ContractsProf Blog

How to draft enforceable consumer arbitration clauses

Consumer arbitration clauses are the subject of a good deal of controversy in the contracts world, but if you want to learn how to draft them to minimize the risk of judicial nullification, the ABA Business Law Section has How to Draft Enforceable Consumer Arbitration Provisions (ABA membership required).  Here's the gist:

Business clients, especially financial institutions, want to minimize the risk of excessive damages awarded by runaway juries or in forums in which they believe the playing field is not level.  Arbitration is an attractive alternative, but the courts may refuse to enforce arbitration arrangements that they determine to be unfair to, or to have been unfairly imposed upon, consumers.  These materials offer comprehensive background coupled with practical recommendations as to how to craft enforceable consumer arbitration provisions.

Parents to sue over Exeter University changes

Angry parents are threatening contract actions against the University of Exeter, in the wake of the school's decision to close two money-losing departments.  The group, Parents Against Cuts at Exeter (PACE), said, "We have a legal team in place, and we are advised that we would have a case to take to the High Court on the grounds of breach of contract."

At issue is the vote by the University Senate and Council to shut down the music and chemistry departments, which will eliminate cost about 130 faculty and staff.  The university says it is facing a £ 4.5 million deficit this year.

The plan is to "refocus" the University to emphasize its strengths in biology, given that funding in the UK is increasingly targeted to highly rated depatments.  Some continuing education programs will also be phased out.  The changes were approved by large majorities of the faculty and the governing council.  The school's news release is here.

Fired coach sues Louisiana-Lafayette for breach of contract

A basketball coach at the University of Louisiana-Lafayette, fired for listing on his resume a college degree he did not have, has sued the institution for breach of contract.

Glynn Cyprien had been a successful assistant coach at Oklahoma State, and before that at Nevada-Las Vegas, when he was hired away by ULL, which gave him a five-year deal at $170,000 a year.  But Cyprien’s resume showed him with a bachelor’s degree from University of Texas-San Antonio, a degree he did not have.  He attended UTSA, but did not graduate, and actually has a bachelor’s and master’s degree from Lacrosse University, an online school.

Cyprien says the resume he gave the school properly showed the Lacrosse degrees, and that one sent by fax from Oklahoma State was in error. ULL says it only saw the resume with the UTSA degree.  Cyprien also claims that, as an exempt employee, he is not required to have a college degree, while the university claims that all athletic employees are required to be graduates of accredited colleges.

Spin doctors

In case you missed it, Levick Strategic Consultants has released this year’s list of the most PR-savvy law firms.  Jones Day tops the list for the second straight year, and is the only firm to amass more than 2,000 media mentions during the year.

New York college can go co-ed despite contract suit

Wells College can go ahead and enroll male students next year, after a New York state judge denied a preliminary injunction to prevent it.  Two female students had sought the injunction, claiming the school had breached its contractual promise to them that the school would remain single-sex through 2008.

Acting State Supreme Court Justice Peter Corning credited testimony from the college that it was losing $5 million a year and needed male students to make ends meet.  From news reports, he doesn’t sound like he actually gave much scrutiny to the claim, though.  "Trustees have an obligation to preserve the institution," he reportedly said from the bench. "I cannot second-guess the trustees."

Corning did not pass on the merits of the contract case, which will go forward.

Stalking the unhappy contract

The goal of most contracts, it is usually said, is to maximize the joint profits of the two parties.  But some, points out Margaret Friedlander Brinig (Iowa), do not fit that model. In a new paper, "Unhappy Contracts": The Structure and Effect of Telecommunication Interconnection Agreements, she takes a look at the interconnection agreement entered into by telephone companies in the wake of the 1996 Telecommunications Act.

She takes an unusual approach, looking in great depth at 140 of these contracts entered into in Michigan, analyzing them in light of litigated cases, subsequent amendments, and proceedings by the Michigan Public Service Commission—all the while seeking to determine which characteristics seem to lead to cooperation and which to future conflict.  Click on the link below for the abstract.

ABSTRACT:

While most contracts are made between two parties in search of profit and without substantial government scrutiny, some are not so happy. This project examines one such species, the interconnection agreement entered into under the 1996 Telecommunications Act. After discussing the history and requirements of the statute, the paper hypothesizes that instead of the more typical profit maximization motive, the dominant party, in this case the incumbent local service provider, might seek to minimize losses. As in other cases where there is substantial uncertainty, parties to interconnection agreements might also be expected to cluster payment terms around some common patterns, or focal points.

The empirical section of the paper investigates these hypotheses through the complete set of 140 contracts entered into in Michigan between various phone companies entering the local phone market, called CLECs, and one local incumbent provider, SBC. Not only does the paper look at what determines various contract terms, but also it examines through Michigan Public Service Commission minutes, litigated cases and contract amendments what characteristics predict whether the parties can successfully adjust over time or whether they continue to experience conflict.

Today in history—December 20

1606: Three little ships, the Susan Constant, Godspeed, and Discovery set sail from England to establish what will become the first permanent English settlement in the United States, at Jamestown.

1803: The Jefferson Administration costs John Kerry the 2004 presidential election by taking possession of the Louisiana Purchase from France.  The U.S. ultimately gets the states of Arkansas, Colorado, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Oklahoma, South Dakota, and Wyoming, which will go 12-2 for Bush..

1868: Harvey Samuel Firestone, who will go on to found the rubber and tire company that bears his name, is born in Columbiana, Ohio.  He begins making tires for Henry Ford’s new automobile business in 1904.

1881: Baseball executive Branch Rickey is born in Flat, Ohio.  He will become a legendary baseball executive but is most often remembered as the man who signed Jackie Robinson (with Rickey, at left) to a contract.

1902: The pragmatist philosopher Sidney Hook is born in New York City.

1924: The U.S. Senate confirms Billings Learned Hand to the U.S. Court of Appeals for the Second Circuit.

1952: At Ye Olde Virginnie Restaurant in McKenney, Virginia, A.H. Zehmer gets high as a Georgia pine and agrees to sell the Ferguson farm to his sometime friend W.O. Lucy.

1954: The Buick company signs comedian Jackie Gleason to one of the largest entertainment contracts in history to that time, $6.1 million for 78 half-hour shows over two seasons.

1957: Yes, advertisements can be offers, if they’re specific enough, says the Minnesota Supreme Court in Lefkowitz v. Great Minneapolis Surplus Store.

1995: A really bad idea for a movie, Oliver Stone’s Nixon, opens.  It closes a week or two later, grossing $13 million on a production budget of $44 million.  People who like Nixon hate the movie, people who hate Nixon see no reason to spend two hours watching a movie about him.

Cases—Good faith—No duty under contract that hasn’t come into existence

A university contract that must be approved by the Board of Trustees before becoming final is not a contract until that time, and there is no duty of good faith under a contract that does not exist, according the the Idaho Supreme Court.

Shirley Huyett was hired as basketball coach at Idaho State University on a one-year contract. She entered into negotiations for a three-year deal, but during that first year the university "rescinded" the three year deal and put her on administrative leave. She sued.

Idaho law requires Board of Trustees approval for any multi-year employment contract. No university officials have authority to vary that requirement, so any representations to the contrary are unenforceable. Since the board never approved the proposed agreement, it never came into effect. While the law imposes a duty of good faith in contacts in Idaho, there is no such duty for non-existent contracts, and thus the coach’s claim fails. Huyett v. Idaho State Univ., 2004 Ida. LEXIS 209 (Dec. 7, 2004).

Does the UCC apply to souls?

From the law student blog You Must Be Present to Win, a video rental store receipt with a real kicker . . . .

Nebraska reneges on oral agreement with Houston

The University of Houston football program is steamed after the University of Nebraska announced it is backing out of an oral commitment to play next fall.  The game had been tentatively scheduled to be shown on ESPN.

The Nebraska program has been in disarray this year.  The once-proud Cornhuskers (5-6), lost five conference games, including a humiliating 70-10 pasting by Texas Tech.  Houston (3-8) is a pretty bad team, but they’re apparently not bad enough for the Huskers to risk.  Nebraska has replaced the Cougars with Division I-AA Maine, a team beaten this year by the likes of Hofstra and James Madison.

The Houston Chronicle quotes Houston athletic director Dave Maggard, who apparently doesn't understand Holmes's dictum that a contract is merely an option to perform or pay damages.  "This is absolutely unprofessional in every way," he said.  "It's gutless. Spineless. They're going to have to live with it. I've lost a tremendous amount of respect for that program.  I think that for college athletics, it's shameful."

Today in history—December 19

1732: Printer Benjamin Franklin begins publication of his popular Poor Richard’s Almanack under the pseudonym Richard Saunders.  From the first issue:

God works wonders now & then;
Behold! a Lawyer, an honest Man!

1814: Edwin M. Stanton (left) is born in Steubenville, Ohio.  He will later give up a very lucrative legal practice to become attorney general under President Buchanan and Secretary of War under President Lincoln, but will die just four days after being confirmed to the U.S. Supreme Court.

1871 A major advance in the history of the cardboard box, as Albert Jones receives a patent for corrugated paper.

1843: Charles Dickens has a runaway best-seller with a short new work called A Christmas Carol.

1849: Henry Clay Frick, who will become a sometime competitor and sometime partner of Andrew Carnegie before going on to co-found U.S. Steel, is born in West Overton, Pennsylvania.

1917 The new National Hockey League, successor of the old National Hockey Association, begins play with five teams:: Montreal Canadiens, Montreal Wanderers, Ottawa Senators, Quebec Bulldogs, and Toronto Arenas.  Only the Canadiens and the Arenas (now known as the Maple Leafs) survive.

1918 Believe it or not, Robert Ripley begins a regular newspaper column about odd stuff in the New York Globe.

1960: After years recording for Columbia Records, Frank Sinatra holds his first recording session for the new label he’s created for himself, Reprise Records. The first cut is Ring-A-Ding-Ding.

1968: Norman Thomas, the Presbyterian minister who ran six times for President on the Socialist ticket and co-founded the ACLU, dies. People who agreed with him called him "America’s Conscience." Those who didn’t, didn’t.

1973: The Great Toilet Paper Shortage begins with Johnny Carson’s remark on The Tonight Show that the U.S. was facing a shortage of the stuff. Toilet paper begins flying off supermarket shelves, but it was only a joke.

1997: Earth’s highest-grossing film, Titanic, opens. It will gather in $1.8 billion worldwide.

Scots shopkeepers scalping stamps

Some shopkeepers in Scotland are apparently in breach of their contracts with the Royal Mail for selling stamps at above face value.  At several locations, say members of a group called Postwatch, the price of a 28p first-class stamp is 30p, while one store is apparently selling 21p second-class stamps for 26p.

Selling stamps above face value is not illegal, but the owners have contracts with the Royal Mail, which says it takes such things "very seriously" and is investigating.  (Left, the pillar box at Edinburgh Castle.)