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An Eighth Circuit decision of yesterday reminds us of a harsh reality of busi­ness:  Absent an enforceable non-competition covenant, one of your suppliers might decide to cut out the mid­dle­man, i.e., you, and begin selling directly to your customers.

That’s what happened to a vendor of specialty envelopes:  The vendor’s sup­plier, a manufacturer of envelopes, terminated its relationship with the vendor and began selling directly to the vendor’s customers — and successfully poached two of the manufacturer’s large customers. See Tension Envelope Corp. v. JBM Envelope Co., No. 14-567 (W.D. Mo. Mar. 3, 2015), affirmed, No. 16-3728 (8th Cir. Dec. 8, 2017).

The vendor that lost its customers to its manufacturer seems to have been the trusting sort:  The manufacturer: (i) had been founded by one of the vendor’s own former employees; and (ii) had leased two specialty machines from the vendor. Worse, the vendor seems never to have entered into any kind of written contract with the manufacturer.

Anyway: The vendor sued its former manufacturer for poaching its customers, but to no avail — in part because the vendor had never insisted that its former manufacturer sign a contract with an enforceable non-compete provision.

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Email styles: An interesting Hacker News discussion

This Hacker News discussion provides lots of in-the-trenches wisdom about how to write more-effective emails.  (Hacker News is probably the premier discussion site for techies.)

Here are some of the more-interesting takeaways, interspersed with some of my own practices:

1. BLUF: Bottom Line Up Front (from the military) — this might include saying in the first paragraph, e.g., “JANE, please see the request in #5 below.”

2. Short paragraphs.

3. Numbered paragraphs for longer emails, so as to signal changes of topic.

But keep the paragraphs short — use unnumbered continuation paragraphs if necessary.

4. REQUEST: For key paragraphs, use the first word in all-caps as a signal, e.g., RECOMMENDATION; REQUEST (as in this paragraph).

5. All-caps the names of people who should pay particular attention, e.g., JANE in #1 above.  (Or, use @Jane.)

6. Be careful about wording, so as not to appear curt or harsh.

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Street view of Taco del Sol from Google MapsIn the news:

  • The landlord of a commercial property in Bozeman, Montana received complaints about the noise and aromas emanating from a Taco del Sol restaurant operated by a tenant.
  • The landlord, purporting to act under its contractual right to make rea­son­able rules, asked the restaurant to stop playing music; to install felt on its chair legs; and to install a new ventilation system.
  • The restaurant installed felt on the chair legs but declined to stop playing music. The restaurant also bought equipment to reroute its existing ventilation system, but the landlord prevented its installation.
  • The landlord sent the restaurant a notice of breach and of the landlord’s intent to terminate the lease if the tenant did not take all the measures demanded by the landlord within 30 days.
  • Shortly after the 30-day cure period expired, the restaurant sued the landlord for a de­clar­a­tory judgment (1) that its conduct was not a breach, and (2) that the land­lord had anticipatorily breached the lease agreement by sending the notice of default. (The tenant also moved out, possibly to this location.)

The trial court held in favor of the restaurant and awarded damages. This week, the state supreme court affirmed. See Bridger del Sol, Inc. v. VincentView, LLC, 2017 MT 293 (Nov. 28, 2017).

For another “own goal” tale in the same vein, see the Common Draft annotation on termination.

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One wonders whether American Airlines used an outside contractor to develop the scheduling software that is allowing too many pilots to take vacation over the holiday season. If so, then both that contractor and American are probably taking a careful look at the limitation-of-liability provision(s) in the contract and/or in the statement of work.  See Oops: American Airlines Accidentally Let Too Many Pilots Take Off The Holidays, NPR.org, Nov. 29, 2017. (See also the risk-by-risk post linked below.)

UPDATE: CNN is reporting that the cost to American Airlines could be in the range of $10 million, according to a JPMorgan estimate.

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Tim Cummins, CEO of the International Association for Contract and Com­mer­cial Management, writes that “Contract success is directly impacted by the motiv­ation of the parties. Research increasingly shows that traditional forms of contract are demotivating and therefore can be directly responsible for under-performance. The way that terms are expressed, the extent to which they mandate specific actions and the degree to which they provide a relational structure are of particular importance.” (IACCM.org Nov. 27, 2017; emphasis added.) Tim cites academic research indicating that:

… [S]ubtle reductions in the specificity of a contract’s language can boost autonomy, which increases intrinsic motivation and improves a range of desirable behaviors.

Nine field and laboratory experiments found that less specific contracts increased task persistence, creativity, and cooperation, both immediately and longitudinally, because they boosted autonomy and intrinsic motivation.

These positive effects, however, only occurred when contracts provided sufficient structure. …

Eileen Y. Chou, Nir Galinsky, Adam D. Halevy, and J. Keith Murnighan, The Goldilocks contract: The synergistic benefits of combining structure and autonomy for persistence, creativity, and cooperation, Journal of Personality and Social Psychology, 113(3), 393-412 (2017) (paywalled; emphasis added).

DCT comment:  I bought and read the Chou et al. “Goldilocks contract” paper; their hypothesis is intriguing and seems right, but their evidentiary support needs more work.

Still, I’m going to look for opportunities to soften imperious-sounding provisions in my contracts, along the same lines as my preference for using will instead of shall or must (for example, “Alice will pay Bob $100” instead of “Alice shall pay Bob $100”), for reasons explained in this post.

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On Contracts is Stephen Fry proof thanks to caching by WP Super Cache