[HCoop-Discuss] Insurance term

[Sidney Fong]

> 1. There is a threshold question as to whether the term has been waived
> by Peer1.   I think the fact that they admit that they have never asked
> for proof of insurance even though the term expressly says that they
> require it makes it obvious that they have waived this term, and so it
> is effectively void.  That's just my second-year-of-law-school opinion,
> for what it's worth.  Frank could weigh in with his
> second-year-of-law-school opinion too, perhaps he has had more than two
> semesters of contract law.

Upon my reading of clause 19, it seems that it contains are _two_
terms, the first is that the client must buy insurance, and the second
is that the client will provide proof of such insurance on request. I
think even if Woody's assertion is construed to be a waiver, it is
possible that he would be deemed to have simply waived the second
term, but the first term would still be effective and enforceable.

Woody says they have never requested proof of insurance, but that does
not necessarily mean that they do not (intend to) require clients to
buy insurance. Actually, I'm not totally sure whether saying "we've
never requested proof for the past 5 years" is a waiver, since failure
to exercise a contractual right probably doesn't constitute a wavier.
And also see 11.8.

There may also be a parole evidence rule problem.

Regarding your point 2A, I think the term is not so fundamentally
important that it is a condition to the contract, so a breach on our
part would not allow them to breach the contract.

Of course, I agree that this is a problem only if something really bad
happens with Peer1, and we probably should go ahead.

Note: I'm currently an undergraduate law student (faring poorly to say
the least :-/ ). I'm living in Hong Kong, and we largely follow
English law, so the above may or may not apply.

On 11/10/06, Nathan Kennedy <ntk at hcoop.net> wrote:
> I got this response from Woody:
> > No. 19- comes up all the time. I have been with P1 for almost 5 years now
> > and we have never requested proof of insurance. We do not change our
> > Terms
> > but rest assured that we have never asked for proof.
> Basically it sounds like they are either using a form contract and they
> are minimizing their legal expenses or their lawyers are being
> assholes.  If we were a bigger client then we could probably negotiate
> this term out, but since we are small and the facility is filling up, it
> wouldn't be worth their while to even ask a lawyer about it.  They are
> offering the terms as is.
>
> So at this point, we are stuck with a liability insurance term in the
> contract that they do not enforce.  Some googling around has found this
> exact form term in a number of provider's agreements, who do not enforce
> it mostly, although *most* do the right thing and do not include this term.
>
> Backing out now would be a huge pain and would require us to start from
> scratch.  It pisses me off that we are faced with this option at this
> point in the game, and the lesson for me in the future is to ask for the
> exact terms with the quote and compare them from the outset so we can
> ask these kinds of questions during the selection phase.
>
> As to the implications of this term in the contract:
> 1. There is a threshold question as to whether the term has been waived
> by Peer1.   I think the fact that they admit that they have never asked
> for proof of insurance even though the term expressly says that they
> require it makes it obvious that they have waived this term, and so it
> is effectively void.  That's just my second-year-of-law-school opinion,
> for what it's worth.  Frank could weigh in with his
> second-year-of-law-school opinion too, perhaps he has had more than two
> semesters of contract law.
> 2. If a court determined that the term was in fact enforceable and NOT
> waived, we are in a different situation.  Obviously if all goes well it
> would make no difference since they aren't enforcing it and it would
> never end up in court anyway.  If it did, there are two scenarios.
>     A. We claim they are breaching the contract for whatever reason and
> insist on some remedy.  Their lawyers can be clever and say that we
> breached an express term of the contract first by not having insurance,
> and so they were entitled to breach.  There are additional defenses we
> could raise based on their lack of action on the breach, but if I was
> wrong about (1), this is a potential concern.
>     B. Peer1's datacenter catches fire and burns down, and they claim
> that it our fault because our equipment started the fire, and we owe
> them a million dollars.  In this case, the existence of the term makes
> no difference, because in fact we don't have any insurance, and either
> way we're pretty screwed whether it's our fault or not because our
> equipment is wasted.  If they won a lawsuit against us it could bankrupt
> the cooperative, but this is an unlikely scenario that has nothing to do
> with this contract term anyway.
>
> Under the totality of these possibilities, I think we should go ahead.
> I will read the terms over one more time carefully to make sure there's
> no other surprises first.  And I am emailing Adam about the payment
> authorization.
>
> -ntk
>
> _______________________________________________
> HCoop-Discuss mailing list
> HCoop-Discuss at hcoop.net
> http://hcoop.net/cgi-bin/mailman/listinfo/hcoop-discuss
>