ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Saturday, November 27, 2004

Is it a gift or a contract?

As donors to colleges and universities seek to place more strings on their gifts, and to more vigorously enforce their desires, disputes between donors and recipients are becoming more common, reports the New York Times today.  And the question whether the money arrives as a conditioned gift or as part of a contract -- treated almost 80 years ago by Chief Judge Cardozo in the classic case Allegheny College v. National Chautaqua County Bank of Jamestown, 159 N.E. 173 -- seems likely to be back on the table.  As reported in the Times, Paul Glenn, a major donor to the University of Southern California, doesn't call what he does "giving" any more.  "Instead, he likes to say that he strikes deals with universities for the betterment of humanity, then polices them with all the ardor of a businessman who has been burned, badly. . . We now know that there's got to be a quid pro quo here.  This is not a donation.  It's a contract, and both parties have to live up to it."  Whether the courts will see a quid pro quo or a condition remains to be seen.  In the meantime, colleges and their donors are drafting more precise agreements to govern at least the larger gifts, specifying more clearly the expectations of both parties to the transaction.  

November 27, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Real life exam question of the day

Lopez Singer Jennifer Lopez likes white rooms—we mean, really white rooms.  The singer/actress’s contract rider specifies that she must be provided: “White room, white flowers, white tables and/or tablecloths, white drapes, white candles, white couches.”

These were part of her requirements for her work in making a “charity” video to benefit African AIDS victims.  Unfortunately, the couch provided was apparently “greenish,” not white.

Questions:  Since Lopez is donating her time, is there a contract between the parties?  If so, is the greenish couch a material breach of the contract that would excuse Lopez from performing?  If not, what damages should she receive for breach?  If those damages would be inadequate, would she be entitled to specific performance?  Would your answer change if the promoters could have given her a white couch, but put the greenish one in the room to annoy her?

November 27, 2004 in Celebrity Contracts | Permalink | Comments (0) | TrackBack (0)

Today in history—November 27

1703: James Delancey, the British chief justice of New York who presided over the prosecution of newspaper entrepreneur Peter Zenger, is born.

Livingston 1746: Robert Livingston is born. The lawyer-turned-diplomat goes on to negotiate one of the biggest deals in U.S. history, the purchase of French Louisiana for $15 million—about $242 million in today’s dollars. He will also be one of the principal backers of Robert Fulton’s newfangled steamboat, and with Fulton will enjoy a legislative monopoly on steamboat travel on the Hudson.

1779: The College of Pennsylvania is promoted to the University of Pennsylvania.

1839: The American Statistical Association is organized in Boston.  At least, we have detected a close correlation with this date.

1874: One of the great-grandfathers of the law and economics movement, historian Charles (An Economic Interpretation of the Constitution of the United States) Beard is born

1910:  Pennsylvania Station, the largest railway station in the world, opens in New York.  All the trains are late, setting a tradition.

Ussteel 1979: A former titan falls on hard times, as U.S. Steel announces it is closing 12 plants. It blames environmental regulations and the government’s failure to restrict cheap foreign imports.

1995: The nation’s biggest health care firm is formed by the merger of AmHS/Premier and SunHealth Alliance.

November 27, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Your assignment, Mr. Phelps . . .

When do parties prefer that their contract obligations be assignable? When do they not?  A new article by Jared Kramer, When Should Contracts be Assignable? An Economic Analysis, seeks to bring some rigor to the discussion, by analyzing the different situations under which parties may choose assignability or non-assignability.

The abstract follows.

Continue reading

November 27, 2004 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Adhesion employment contracts, Chinese style

Shanghai Chinese students in Shanghai, who must sign employment letters of intent while they were still in school for jobs they will get when the graduate, caught a break this week. From now on, the maximum amount they’ll have to pay if they breach their contract is simply the monthly income the new job would have paid.

If that sounds a bit harsh, it’s a big improvement over the previous situation, under which the penalties for breach of such contracts were unlimited. The Shanghai Education Commission decided that it made sense to provide some kind of uniform standard to avoid the problem of students stuck with penalties much higher than the compensation they would have received from the spurned employer.

November 27, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Friday, November 26, 2004

British credit card companies breathing easier

British_flag Buying goods from foreign sellers just got a little dicier for British consumers, in the wake of a ruling that domestic British consumer protection laws do not apply to customers who use their credit cards to buy foreign goods and services, according to a report in the Northern Ireland News Letter..

British law apparently provides that consumers who have a complaint against a seller (in an amount between £100 and £30,000) have the option of suing the credit card issuer instead of the seller; the issuer then can go after the seller.  But with the increased use of credit cards overseas and for Internet purchases in foreign countries, the card companies have found themselves becoming virtual insurers—particularly for sellers in countries that lack consumer protection laws or in which suing the seller is difficult.

In a test case, a British judge held that the provision did not extend to foreign sales, since it had been based on the assumption that the credit card company would be able to recover any losses from the seller, and that is not feasible in many international transactions.  Thus, there was no justification for giving the domestic provision extraterritorial effect.

November 26, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Man, I hate it when that happens

Mississippi_flag An $80 million breach of contract judgment was thrown out this week by the Mississippi Supreme Court because the plaintiff filed the suit in the wrong state.  The plaintiff, Carroll Hood, had claimed breach of an exclusive marketing agreement against St. Paul Fire and Marine Insurance Co.  He won the jury verdict in 2001.

Trouble is, a  forum selection clause in the contract provided that all disputes must be brought in federal court in Bexar County (San Antonio), Texas, when St. Paul is located.   The trial judge, said the court, should have dismissed the action.  Because there was no mechanism for transferring the case, the judgment was overturned and dismissed.

November 26, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Hospitals can pursue contract claims against ERISA plans

Hospital Representatives of health care providers are pleased by a recent ruling that they can pursue their contract claims against non-paying and slow-paying employee benefit funds, ERISA notwithstanding.  A federal appeals court ruling permitted Pascack Valley (N.J.) Hospital (left) to pursue its breach of contract actions in state court against the United Food and Commercial Workers International Union Local 464-A Welfare Reimbursement Plan.

There have been chronic problems with failure to pay by managed care plans, including union benefit plans. "We've always looked at these plans as being untouchable when it comes to collecting past due payments;" said the hospital’s lawyer, Keith McMurdy, quoted in the Newark Star-Ledger. "We hope this will make it easier for hospitals to collect and cut down on uncovered medical bills."

November 26, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Cases—Arbitration—No, it’s your turn to be estopped

Maine_flag Plaintiff shareholders who claimed they were duped into selling their shares were entitled to take advantage of arbitration provisions, even though they never signed them and even though they had previously brought legal proceedings, according to the U.S. District Court in Maine.

Defendants argued that after bringing the judicial action the plaintiffs should be estopped from now seeking to compel arbitration, but Judge Stewart Dalzell decides instead that it was the defendants, who had previously requested arbitration, who ought to be estopped from changing their tune.  Hall v. Internet Capital Group, 2004 U.S. Dist. LEXIS 20149 (D. Maine Oct. 1, 2004).

November 26, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Today in history—November 26

1504: Isabella I ("the Catholic"), queen of Castile and Aragon, who financed Columbus’s venture to the Indies, dies.

1607: Preacher John Harvard is born; he will leave his wealth to found the university that bears his name.

1872: The Great Diamond Hoax, one of the greatest commercial cons of all time, is exposed.  The entertaining story is here.

Carrier_1 1876: The Father of the Sun Belt, engineer Willis Haviland Carrier (left) is born.  He will go on to invent air conditioning.  His motto?  "I fish only for edible fish, and hunt only for edible game, even in the laboratory."

1913: Jesse Lasky forms the Jesse L. Lasky Feature Play Company in partnership with his brother-in-law, Samuel Goldfish (later Goldwyn) and his friend Cecil B. DeMille; the company, after many mergers, will eventually become better-known as Paramount.

1962: Four boys from Liverpool hold their first recording session under the new name "Beatles."

1974: Tightwad Oakland A’s owner Charlie Finley and star pitcher Jim "Catfish" Hunter go to arbitration.

1984: The owner of the New Orleans Saints puts the football team on the block for $75 million.

1985: Former President Nixon signs a record-breaking contract with Random House, which gives him a $3 million advance for his autobiography.

1990: One of the biggest deals of the great "Japan Inc." period comes when Matsushita Electric buys the MCA film studio for $6.6 billion.

November 26, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Job Beat

Uvic The University of Victoria Faculty of Law is looking for a tenure-track assistant professor, preferably in commercial and corporate law, starting in July 2005.  The announcement is here.

Canadian residents will be given preference, but the school says that all are welcome to apply.  Deadline is December 31.

November 26, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Economics, interpretation, and incomplete contracts

A couple of interesting new papers with an economic bent are mentioned over at Lawrence Solum’s Legal Theory Blog.  They're still in workshop form, but they’re both of interest to Contracts teachers.

In the first, Judge Richard Posner notes that the interpretation of contracts is one of the least-studied aspects of contract law and economics, and takes a stab at it in The Law and Economics of Contract Interpretation.  His goal is to show that interpretation involves more than textual analysts or cognitive psychology, but that that economics has a role to play in determining the meaning of ambiguous terms.

And in Contingency and Control: A Theory of Contracts, Lewis Kornhauser and Bentley Macleod set themselves a large task: reconciling the theories of incomplete contracts with the economic analysis of contract law.  They start by recognizing that contracts are made in different environments, and different types of contracts are suitable to different forms.  In particular, they distinguish between what they call contingency contracts and control contracts, and argue that the contract regime should change depending on the type of environment in which contracting occurs.

November 26, 2004 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, November 25, 2004

Happy Thanksgiving!

November 25, 2004 | Permalink | Comments (0) | TrackBack (0)

Today in history—November 25

1507: Flemish jurist and civil servant Joost de Damhouder is born in Bruges. His Praxis Rerum Civilium (1567), a general treatist on the civil law, contains valuable descriptions of commercial law in the 16th-century Netherlands.

1795: Levi Wyman, the wandering son and sometime sailor who features in Mills v. Wyman, is born in Shrewsbury, Massachusetts.

Christie 1952: The longest-running play in the known galaxy, The Mousetrap by Agatha Christie (left) opens in London. If it had been a contract dispute instead of a murder, it no doubt would have been more popular.

1952: George Meany is elected president of the American Federation of Labor.

November 25, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Cases—Conditions—"Clear and ambiguous" clause lets lessor off the hook

Pennsylvania_flag A condition is a condition, said a federal district court in Pennsylvania, and a real estate lessor was not in breach of its contract when it was unable to get the necessary government permits to allow it to build the building it had agreed to for the plaintiff.

A clause in the contract provided that neither party would be liable if the permits could not be obtained. The permit process, usually routine, got held up when the local township tried to extort cash and additional agreements out of the lessor by delaying the permits. Judge Lawrence Stengel, applying Pennsylvania law, held the the clause was a "clear and unambiguous" condition precedent to liablity; since the permits were not secured the lessor had no obligation to go forward.

Morgantown Crossing, L.P. v. Manufacturers & Traders Trust, 2004 U.S. Dist. LEXIS 22949 (E.D. Pa. Nov. 10, 2004)

November 25, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Wednesday, November 24, 2004

Cases—Juries—Plaintiff entitled to directed verdict where evidence of breach was uncontested

Texas_flag_1 Where it was uncontested that the defendant cancelled the contract with plaintiff without cause, a jury decision that the defendant had performed all its obligations under the agreement was clearly erroneous and would be reversed, according to the Texas Court of Appeals.

A client retained an adjuster to help negotiate a fire insurance claim.  The client subsequently fired the adjuster, settled the claim, and refused to pay.  The client won a jury verdict, but the court, in an opinion by Judge Linda Reyna Yanez, set it aside, holding that the adjuster was plainly entitled to its fees.

Adjusters & Loss Consultants Group. v. Johnson Int’l Material, Inc., 2004 Tex. App. LEXIS 9934 (Corpus Christi, Nov. 10, 2004)

November 24, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Today in history—November 24

1859: Charles Darwin initiates the use of Social Darwinism in contract theory by publishing The Origin of Species.

Southern 1880:  Southern University is formed; it will open its doors in Baton Rouge a year later, in 1881.  It will start its law school in 1947.

1888: Dale Carnegie is born in Maryville, Missouri. His How to Win Friends and Influence People should be read by more lawyers.

1902: French historian Fernand Braudel, one of the fathers of interdisciplinary history, is born.

1949: Britain nationalizes its steel industry.  Well, it seemed like a good idea at the time.

1997: The New York Stock Exchange "circuit breaker" kicks in for the first time after a sudden 500-point drop in the market.

1998: AOL announces its plans to buy Netscape for $4.2 billion.

November 24, 2004 in Miscellaneous | Permalink | Comments (0) | TrackBack (0)

Pay for university presidents on increase

Witherspoon In case you thought that you made almost as much as your university president, the Chronicle of Higher Education has bad news.  Salaries of university presidents are rising faster than faculty salaries, and some are approaching $1 million a year, nearly one-twentieth of the amount that Reese Witherspoon (left) received for Legally Blonde 2.

Forty-two university presidents made more than $500,000 a year; the highest paid was the president of Johns Hopkins, at $900,000.  The highest-paid public university president was Mark Emmert of the University of Washington, at $762,000, or about the same amount as a backup shortstop for the Toronto Blue Jays.

November 24, 2004 in In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, November 23, 2004

Book beat

Law_books_1 A plethora of new book announcements today just in time for Christmas giving.  (They make wonderful stocking stuffers!)

A new edition of an old standard is out: Thomas Crandall’s (Wake Forest) and Douglas Whaley’s (Ohio State) Cases, Problems, and Materials on Contracts is now in its fourth edition from Aspen.  The book retains its problem-oriented approach, adds some new cases and aproblems, and reflects the proposed changes to Article 2.

Foundation Press has a new entrant in the Contracts field.  Louis Kaplow (Harvard) and Steven Shavell (ditto) have published Contracting. The short (141 pages) book is actually a slice of their longer Analytical Methods for Lawyers text.  It’s oriented toward teaching students how contracts function and how they are designed, and contains many sample contract provisions and full-length contracts.  There is a teacher’s manual.

Those who take an E-commerce focus in their classes will probably like Commercial Contracting: Sales, Leases, and Computer Information (LexisNexis) by Peter Alces (Wm. & Mary), David Frisch (Richmond), and Francis Mootz (Penn State). The text is designed for something a little broader than the traditional Article 2 course, with in-depth treatment of UCITA, UETA, E-Sign, and the CISG.

An E-commerce stalwart is also out in a new edition from Aspen, Electronic Commerce by Ronald Mann (Texas) and Jane Winn (U. Washington). The second edition is a problem-oriented approach that covers 40 distinct topics, allowing teachers to select the items they like from the buffet.

Finally, it’s not a Contracts book, but Section member Tom Joo (UC-Davis) has a new anthology on from Carolina, Corporate Governance: Law, Theory & Policy. If you (like one of the editors of this blog) teach business associations along with Contracts), you’ll find it a well-balanced and thoughtful selection of recent scholarship, particularly suitable for those who focus on large publicly held entities.

November 23, 2004 in Books | Permalink | Comments (0) | TrackBack (0)

Cases—Arbitration Clauses—Not compelled where minority of parties had signed agreements

California_flag Twenty residents of a trailer park who had signed arbitration agreements were not required to arbitrate because they were joint plaintiffs with 49 others who had not signed such agreements, according to the California Court of Appeals in an unpublished opinion.   [Ed. note:  most of the interesting California contract decisions these days seem to be unpublished.]

All the plaintiffs were making identical claims, said the court, and requiring 20 of them to go to arbirtration and 49 of them to proceed in court raised the possiblity of conflicting decisions.

McGrath v. General Trailer Park Assocs

., 2004 Cal. App. Unpub. LEXIS 10203 (2d Dist. Nov. 10, 2003).

November 23, 2004 in Recent Cases | Permalink | Comments (0) | TrackBack (0)