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Archive for July, 2014

Reed Smith attorney Vincent Martorana has just published a new edition of A Guide to Contract Interpretation on Drafting Points, his excellent blog. In less than sixty pages, the Guide provides a thorough and systematic account of the principles courts use to identify and handle drafting ambiguities.  On page 4, there is very useful Contract-Interpretation Flow Chart (students, take note!).  The only caveat I would enter is that Vincent has distilled the principles from opinions in two jurisdictions, New York (where he is based) and Delaware. For those of us who study or practice in other jurisdictions, it is essential that we cross-check the principles against local law and cite to local law in situations where local law governs.  Even so, this is a fairly mild caveat. New York and Delaware are, of course, very important and influential commercial law jurisdictions. And at the level of general principle (as opposed to the specifics of individual cases), my impression is that the basic approach to contract interpretation in most, if not all the states, is similar to that in NY and DE. As ever, there will be differences in how the principles are applied judge by judge and state by state.
Our congratulations to Vincent on a really nice and very helpful piece of work!
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I just read this article – Supercharging Lawyer Development Through Feedbackauthored by Prof. Bill Henderson, which I picked up on the TaxProfBlog.  Music to my ears. The problem is how to institutionalize “legal education as professional development” – and, in particular, how to go about implementing a pedagogy which prides itself on “quality and speed of feedback, as well as on sufficient opportunity to practice” (to quote Daniel Kahneman to whom Prof. Henderson cites).  The closest approximation we currently have is Legal Writing.  But there’s no doubt we should make it happen as, I for one, do not find Prof. Henderson’s predictions either “fanciful or utopian”. It’s a design problem that law schools can and should try to solve.

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My bankruptcy law students are aware that, as a general rule, federal bankruptcy law treats ipso facto clauses in contracts and leases with considerable disfavour. Ipso facto clauses are clauses that provide for a contract or lease to terminate in the event that a party files for bankruptcy. The Latin phrase means “by the fact itself” or “by that very fact” and its usage reflects the notion that a contract or lease including such a clause is designed to terminate “by the very fact” that one of the parties files for bankruptcy. Bankruptcy law doesn’t like ipso facto clauses because they deprive the bankruptcy estate of valuable assets that could otherwise be monetized for the benefit of creditors.

 

As my bankruptcy law students also know, there are exceptional circumstances in which these clauses do hold up. Ken Adams, Bob Eisenbach, and I just had an article published in the ABA’s Business Law Today that discusses these clauses and proposes model language that practitioners can use when drafting them. We also suggest – well it was Ken’s idea really – that we should cut out the Latin and start referring to ipso facto clauses in plain old English as “termination-on-bankruptcy” provisions. I welcome any thoughts and comments on the article.

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