ContractsProf Blog

Call for Proposals

Call for Proposals

AALS Section on Contracts

New Approaches to Teaching Contracts: A “Teach-In”

2010 AALS Annual Meeting, New Orleans, Louisiana

The Section on Contracts solicits proposals for its Annual Meeting program, New Approaches to Teaching Contracts: A “Teach-In,” scheduled for Friday, January 8, 2010, at 10:30 a.m., and for a planned print symposium to follow.

The Topic: Responding to profound changes in the practice of law and in our larger culture, many Contracts professors strive to update their methods and materials.  In the spirit of the Annual Meeting’s transformative theme, our program will explore a variety of new approaches that contracts professors have begun to introduce in the classroom and in teaching materials to address both changes in the structure of practice that require new lawyers to hit the ground running and ways that wired students synthesize material and acquire skills.  We hope that the program, as a whole, will motivate experienced contracts professors to de-laminate their notes and inspire newer professors to move beyond their own professors in developing new ways to convey the beauty, complexity, and occasional imperfections of contract law.

The Program: The roundtable discussion will feature professors demonstrating a variety of pedagogical approaches.  Invited presenters include: Douglas Baird (Chicago), on the Langdellian method centering on classic cases; Scott Burhnam (Montana), on using drafting exercises to develop both skills and doctrinal understanding; Carol Chomsky (Minnesota) or Christina Kunz (William Mitchell), on their contribution to West’s Interactive Casebook Series, Contracts: A Contemporary Approach (West forthcoming 2009); and Emily Kadens (Texas) on adapting the problem-based method more commonly used in upper-level commercial law courses to the first-year Contracts course.  We seek two more presenters on innovative approaches to teaching Contracts.  Presentations should demonstrate (rather than merely describe) teaching methods, perhaps distributing or illustrating any relevant materials through PowerPoint or other means.  Each presentation should last 10-15 minutes, though we realize it will likely be taken from a larger work or set of materials.

The Symposium: We are working to identify a journal that will provide the best outlet in which to publish papers from our presenters, as well as additional contributions from those who respond to this call for proposals.  We have begun discussions with the Journal of Legal Education and welcome your suggestions about other venues for the print symposium.

How to Submit a Proposal: Please submit a title, brief description, and any supporting materials no later than SEPTEMBER 1, 2009 to the Planning Subcommittee: Martha Ertman (Maryland), Lisa Bernstein (Chicago), and Keith Rowley (UNLV).  Please direct your submission to all three of our email addresses: mertman@law.umaryland.edu, lbernst621@aol.com, and keith.rowley@unlv.edu, respectively.  We will select two proposals for the Annual Meeting program from those submitted and notify their authors by October 1, 2009.  Once we secure a publication commitment, we will begin contacting additional proposal authors to discuss contributing to the print symposium.

[Keith A. Rowley]

Now in Print

J. Edward Allen, Comment, Insurance Carriers v. Construction Industry: A Texas-sized Showdown to Come? A Closer Look at the Implications of Lamar Homes, 50 S. Tex. L. Rev. 505 (2009).

Oren Bar-Gill & Omri Ben-Shahar, An Information Theory of Willful Breach, 107 Mich. L. Rev. 1479 (2009).

Omri Ben-Shahar & Ariel Porat, Fault in American Contract Law, 107 Mich. L. Rev. 1341 (2009).

Phillip M. Brick, Jr., Casenote, Agree to Disagree: The Inequity of Arkansas's Tacit-Agreement Test as Seen in Deck House, Inc. v. Link, 62 Ark. L. Rev. 361 (2009).

George M. Cohen, The Fault That Lies Within Our Contract Law, 107 Mich. L. Rev. 1445 (2009).

Teresa Stanton Collett, Whose Life is it Anyway?: Texas Public Policy and Contracts to Kill Embryonic Children, 50 S. Tex. L. Rev. 371 (2009).

Richard Craswell,When Is a Willful Breach “Willful”? The Link Between Definitions and Damages, 107 Mich. L. Rev. 1501 (2009).

Melvin Aron Eisenberg, The Role of Fault in Contract Law: Unconscionability, Unexpected Circumstances, Interpretation, Mistake, and Nonperformance, 107 Mich. L. Rev. 1413 (2009).

Richard A. Epstein, The Many Faces of Fault in Contract Law: Or How to Do Economics Right, Without Really Trying, 107 Mich. L. Rev. 1461 (2009).

Stefan Grundmann, The Fault Principle as the Chameleon of Contract Law: A Market Function Approach, 107 Mich. L. Rev. 1583 (2009).

Adam Kramer, The New Test of Remoteness in Contract, 125 L.Q. Rev. 408 (2009).

Roy Kreitner, Fault at the Contract-Tort Interface, 107 Mich. L. Rev. 1533 (2009).

Saul Levmore, Stipulated Damages, Super-Strict Liability, and Mitigation in Contract Law, 107 Mich. L. Rev. 1365 (2009).

Louise Merrett, Costs as Damages, 125 L.Q. Rev. 468 (2009).

Geoffrey P. Miller & Theodore Eisenberg, The Market for Contracts, 30 Cardozo L. Rev. 2071 (2009).

Ariel Porat, A Comparative Fault Defense in Contract Law, 107 Mich. L. Rev. 1397 (2009).

Eric A. Posner, Fault in Contract Law, 107 Mich. L. Rev. 1431 (2009).

Richard A. Posner, Let Us Never Blame a Contract Breaker, 107 Mich. L. Rev. 1349 (2009).

Ingeborg Schwenzer, Force Majeure and Hardship in International Sales Contracts, 39 Victoria U. Wellington L. Rev. 709 (2009).

Robert E. Scott, In (Partial) Defense of Strict Liability in Contract, 107 Mich. L. Rev. 1381 (2009).

Steven Shavell, Why Breach of Contract May Not Be Immoral Given the Incompleteness of Contracts, 107 Mich. L. Rev. 1569 (2009).

Seana Shiffrin, Could Breach of Contract Be Immoral?, 107 Mich. L. Rev. 1551 (2009).

Ian Shrank & Samuel Yin, Liquidated Damages in Commercial Leases of Personalty -- The Proper Analysis, 64 Bus. Law. 757 (2009).

Steve Thel & Peter Siegelman, Willfulness Versus Expectation: A Promisor-Based Defense of Willful Breach Doctrine, 107 Mich. L. Rev. 1517 (2009).

N.B.: The numerous Michigan Law Review articles emanated from the Fault in Contract Law symposium, which the University of Chicago Law School hosted, and its John M. Olin Program in Law and Economics and the Michigan Law Review co-sponsored, last fall.  Copies of all of the symposium articles are available, in .pdf format, at http://www.michiganlawreview.org/index-mlr.htm.

[Keith A. Rowley]

Mid-Year Legislative Update

With most state legislatures having concluded their business for the year, here is the 2009 mid-year legislative update.

Revised Article 1

As of January 1, 2009, Revised Article 1 was in effect in thirty-four states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, and West Virginia.

Notwithstanding my suggestion elsewhere that the substitute § R1-301 NCCUSL and the ALI promulgated last year might “grease the skids” for additional enactments this year, 2009 has turned out to be a relatively quiet legislative year for Revised Article 1, with only three enactments -- down from five in 2008, and seven in 2007. While the most noteworthy nonuniformity among the thirty-seven enactments remains the definition of “good faith” -- with 26 states having adopted the uniform § R1-201(b)(20) definition and 11 having retained the pre-revised definition that imposes a different good faith standard on merchants and non-merchants -- all three 2009 enactments adopt the uniform definition and one of the eleven states (Indiana) that retained the pre-revised definition has amended its version of Revised Article 1 to adopt the uniform definition effective July 1, 2010.

As of June 30, Alaska (HB 102), Maine (LD 1403), and Oregon (SB 558) have enacted Revised Article 1 thus far this year. The Alaska and Oregon enactments take effect on January 1, 2010, with Maine’s following on February 15, 2010.

The Washington legislature failed to act on SB 5155 before adjourning sine die on April 26. (That’s probably just as well, because the introduced version of SB 5155 appeared to be drawn directly from the language of official Revised Article 1 circa 2001 and included the no-longer-official version of Revised 1-301 that all 37 enacting states have declined to adopt).

It is possible that the Massachusetts legislature will consider a Revised Article 1 bill sometime this year; however, having waited months for HD 89 to be assigned a bill number, and given the failure of four prior bills to garner a floor vote in either chamber, I would be surprised to see definitive action anytime soon.

Article 2 and 2A Amendments

As of June 30, 2009, only three state legislatures (Kansas, Nevada, and Oklahoma) had considered bills proposing to enact the 2003 amendments to UCC Articles 2 and 2A. In 2005, Oklahoma amended Sections 2-105 and 2A-103 of its Commercial Code to add that the definition of “goods” for purposes of Articles 2 and 2A, respectively, “does not include information,” see 12A Okla. Stat. Ann. §§ 2-105(1) & 2A-103(1)(h) (West Supp. 2008), and amended its Section 2-106 to add that “contract for sale” for purposes of Article 2 “does not include a license of information,” see id. § 2-106(1). The net effect is similar to having enacted Amended §§ 2-103(k) & 2A-103(1)(n), both of which exclude information from the meaning of “goods” for purposes of Article 2 and 2A, respectively. Otherwise, no state has enacted the 2003 amendments.

Article 3 and 4 Amendments

As of January 1, 2009, the 2002 amendments to Articles 3 and 4 were in effect in six states: Arkansas, Kentucky, Minnesota, Nevada, South Carolina, and Texas. By July 1, 2010, that number will increase by at least 50%.

As of June 30, 2009, Indiana (SB 501), New Mexico (SB 74), and Oklahoma (SB 991) have enacted the 2002 amendments to Articles 3 and 4. Oklahoma SB 991 will take effect on November 1, 2009; New Mexico SB 74 will take effect on January 1, 2010; and Indiana SB 501 will take effect on July 1, 2010.

In addition to enacting the 2002 amendments to Articles 3 and 4 and the usual conforming amendments, Indiana SB 501 also revises the definition of “good faith” in Ind. Code § 26-1-1-201(19) to require all parties to act honestly and to observe reasonable commercial standards of fair dealing. At present, Ind. Code § 26-1-1-201(19) requires only “honesty in fact.” Like the rest of SB 501, this change will take effect July 1, 2010, and further tip the balance among enacting states in favor of the unitary good faith definition in uniform § R1-201(b)(20).

Revised Article 7

As of January 1, 2009, Revised UCC Article 7 was in effect in thirty-one states: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maryland, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Texas, Utah, Virginia, and West Virginia. As of July 1, Revised Article 7 will be in effect in South Dakota, as well.

This has been a relatively active legislative year for Revised Article 7. In addition to South Dakota SB 89, which takes effect on July 1, Alaska (HB 102), Maine (LD 1405), and Oregon (SB 558) have already enacted Revised Article 7 in 2009, and Louisiana HB 403 lacks only Governor Bobby Jindal's signature (or pocket veto). Alaska HB 102 and Oregon SB 558 will take effect on January 1, 2010, as will Louisiana HB 403 (if enacted). Maine LD 1405 will take effect on February 15, 2010.

Georgia HB 451 made significant progress toward adoption. First introduced on February 18, the Georgia House unanimously passed the House Judiciary Committee’s substitute version on March 12, and the Senate Judiciary Committee recommended passage on March 26. However, the legislature adjourned on April 3 without a third reading and final action in the senate.

Washington SB 5154 stalled, like its Revised Article 1 counterpart, but without as compelling a reason.

UETA

Although the Georgia legislature did not pass HB 451 prior to adjourning, it did pass the Uniform Electronic Transactions Act (HB 126), to which Governor Sonny Perdue affixed his signature on May 5. As a result, effective July 1, 2009, Illinois, New York, and Washington will be the only states in which UETA is not in effect.

[Keith A. Rowley]

The Coen Brothers on Studio Contracts

I recently watched Barton Fink for the first time in more than a decade and the following scene reminded me of casebook staple Locke v. Warner Brothers, Inc., 66 Cal. Rptr. 2d 921 (Cal. Ct. App. 1997), in which the plaintiff alleged that the studio resolved not to develop any movie idea she pitched and not to hire her to direct any movie during the term of their three-year "non-exclusive first look" development and "play or pay" directorial agreement.

Lipnik: ... I had Lou read your script for me. I gotta tell you, Fink. It won't wash.

Fink: With all due respect, sir, I think it's the best work I've done.

Lipnik: Don't gas me, Fink. If you're opinion mattered, then I guess I'd resign and let you run the studio. It doesn't and you won't, and the lunatics are not going to run this particular asylum....

Fink: Yes, sir.

....

Lipnik: Hell, I could take you through it step by step, explain why your story stinks, but I won't insult your intelligence.  Well, all right.  First of all, this is a wrestling picture; the audience wants to see action, drama, wrestling, and plenty of it.  They don't wanna see a guy wrestling with his soul -- well, all right, a little bit, for the critics -- but you make it the carrot that wags the dog.  Too much of it and they head for exits and I don't blame 'em.  There's plenty of poetry right inside that ring, Fink.  Look at Hell Ten Feet Square....  Look at Blood, Sweat, and Canvas.  These are big movies, Fink, about big men, in tights -- both physically and mentally -- but especially physically....

Fink: I'm sorry if I let you down.

Lipnik: You didn't let me down....  You let Ben Geisler down.  He liked you.  Trusted you.  And that's why he's gone.  Fired.  That guy had a heart as big as the outdoors, and you f*cked him.  He tried to convince me to fire you too, but that would be too easy.  No, you're under contract and you're gonna stay that way.  Anything you write will be the property of Capitol Pictures; and Capitol Pictures will not produce anything you write....

[Keith A. Rowley]

Now in Print

Rachel S. Arnow-Richman, Employment as Transaction, 39 Seton Hall L. Rev. 447(2009).

Allen Blair, A Matter of Trust: Should No-Reliance Clauses Bar Claims for Fraudulent Inducement of Contract?, 92 Marq. L. Rev. 423 (2009).

Ian Brereton, Note, The Beginning of a New Age?: The Unconscionability of the "360-degree" Deal, 27 Cardozo Arts & Ent. L.J. 167 (2009).

Curtis Bridgeman & Karen Sandrik, Bullshit Promises, 76 Tenn. L. Rev. 379 (2009).

David Cabrelli, The Effect of Past and Subsisting Breaches on Contractual Rights, 13 Edinburgh L. Rev. 290 (2009).

Jillian R. Camarote, Comment, A Little More Contract Law with my Contract Please: The Need to Apply Unconscionability Directly to Choice-of-Law Clauses, 39 Seton Hall L. Rev. 605 (2009).

J.W. Carter, Exclusion of Liability for Consequential Loss, 25 J. Contract L. 118 (2009).

David Cheng, Interpretation of Material Adverse Change Clauses in an Adverse Economy, 2009 Colum. Bus. L. Rev. 564.

Michael Furmston, Letters of Intent and Other Preliminary Agreements, 25 J. Contract L. 95 (2009).

Lauren Gaffney, Note, The Circle of Assent: How "Agreement" Can Save Mandatory Arbitration in Long-Term Care Contracts, 62 Vand. L. Rev. 1017 (2009).

Justin Gleeson & Nicholas Owens, Dissolving Fictions: What to Do with the Implied Indemnity?, 25 J. Contract L. 135 (2009).

Claire A. Hill, Bargaining in the Shadow of a Lawsuit: A Social Norms Theory of Incomplete Contracts, 34 Del. J. Corp. L. 191 (2009).

Martin Hogg, The Continuing Confused Saga of Contract and Error, 13 Edinburgh L. Rev. 286 (2009).

David Horton, Unconscionability in the Law of Trusts, 84 Notre Dame L. Rev. 1675 (2009).

Christina L. Kunz, The Definitional Hub of E-Commerce: "Record," 45 Idaho L. Rev. 399 (2009).

Christine Liyanto, Note, The Discrete, the Relational, the Selfish, and the Societal: Elements Present in All Transactions, 4 Hastings Bus. L.J. 315 (2008).

Charles E. Rounds, Jr., The Common Law is Not Just About Contracts: How Legal Education has been Short-Changing Feminism, 43 U. Rich. L. Rev. 1185 (2009).

B. Soyer, Warranties in Commercial Insurance Contracts -- Is the Time Ripe for a Reconsideration of Their Contractual Status?, 25 J. Contract L. 168 (2009).

Benjamin Taibleson, Note, Forgiving Breach: Understanding the Preference for Damages Over Specific Performance, 27 QLR 541 (2009).

David F. Tavella, Are Insurance Policies Still Contracts?, 42 Creighton L. Rev. 157 (2009).

Bret Walker, The Fourth Category of Masters v. Cameron, 25 J. Contract L. 108 (2009).

Jovita T. Wang, Article 14 of China's New Labor Contract Law: Using Open-Term Contracts to Appropriately Balance Worker Protection and Employer Flexibility, 18 Pac. Rim L. & Pol'y J. 431 (2009).

Emma Wilson, Comment, Douglas v. Talk America: Making the Case for Proper Notice, 45 Idaho L. Rev. 479 (2009).

Jeremy L. Zell, Discerning the Validity of Arbitration Agreements Containing Heightened Judicial Review Clauses After Hall Street Associates, L.L.C. v. Mattel, Inc., 40 Loy. U. Chi. L.J. 959 (2009).

[Keith A. Rowley]

ALI Principles of the Law of Software Contracts

Speaking of the recently-approved Principles of the Law of Software Contracts (the subject of our sister section's call for proposals below), here's an overview and remarks from Reporter Bob Hillman for the benefit of those who have not already read them on Concurring Opinions:

Maureen O’Rourke, the Associate Reporter on the Principles of the Law of Software Contracts, and I are posting the following to acquaint readers with the Principles and also to respond to some criticism of one section of the Principles that creates, under certain circumstances, an implied warranty of no known material hidden defects in the software.

On May 19, the membership of the American Law Institute unanimously approved the final draft of the Principles of the Law of Software Contracts. As the Introduction to the project states, the Principles “seek to clarify and unify the law of software transactions.” The Principles address issues including contract formation, the relationship between federal intellectual property law and private contracts governed by state law, the enforcement of contract terms governing quality and remedies, the meaning of breach, indemnification against infringement, automated disablement, and contract interpretation.

The Introduction to the Principles explains further that “[b]ecause of its burgeoning importance, perhaps no other commercial subject matter is in greater need of harmonization and clarification. . . . [T]he law governing the transfer of hard goods is inadequate to govern software transactions because, unlike hard goods, software is characterized by novel speed, copying, and storage capabilities, and new inspection, monitoring, and quality challenges.” Many of the rules of Article 2 of the UCC therefore apply poorly to software transactions or not at all, and the Principles are intended to fill the void.

The Principles are not “law,” of course, unless a court adopts a provision. Courts can also apply the Principles as a “gloss” on the common law, UCC Article 2, or other statutes. Nor do the Principles attempt to set forth the law for all aspects of a transaction, but instead rely on sources external to the Principles in many areas.

The Principles apply to agreements for the transfer of software or access to software for a consideration, i.e., software contracts. These include licenses, sales, leases, and access agreements. The project does not apply to the exchange of digital media or digital databases. It applies a predominant purpose test to determine applicability to transactions involving embedded software or software combined in one transfer with digital media, digital databases, and/or services.

We are the Reporter and Associate Reporter of the software principles. We have been greatly aided by our advisors, consultative group members, ALI Council members, liaisons from the National Commissioners on Uniform State Law, Business Software Alliance, and the American Bar Association, and many additional lawyers from industry and other groups who, over the last five and one-half years, have met with us, talked with us on the phone, and exchanged e-mails with us. We believe the project moved along smoothly largely because of the efforts of all of these groups and individuals.

Nevertheless, in the two weeks leading up to approval in May, we received communications from a few software providers evidencing concern largely with one section of the Principles. Section 3.05(b) creates a non-excludable implied warranty that the software “contains no material hidden defects of which the transferor was aware at the time of the transfer.” The section only applies if the transferor receives “money or a right to payment of a monetary obligation in exchange for the software.” Because the section may be the most controversial provision, we devote the rest of this post to the issue.

Despite concerns that section 3.05(b) creates “new law,” it simply memorializes contract law’s disclosure duties and tort’s fraudulent concealment law. The section makes clear that these rules apply to software transfers in order to allocate the risk to the party best able to accommodate or avoid the costs of materially defective software. Obviously this is the transferor in situations where only it knows of the material defect and the transferee cannot protect itself. The section requires that the transferor knows of the defect at the time of the transfer (negligence in not knowing is not enough to trigger liability), the defect is material, and it is hidden.

A few software providers have concerns that the concepts of “hidden,” and “material defect” are obtuse and will “increase litigation” or require a flood of “detailed notices” to prospective users. These concepts, however, are hardly unknown to the law. A comment to section 3.05(b) says that a “hidden” defect occurs if the “defect would not surface upon any testing that was or should have been performed by the transferee.” This is nothing new. See, e.g., UCC 2-316(3)(b) (”there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to [the buyer]“).

A few software providers also worry about the meaning of “material defect.” The comments to section 3.05(b) point out that the section simply captures the principle of material breach: Does the defect mean that the transferee will not get substantially what it bargained for and reasonably expected under the contract? The criticism that “materiality” is too vague, if accurate, would mean that contract law would have to abolish its material breach doctrine too.

Putting together the requirements of actual knowledge of the defect at the time of the transfer, that the transferee reasonably does not know of the defect, and that the defect constitutes a material breach means that a transferor would be insulated from liability in situations identified by the concerned software providers as problematic. These include where the transferor has received reports of problems but reasonably has not hadtime to investigate them, where the transferee’s problems are caused by uses of which the transferor is unaware, where the transferor learns of problems only after the transfer, and where the problems are benign or require reasonable workarounds to achieve functionality. The best example of when section 3.05(b) would apply is, as comment b to the section says, where the transferor already knows at the time of the transfer that the software will require “major workarounds . . . and cause[] long periods of downtime or never [will] achieve[] promised functionality,” the transferee cannot discover this for itself, and the transferor chooses not to disclose the defect.

As we have already said, the section simply memorializes existing law. Under the common law, a contracting party must disclose material facts if they are under the party’s control and the other party cannot reasonably be expected to learn of the facts. Failure to disclose in such circumstances may amount to a representation that the facts do not exist and may be fraudulent. See, e.g., Shapiro v. Sutherland, 76 Cal. Rptr. 2d 101, 107 (Cal. Ct. App. 1998) (”Generally, where one party to a transaction has sole knowledge or access to material facts and knows that such facts are not known or reasonably discoverable by the other party, then a duty to disclose exists.”); Hill v. Jones, 725 P.2d 1115, 1118-19 (Ariz. Ct. App. 1986) (”[U]nder certain circumstances there may be a ‘duty to speak.’ . . .  [N]ondisclosure of a fact known to one party may be equivalent to the assertion that the fact does not exist. . . . Thus, nondisclosure may be equated with and given the same legal effect as fraud and misrepresentation.”). The Restatement (Second) of Contracts section 161(b) states that “[a] person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist . . . where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.” Section 161, comment d of the Restatement (Second) adds “In many situations, if one party knows that the other is mistaken as to a basic assumption, he is expected to disclose the fact that would correct the mistake. A seller of real or personal property is, for example, ordinarily expected to disclose a known latent defect of quality or title that is of such character as would probably prevent the buyer from buying at the contract price.”

One concern of a commentator is that fraudulent concealment is a tort, implying that it has no place in the Principles. But the principle appears prominently in the Restatement (Second) of Contracts section 161. And why not memorialize a principle that discourages a party in a contract setting from hiding material facts that the other party reasonably does not know? The commentator notes that fraudulent concealment requires intent to deceive, but wouldn’t that be the usual inference if a transferor licenses software it knows is materially defective and knows the transferee cannot discover it?

A few organizations also are concerned that section 3.05(b) cannot be disclaimed. But there are plenty of cases that do not allow a party to contract away liability for concealment. One critic wonders why a statement such as “I am not giving any assurances about there being no defects in this software,” should not insulate a transferor from liability. A reasonable licensee, assuming the good faith of the licensor, would believe that this licensor does not intend to make any express warranties or implied warranties of merchantability or fitness, not that the licensor knows that the software is materially defective so that the software will be largely worthless to the licensee. A transferor playing this game is surely in bad faith and, frankly, engaging in reprehensible conduct. But there is a way to ensure no liability under this section, namely to disclose material hidden defects. In effect, disclosure is the disclaimer.

Bob Hillman and Maureen O’Rourke
June 2, 2009

The Concurring Opinions post -- which Bob asked me to re-post, with the blessings of the Concurring Opinions folks -- has provoked several comments and has been the subject of a follow-up post by David Hoffman, one of Concurring Opinions's thirteen regular contributors.  Dave's post has generated its own comments.  While we here at ContractsProf might have a vested interest in generating site traffic, it may be more efficient to funnel feedback through a single conduit.  Because Concurring Opinions got the ball rolling, feel free to comment, or to respond to existing comments, there.

[Keith A. Rowley]

Call for Proposals

Call for Proposals

AALS Section on Commercial and Related Consumer Law

 

“The Principles of the Law of Software Contracts:

A Phoenix Rising from the Ashes of Article 2B and UCITA?”

 

2010 AALS Annual Meeting, New Orleans, Louisiana

The Executive Committee of the AALS Section on Commercial and Related Consumer Law invites proposals for the Section’s 2010 AALS Annual Meeting program and a print symposium to follow on the topic “The Principles of the Law of Software Contracts: A Phoenix Rising from the Ashes of Article 2B and UCITA?”

The Topic: Contracts concerning computer software have presented difficult legal issues for many years.  Although software is often bought and sold like goods, software contracts do not fit easily into the sale of goods rubric of Uniform Commercial Code Article 2.  In the 1990s, the American Law Institute (ALI) and the National Conference of Commissioners on Uniform State Laws (NCCUSL) sought to address special issues concerning software contracts by developing a new UCC Article 2B.  This effort failed because of fundamental disagreements about the substance of important rules.  NCCUSL (now known as the Uniform Law Commission, or ULC) then carried forward the project on its own and, in 1999, promulgated the Uniform Computer Information Transactions Act (UCITA), providing a comprehensive (and controversial) set of rules for licensing computer information.  To date, only Maryland and Virginia have enacted UCITA, and the ULC has ceased promoting additional enactments.

A new software contracts project has emerged in Article 2B’s and UCITA’s wake: the Principles of the Law of Software Contracts.  On May 19, the ALI approved the Principles, which undertake to weave the currently divergent threads of law governing software contracts into a coherent whole that will guide parties in drafting, performing, and enforcing software contracts, assist courts and other arbiters in resolving disputes involving software contracts, and, perhaps, inform future legislation addressing software contracts.  Do the Principles clarify the law of software contracts?  Will they successfully unify the law of software contracts?  Are they consistent with current best practices in software contracting?  Will they encourage desirable future developments in the law and practice of software contracts?  These are among the questions we hope our program speakers and symposium contributors will address.

The Program: Principles Reporter Bob Hillman (Cornell) and Associate Reporter Maureen O’Rourke (Boston U.) will offer their unique insights on the Principles’ drafting, key substantive provisions, and their legal and practical implications.  Amy Boss (Drexel), who was intimately involved with both Article 2B and UCITA and has been an adviser on the Principles, will add her own insights about the prior efforts’ failures and the prospects for the Principles’ success.  We seek one or more additional speakers who will offer their perspectives on the Principles, the economic, historical, policy, and political forces that motivated and shaped them, and their likely impact on the law and practice of software transactions.

The Symposium: We are working to identify a law review that will provide the best outlet in the which to publish papers from our presenters as well as a number of additional papers from those who respond to this call for proposals and others from whom we are soliciting contributions.  In addition to contributions from a broader cross-section of legal scholars than we can offer the opportunity to speak at the annual meeting, we hope that the print symposium will also include articles from interested judges, practitioners, and others.  We currently anticipate that finished papers would be due in late spring or summer 2010 for publication in late 2010 or early 2011.

How to Submit a Proposal: If you would like to present or contribute, please e-mail an abstract, précis, or draft by August 29, 2009 to Professor Keith A. Rowley, Chair of the Section on Commercial and Related Consumer Law.  E-mail: keith.rowley@unlv.edu.  The Executive Committee will review all submissions and notify by October 1, 2009 those we would like to present their topics at the annual meeting and those additional authors we would like to contribute to the print symposium.

[Keith A. Rowley]

Now in Print

M. Neil Browne & Jennifer Coon, The Impact of Market Ideology on Transnational Contract Law, 30 Loy. L.A. Int’l & Comp. L. Rev. 91 (2008).

Kenneth M. Casebeer, Of Service Workers, Contracting Out, Joint Employment, Legal Consciousness, and the University of Miami, 56 Buff. L. Rev. 1059 (2008).

David R. Collins, Note, Shrinkwrap, Clickwrap, and Other Software Agreements: Litigating a Digital Pig in a Poke in West Virginia, 111 W. Va. L. Rev. 531 (2009).

Kate Galloway, Statutory Modification of Contract Law in Queensland: A New Equilibrium or Entrenching the Old Power Order?, 15 James Cook U.L. Rev. 67 (2008).

Ronald J. Gilson, Charles F. Sabel & Robert E. Scott, Contracting for Innovation: Vertical Disintegration and Interfirm Collaboration, 109 Colum. L. Rev. 431 (2009).

Andrew S. Gold, A Property Theory of Contract, 103 Nw. U. L. Rev. 1 (2009).

Haitham A. Haloush, Prescription in Arab Civil Codes and the UNIDROIT Principles of International Commercial Contracts of 2004: A Comparative Analysis, 15 James Cook U.L. Rev. 97 (2008).

George E. Henderson, A New [Article] 2 for Texas: Well-Suited or Ill-Fitting, 41 Tex. Tech L. Rev. 235 (2009).

David Horton, Flipping the Script: Contra Proferentem and Standard Form Contracts, 80 U. Colo. L. Rev. 431 (2009).

Chunlin Leonhard, Beyond the Four Corners of a Written Contract: A Global Challenge to U.S. Contract Law, 21 Pace Int'l L. Rev. 1 (2009).

Jayce R. Lesniewski, Casenote, Contracts: The War Against Words: When Contract Interpretation Impedes Judicial Goals (Lee v.Fresenius Med. Care, Inc., 741 N.W.2d 117 (Minn. 2007)), 35 Wm. Mitchell L. Rev. 627 (2009).

John D. McCamus, Mechanisms for Restricting Recovery for Emotional Distress in Contract, 42 Loy. L.A. L. Rev. 51 (2008).

Asa Markel, American, English, and Japanese Warranty Law Compared: Should the U.S. Reconsider Her Article 95 Declaration to the CISG?, 21 Pace Int'l L. Rev. 163 (2009).

Kabir Masson, Note, Paradox of Presumptions: Seller Warranties and Reliance Waivers in Commercial Contracts,109 Colum. L. Rev. 503 (2009).

Tatiana Melnik, Note, Can We Dicker Online or is Traditional Contract Formation Really Dying?: Rethinking Traditional Contract Formation for the World Wide Web, 15 Mich. Telecomm. & Tech. L. Rev. 315 (2008).

Gerald M. Moody, Jr., Writing is Reading is Writing: Two Applications of the Parol Evidence Rule to Collective Bargaining Agreements, 2009 Colum. Bus. L. Rev. 326.

Val D. Ricks, The Possibility of Plain Meaning: Wittgenstein and the Contract Precedents, 56 Clev. St. L. Rev. 767 (2008).

Caprice L. Roberts, Restitutionary Disgorgement for Opportunistic Breach of Contract and Mitigation of Damages, 42 Loy. L.A. L. Rev. 131 (2008).

Luigi Russi, Chronicles of a Failure: From a Renegotiation Clause to Arbitration of Transnational Contracts, 24 Conn. J. Int'l L. 77 (2008).

Sarah E. Smith, The United Nations Convention on the Use of Electronic Communication in International Contracts (CUECIC): Why It Should be Adopted and How It Will Affect International E-Contracting, 11 SMU Sci. & Tech. L. Rev. 133 (2007).

Andrew Tettenborn, Consequential Damages in Contract--The Poor Relation?, 42 Loy. L.A. L. Rev. 177 (2008).

Alan M. White, Behavior and Contract, 27 L. & Ineq. 135 (2009).

[Keith A. Rowley]

Plaudits for (Mostly Dead) Contracts Scholars

Also appearing recently on Brian Leiter's Law School Reports: the results of a poll of the blog's readers to name The Most Important Legal Thinkers in American Law of the Past Century.  The poll and the results were both skewed toward dyed-in-the-wool jurisprudes, public law scholars, and Supreme Court Justices.  Nonetheless, several of the top vote-getters at least dipped their toes in the waters of contract law and a few dove in unabashed.  Included among the top 25: 1. Oliver Wendell Holmes, Jr.; 2. Richard Posner; 5. Benjamin Cardozo; 7. Karl Llewellyn; 16. Lon Fuller; and 23. Frank Easterbrook(whose failure to grasp the importance of UCC § 2-206 and the first clause of § 2-207(1) in Hill v. Gateway has spawned considerable judicial and academic debate).  I suggested to the pollster that the poll should have included Corbin, Williston, and Farnsworth (curiously, Grant Gilmore -- though not his posthumous alter ego Gil Grantmore -- was in the poll, but did not make the top 25); others suggested Charles Fried and Roger Traynor.  Still, being able to lay a legitimate claim on 20-24% of the top 25 (depending on your view of Easterbrook's contracts contributions) isn't bad for the red-headed step-child* of legal academia.

[Keith A. Rowley]

* - Being the red-headed child of a red-headed step-child whose adoptive parents shipped him off to live at the YMCA while finishing high school, I feel free to invoke this metaphor.

Plaudits for (Living) Contracts Professors

Brian Leiter's Law School Reports, a reliable source of information about moving and shaking in legal academia, reported yesterday that Contracts professor and current dean of the Seattle University School of Law Kellye Testy will become the new dean at the University of Washington School of Law.  I met Kellye at the 1999 AALS Conference on Contracts in Washington, DC and have had several opportunities to talk and correspond with her since then.  She's terrific.  Congratulations, Kellye!

This also affords me the opportunity for long overdue acclaim for our friend Tadas Klimas, who has made the trip from Lithuania to the International Contracts Conference and the AALS Contracts Mid-Year in Montreal.  Some of you may recall that Tadas was the dean for several years of the Vyatus Magnus University School of Law in Vilnius and actively sought to Westernize legal education in his country.  He has also taught as a visiting professor at Stetson, as well as at universities in Spain and Brazil.  Earlier this year, Lithuanian President Valdas Adamkus decreed Tadas a Cavalier of the Lithuanian Order of Merit.  Sveikiname, Tadas!

[Keith A. Rowley]

A Lesson in Contract Drafting to Trump All Others

What is the drafting lesson to trump all others?  The usual: one size does not fit all.  

AmLaw Daily reports that Trump Corporation leases space in one of the co-op buildings it constructed in New York in the 1980's.  The co-op board of that building (Trump Plaza Owners, Inc.) is looking to evict Trump Corporation, alleging it is nearly $87,000 in arrears.  

At the helm of the effort to remove Trump from the building is the president of the co-op, Andrew Perel (his day job is as an environmental law partner at Steptoe & Johnson).  And here's where Mr. Perel provides the lesson: 

"The funny part of it is what one of his internal lawyers must have done years ago," Perel says. "Normally Trump is the landlord, not the tenant. So what they did is they took one of their leases and just changed the names. And so it's not a very favorable lease if you're the tenant."

* * * The co-op gave notice of default to Trump Corporation on April 10, but the company still didn't pay its rent. The lease terminated May 6, five days past the deadline required to pay the rent and avoid termination.

"If you don't pay the rent when Donald Trump is your landlord, he comes down on you like a hammer," Perel says. "Well lo and behold, he signed a lease that was his own lease and he's the tenant. And he missed April and May.

Maybe the other lesson is: what's good for the goose, is good for the gander.

[Meredith R. Miller]

Is Miss California in Breach of Contract?

Miss California - Carrie Prejean - has been getting a lot of press play lately.  Just recently, at the Miss USA pageant, she got into a little bit of a jam when responding to Perez Hilton's question about same-sex marriage.  Now, in a story written for ContractsProf Blog, the LA Times reports that she may lose her crown for breach of contract:

Officials with the Miss California USA Pageant said today in Beverly Hills that title-holder Carrie Prejean is in breach of contract and "entered the contest under false pretenses." Donald Trump, who owns the Miss USA pageant, will decide tomorrow whether she will keep her crown.

Prejean didn't inform contest officials about her involvement with anti-gay marriage organizations and failed to show up for public appearances as required under her contract with the Miss USA organization, said Keith Lewis and Shannon Moakler, co-executive directors of Miss California USA.

Prejean's brief reign has been clouded by controversy over semi-nude photos and her comments on gay marriage. She made national headlines last month when during the Miss USA pageant she said that marriage should be between a man and woman.

She said in later interviews that she does not support gay marriage (California voters voted to prohibit gay marriage last November). Some have questioned whether her comments cost her the Miss USA title, and she's been the subject of much criticism from pro-gay-marriage activists. Her supporters believe she is being singled out because of her views on gay marriage, which they say are the same as President Barack Obama's.

Now, Miss California officials say they are looking into whether Prejean violated rules by working for a group opposed to gay marriage and by posing semi-nude. It's unclear whether she could lose her California crown if officials determine that she broke the rules. Prejean has said she did nothing wrong.

Donald Trump, who runs Miss USA, told KIIS-FM (102.7) radio last week that he would review the photos. California pageant officials said they first thought that there was only one racy photo but have since discovered there are four. “This completely changes things for us,” Keith Lewis, co-director of the Miss California USA pageant, said last Wednesday in a statement. “Yesterday, we thought she had explained things accurately. We need to revisit this issue with her."

The Donald loves a controversy -- suddenly people are actually paying attention to his Miss USA enterprise (for other examples see this and this).  I think he'll tell Miss California: "You breached the contract.  You're fired."   

[Meredith R. Miller]

After a Home Short Sale, Lender May Still Seek the Difference

For underwater homeowners who opt for the short sale, this WSJ article suggests that they still might have to tread water.  In a short sale, a seller facing foreclosure can work out a deal with the lender to sell the property for less than the outstanding debt, which the lender will accept as a payoff.  However, as the article explains, this doesn't necessarily mean that the borrower is "home free":

In a growing number of cases, holders of mortgages or home-equity loans are requiring borrowers in short sales to sign a promissory note, which is a written promise to pay back a loan or debt. Real-estate agents and attorneys say they have seen an increase in requests for promissory notes as mortgage companies look to short sales as an alternative to foreclosure.

In many states, lenders have always had the right to pursue former homeowners for unpaid mortgage debt. Yet until recently, most borrowers who ran into trouble were able to refinance or sell their homes and pay off their loans. Now, falling home prices are widening the gap between home values and mortgage balances, and the number of homeowners who can't make their mortgage payments is rising as the economy has weakened. More than 3.8 million homes will be lost in 2009 and 2010 because borrowers can't make their mortgage payments, according to forecasts from Moody's Economy.com.

Some borrowers are surprised to find themselves on the hook. Jodie Byrd sold her home in the Los Angeles area in a short sale last summer after her husband lost his job and the couple realized they wouldn't be able to make their mortgage payments. The sale price covered the $685,000 mortgage, but their lender, Washington Mutual Co., then began pursuing them for the $21,600 balance on their second mortgage.

Ms. Byrd says a clause in their contract gave Washington Mutual the right to pursue the debt, but adds that her real-estate agent said that wasn't likely to happen. The couple eventually settled the claim for $4,000.

A spokesman for J.P. Morgan Chase & Co., which acquired Washington Mutual last year, says it's the company's policy not to comment on individual cases. Speaking generally, he says, "a short sale may resolve the first mortgage, but the second mortgage ... would be a separate negotiation with the lender or servicer."

Some experts say that mortgage companies may pursue leftover debt, or "deficiencies," in greater numbers as the housing market settles. Lenders are "doing everything possible to work with their borrowers and trying to bring stability back to the lending and real-estate market," says Marc Ben-Ezra, an attorney in Ft. Lauderdale, Fla., who represents mortgage companies in foreclosures. "However, the ability to get a deficiency judgment is a valuable right that I think lenders will pursue aggressively in the future as the market stabilizes."

What, then, is the incentive for the borrower to opt for a short sale instead of foreclosure?  It seems that, if the borrower's counsel can't get the bank to consider the loan paid in full, the better option for the borrower is to allow the house to go into foreclosure.  Why would anyone counsel the borrower to opt for a short sale if the borrower has to sign a promissory note for the difference?  As I understand it, either option is bad for a borrower's credit. 

[Meredith R. Miller]

Now in Print

Paula D. Baron, Confused in Words: Unconscionability and the Doctrine of Penalties, 34 Monash U.L. Rev. 285 (2008).

Omri Ben-Shahar, A Bargaining Power Theory of Default Rules, 109 Colum. L. Rev. 396 (2009).

Curtis Bridgeman, Contracts as Plans, 2009 U. Ill. L. Rev. 341.

Joshua A.T. Fairfield, Anti-social Contracts: The Contractual Governance of Virtual Worlds, 53 McGill L.J. 427 (2008).

Joshua Getzler, Quantum Meruit, Estoppel, and the Primacy of Contract, 125 L.Q. Rev. 196 (2009).

Matthew C. Jennejohn, Collaboration, Innovation, and Contract Design, 14 Stan. J.L. Bus. & Fin. 83 (2008).

David McLauchlan, Contract Interpretation: What Is It About?, 31 Sydney L. Rev. 5 (2009).

Colleen P. Murphy, What Is Specific About "Specific Restitution"?, 60 Hastings L.J. 853 (2009).

M.H. Ogilvie, Mental Distress and Punitive Damages for Breach of Contract in the Supreme Court of Canada: Here's the Remedy, but Where's the Right?, [2009] J. Bus. L. 248.

Carl N. Pickerill, Executory Contracts Re-Revisited, 83 Am. Bankr. L.J. 63 (2009).

Ingeborg Schwenzer & Pascal Hachem, The CISG--Successes and Pitfalls, 57 Am. J. Comp. L. 457 (2009).

D. Gordon Smith & Brayden G. King, Contracts as Organizations, 51 Ariz. L. Rev. 1 (2009).

Robert P. Bartlett, III, Commentary, 51 Ariz. L. Rev. 47 (2009).

Anna Gelpern, Commentary, 51 Ariz. L. Rev. 57 (2009).

Richard S. Wirtz, Cost of Performance or Difference in Value?, 59 Case W. L. Rev. 61 (2008).

[Keith A. Rowley]

Happy Law Day!

Happy Law Day!

[Meredith R. Miller]

Your Public Interest Auction Donations

Over at PrawfsBlawg, Rose Cuison Villazor asks: what do you donate to your law school's public interest auction?  Here's my answer.  Each original print is signed by the undersigned, and they are pictured in the home of the 2008 auction winner:

 

[Meredith R. Miller]

Another Benefit of Contract-Based Warranties: Class Certification?

This blog's illustrious editor, Prof. Snyder, recently pointed out that tort law provides much better remedies than contracts-based breach of warranty claims, but students nevertheless need to know about contracts-based remedies because of the longer statute of limitations.

It seems that there is another reason that students should learn about UCC and common law warranty claims: class certification.  At least, for those warranty claims that don't have a reliance element.  

This is evidenced by a recent Oklahoma Supreme Court ruling in a case against Ford, as summarized at law.com: 

Among Detroit's Big Three, Ford Motor Company looks to be in the best shape. But sometimes, even when you think you're in the clear, you're not. (At least in litigation.) That's what happened to Ford last week in Oklahoma, where the state's supreme court reinstated a nationwide class action against Ford and auto parts maker Williams Controls that had been tossed by an intermediate appellate court. The class, which includes an estimated 300,000-500,000 members, contends that certain models of Ford Super Duty pickup trucks and Expedition sport utility vehicles contain faulty accelerator pedals, causing the trucks to idle rather than accelerate when drivers step on the gas.

The case, which was first filed in 2004, alleges breach of warranty, negligence, and product liability. The trial court certified a nationwide class in 2007, but last year the Oklahoma Court of Civil Appeals reversed the lower court. In reinstating the case, the Oklahoma Supreme Court found that the trial court did not abuse its discretion in certifying a class on the breach of warranty claims. It declined to affirm class certification on negligence or product liability claims.

(emphasis added).  And, a class action, by the way, seems the only feasible way such small individual warranty claims would ever be litigated.  Attorneys for plaintiffs will seek between $60-100 million, depending on the size of the class.  This amount is based on a price tag of $185 per faulty accelerator pedal.

[Meredith R. Miller]

Man claims campground had contract duty to protect him from water balloon

A New Hampshire man who suffered injuries when he was hit by a water balloon fired by a slingshot is suing his campground, claiming that the facility owed a duty to protect him from being attacked.

Things apparently get rowdly on Maine's Saco River during the summertime The plaintiff was taying at the Fiddlehead Campground (left), which advised residents to  " 'avoid rowdy groups canoeing on the river' by staying at the campground, where campers agree to standard campground groups that 'help control noise and unruly behavior."  Plaintiff nevertheless was hit in the eye by a water balloon launched 67 feet away by three men using a large slingshot.  He is apparently claiming that the campground's advice created a promise that he would be safe if he stayed there.

[Frank Snyder]

Contract law: the last resort of the tardy

Teaching contract remedies for breach of warranty, whether common law or UCC, often seems like a waste of time, since in many cirucmstances tort law provides superior remedies for defective products or services that cause injuries.  But, as we often explain to students, you need to know contract remedies if for not other reason that sometimes either you or (hopefully) your client will have blown the tort statute of limitations and will have to make out a claim under contract law.

That seems to e the situation in a recent professional malpractice case, Tower Investments Inc. v. Rawle & Henderson, where counts for negligence and breach of fiduciary duty against a law firm were barred by the statute of limitaitons, but breach  of contract claims were held to be timely.  The Legal Intelligencer, via Law.com, has a synopsis of the litigation here.

[Frank Snyder]

The case of the wry-faced llama

Karl Llewellyn liked to make fun of 19th century contract law as being based on the arms' length horse trade between two strangers.  But two centuries later animal cases still come up with some frequency.

Like this Georgia case, in which a llama breeder was held liable for breach of warranty when the two animals it sold were found to be suffering from a condition called "wry face" (left).

[Frank Snyder]

Today in history: April 26

On this date in 1607, English employees of the privately held Virginia Company of London (left: the company seal) land at Cape Henry, Virginia, with the intent of founding a gold-mining operation. A month later they will found the first successful settlement of Jamestown.

They don't actually find any gold, but the settlement will endure, making the United States the first nation in history to be founded by a for-profit corporation.

[Frank Snyder]

When promisors' intent to perform is conditional

When a contracting party makes a promise, does it intend to keep that promise, "no matter what"?  Gregory Klass of Georgetown says no.  Every promise, he says, is conditional -- that is, the promisor intends to perform under what it expects will be the future circumstances.

Sometimes, though, those future circumstances are so narrowly defined that the promise may actually amount to promissory fraud.  He explores the topic in a new paper, A Conditional Intent to Perform.  Here's the abstract:

No promisor intends to perform come what may. Yet some undisclosed conditions on a promisor's intent are so material that they can support a claim of fraud. A theory of promissory fraud should be able distinguish such foreground conditions on a promisor's intent to perform from the background conditions that attach to all intentions. Michael Bratman's planning theory of intention provides resources to explain the difference. A background condition is one that the agent accepts as satisfied or not satisfied in her practical reasoning; a foreground condition is one whose satisfaction she treats as an open question. Foreground conditions permit an agent to plan for futures in which she does not perform the act in question and reduce the rational pressure to adopt necessary means of performing it. Background conditions do neither.

This planning theory of conditional intentions provides a more complete account of why a promisee should care about foreground conditions on the promisor's intent to perform. An undisclosed foreground condition is likely material not only because it reduces probability of performance (background conditions do that too), but also because it is likely to affect the promisor's preperformance deliberations and behavior. The promisor is more likely to continue planning for possible futures in which she does not perform and less likely to invest in necessary means of performance. A foreground condition on the promisor's intent to perform also reduces the rational pressure to fill contract gaps in ways that accord or mesh with the promisee's plans and preferences, as described by the theory of shared intentions. These conclusions suggest revisions to the analysis of what a promise says about the promisor's intent to perform and any conditions on it. They also supply the beginning of a philosophical account of the relationship-based, extralegal expectations and obligations that attend agreements for consideration, and of the law's proper response to them.

[Frank Snyder]

Today in history: April 25

On this date in 1938, the United States Supreme Court shocked just about everyone with the release of Erie Railroad v. Tompkins, a decision that wiped nearly 100 years of federal common law off the books and became a permanent fixture of the U.S. civil procedure casebook.

Why mention it on a blog related to contract law?  Because the lawyer who lost the case (and who saw his law firm go out of business with the loss of the contingent fee) was 24-year-old Aaron L. Danzig, who had graduated from law school only two years earlier.  He's best known in contract law circles as the father of future Stanford Contracts tprof (and, later, my partner at Latham & Watkins partner and Secretary of the Navy) Richard Danzig, author of The Capability Problem in Contract Law.

[Frank Snyder]

"Payday lender" squeezing defenseless . . . banks?

Guess who's feeling what it's like being in the clutches of a predatory lender?  Yep, Americas's banks, who are suddenly discovering what a lot of consumers have discovered over the years: the peril of fine print in loan agreements.  Here are some highlights of a new piece by Katharine Mangu-Ward:

Everyone knows that you should read the fine print before taking out a loan, whether it's $100 from a payday lender or $100 million in bailout loans from the federal government. You'd think that no one would know this better than bankers themselves.

Banks who are trying to pay back their bailout funds are finding that it's not easy to get back out of debt.

“It almost makes the Treasury look like a payday lender," Camden Fine, president of the Independent Community Bankers of America told Bloomberg, discussing the kerfuffle over the refusal of the Treasury department to accept early repayment of bailout loans on favorable terms.

While Fine meant to criticize Treasury for the high dollar costs it was imposing on banks attempting to pay back TARP money ahead of schedule—“If you look at the cost of those warrants and turn it into an annual percentage rate, it’s enormous,” Fine said—but the point goes in both directions. The federal government may be acting like a payday lender trying to extract the greatest gain from loans to folks with limited options, but the banks are acting like payday lending customers who take out loans and then go whining to their legislators and city council members when the loans come due.

Check out the whole discussion.

[Frank Snyder]

US News First: No law school sees ranking decline

The recent U.S. News rankings are out, and apparently every law school either rose in rankings or stayed the same, according to a survey of news releases by the schools.  Announcing their highers rankings were, among others, William & Mary, Utah, Seattle, Denver, Florida State, UNLV, Georgia State, Duke, Emory, and North Carolina,  The big news, though, is that a review of school news releases shows that not a single school has announced a ratings decline from last year.  Kudos to everyone!

[Frank Snyder]