The Last 100 Days  

Tuesday, April 25, 2017

100 days has become a standard of time for a measurement of success. The most obvious example is the first 100 days of a President's term. As enticing as it may be to comment on our President's first 100 days, instead I am actually going to share with you my last 100 days, which I hope you find more interesting than my commenting on the President's first 100 days. There are 3 events to discuss. All three have a common theme, two are comparable and the last comes out of left field.

The first two involve business activities that have become all too common. Both involve my representation of small companies that either sold assets or stock. The last is a most recent newsworthy event that did not involve my representation, at least not yet.

For my entire first year in law school, we studied contracts. The ins and outs of contracts fascinate and titillate law professors. The good ones pass on this fascination to their students. I must have been bitten. A foundation principle of contract law concerns contracts of adhesion. Contracts of adhesion are currently defined as:

"A standard form contract drafted by one party (usually a business with stronger bargaining power) and signed by the weaker party (usually a consumer in need of goods or services), who must adhere to the contract and therefore does not have the power to negotiate or modify the terms of the contract."

In many of the cases we studied, Courts held contracts of adhesion to be invalid and released the parties from the contractual obligations.

In the two business transactions I mentioned, I represented two small software development businesses whose assets or stock was purchased by Fortune 1000 companies. In the transaction involving the asset purchase, the asset was a single application that solved a bedeviling problem. We were presented with a thirty page sales and assignment agreement. In the second transaction, a small software development company was being acquired by the acquisition of all of its stock. The piece of software that was the heart of the company was essentially the only asset acquired. However, the client's development team was highly sought after. The company had no hard assets and little revenue but it sold for multiple millions. In that transaction, we were presented with a 100+ page purchase agreement.

In each contract, there were representations and warranties that the buyers wanted the sellers to make. My job was to make sure that the sellers were not over representing or over warranting what it was that they were selling. In each case, my legal training told me that these were contracts of adhesion. Could they be negotiated? Yes, but not in any meaningful way if the deals were to ever be done. Expediency won out over prolonged detailed negotiations.

It is the last example and an enlightening conversation that really made me sit bolt upright. By now you all know about the poor soul who was dragged off a United Airlines plane when he refused to relinquish his seat on a flight that United oversold and had four company employees paying a lesser or no fare who needed to get to the plane's destination. As it turns out in the fine print of an airline ticket, which I have never read, (how many of you have read your cell phone contract, your cable contract, your concert or Bronco ticket, credit card contract or the purchase agreement for all your apps?), the airline reserves the right to de-seat you for any number of reasons. The airlines apparently reserve the right to oversell a plane because of some algorithm which indicates that some number of people cancel or never show up for a flight. I mistakenly thought that when you buy an airline ticket and pay your money, you have entered into a contract for transport from point A to point B. Not so! And I find this outrageous. The conversation that made me sit bolt upright was with another lawyer, a consumer law expert, and a contemporary, who told me that he had not seen the concept of contracts of adhesion applied since he left law school. Where have I been that I missed this lesson? The doctrine of contracts of adhesion needs to make a return and we need to start paying attention to the contracts we enter into.

My last 100 days has been rewarding in many ways, more importantly it has been educational, certainly in the lesson that today's expediency to get the deal done or to get to point B is more important than a negotiated fair and just deal. I wonder if the President appreciates the lessons of his last 100 days.