Say what you mean and mean what you say: A review of boilerplate contract provisions. Presented at the Association for Corporate Counsel.

1. Review of Boilerplate Contract Provisions:
Say What You Mean and Mean
What You Say
presented by:
Chris Hanslik
BoyarMiller
832.615.4212
chanslik@boyarmiller.com
ACC Houston Chapter June 2012

2. Overview
 Forum Selection Clauses
 Venue Selection Clauses
 Choice of Law Provisions
 Jury Waivers
 Disclaimer of Reliance Provisions
 Damage Limitation Provisions
 Arbitration Clauses

3. 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.

4. 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)

5. 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.

6. 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.

7. 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 . . .”

8. 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.

9. 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)

10. 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)

11. 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.

12. 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.

13. 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)

14. 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)

15. Questions?
Chris Hanslik
BoyarMiller
832.615.4212
chanslik@boyarmiller.com