In representing tech suppliers, service providers and developers, we often come across “time is of the essence” clauses in customer contracts that purport to apply to some or all obligations of the agreement. An example is, “Time is of the essence with respect to Developer’s compliance with all deliverable milestones.”
It’s tempting to ignore such clauses, in favor of “picking your battles” and focusing on clauses of more obvious import like the liability caps. But that could be a mistake. The point of a “time is of the essence” clause is to allow the customer to claim a right of termination, or even rescission, of the agreement if the vendor is merely an hour late in delivery.
As a general matter of contract law, failure to meet a deadline is not grounds for discharge of the other party’s duties, although such failure may give rise to claim of damages to compensate for the delay. A time of the essence clause is an attempt to change that dynamic; to enhance leverage in the case of delays, via a rescission threat. Can it work? Possibly.
Strategies for dealing with essence clause negotiations and related work product available here.
The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
The Software Freedom Conservancy Inc. has sued Vizio, Inc., a manufacturer of televisions with computing capabilities, in California state court. The SFC has accused Vizio of distributing software derived from code licensed under the General Public License v2, without complying with the copyleft obligations of that license.
Intriguingly, SFC is asserting a breach of contract claim, not a copyright infringement claim. SFC does not own the copyright to the Linux kernel, the open source software at issue in this case.
So how can SFC accuse Vizio of breaching a contract it never had with Vizio?
As a consumer of the Vizio product, SFC maintains that it is an intended third-party beneficiary of the GPL “contract” between the copyright owners of the Linux kernel, on the one hand, and those who take, copy and distribute code derived from it, on the other (ie Vizio). As an intended third party beneficiary, SFC is entitled to enforce the contract as if it is a direct party.
The remedy that SFC is seeking? Specific performance of the obligation to release the “full source code corresponding to the executable code resident on Vizio’s devices covered by the GPL agreements.”
Specific performance of the source code disclosure obligation is the holy grail of the FOSS movement, and now there’s a plausible path towards it.
That’s the sound of distant thunder.
Needless to say, if SFC is successful here, and consumers have standing to enforce copyleft open source licenses—and compel the production of source code of derivative works—the consequences will be non-trivial.
Described as the “fourth Apollo crewmember,” and credited with saving thousands of lives by improving common medical procedures like IV insertion, a checklist aims to solve one of two operational vulnerabilities humans have in tackling any decision, problem, or task: ignorance — lack of information, and ineptitude — failure to apply known information correctly or consistently. It’s not that we don’t know; it’s that we seem to lack the attention and focus to invest in marshalling what we do know, in a readily accessible form.
A simple checklist is a powerful legal knowledge management tool, and ideally suited for assisting counsel in drafting or negotiating standard categories of agreements.
Here are selected excerpts from a checklist for evaluating the other side’s confidentiality agreements (on the assumption that your client will disclose the client’s valuable and proprietary information):
Defined Purpose. If the NDA contains a defined “purpose” for the CI exchange, is the purpose used in order to restrict permitted use of CI, or is it used in order to limit the type of information that qualifies as CI (i.e., to qualify as CI, the info must be germane to the purpose)? If the latter, either pushback or ensure the client understands the risks of disclosing something that’s not deemed germane ….
Affiliates. If affiliates are not mentioned, consider including them. (Even if your client has none now, it may later.) If they are included, ensure language making the signatory responsible for affiliate breaches. In all cases, affiliates should be defined to mean those controlling, controlled by, or under common control ….
Special Restrictions. Consider including restrictions against (a) reverse engineering, (b) using CI to develop or improve any product or technology, (c) using CI to enhance a patent portfolio, or (d) using CI to assess whether patents are infringed. ….
Residuals. Consider pushing back on the clause or, failing that, adopt defensive measures to protect CI: (a) no intentional memorization; (b) no license to IP; (c) can use but not disclose; (d) limit to non-tangible information; (e) limit to technical information and not financial, business, marketing, or other information ….
Redline is a dynamic collaboration environment for a select cadre of lawyers worldwide, and a powerful knowledge management platform.Watch the trailers Lawyers with Mojo and Knowledge is Power, or go here to learn more.
The intended audience for this post is licensed and practicing lawyers, not laypersons seeking legal advice for their situation. If you are not a lawyer, hire one before using or relying on any information contained here. This post is: (1) informational only and not intended as advertising or as solicitation for legal services, (2) not intended to render legal advice to you, and (3) not a substitute for obtaining legal advice from a qualified attorney to assess your exact situation. The information here is subject to change and may not be applicable or correct in your jurisdiction. The views and opinions expressed here are Sean’s alone and do not necessarily represent the positions of Sean’s present or former employers, law firms, or clients.
Consider the following not uncommon scenario: in the payments section of the contract you are negotiating, overdue interest is charged at five percent. A higher rate is better for your client, and the client wants ten percent, so you redline accordingly. Client ultimately concedes and is willing to accept five. However, the draft from opposing counsel contains the following text:
Overdue interest is chargeable at the rate of five percent (10%).
The number in parentheses erroneously remains at 10. If anything, the discrepancy favors your client, since it leaves open the possibility to argue for application of the 10%.
Do you leave it alone and remain silent?
What if the applicable contractual rule of construction favors the text over the numbers, or the numbers over the text?
Does the answer change depending on the monetary significance of the ambiguity, or the impact on one or both of the parties?
Redline is a dynamic collaboration environment for a select cadre of lawyers worldwide, and a powerful knowledge management platform.Watch the trailer Lawyers with Mojo or click here to learn more.
Redline is powerful knowledge management. Private guilds enable solos and institutions alike to develop libraries of go-to clauses and forms—and their redlined variations derived from experience and collaboration.
