Limiting Implied Duties and Terms in Commercial Contracts: Key Cases and Strategies to Minimize Risk

Description

Many legal battles revolve around contract interpretation disputes. Business, contract, intellectual property, employment, and real estate litigation often result from poor drafting. Skilled and informed contract drafting is one of the essential tools available to savvy counsel.

A fundamental principle of contract interpretation is to ascertain and give effect to the parties' objectively expressed intent. But most federal and state jurisdictions accept that a court may incorporate laws and duties as implied terms in commercial contracts, even if they are unmentioned in the agreement. This implied incorporation creates a material risk of not only unexpected costs but also "trapping parties in surprise contractual obligations that they never intended." Arcadian Phosphates Inc. v. Arcadian Corp. (2d Cir. 1989).

Counsel must consider practical strategies for limiting or negating the invisible terms implied in every contract. Parties to a commercial agreement can significantly reduce the risk of misunderstandings and costly litigation by taking the time to make sure the contract is both unambiguous and complete. And a careful analysis of judicial decisions from varying jurisdictions provides strategic insights into tailored clauses and provisions that can effectively limit implied duties and terms.

Listen as our seasoned panel of attorneys provides their perspectives on mitigating the problems associated with implied rules of law serving as traps for the unwary drafter. The panel will discuss entire agreement, incorporation and merger clauses, offer practical guidance on additional enforceable provisions to exclude implied terms, duties or pre-contractual representations effectively, examine the UCC and Restatement (Second) of Contracts approaches, and highlight recent cases interpreting these provisions.