Negotiating Business Agreements via , Text and Other Electronic Communications

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A Negotiating Business Agreements via , Text and Other Electronic Communications Avoiding Inadvertent Contracts; Navigating Issues of Enforceability, Authentication of E-Signatures, and Admissibility THURSDAY, AUGUST 27, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Alan G. Fishel, Partner, Arent Fox, Washington, D.C. Jon L. Farnsworth, Shareholder, Felhaber Larson, Minneapolis The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Negotiating Business Agreements via , Text and Other Electronic Communications August 27, 2015 Alan G. Fishel This material and presentation are provided for educational purposes only. They should not be construed as providing legal advice nor establishing any attorney-client relationship. 5 Jon L. Farnsworth jfarnsworth@felhaber.com

6 Overview Recent trends and case law developments Avoid the inadvertent creation of an electronic contract Minimize liability and risks using electronic communications Legal issues with electronic signatures Enforceability, authentication, admissibility in breach of contract disputes 6

7 Learning Objectives Lessons from court rulings Avoid common pitfalls Practical tips Identify best practices 7

8 Contracts 101 But first, a refresher: Negotiation technologies change, but the fundamentals still apply A valid contract requires Offer Acceptance Consideration 8

9 Contracts 101 Can electronic communications constitute a binding agreement? Yes Allows business to operate more efficiently Enables collaboration Removes certain geographic barriers to business 9

10 Recent Trends Electronic communications ( EC ): Accepted practice, but can be risky Increased truncated contracts Speed/ease of communication Quality suffers Greater informality Assumptions omitted Person communicating may not have corporate authority to contractual bind 10

11 Boys v. Monster Energy Co., 983 F. Supp. 338 (S.D.N.Y. 2013) Inadvertent contract Monster Energy Drinks works with DJ to create promo video Promo video contains Beastie Boys music Monster posts video online Monster fails to obtain license or permission for music Beastie Boys sue Monster Monster sues DJ 11

12 Boys v. Monster Energy Co. (cont.) Monster claims a contract was formed with DJ from an exchange Monster s DJ: your music video will be posted online DJ responds (at 3:50a.m.): Dope! Was a binding contract formed? 12

13 Boys v. Monster Energy Co. (cont.) Court finds no contract existed No valid offer from Monster Court noted: In proper context, the word Dope! could certainly be taken as an expression, albeit unorthodox, of approval and acceptance of another s antecedent offer. 13

14 Boys v. Monster Energy Co. (cont.) Takeaways: A one-word response ( Dope! ) could bind a party Formalize contracts with important parties (e.g., indemnification, insurance, etc.) Properly license music 14

15 Basis Tech. Corp. v. Amazon.com, Inc., 878 N.E.2d 952 (Mass. App. Ct. 2008) Inadvertent contract During a jury trial (between two tech companies), parties reached a purported settlement via Parties inform court (on the record) of settlement Settlement terms not stated on the record Following week, parties disagree over the terms of the settlement Amazon argues the settlement was not final 15

16 Basis Tech. Corp. v. Amazon.com, Inc. (cont.) Offer: Lengthy with settlement terms by Basis counsel Acceptance: one-word response from Amazon counsel: correct. Held: Binding settlement agreement existed 16

17 Basis Tech. Corp. v. Amazon.com, Inc. (cont.) Takeaways: An electronic communication with sufficient detail=offer A one-word response ( correct ) can constitute an acceptance Logistics for handling settlement discussions Example: We have reached a tentative settlement, pending the execution of a mutuallyagreeable settlement agreement and release 17

18 CX Digital Media, Inc. v. Smoking Everywhere, Inc. Existing agreements may be inadvertently modified by electronic communications CX Digital Media, Inc. v. Smoking Everywhere, Inc., 2011 U.S. Dist. LEXIS (S.D. Fl. March 3, 2011) 18

19 CX Digital Media, Inc. v. Smoking Everywhere, Inc. (cont.) Agreement existed between parties Day-long instant messenger conversation occurs between parties Discuss about significant increase in volume of business between the companies Specific quantities discussed Purchasing party responds: NO LIMIT! Other party replies: awesome! and starts increasing volume of business 19

20 CX Digital Media, Inc. v. Smoking Everywhere, Inc. Did a modification of the volume of business occur to the contract that previously capped quantities? Def. argued anti-modification contract provision prohibited modification and no consideration existed Day-long IM conversation was held to include a series of offers, counteroffers, and eventually an acceptance No consideration = no problem (estoppel applied) 20

21 CX Digital Media, Inc. v. Smoking Everywhere, Inc. Takeaways: EC can modify existing contracts Terms discussed over instant message treated the same as any other negotiation Contract anti-modification provision can be waived and/or satisfied by unsigned written communication Detrimental reliance by other party may overcome lack of consideration 21

22 Rubinstein v. Clark & Green, Inc., 395 Fed. Appx. 786 (2nd Cir. 2010). Disclaimers: Pl. sues architectural firm, claiming firm failed to complete design work that was negotiated electronically Def. claims no contract created so I would like to target completing a more comprehensive understanding in writing before we get to contract documents state if okay with you. 22

23 Rubinstein v. Clark & Green, Inc. (cont.) Court found no agreement formed Def. regularly used terminology that no contractual obligation existed: We can talk about all this in more detail The agreement I would like to use is an [specific type of architectural agreement]. Thanking the other party for sending the possible schedule and sample contract. 23

24 Rubinstein v. Clark & Green, Inc. (cont.) Takeaways: Courts will look at the intent of the parties was there an intent to be bound? Robust disclaimer may eliminate confusion over whether a contract exists Scope and complexity of contract may impact Court s decisions ($1.5 mil. > one year project) 24

25 Electronic Communications between the Parties to Clarify an Agreement before Execution Common merger provision might make this use of electronic communications unhelpful If a party, however, can show reliance on the communications (i.e., it wouldn t have executed the agreement without these clarifications), it may be able to use them. 25

26 Terms of Use After a Customer has gone through great lengths to negotiate all of the provisions in, for example, a cloud services agreement, what impact should a Service Provider s standard form of Terms of Use, End User License Agreement or Acceptable Use Policy (individually and collectively, TOU ) have on such negotiated terms. The answer a Customer wants is no impact. Nevertheless, terms and conditions contained in TOUs often conflict with the Agreement in connection with numerous matters, including the following: Ownership of Data Data Privacy and Security Limitation of Liability Termination Rights 26

27 Terms of Use (continued) Customers ordinarily want a provision that provides that in the event of any conflict between the terms and conditions of any TOU (including any future modifications thereto) and any terms and conditions of the Services Agreement, the terms and conditions of the Services Agreement will be deemed to control and prevail. It is often helpful to specifically list certain important areas of conflict, and how they are resolved. Many customers seek to have a customized TOU to ensure that the TOU does not undermine their rights or expand their obligations under the Agreement (or, where practicable, customers may seek to have the TOU eliminated altogether and include any necessary TOU terms in the body of the Agreement itself). 27

28 Electronic Signatures The Uniform Electronic Transactions Act (UETA) Adopted by 47 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. Washington, New York, and Illinois have not adopted the UETA Gives legal recognition to electronic signatures, records, and contracts A record or signature may not be denied legal effect or enforceability solely because it is in electronic form. 28

29 Electronic Signatures What s the problem? Parties often disagree over what constitutes a signature Ex. Does a person s typed name at the bottom of an message constitute a signature? 29

30 Buckles Mgmt., LLC v. InvestorDigs, LLC, 728 F. Supp. 2d 1145 (D. Colo. 2010) Business relationship soured Parties tried to reach settlement communication occurred Parties disagreed over whether settlement was reached 30

31 Buckles Mgmt., LLC v. InvestorDigs, LLC (cont.) Court addressed two relevant questions: 1) Can a string of s be considered a writing to satisfy the Statute of Frauds? 2) Can the electronic signature block in an e- mail act as a signature? 1) Yes, EC may satisfy Statute of Frauds Note: this may depend on the jurisdiction 2) No, signature block binding signature Courts look at parties intent 31

32 Buckles Mgmt., LLC v. InvestorDigs, LLC (cont.) Takeaways: Numerous ECs can combine to form an agreement An signature may be construed as a signature on an attachment (unsigned) document in some circumstances 32

33 JSO Assocs. v. Price, 2008 N.Y. Misc. LEXIS 2227 (N.Y. Sup. Ct. 2008) Parties should not assume absence of a signature = no enforceable contract N.Y. broker negotiated terms of a contract to do business with a Mexican corporation via Broker s name in his address was an electronic signature 33

34 JSO Assocs. v. Price (cont.) Court found address constituted an electronic signature and satisfied Statute of Frauds where it contained the individual s first and last name. [W]here there is no question as to the source and authenticity of an , the is signed for purposes of the statute of frauds if the defendant s name clearly appears in the as the sender. 34

35 Electronic Signatures Pitfalls IL, NY, and WA have not adopted the UETA Have individual statutes recognizing e- signatures. Even in states with UETA, be aware of statespecific modifications Example, MN excepts creation of healthcare directives, recording any conveyance, power of attorney, or other instrument affecting real estate. See Minn. Stat. 325L.03 35

36 Electronic Signatures International transactions: Be aware that international transactions may fall under additional frameworks For example: The U.K. adopted the Electronic Communications Act of 2000 and adopted regulations in 2002 governing certificationservice-providers 36

37 Admissibility What evidentiary issues are presented by electronic communications? Arguably more usage in criminal than civil contexts Text messages: courts split on when admission is appropriate Identity of the sender is often disputed Ex., the Idaho Supreme Court ruled that the only admissible text messages were ones a defendant was seen sending on surveillance tape texting State v. Koch, 334 P.3d 280 (Idaho 2014) 37

38 Admissibility Admissibility and authentication of text messages has not been addressed as extensively in civil cases Same rules of evidence apply Text messages are more likely to be admissible when: Forensic expert attests to their authenticity Witness authenticates and reads a text message into the record Non-witness evidence supports authenticity 38

39 Best Practices Consider internal policies for EC for negotiations Reduce usage of riskier communication methods Use disclaimers This communication is not intended to form any binding contract. Any binding contract must be signed with original ink and in writing Identify individuals with contracting authority Train employees 39

40 Food for Thought As technology continue to develops, what other issues are on the horizon? Can enforceable agreements be made using technologies that purport to erase users messages? Snapchat Kik Cyber Dust 40

41 Food for Thought Amazon s Dash Button A button placed on an item in your home (i.e. a washing machine) One-touch re-orders the specified item Twitter s Buy Button Merchants advertise in a twitter user s feed User s may purchase items with one click on a buy button that appears within the tweet itself 41

42 Closing Thoughts Technology advances often surpass the law General contracting principle will still apply to EC EC usage is critical to efficiency EC should be balanced with safeguards Ex., Training, compliance audits 42

43 Questions? Alan G. Fishel, Esq. Arent Fox 1717 K Street, NW Washington, DC Tel: (202) Alan.fishel@arentfox.com Jon L. Farnsworth, Esq. Felhaber Larson 220 South Sixth Street, Suite 2200 Minneapolis, MN Tel: (612) jfarnsworth@felhaber.com