Tuesday, December 20, 2005
Renting something is a contractual relationship. Owning something isn't -- it's a status relationship against the whole world. If a system isn't good at enforcing contractual rights, might we expect to see less renting and more owning? Does the state's contract law regime affect allocation of ownership rights?
Pablo Casas-Arce (Oxford-Economics) and Albert Saiz (Penn-Wharton) (left) look at that question in a new paper, Do Courts Matter? Rental Markets and the Law. Here's the abstract:
We argue that the allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement is costly, there will be a shift from
contractual arrangements that rely on such enforcement (such as a rental agreement) towards other forms that do not (such as direct ownership). We then test this prediction on data on the rental housing market, and show that costly enforcement of rental contracts hampers the development of such a market in a cross-section of countries. We argue that this association is not the result of reverse causation from a developed rental market to more investor-protective enforcement. The results provide supportive evidence on the importance of contract enforcement for the development of financial and other markets.
The audience at Dixie Chicks concerts is about 70 percent female, and that can lead to problems -- at least with respect to restrooms. The Chicks concert contract specifically requests arenas to take steps to ease the jam, by turning some men's restroom into temporary women's facilities, or using some backstage facilities ordinarily off-limits to patrons. The contract provides that this isn't "mandatory," though. You can see the contract at The Smoking Gun.
The obvious question would be whether a promoter would have a "good faith" obligation to at least try to fulfill a term that the contract says isn't "mandatory."
New York City transit workers are striking, shutting down the New York City subway system. From news reports it appears that the failure to reach a contract is centered around the issue of pension benefits. As reported by the New York Times, this type of strike has not happened in twenty-five years.
Monday, December 19, 2005
In Oregon, ORS 653.295 provides that a noncompetition agreement is unenforceable unless certain conditions are met. For example, under the statute, a noncompete is only enforceable if it was signed at the initial time of employment. In a recent case, an Oregon appellate court addressed an employee’s suit to enforce a noncompete -- the employer was attempting to get out of its payment obligations under the noncompete by claiming that the agreement was executed during the course of employment and, therefore, was not enforceable.
Here's what happened:
Plaintiff was hired by defendant in 1973 to work as its chief engineer. In 1996, plaintiff planned to retire and informed defendant of that fact. To induce plaintiff to continue in its employ, defendant offered and plaintiff agreed to a two-year, part-time employment contract "following your retirement on August 3, 1996. The employment contract provided that plaintiff would work up to 300 hours per year at $1,040 per month, and would receive medical benefits equivalent to what he had received as a full-time employee during the two years of the contract and for an additional eight years following. The contract also specified that [plaintiff’s work would no longer include production engineering, field engineering or field service, but would include consulting on design and sales assistance.]
The part-time employment contract was also subject to plaintiff's entering into a noncompetition agreement with defendant. The noncompetition agreement recited that "[plaintiff] intends to retire on August 3, 1996, and [defendant] desires to have an agreement with [plaintiff] not to compete" and provided that defendant would pay plaintiff $30,000 per year for a period of ten years as consideration for the agreement, to begin on August 3, 1996. The noncompetition agreement specified that plaintiff would not directly or indirectly compete or disclose information he learned or obtained while working for defendant that was not already available to the public. In the event of plaintiff's death, payments due under the contract would be made to a person specified by plaintiff, provided that his estate was bound by the terms of the agreement. In 1998, the part-time employment contract was modified by the parties to extend it an additional eight years, until 2006. Under the modification, plaintiff agreed to work up to 200 hours per year for $1,200 per month, with medical benefits to continue throughout the period of the contract and up to eight years following its expiration.
The employer made the payments required under the noncompetition agreement until 2003, when it declared the agreement "void and not enforceable" under ORS 653.295. The employer argued that the noncompete was executed after the employee’s initial employment. The employee sued for breach of contract. The appellate court affirmed the decision of the trial court and enforced the noncompete.
After reviewing the statutory history of the phrase “initial employment,” the court held that:
because plaintiff's new employment relationship with defendant began after he retired and because his employment was as a consultant rather than as a chief engineer, the noncompetition agreement is enforceable under the statute. Here, plaintiff gave notice to defendant that he intended to retire on August 3, 1996. With his retirement on that day, plaintiff's employment relationship as chief engineer with defendant ended. But for the new agreement to employ plaintiff as a consultant, there would have been no employment relationship between them. The subsequent agreement to employ plaintiff in a different capacity as a consultant operated to create a new employment relationship that had not existed before. Under the agreement that employed him as a consultant, plaintiff's job responsibilities and working hours decreased dramatically, resulting in a completely different employment relationship from the one that had existed previously.
The court noted that its reasoning was consistent with “the legislature's intent to protect employees from the coercive effect of employers requiring a noncompetition agreement in the midst of the employment term as a condition of continued employment.” Because the employee intended to retire, the employer “lacked the leverage of a continuing employment relationship that concerned the legislature.”
McGee v. The Coe Manuf. Co. (Or. Ct. App. Dec. 7, 2005).
[Meredith R. Miller]
Sunday, December 18, 2005
When you live in a country where courts aren't particularly good at working with the U.N. Convention on Contracts for the International Sale of Goods, it's kind of nice to see your neighbors having the same difficulties.
Canada, for example. In the recent case of GreCon Dimter Inc. v. J.R. Normand Inc., the Supreme Court of Canada muffed it, says Antonin I. Pribetic (Steinberg Morton Frymer LLP) in a new paper on SSRN, The (CISG) Road Less Travelled. Here's the abstract:
At first glance, the Supreme Court of Canada's recent decision in GreCon Dimter Inc. v. J.R. Normand Inc. appears to be a case upholding the primacy of international commercial arbitration, choice of forum and choice of law clauses. Upon closer scrutiny, however, the Supreme Court of Canada failed to consider the application of the UN Convention on Contracts for the International Sale of Goods (CISG) to the overall dispute. Interestingly, the same choice of forum and choice of law clauses were considered by the United States Court of Appeals a year earlier in GreCon Dimter, Incorporated v. Horner Flooring Company, Incorporated. In either of the Canadian and American GreCon decisions, the parties' (and their respective counsel's) characterization of the legal issues, including jurisdictional arguments, ultimately guided the domestic forum court's jurisprudential analysis. Unlike GreCon v. Horner, choice of forum remained a live issue when it reached the Supreme Court of Canada in GreCon v. Normand. In both cases, the parties' choice of law remained an important, but not exclusive, factor in the domestic court's overall determination of proper forum. While the Supreme Court of Canada did not address the applicability of the CISG in GreCon v. Normand, perhaps another opportunity awaits Canada's highest court to contribute to the CISG's global jurisconsultorium.
Actor/comedian Dave Chappelle has been sued by his ex-manager, who claims Chappelle owes him more than $800,000 in fees for jobs the manager negotiated. The Smoking Gun has a copy of the complaint here.
United Press International, which has only the vaguest idea of the rules of evidence and the statute of frauds, says that the manager has "no proof" of his claim, since the agreement wasn't reduced to writing.
Typepad has apparently got its problems fixed, so we're back on the air as of today. To echo the old motto of the New York subway system, "We apologize for the inconvenience, and thank you for your cooperation."
Remember we're not liable for consequential damages for the downtime and your remedy is limited to the amount paid to visit the site.
Saturday, December 17, 2005
Friday, December 16, 2005
The new issue of Vincent Polley's invaluable Miscellaneous IT Related Legal News is out. Some highlights for contracts folks:
* An Oregon court holds that the Communications Decency Act bars a contract claim based on an ISP's promise to remove material.
* The U.N. General Assembly officially approved UNCITRAL's new Convention on Electronic Communications in Contract, which will be signed next June.
* BellSouth has withdrawn its offer to give a damaged building to the City of New Orleans for use as a police station after the city announced plans to build a city-owned wireless network that would be free for everyone.
* A California appellate court has held Earthlink's arbitration and forum selection clauses in its click-through agreement are invalid as against public policy.
Thursday, December 15, 2005
On this date, December 15, 1913, construction was supposed to be finished on the home of George Edward Kent and his wife Lillias Grace Kent at the Long Island hamlet of Jericho in the town of Oyster Bay, New York. But Kent and his builders, Jacob & Youngs, had agreed to additional work, so they subsequently agreed to a contract modification extending the completion date indefinitely. It was going to be an expensive house: about $80,000 for construction. (That's about $1.5 million today using the consumer price index, but $24 million using relative share of GDP.) After construction was finished, of course, a dispute would arise because the contractor used the wrong pipe, leading to the decision one of Cardozo's tours-de-force in Jacob & Youngs v. Kent.
Jericho at the time was a rural hamlet of less than 600 people, chiefly Quaker farmers. (Pictured: Two scenes of Jericho, 1909). It lay on the Jericho Turnpike, an ancient road that connected Jamaica to New York City, which made it convenient for a lawyer like Kent who kept an office in the City. Other famous residents found the area pleasant, including Theodore Roosevelt, whose Summer White House was at nearby Sagamore Hill.
The Kent residence has not survived. Some information about it, including an image of the site plan, is available from the Philadelphia Athanaeum's web site, which reports that the building, including the extensive gardens by the Olmstead Brothers, were subsequently demolished.
In the latest issue of the Yale Law Journal's "Pocket Part" feature, Professor John Goldberg of Vanderbilt argues in The Constitutional Status of Tort Law that there are constitutional limitations on the ability of legislatures to regulate and restrict tort causes of action, at least for consumers.
We here don't know much about the merits of tort reform, but the bright student editors of the YLR seem to. The piece is accompanied by the following on the YLJ web site:
. . .
NO WARRANTIES. THE YALE LAW JOURNAL COMPANY, INC. MAKES NO REPRSENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE POCKET PART, INCLUDING ANY OF THE CONTENT OR INFORMATION CONTAINED ON THE SITE. ALL CONTENT IS PROVIDED ON AN "AS IS" BASIS. THERE IS NO WARRANTY AGAINST INTERFERENCE WITH YOUR ENJOYMENT OF THE SITE, OR OF UNINTERUPTED SERVICE OR OTHER FUNCTIONALITY, INCLUDING LINKS TO OTHER WEBSITES, NOR ANY WARRANTY THAT THE SITE IS FREE OF DEFECTS, VIRUSES OR OTHER HARMFUL COMPONENTS.
NO LIABILITY. IN NO EVENT SHALL YALE UNIVERSITY, THE YALE LAW JOURNAL COMPANY, INC., THEIR EMPLOYEEES, AGENTS, EDITORS OR ANY OTHER PARTY, THAT HAS BEEN INVOLVED IN THE CREATION, PRODUCTION AND/OR DELIVERY OF THE POCKET PART BE LIABLE FOR ANY CLAIMS, LIABILITIES, LOSSES OR EXPENSES OF ANY KIND INCLUDING WITHOUT LIMITATION, ANY DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, SUCH AS, BUT NOT LIMITED TO: LOSS OF ANTICIPATED PROFITS, BENEFITS, OR USE OF DATA, EVEN IF ANY OF THEM HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND EVEN IN THE EVENT OF FAULT, TORT (INCLUDING NEGLIGENCE) OR STRICT OR PRODUCTS LIABILITY OR MISREPRESENTATION.
In the wake of the Jessica Simpson/Nick Lachey breakup, the Associated Press ran a story about celebrity pre-nuptial agreements. It turns out that Simpson and Lachey don't have one, which means that Simpson is probably going to be writing a big check to Lachey at some point.
More interestingly, the article discusses wacky clauses that celebrities have put into their pre-nup contracts, such as:
- Limiting the wife's weight to 120 pounds or she must relinquish $100,000 of her separate property.
- Allowing a spouse to perform random drug tests, with financial penalties for positive results.
- Requiring a husband to pay $10,000 each time he is rude to his wife's parents.
- No mother-in-law sleepovers.
- Only one football game per Sunday.
- Mandatory sexual positions.
I often wonder if clauses like these have enforceable remedies. I can see judges potentially enforcing the first three covenants because they are coupled with liquidated damages clauses (although a judge might think it's unreasonable to award $100k award for going 1 pound over 120). In contrast, I think the last example might be a good illustration of a remediless covenant. Without getting too vulgar, I'm skeptical that a judge would assess damages for breach, and I'm 100% confident that a judge will not order specific performance!
When two parties have entered into a contract to carry out some sort of work, they usually agree to a final date for performance. During performance, however, they may agree to change the requirements. What happens if they agree to a change, but don't address the issue of the final date of performance? The building project in Jacob & Youngs v. Kent (see next entry) was one of these kinds of deals.
In the U.K., this is dealt with by the concept of "time at large," which usually means the work must be done in a "reasonable" time. Adrian Bell of London's CMS Cameron McKenna LLP offers a rundown in "Time at large" and Termination of Contracts for Delay.
On this day in …
1791, the Bill of Rights went into effect following ratification by Virginia
1916, the French defeated the Germans in the World War I battle of Verdun
1938, groundbreaking ceremonies for the Jefferson Memorial took place in Washington, D.C.
1965, two U.S. manned spacecraft, Gemini 6 and Gemini 7, maneuvered to within 10 feet of each other while in orbit
I agree that any claim or lawsuit relating to my service with [DiamlerChrysler] or any of its subsidiaries must be filed no more than six (6) months after the date of the employment action that is the subject of the claim or lawsuit. I waive any statute of limitations to the contrary.
In 2001, the company had forced Clark into early retirement as part of a "salaried workforce reduction." He worked his last day on August 31, 2001. On September 8, 2003, Clark filed an action against the company, alleging age discrimination. The trial court applied the shortened 6-month statute of limitations in Clark's employment contract and dismissed the action. The appellate court affirmed. The court rejected Clark's argument that the agreement was an unenforceable contract of adhesion, and rejected his argument that it was unconscionable because Clark had " failed to present any evidence that he had no realistic alternative to employment with [DaimlerChrysler]."
Judge Neff dissented; she would have held that the contract provision was both procedurally and substantively unconscionable.
[Meredith R. Miller]
Wednesday, December 14, 2005
Speaking of gifts, are you looking for that perfect gift for the contracts professor on our list? Instead of that tacky "Contracts Professors Do It With Consideration" mug, how about a nice piece of classic boilerplate?
An eBay seller is offering three nice, vintage boiler plates, all from Saskatchewan in the 1930s. These are genuine, official, and date from 1933, 1934, and 1935 (pictured). (Click on image for larger picture.) But hurry! Auction ends Friday.
For those looking for a more upscale version, another seller has got an elegant set of Victorian boiler plates from the D.M. Dillon Boiler Works in Fitchburg, Massachusetts.
Yesterday, the judge declared a mistrial in the breach of contract suit against Venus and Serena Williams. As mentioned in a previous post, the lawsuit claims that the sisters reneged on a contract to participate in a "Battle of the Sexes" tennis spectacle. (Aside: sounds a lot like Andy Kaufman's bit about being "Inter-Gender Wrestling Champion.")
[Meredith R. Miller]
A previous post discussed Inwood Park Apts., Inc. v. Coinmach Indus. Co., which involved a coin-op laundry room company, Coinmach, and an apartment building in New York City. In that case, a New York appellate court invalidated Coinmach's “right of first refusal” clause, which retained the indefinite right to remain in the building past the expiration of the lease until presented with the right to match the competitor’s offer. (Image Source: Wikipedia).
Well, Coinmach is in the news again over a laundry contract, but this time it is on the offensive. Coinmach has sued the Marion County Housing Authority in the Southern District of Illinois, apparently claiming "it had a contract to occupy the laundry rooms of 13 residential properties containing 281 units pursuant to the lease signed in 1994 for the operation of coin-operated clothes washing and drying equipment." Apparently, the Housing Authority sent Coinmach a notice of cancellation of the lease, but Coinmach claims that it was entitled to two 7-year renewal periods. The Madison Record reports:
The suit claims that the lease did not provide MCHA the ability to cancel the lease on a six-month notice and the only provision which allowed cancellation would be if Coinmach failed to correct service problems within 30 days of notice.
According to Coinmach, it notified MCHA that it did not possess the power to cancel the lease and stated the cancellation was void and without effect. However, in the first part of August, MCHA forcibly and without legal right disconnected its equipment and removed it from the laundry rooms, dispossessing them from its leasehold.
Coinmach is seeking the loss of net laundry revenues it would have received from consumer use if it was not removed, plus future revenues it would have received, an amount they claim to be in excess of $75,000.
It is not certain whether the right of first refusal clause which was invalidated in the New York case is being invoked by Coinmach in the Illinois case.
[Meredith R. Miller]
In preparation for exams, many of my students have been emailing me questions about specific cases. One student (who gave me his permission to post this) wrote to me with a question about the “Red Parrot” case. When I wrote back to ask whether he meant the “Red Owl” case, the student profusely apologized for using the wrong casename. As he told me “I’m from Brooklyn, so the only birds I know about are pigeons.”
Well, it actually turns out that not only does a tree grow in Brooklyn, but parrots inhabit Brooklyn as well. Proving that truth is stranger than fiction, yes, there is a large colony of wild parrots that live on the campus of Brooklyn College. The Brooklyn Parrots website asks the intriguing question of how the parrots got there. Was there an escape of parrots from a shipment at JFK airport? Were they released from a pet store on Flatbush Avenue that was going out of business? Did a truck carrying parrots overturn on the highway? These hardy birds continue to inhabit the wilds of Brooklyn, despite the cold climate.
And, yes, this officially continues my fixation with the Hoffman v. Red Owl; earlier I posted an entry about Red Owl collectible toys. Perfect for the picky contracts prof on your Christmas or Hanukkah list.