This is a follow up post on our series of merger and acquisition issues. If you are selling your company you’ll be faced with the prospect of indemnifying the purchaser for any damages they suffer in connection with the sale. Now such indemnification may arise for a number of reasons, such as an unknown debt or lien that was on an asset you sold, a claim that an employee or third party made against the company or an asset which you did not inform the purchaser of, or a number of other issues. These are usually breaches of the representations and warranties that sellers have to make to the buyers in the asset purchase agreement. For example, the seller will represent (i.e. state as true at the time of signing or closing or both) that there are no debts owed by the company or liens on the company assets. If the deal closes and a lender or lien of the company did exist, its a breach of that representation, and the seller is liable to the buyer for any resulting damages.
This is a response to a post by Ken Adams of Adams on Drafting. In one of my earlier posts about the desires of certain clients to have as short a contract as possible, I stated that it was beneficial to draft an agreement a certain way, including certain terms and language, because judges have seen similar items before. Ken identified this and he reiterated his position that a contract drafter should not rely on what he deems “tested” contract language.
Over the years, I’ve lost track of the number of times I’ve sat with or been on the phone with a client and we went over the deal they were trying to close (or more often some part of the overall deal), where they said “We just need something short to memorialize this, preferably a one page agreement.”
Treiber & Straub, Inc. v. UPS, 474 F.3d 379 (7th Cir. 2007).
In this case, a user shipped a ring worth $100,000 via UPS’s online shipping website. He submitted the ring in a package for shipping with the shipping label. UPS then lost or misplaced the package.
The Court held that using a clickwrap agreement for online transactions was “common in Internet commerce” where “one signifies agreement by clicking on a box on the screen.” The court reasoned that merely because the user chose not to read the terms, that does not let him avoid any of the provisions he does not like.