the deal goes bad or the parties want to break the agreement and a lawsuit ensues?

When you bring a claim to court, in order for the court to hear the claim the court must have jurisdiction (the power over the subject) to even do anything about the claim.

Do you remember my discussion about the raising of Small Claims Court for claims to $5,000 in amount? Well, that is jurisdiction, Small Claims Court only has the power to hear claims/cases under $5,000. If your situation exceeds that amount you must have your case heard in Regular Claims Division, which has jurisdiction over claims that are over $5,000 and under $25,000.

Jurisdiction also includes location (usually, by state). Therefore, an attorney drafting an agreement for one party will often insert a forum selection provision to choose a jurisdiction favorable to one side. Favorable in the sense that: (1) the party already knows lawyers in the area; (2) does not need to travel and deal with travel costs; and (3) generally, has advantages of suing the other party in a state they are familiar with.

Clause in Action: Burgers in Michigan, Court Battles in Florida

A famous case, where a Michigan couple opened a Burger King franchise highlighted the importance of this clause. In the franchise agreement Burger King stated that any court fight would have to be done in Florida (where they are headquartered). When problems arose between the parties, the couple tried to say they did not understand the provision, but the court disagreed and they were forced to fight Burger King down in Florida from Michigan.

Final Word

I like to use this case because I think Hawaii business owners appreciate the gravity of such a clause. We do a lot of trading with the West Coast states, and any long-term agreement you are going to want to look at if we have a fight, where are we suing the other party? Is it in California? Washington? Oregon?

The spooky part is for a local, small business, to be forced to fly to California and fight a company there because of one sentence in an agreement you signed three years ago. Enjoy your Halloween and next Boilerplate Blurb I will discuss jurisdiction provision clause’s best friend “governing law” provision as the two of them are sometimes combined or near each other in an agreement.

Enjoy Halloween and be safe! Also don’t make me become a zombie and chase you down to “Subscribe” to my blawg by clicking the orange button in the top-right!

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

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New in the Brief – Act 196, Members, Partners, and Sole Proprietors are Not Employees for Workers’ Comp

Hey Everyone,
just a reminder to come join me at the Box Jelly tomorrow night 10/18 for a talk on “Protecting Your Brand.” The subject will be a discussion of various intellectual property laws that a small business owner should understand as they grow their business. Here is the link for more info.

Today’s law in the brief shows exactly why definitions play a role in the application of the law. If you attended my talk on Business Entity Formation you would know that when you choose to operate a business there are many forms you can choose from. Each has its pro and con.

Many times the pros and cons come with dealing with things like taxation and the way benefits are handled by the entity. Act 196 tries to specifically clarify one of these areas. Namely, that LLC members, partners in partnerships, and sole proprietors are NOT defined as “employers” for the purposes workers’ compensation.

The Mechanics of it All

Act 196 amended HRS Section 386-1, which is the definition of employment AND lists what is excluded from that definition. Thus by adding the following lines to the exclusion section:

(10)Service performed by a member of a limited liability company if the member is an individual and has a distributional interest, as defined in section 428-101, of not less than fifty per cent in the company; provided that no employer shall require an employee to form a limited liability company as a condition of employment;

(11)Service performed by a partner of a partnership, as defined in section 425-101, if the partner is an individual; provided that no employer shall require an employee to become a partner or form a partnership as a condition of employment;

(12)Service performed by a partner of a limited liability partnership if the partner is an individual and has a transferable interest as described in section 425-127 in the partnership of not less than fifty per cent; provided that no employer shall require an employee to form a limited liability partnership as a condition of employment; and

(13)Service performed by a sole proprietor.

people in those situations would not be treated as an “employer” for workers’ compensation law.

What does this Mean?

To put it succinctly, The Retail Merchants of Hawaii stated it in their testimony regarding the Act when it was a measure in the Legislature:

A business owner who is not actively involved in the day-to-day activities of the business most likely would not suffer a work-related injury and therefore would not benefit from workers’ compensation insurance. Even if the owner does work at the business, there would be little or no gain to file a worker’s compensation claim, which would result in increased premium costs borne by the business. In the case of a sole proprietorship, an injury would likely result in the termination of the business operations.

Admittedly, worker’s compensation insurance imposes additional costs on the business. This exclusion would provide additional and much needed financial resources to the small business person.

Taken from Testimony before the WAM Committee on HB518 HD1 SD1, 04-01-11.

Therefore, a change in definition saves businesses from having to purchase workers’ compensation insurance. After next week’s Law in the Brief, I will be talking about definitions in agreements in my new series “Boilerplate Blurbs.” This will be all about those sentences you see in agreements. This will culminate into a seminar entitled “What’s in an Agreement? A Primer on Contract Law.”

As always, don’t forget to “Subscribe” to this blawg do so by clicking the little orange button up in the right-hand corner of the page.

*Disclaimer: This post discusses general legal issues, but does not constitute legal advice in any respect. No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction. Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.