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See How the Gates Divorce is All About Contract Law

"Bill Gates - World Economic Forum Annual Meeting 2011" by World Economic Forum is licensed under CC BY-NC-SA 2.0

Scandalous allegations about Bill Gates have broken out since the news of his separation and divorce from wife of 27 years Melinda Gates has arisen. Among the allegations are that he vacationed with ex Ann Winblad every year and had a number of meetings with convicted sex trafficker Jeffrey Epstein. Additionally, there was an allegation that he had at least one confirmed affair with a Microsoft employee and allegedly may have asked out or dated others. It could be disastrous for Melinda is she was the source of the allegations given a settlement agreement that likely has a confidentiality clause. Experts state this is highly unlikely, though the terms of the settlement agreement are secret.

A likely provision of the settlement agreement is that Melinda not speak with the media or publish anything (whether via any social media, article, book, even fictional) that relates not only the terms and provisions of their agreement but also their personal lives. There might be written into the agreement a liquidated damage clause or some other financial penalty should Melinda violate such a provision. Funds or assets held in escrow might be imperiled or there might be some other reduction in contemplated payments over time. There would most likely be a caveat/exception which would allow her to speak in the event that some governmental agency required it or if she was subpoenaed – but with Epstein’s death, that is probably unlikely.

Settlement agreements are a type of contract, and contract law applies to the interpretation of a document like this.

What is a liquidated damages clause, for example? A liquidated damages clause is a means of ensuring that a party is compensated if the other party fails to do some contracted for act. The liquidated damages clause sets out a specific amount of damages the aggrieved party will receive if a specific type of breach occurs. This amount needs to be negotiated with the contracted party, but it should represent an estimate of the damages the offending party will sustain if they do not perform as negotiated. This specificity is needed to prevent the case from going to court and having a judge determine the amount of money owed by the other party, which can be costly for both parties.

A liquidated damages clause is not automatically enforceable. In California, it is possible to enforce a liquidated damages clause. The amount agreed to at the time the parties sign the contract must be a reasonable estimate of losses that may be suffered should the offending party fail to perform. If the aggrieved party insists on an amount that aims to punish the other party for falling short of the contracted for provision, the clause will be considered a penalty and unenforceable.

There are some factors to consider in deciding whether a liquidated damages clause is enforceable:

· Did the legal team of the other party participate in the drafting of the contract?

· Is the liquidated damages clause clear in the contract?

· Is the amount the aggrieved party is asking for reasonable given how much the prospective damage may cost you?

· How hard would it be to prove that the other party breached the contract?

Regarding Bill and Melinda Gates, it is hard to balance the factors since the settlement agreement is secret. What is clear is that the parties negotiated the agreement at arms-length. What will be interesting to see is if the Bill Gates camp can prove Melinda was behind the stories. That would be a game changer.

If you would like help in crafting an enforceable settlement agreement, schedule a free initial consultation with the Law Offices of Jane Migachyov NOW.


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