MY QUICK TAKE

When you work with contracts, you are are trained to find the path to a better result. So much of our work is reframing, redirecting, and bending a deal toward a better outcome. But sometimes you face problems that require a decision. You have bad choices in front of you and your job in those moments is to make the call.

AI CONTRACT LESSON

When you define input data in an AI product contract, you are doing a lot. The one defined term sets what the customer keeps protected and what the vendor may reuse or train on. If you get it wrong, as our speakers said, the provision that says “do not train on my data” may not protect what you think it does. Laura Belmont and David Sclar explain how they approach these definitions and traps to avoid. Comes with a two-page PDF desk reference and a 12-minute video segment.

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Watch the video lesson →

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MEME OF THE WEEK

If employers were honest in their job descriptions, this one would be at the top of the listed job duties for every contract-related job post.

That leads me to think that maybe companies should add it as a KPI for our promotions and bonuses. I'm thinking, "attached at least 20 PDF copies of linked documents and policies on 80% or more of the contracts processed." If that doesn't earn a bigger bonus, I don't know what would.

What do you think the KPI should say?

CONTRACT TIPS

Today's contract tip is about drafting termination for convenience provisions.

These provisions allow a party to terminate the contract for any reason, even if there is no breach.

Many companies prefer to use this approach rather than terminate for cause.

I remember being surprised that the senior lawyers advised a client to use this approach in the face of a ton of documentation and evidence of the counterparty's unprovoked breach. I now understand the wisdom of it.

The reason many lawyers advise their clients to terminate for convenience is to avert the distraction and cost of a potential wrongful termination claim. The cost may be less than the potential litigation over whether there was a breach.

I think of it as akin to offering the counterparty an opportunity to save face during negotiations.

While less risky than termination for cause, termination for convenience is not risk-free.

Many contracts require the terminating party to pay the other party something if there is a termination for convenience. The amount to be paid is often the subject of heavy negotiation.

Vendors want to receive payment for all work performed and goods delivered, any sunk costs that can’t be recouped (such as cancellation fees), and their overhead and lost profit.

Customers want the vendor to stop work immediately, mitigate costs, and deliver any works in progress.

Where they end up depends on their negotiation.

One last point - make sure you evaluate if the early termination fee is a liquidated damage (LD). If you set a fixed payment unrelated to actual damages, it may be and you'll need to include all the other language required for LD provisions.

What other advice would you add that new lawyers should know about termination for convenience provisions?