Review of Boilerplate Contract Provisions:

Say What You Mean and Mean What You Say

presented by:

Chris Hanslik

BoyarMiller832.615.4212

chanslik@boyarmiller.comACC Houston Chapter June 2012

Overview

Forum Selection Clauses

Venue Selection Clauses

Choice of Law Provisions

Jury Waivers

Disclaimer of Reliance Provisions

Damage Limitation Provisions

Arbitration Clauses

Forum Selection Clauses

Forum selection clauses are presumptively valid.

Two-part test: The parties contracted to submit to the exclusive jurisdiction of another

state; and

The other state recognizes the validity of such provisions.

Satterwhite Aviation Services, Inc. v. International Profit Associates, Inc., 2008 WL 257372 (Tex. App.—Houston [1st Dist.] 2008, no pet.)

Valid forum selection clauses govern all transaction participants – whether a signatory or not.

Forum Selection Clauses

To avoid the selected forum the burden is on the party opposing enforcement to show:

The clause is invalid based on fraud, undue influence, or unequal bargaining power;

Enforcement would be unreasonable and unjust; Enforcement of the clause would go against a strong public policy of

the forum in which the suit was filed; or The balance of convenience is so strongly in favor of litigation in the

forum in which the suit was filed that in the forum specified would be so manifestly inconvenient to the resisting party that they would effectively be deprived of their day in court.

Deep Water Slender Wells v. Shell Int’l Exploration & Prod., 234 S.W.3d 679 (Tex. App.—Houston [14th Dist.] 2007, pet denied)

Venue Selection Clauses

Venue selection clauses are not presumptively valid. Forum selection clauses arise out of contracts. Venue selection clauses arise specifically from statutes. 

Venue selection clauses may not contravene the statutory scheme for fixing venue.

Clauses that conflict with the statute provisions are void as against public policy.

Some statutes allow parties to agree to a specific venue.

― “Major transactions” – written agreement with aggregate value equal to or greater than $1 million.

― A contract that expressly names the county in which the obligation is to be performed i.e. promissory notes.

 

Choice of Law Provisions

Contracting parties may choose the law that will govern their dispute . . . with some limitations.

Two scenarios where a contractual choice of law provision will not be enforced:

The contracting parties have not established sufficient connections with the chosen state; or

The law of the chosen state violates a fundamental Texas public policy.

DeSantis v. Wachenhut Corp., 793 S.W.2d 670 (Tex. 1990)

Example: Non-compete agreements with Texas residents that call for law of another state to govern.

 

Choice of Law Provisions

Tort Claims Generally the contractually-chosen law will not be applied if the

provision is narrowly written and construed to relate only to contractual matters.

― “any action for breach of this agreement . . . “ Broad choice of law provisions may encompass tort claims.

― “any and all rights and duties of the parties arising from or relating in any way . . .”

Jury Waiver Clauses

Jury waivers are valid in Texas – If:

They are made “Knowingly and Voluntarily” Conspicuous and “crystal clear”.

― Conspicuous – written or displayed such that a reasonable person ought to have noticed i.e. capital letters and bold print.

― Prima facie evidence of “knowing and voluntary.” Burden on party opposing to rebut the presumption.

Not procured through fraud Alleged fraud must relate specifically to the jury waiver and not the

entire contract.

Disclaimer of Reliance Provisions

Contract provisions disclaiming reliance on a party’s representations may be enforced in limited circumstances to effectively bar claims of fraudulent inducement.

Factors a court will consider in evaluating a “Disclaimer of Reliance” provision:

The terms of the contract were negotiated, rather than boiler plate, and during the negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute;

The complaining party was represented by counsel; The parties dealt with each other in an arm’s length transaction; The parties were knowledgeable in business matters; and The release language was clear.

Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 (Tex. 1997); Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008)

 

Damage Limitation Provisions

Direct vs. Consequential Damages Direct damages are those damages that flow naturally and necessarily

from a breach of contract i.e. foreseen or contemplated by the parties.

― Example: benefit of the bargain  Consequential damages are those damages which result, naturally,

but not necessarily, from the alleged breach.

― Example: lost profits that are incidental to the performance of a contract 

Limiting Damages Generally enforceable. Cannot violate public policy. Courts look to bargaining power between the parties.

Allright, Inc. v. Elledge, 515 S.W.2d 266 (Tex. 1974)

Conspicuousness of Limiting Provisions

U.C.C.  Limitation of damages provisions governed by the U.C.C. must be

conspicuous. U.C.C. definition of “conspicuous”:

― Displayed in a way that a reasonable person ought to have noticed it.

― Headings in capitals, equal or greater text size, contrasting type, font or color.

Texas has adopted this definition for exculpatory provisions which shift risk in an extraordinary way i.e. releases and indemnity clauses where one party exculpates itself from its own future negligence.

Conspicuousness of Limiting Provisions

Common Law 

Limitation of damages provisions are not required to be conspicuous. Regardless, courts will consider the conspicuousness of the provision

when determining if it is enforceable. Language must be clear and unequivocal. Courts will strictly construe the provisions against the party they are

intended to protect.

Arbitration Clauses

Narrow vs. Broad Arbitration Clauses  Narrow clauses limit the scope of arbitration to specifically identified

matters. Broad clauses widen the scope of arbitration to all disputes that touch

matters related to the contract.

― Broad clauses use language such as: “any and all claims,” “arising out of,” “relating to,” or “in connection with” the agreement.

 Who is subject to an Arbitration Clause  Signatories to the agreement. Any other party who meets the agreement’s definition of “party”.

― In re Rubiola, 334 S.W.3d 220 (Tex. 2011)

Appealing Arbitration Awards

Federal Arbitration Act  Grounds specified in FAA are exclusive.

― Extreme arbitral conduct (fraud, corruption, misconduct, etc.).Hall Street Assocs. v. Mattel, Inc., 522 U.S. 576 (2008)

 Texas General Arbitration Act  Right to appeal is possible if parties place restrictions on the

arbitrator’s powers.― Powers possessed by a traditional trial court judge.

o Reaching a decision based on reversible error.o Applying law not recognized by relevant jurisdiction.

― Specifying that award will be subject to traditional judicial standards of review.

― A verbatim record of the arbitration proceeding is mandatory. Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011)

 

Questions?

Chris Hanslik

BoyarMiller832.615.4212

chanslik@boyarmiller.com