U.S. Court of Appeals Issues Opinion on Contract to Locate Venture Capital

Recently, the U.S. Court of Appeals (10th Cir) examined a case relating to a contract to pay commissions for locating investors that would provide venture capital to a technology company. In Fonix v. Perpetual Growth Fund Advisors, the Court of Appeals issued an "Order and Judgment" that the agreement was ambiguous as to whether "trailing fees", commissions on any future investment made by an investor located by the principal of Perpetual Growth, would be paid. Having found that the extrinsic evidence presented by the parties failed to clarify the terms of the agreement, the Court of Appeals affirmed the decision of the District Court and resolved the ambiguity against the drafter of the contract, Perpetual Growth. As a result, Fonix was not was required to pay "trailing fees". The court's judgement in this case emphasized the value of clarity when it comes to drafting agreements. To view a copy of the case, visit: http://pacer.ca10.uscourts.gov/cgi-bin/getopn.pl?OPINION=01-4051.wpd