ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, May 26, 2005

News in brief

Despite student protests, key committees at the University of California have approved plans to bid for the management contract for the Los Alamos nuclear weapons lab.

Australia is getting new regulations to liberalize the grounds on which employers can terminate employees and cut back on the right of appeal.

A contractor who says it was driven out of business by the University of North Carolina is seeking more than $2 million for breach of contract and deceptive trade practices.

A French coach has been hit with a $1.13 million breach of contract penalty by FIFA for leaving a soccer team in the United Arab Emirates for one in Qatar.

The U.S. government awarded $11 billion in prime IT-related contracts in the second quarter of fiscal 2005; that's actually down 40 percent from the preceding quarter.

Three British teenagers who have "wreaked havoc" in the town of Caversham by intimidating people, stealing cars, and wrecking property, have signed "Anti-Social Behaviour Contracts" promising to stop.

The investment firm that has a $1.2 billion deal to buy Boeing's commercial aircraft division says it won't exercise its option to walk away after workers rejected a new contract.

Potato farmers in Tasmania will be hit by McDonald's decision to split its Australian french-fry contract between two suppliers, one of which will be in New Zealand.

May 26, 2005 in In the News | Permalink | TrackBack (0)

Cases: No copyright preemption in contract claim

An author’s breach of contract claims against a publisher for violation of a publication agreement are not preempted by federal copyright law, according to a new decision by the Massachusetts Court of Appeals.

The case involved author Misha Levy Defonseca, a Holocaust survivor whose harrowing story of survival as a 7-year-old in hiding became a best-seller in several countries, though not in the U.S.  The story of the publishing fiasco she entered when she signed a deal with a shady fly-by-night publisher, detailed in Lee v. Mt. Ivy Press, L.P., is also harrowing in its way.  Ultimately, she and her co-author Vera Lee won verdicts of $22.5 million and $9 million respectively against the publisher.  On appeal, the publisher argued that there was no jurisdiction in the Massachusetts courts because the basic claim, that the publisher involved in various machinations to steal all the profits from the book, was rooted in copyright.

A contract claim is preempted, said the court, if it’s essentially the same as a copyright claim—as when the publisher exercises a right reserved to the author.  But where there are other provisions that are breached, the claim isn’t preempted.  Here, in addition to publishing the work in some countries without authority, the publisher engaged in other breaches, such as failing to pay royalties, do sufficient publicity, and give the co-author proper credit.  The contract claim was therefore properly before the court and verdict was affirmed.

May 26, 2005 in Recent Cases | Permalink | TrackBack (0)

The uniformity paradox in sales law

Commercial parties tend to like clear rules because they allow for more accurate planning.  Those who are trying to gain uniformity in contract law like flexible (or vague) standards, because it's easier to get agreement across jurisdictions.  Thus, growing uniformity paradoxically creates more uncertainty.

That's the thesis of Clay Gillette (NYU) and Bob Scott (Virginia) in a provocative new paper, The Political Economy of International Sales Law.  They focus their attention on the Convention on Contracts for the International Sale of Goods, using its development as an illustration of the process.  Click on the "continue reading" link for the abstract.

Continue reading

May 26, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Today in history—May 26

1328: William of Ockham departs from the Papal court at Avignon in some haste after he calls Pope John XXII a heretic.

1538: John Calvin is expelled from Geneva after the City Council refuses his demand to adopt the new creed he has drawn up.  He'll be invited back in 1541, and will rule the city until his death.

1830: The U.S. Congress passes the Indian Removal Act, which gives authority to President Jackson to negotiate for the removal of Native American tribes to lands west of the Mississippi.  Tennessee Congressman David Crockett is a vocal opponent of the bill.

1885: Asa Yoelson is born in Seredzius, Lithuania, the son of a cantor.  As Al Jolson, he'll be the first singer to sell one million records and will become the most popular entertainer in the first half of the 20th century.

1896: Charles Henry Dow issues the first Dow Jones Industrial Average.  Only one company on the original list is still there: General Electric.

1897: A novel by an unknown author goes on sale in London to decidedly mixed reviews.  Word of mouth will soon make Bram Stoker's Dracula a best-seller.

1907: American icon John Wayne is born Marion Michael Morrison in Winterset, Iowa.  His first job in show business comes when he swaps Southern Cal football tickets to Tom Mix in exchange for a summer job in a studio prop department.

1908: The first commercially successful oil strike in the Middle East is made at Masjid-al-Salaman in Iran.

1933: The "Singing Brakeman," James Charles "Jimmie" Rodgers, dies of tuberculosis at the Taft Hotel in New York City.  His career began in 1927 when he answered a newspaper ad seeking performers for the Victor Talking Machine Co. of Camden, New Jersey.

1938: The House Un-American Activities Committee holds its first session.  Under Chairman Martin Dies, it will lead witch hunts after Nazi sympathizers and suspected Klansmen.

1978: Casino gambling comes to the East Coast, as the Resorts International casino opens in Atlantic City.

1986: The European Community adopts a new flag, which critics say looks rather like an airline logo.

2002: The Mars Odyssey probe finds water on Mars, which would be more useful if there were air, too.

May 26, 2005 in Today in History | Permalink | TrackBack (0)

Revised Article 1 Update (5/25)

As legislative sessions draw near to adjournment in many states, here is a quick update on the status of Revised Article 1. Thus far this year, Arkansas, Montana, Nebraska, New Mexico, and Oklahoma have enacted versions of Revised Article 1, bringing the total number of enacting states to 12. All twelve enacting states have rejected uniform R1-301 in favor of language similar to existing 1-105 and five (Alabama, Hawaii, Idaho, Nebraska, and Virginia) have rejected uniform R1-201(b)(20) in favor of retaining the current definitions of "good faith" in Articles 1, 2, 2A, 3, 4, 4A, 8 & 9. Otherwise, the enacting states have made few if any change to the text of uniform Revised Article 1.

Yesterday (5/24), the Connecticut Senate unanimously approved HB 6985, and today (5/25) the Nevada Assembly did likewise to SB 201, clearing the final legislative hurdle to enactment in their respective states. Once each bill is transmitted to Governors Jodi Rell and Kenny Guinn, respectively, each will have five calendar days (excluding any Sunday or legal holiday falling within the five day period) to sign or veto the bill before it is deemed enacted as a matter of law. Given the looming Memorial Day weekend, it will likely be next week before either governor acts. As do their twelve predecessors, Connecticut HB 6985 and Nevada SB 201 reject uniform R1-301 in favor of language similar to existing 1-105. As do seven of their predecessors, HB 6985 and SB 201 opt for uniform R1-201(b)(20) over retaining the current definitions of "good faith" in Articles 1, 2, 2A, 3, 4, 4A, 8 & 9.

Illinois SB 1647, which the Illinois Senate approved unanimously before either Connecticut HB 6985 or Nevada SB 201 made it out of their originating houses, appears to have stalled. After languishing on the House Executive Committee's docket for more than two weeks, it was re-referred by rule to the Rules Committee, from which it is unlikely to emerge.

The bills introduced earlier this year in Arizona, Kansas, New Hampshire, and West Virginia died on the vine.

May 26, 2005 in Legislation | Permalink | TrackBack (0)

Wednesday, May 25, 2005

Regulation + market + contract = best rates

Ontario has a new system for regulating electricity prices in the province, which is said to be a blend of regulatory, contract, and market mechanisms.  Under the new plan, municipalities, hospitals, and users who consume up to 250,000 kWh—that’s pretty much all but large businesses—will see their electricity prices capped.  Those who consume more will leave the province.

Just kidding.  Most of them will probably stay.  But the convolutions of the Ontario plan are laid out in a client memo from William McLean at Canada’s Borden Ladner Gervais LLP.

May 25, 2005 in Commentary | Permalink | TrackBack (0)

Cases: Insurance exclusions

South_carolina_flag An exclusionary clause in a South Carolina insurance contract is to be given force even if the excluded activity did not proximately cause the claimed loss, according to the U.S. Court of Appeals for the Fourth Circuit in a recent unpublished decision.

In the case, American Automobile Insurance Co. issued professional liability policies to three insurance brokers.  The brokers sold health insurance policies to individuals.  The health insurer, however, failed, leading to claims by the customers of the brokers.  The brokers demanded coverage from American.  The policies contained a provision excluding :

Any claim arising out of the insolvency, receivership, bankruptcy, liquidation or financial inability to pay of any organization in which the INSURED has (directly or indirectly). . . placed the funds of a client or account or in which any person has invested as a result of consultation with INSURED.

Since these claims all arose because of the failure of the other insurer, they were excluded, said the court.  The district court had held that the brokers’ losses were not proximately caused by the excluded events, but that was irrelevant, since there is no proximate cause requirement for an insurance policy exclusion.  Declaratory judgment for American should have been entered.

American Automobile Insurance Co. v. Valentine, 2005 U.S. App. LEXIS 8601 (4th Cir. May 13, 2005).

May 25, 2005 in Recent Cases | Permalink | TrackBack (0)

Lending to the military

Whether you think that "predatory" lenders "target"  vulnerable people, or that "high risk" lenders offer a valuable service to cash-strapped individuals who don't qualify for overdraft protection, some actual data never hurts.  Christopher Lewis Peterson (Florida Law) & Steven M.  Graves (CSU Northridge), Predatory Lending and the Military: the Law and Geography of “Payday” Loans in Military Towns, are firmly in the "predator" camp, but they collect a lot of data.  Click on "continue reading" for the abstract.

Continue reading

May 25, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Today in history—May 25

735: St. Bede the Venerable dies in his monk's cell at Jarrow, Northumberland.  He's known as the father of English history for his  Historia ecclesiastica gentis Anglorum, but he also invented the footnote.

1085: Alfonso VI of Leon and Castile retakes Toledo, the old capital of Christian Visigothic Spain, from the Moors who have held it for 200 years.

1659: Richard Cromwell, who never wanted the job, resigns as Lord Protector of England, leaving the way clear for the eventual restoration of Charles II.

1879: William Maxwell Aitken, the archetype of the untutored British press lord and 1st Baron Beaverbrook, is born at Maple, Ontario.

1885: Igor Sikorsky is born at Kiev in the Russian Empire.  Emigrating to the U.S. after the Bolshevik Revolution, he'll design the first practical helicopter and found what is now the Sikorsky Aircraft division of United Technologies.

1895: The first republic in Asia is born, as the Republic of Taiwan is proclaimed.  It is quickly subdued by the Japanese.

1914: The British Parliament passes the Government of Ireland Act, providing for eventual Irish home rule.  World War I and the Easter Rising in 1916 will intervene to make it a dead letter before it can go into effect.

1925: John T. Scopes is indicted by his friends in the District Attorney's office in a bid to bring some publicity to Dayton, Tennessee.  One curious aspect of the subsequent Monkey Trial is that there was a section on evolution in the required text approved by the State Board of Education.

1963: The Organization of African Unity is founded to promote the unity and solidarity of African states.

1968: Vice President Humphrey, campaigning for President, dedicates the new Gateway Arch in St. Louis, which some describe as the world's largest croquet wicket.

1981: Dubious about the success of an oddball film with a cast of unknowns, Twentieth Century-Fox opens its new film Star Wars in only 37 theaters.

May 25, 2005 in Today in History | Permalink | TrackBack (0)

Tuesday, May 24, 2005

UK settlements: Be specific

Drafting settlement agreements in employment disputes is going to be more difficult in the U.K.  In a recent decision the Court of Appeal knocked out attempts to use a broad phrase like “in full and final settlement of all statutory rights” on grounds that the Employment Rights Act 1996 requires that settlement agreements must specifically “relate to the particular proceedings.”

Lawyers Simon Jeffreys, Alexander Green, and Anthony Fincham of London’s CMS Cameron McKenna LLP have advice for those who have to draft agreements to settle employment claims.

May 24, 2005 in Commentary | Permalink | TrackBack (0)

Today in history—May 24

1487: Ten-year-old imposter Lambert Simnel is crowned as "Edward VI" at Dublin.  It doesn't work, and he will find himself with a job as a turnspit in King Henry VII's kitchen.

1543: Canon lawyer Nicolaus Copernicus dies, willing his papers, including his De revolutionibus, to his close friend, the Bishop of Warmia, who has them published.

1626: In one of the largest private real estate transactions to date, Peter Minuit buys Manhattan Island for the Dutch West India Company for 60 guilders in trade goods.

1689: The English parliament passes the Act of Toleration, which disenfranchises Catholics.

1787: A convention to discuss drafting a new constitution to replace the Articles of Confederation meets in Philadelphia, Pennsylvania.

1839: Mary Josepha Hale publishes a new poem, Mary Had a Little Lamb, which apparently is based on a real incident at a schoolhouse in Sterling, Massachusetts.

1844: Samuel F.B. Morse sends the first electric telegraph message between Baltimore and Washington, D.C.  He asks "What has God wrought?"   Many people still wonder that about Washington.

1870: Benjamin Nathan Cardozo is born in New York City.

1883: After fourteen years of construction, the Brooklyn Bridge opens in New York City.

1899: The first multi-story parking garage opens in Boston, Massachusetts.

1929: The film The Cocoanuts, "Paramount's All Talking-Singing Musical Comedy Hit!," opens.  It's the first screen appearance of the Marx Brothers.

1958: United Press and the International News Service merge to form United Press International.

1980: The International Court of Justice calls on Iran to release American hostages taken from the U.S. Embassy.  Impressed, the Iranians release them just seven months later.

May 24, 2005 in Today in History | Permalink | TrackBack (0)

Monday, May 23, 2005

Weekly Top Ten

Readers just can't seem to get enough of that good old government contract law.  That seems to be the message as Steven Schooner and Christoper Yukins have yet another hot-selling article at the top of the charts this week.  Following are the top ten most-downloaded papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending May 22, 2005.

1 (1) Risky Business: Managing Interagency Acquisition, Steven L. Schooner (George Washington)

2 (–) Commentary on the Acquisition Workforce, Steven L. Schooner & Christopher R. Yukins (George Washington)

3 (2) Putting Identity Theft on Ice: Freezing Credit Reports to Prevent Lending to Impostors, Chris Jay Hoofnagle (Electronic Privacy Information Center)

4 (3) There Are No Penalty Default Rules in Contract Law, Eric A. Posner (Chicago)

5 (4) A Normative Theory of Business Bankruptcy, Alan Schwartz (Yale)

6 (5) Institutions, Incentives, and Consumer Bankruptcy Reform, Todd J. Zywicki (George Mason)

7 (6) Pricing Legal Options: A Behavioral Perspective, Oren Bar-Gill (NYU)

8 (7) The Role of Groups in Norm Transformation: A Dramatic Sketch, in Three Parts, Robert B. Ahdieh (Emory)

9 (8) Free Markets Under Siege, Richard A. Epstein (Chicago)

10 (10) On-line Consumer Standard-Form Contracting Practices: A Survey and Discussion of Legal Implications, Robert A. Hillman (Cornell)

May 23, 2005 in Recent Scholarship | Permalink | TrackBack (0)

Cases: The Velcro Don

John Gotti has lost a good many arguments under the criminal laws, and now he’s lost one based on breach of contract.

A New York federal court has held that Gotti’s 1999 plea bargain on RICO, loan sharking, and tax charges, did not bar the government from proceeding against him on new charges.  Gotti’s plea agreement stated, “The Offices have no present intention to indict defendant Gotti for additional crimes based on the evidence currently known to the Offices.”  When prosecutors went after him on more RICO charges in June 2004, Gotti moved to dismiss the indictment based on the 1999 plea agreement.

Sorry, said the court.  The court analyzed the agreement as a contract, but noted that it was proper to take parol evidence into account in deciding whether the government’s representation was a promise.  The court noted that during negotiations Gotti had repeatedly asked for assurances that he would not be prosecuted again, which the prosecutors refused to give him.  The prosecutors insisted on the “no present intention” language, which, said the court, did not create a promise.  Motion denied.

United States v. Gotti, 2005 U.S. Dist. LEXIS 9031 (S.D.N.Y. 2005).

May 23, 2005 in Recent Cases | Permalink | TrackBack (0)

Call for papers: Social Science Research

The Section Annual International Conference on Social Science Research will be held December 4-6, 2005, at the Hilton Hotel Orlando in Florida.   The Call for Papers is out; deadline is September 15.  Click on the “continue reading” link for the announcement.

Continue reading

May 23, 2005 in Conferences | Permalink | TrackBack (0)

Bankruptcy Act limits executive benefits

One aspect of the new Bankruptcy Act that didn’t get much air time is a provision that restricts the ability of trustees to make big payments to company execs to keep them aboard during a reorganization.  Under the new act, say Joseph Adams, Jennifer Miani and Karen Simonsen of McDermott Will & Emery in a new client advisory,  there are new guidelines that, among other things, prohibit such payments unless the individual already has a bona fide job offer at the same or higher salary.

May 23, 2005 in Commentary | Permalink | TrackBack (0)

Today in history—May 23

1568: The long struggle for independence of the Netherlands begins with the Battle of Heiligerlee, as rebels under Louis of Nassau defeat a small Imperial army.

1609: The Virginia Company of London, a joint-stock enterprise founded to colonize America, receives its second royal charter.

1783: Former Massachusetts Attorney General James Otis, who gave up his job rather than execute illegal writs and who said, "Taxation without representation is tyranny," dies after being struck by lightning.

1788: South Carolina becomes the eighth state to ratify the new U.S. Constitution.

1875: Alfred Pritchard Sloan, Jr., is born at Mew Haven, Connecticut.  At age 24 he will become president of a small ball-bearing company, which through various mergers will ultimately become General Motors.

1910: Arthur Jacob Arshawsky (a/k/a Artie Shaw), the clarinetist and bandleader who will earn $30,000 a week during the Depression, is born in New York City.

1923: Belgian air carrier Société Anonyme Belge d'Exploitation de la Navigation Aerienne, better nown as SABENA, is founded.  It will go bankrupt in 2001.

1934: Bank robbers Clyde Barrow and Bonnie Barker are ambushed and killed by police at Black Lake, Louisiana.

1937: James Davison Rockefeller dies at Ormond Beach, Florida.  On a scale of the richest Americans by share of Gross National Product, he's number one.

1949: The Grundgesetz für die Bundesrepublik Deutschland, the constitution of modern Germany, comes into effect.

1999: Wrestler Owen "The Blue Blazer" Hart falls 90 feet to his death during a live pay-per-view wrestling program in Kansas City.  The audience believes it's part of the show and give him a big round of applause as paramedics carry him out.

May 23, 2005 in Today in History | Permalink | TrackBack (0)

Sunday, May 22, 2005

Cases: Liquidated damages subsumed in fraud

California_flag_4 An unpublished California decision shows some offbeat damages calculations in a case involving a liquidated damages clause in a fraud situation.

Two men, Tumanjan and Capazzola, owned Dante's Inferno, a sports bar, and Dante's Italian Cuisine, a family-style restaurant.  These two businesses shared the same address and the same liquor license.  When Dante's Italian Cuisine went under, Tumanjan and Capazzola leased the property to RiLoRo, Inc.  Under the deal, RiLoRo would open a new restaurant, Cucina Paradiso.  The contract contained the following clause:

Lessor shall be responsible for providing Lessee with use of Lessor's liquor/wine/beer license. If Lessee does not have full use of a type 47 bona fide liquor license, Lessee shall have the right to terminate the lease and all funds paid by Lessee ($ 103,750.00) shall be returned within thirty (30) days upon return of all personal property.

Turns out that there were, however, problems with the liquor license.  First, Dante’s had no right to let someone else use the liquor license, and second, the license was already under investigation because Capazzola was a convicted felon and ineligible for a license.  Three years after Cucina Paradiso started operating, the ever-vigilant state ABC authorities finally got around to noticing the problems and suspending the license.  RiLoRo sued, claiming fraud.

The trial court, no piker when it comes to damages, managed to award liquidated damages ($103,750), reliance damages ($450,000) and “benefit of the bargain” damages ($300,000).   This was too much for the court of appeals, which tossed the liquidated damages award as duplicative, found the evidence insufficient for the expectation measure, and stuck with the $450,000 as damages for the fraud.

RiLoRo, Inc. v. Tumanjan, 2005 Cal. App. Unpub. LEXIS 4221 (Cal. Ct. App. May 12, 2005).

May 22, 2005 in Recent Cases | Permalink | TrackBack (0)

Contracts and strategic alliances

Wisconsin's Gordon Smith has a new paper out that will be of particular interest to those who are interested in business associations as well as contracts.  It's called The Exit Structure of Strategic Alliances, and it's forthcoming in the Illinois Law Review.  Here's the abstract:

Today, many biotechnology firms use strategic alliances to contract with other companies.  This article contends that the governance structure of these alliances—specifically, the “contractual board”—provides an integrated restraint on opportunism.   While an alliance agreement’s exit structure could provide a check on opportunism by allowing the parties to exit at will, such exit provisions also can be used opportunistically.  Most alliance agreements, therefore, provide for contractual “lock in” of the alliance partners, with only limited means of exit.  Lock in, of course, raises its own concerns, and the contractual board—which typically is composed of representatives from each alliance partner, each wielding equal power—addresses these concerns about opportunism via the potential for deadlock.

May 22, 2005 in Recent Scholarship | Permalink | TrackBack (0)

California mandates supervisor training

California has a new law requiring all firms with 50 or more employees to give mandatory sexual harassment training to all “supervisory employees.”  Training is to be done by January 1, 2006, and must be repeated every two years thereafter.

There are minimal penalties for violation but, as Richard J. Frey of McDermott Will & Emery reports in a client advisory, plaintiffs’ lawyers will almost certainly zero in on compliance as part of their cases, so it will be a good idea for employers to comply.    One difficulty with the new law is that it neither defines who counts as a “supervisory employee” nor specifies what kind of training is sufficient.

May 22, 2005 in Commentary | Permalink | TrackBack (0)

Today in history—May 22

337: A few weeks after he is baptized by Bishop Eusebius, Flavius Valerius Constantinus, who will be known to history as Constantine I, dies at Nicomedia (now Izmit, Turkey).

1807: Former U.S. Vice President Aaron Burr is arraigned before a grand jury in Richmond, Virginia, on a charge of treason.  It's the fourth time the government has tried, and this time the jurors issue a true bill.

1819: The Savannah Steamship Co.'s first vessel, the S.S. Savannah, leaves the harbor to become the first steamship to cross the Atlantic.  Even after a successful round-trip voyage her owners can't convince passengers or shippers to trust the "Steam Coffin," so her engines are removed and she's turned into a sailing ship.

1826: Christopher Columbus Langdell is born in New Boston, New Hampshire.

1856: South Carolina Congressman Preston Brooks savagely beats the seated, unarmed Senator Charles Sumner with a cane on the floor of the U.S. Capitol.  Admiring students at the University of Virginia vote to present Brooks with a fine new cane.

1859: Sir Arthur Ignatius Conan Doyle is born at Edinburgh, Scotland.  He will become a physician, but won't get patients.  He will become a politician, but won't get elected.  He'll write serious stuff, but will only be remembered for detective stories.

1872: President Grant signs the Amnesty Act, restoring civil rights to all but about 500 persons who took part in the recent unpleasantness.

1893: Karl Nickerson Llewellyn is born in Seattle, Washington, on C.C. Langdell’s 77th birthday.

1908: Orville and Wilbur Wright receive a patent for the airplane.

1922: Television Producer Quinn Martin (The Untouchables, The Fugitive, 12 O'Clock High, The FBI, Cannon, Streets of San Francisco, Barnaby Jones) is born Martin Cohn, in New York City.

1967: The first episode of a new children's TV series airs on WQED in Pittsburgh, Pennsylvania.  It stars an ordained Presbyterian minister and is called Mister Rogers' Neighborhood.

1992: Johnny Carson ends a 30-year run as host of the Tonight Show on NBC.  A lot of your students think that the host has always been Jay Leno.

May 22, 2005 in Today in History | Permalink | TrackBack (0)