Winning Contract Disputes:

Tips for Drafting, Negotiating and Litigating Contracts

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Mark P. HenriquesWomble Carlyle Sandridge & Rice, LLP

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Winning Contract Disputes:

Tips for Drafting, Negotiating and Litigating Contracts

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mail: P.O. Box 509 Eau Claire, WI 54702-0509 • telephone: 866-352-9539 • fax: 715-833-3953email: customerservice@lorman.com • website: www.lorman.com • seminar id: 399863

Prepared By:Mark P. Henriques

Womble Carlyle Sandridge & Rice, LLP

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Winning Contract Disputes

Mark P. Henriques

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What we will cover

• An Ounce of Prevention: Key issues to address in the contract

• Things are Heating Up: Responding to claims of breach

• Proving Your Case: Winning your case before a jury, judge or arbitrator

Hypothetical

You are asked to help draft and negotiate a contract for a custom software solution.

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Best Practice

• Research the other side

Research before you sign

• Check financials

• Check with prior customers

• On-line searches

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Drafting the Contract

• Key provisions– Define work product / deliverable

– Define acceptance / when payment due

– Venue/Choice of Law

– Dispute resolution

– Ownership of work product

• Ambiguous provisions will usually be construed against the drafter

Payment Terms

• Types– Time and Materials

• Payment based on hourly work at a contracted rates

– Deliverables• Payment based on completed work product

– Fixed price• Payment not to exceed contracted price

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Defining Performance

• Clarity is key - if you do not understand what is being done, neither will a jury

• Use specific performance measures

• Address timing issues

• Anticipate problems and disputes

Use of Subcontractors

• Inform Client of all subcontractors

• Get contracts with all subcontractors

• Clearly identify the organizational structure to client and subcontractors

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Change Management

• Document deviations

Managing Change

• Get it in writing

• Save all correspondence

• Establish and follow contractual language

• Communicate changes with your team

• Update scope documents and timelines

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Dispute Resolution

• Arbitration or Litigation?

• Business Leader meeting?

• Mediation?

Forum Selection

• Choice of Law– Negligence

– Statutes of Limitation

• Venue– Location

– Court (Federal, State or Business)

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Things are Heating Up

Contractor gets behind on payment and owes more than $1 million. When you attempt to discuss the invoices, they claim you have not provided any useable work-product.

Best Practice

• Contact litigation counsel when relationship becomes hostile

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Role of Legal Counsel

• Possible negotiation of payment

• Assist with making sure termination provisions of contract are followed– Notices of Breach/Payment Demands

• Prepare for possible litigation

Best Practice

• Contact litigation counsel when relationship becomes hostile

• Keep records and begin gathering supporting documents

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Litigation Hold

• Implement a litigation hold• Immediate stop of deletion of email and

other electronic documents

– Notify employees and gather documentation

Termination Options

• Review contract provisions

• Pros and cons of termination

• Need for clarity

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Proceeding to Litigation

• What form of dispute resolution?

• What will it cost?

• How long will it take?

• What lawyers do I need?

• Do I have buy-in from the business?

Early Case Assessment

• What is it?

• How does it work?

• Using ECA to establish a case management strategy

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Possible Claims

• Breach of Contract

• Breach of Warranty (especially UCC)

• Quantum Meruit / Unjust Enrichment

• Unfair Trade Practices

• Misrepresentation

• Other Statutory Claims

Possible Defenses

• Lack of Consideration

• Lack of Privity

• Statute of Frauds

• Statute of Limitations

• Accord and Satisfaction

• Economic Loss Rule

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What is Discovery?

• Types– Request for Document Production

• Responsible for documents in your “custody and/or control”

– Interrogatories

– Requests for Admissions

• Usually 30 day response deadlines absent agreements for extended time

Responding to Discovery

• Start the collection process early

• Identify key document custodians

• Identify the types of documents and the location of those documents

• Work with counsel to create search terms to target document collection

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Best Practice

• Work with IT personnel to collect documents– Consider extended steps to pull

documents in “the Cloud”

• Work with counsel to identify sensitive information in the documents for possible redaction (ie employee personal data)

Best Practice

• Consider review platforms and cost efficient methods of review

• Provide counsel with ALL documents– Need to prepare strategy for bad

documents as well as good documents

• Work openly with counsel to resolve the dispute

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Using Experts

• Why do I need one?

• How do I find one?

• How to prepare experts for deposition and trial testimony

Winning at Trial

• Preparation is key

• Picking the right jury

• Selecting and using exhibits

• Choosing you witnesses and the order of proof

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Winning Themes

• The broken promise

• The hidden agenda

• They are incompetent

• They ran out of money

• They did not care

Importance of Following these Tips

• Chances of success in litigation are improved

• Increase ability to defend claims

• Increase ability to pursue affirmative claims including collection of past due invoices

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QUESTIONS?

Mark P. Henriques

Womble Carlyle Sandridge & Rice, LLP

One Wells Fargo Center

301 South College Street, Suite 3500

Charlotte, North Carolina 28202

704-331-4912

mhenriques@wcsr.com

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Car Talk’s 10 Rules of Contractingi “Don’t be afraid of work. Make work afraid of you.” Or a Contract is NOT the Great American Novel. Tom’s self-proclaimed motto – “Non Impediti Ratione Cogitationis” (Unencumbered by the Thought Process.) Or You are NOT Writing the Bible. “It's only a car.” Or a Contract is Just a Contract and It’s Not Always Pretty. “If it falls off, it doesn't matter.” Or Let the Other Person Win Some & If Everything is Important, Then Nothing is Important. “Reality often astonishes theory.” Or Office Politics are Not a Bad Bad Thing. "If money can fix it, it's not a problem." Or the Importance of Risk Analysis. “Never let the facts stand in the way of a good answer.” & “It is better to travel in hope than arrive in despair.” Or Hanging Hats. “Our humility is what makes us great.” Or a Lawyer’s Ego is often their Achilles’ heel. “Would you rather be right, or would you rather be happy?” OR "Happiness equals reality minus expectations."

"I like to drive with the windows open. I mean, before you know it, you're going to spend plenty of time sealed up in a box anyway, right?" i Tom Magliozzi who, along with his brother Ray, hosted NPR’s hit comedy show Car Talk for the last 37 years, died Monday morning, November 3, 2014, from complications of Alzheimer’s disease. My thanks to Peter Barr, counsel at Rack Room Shoes, for assembling this list.

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Notes