ContractsProf Blog

Today in history—April 13

814: Krum, the Khan of Bulgaria who created the first written Bulgarian laws, dies on a campaign against the Byzantines. One of his idiosyncrasies was to drink his wine from the silver-lined skull of a Byzantine emperor he had defeated.

1180: Emperor Frederick I Barbarossa issues the Gelnhausen Charter, an important step in German constitutional history.

1732: Frederick North, 2nd Earl of Guilford, the British Prime Minister (1770-82) who will perhaps do more than any other man for the cause of American independence, is born at Wroxton Abbey, Oxfordshire.

1743: Thomas Jefferson, a sometime lawyer who will also play a role in the War of Independence, is born at Shadwell, Virginia.  Trivia fact: He’s the only former vice president to serve two full terms as President.

1771: Richard Trevithick is born at Illogan, Cornwall.  He'll develop the first railway steam locomotive (for the Pen-y-Darren ironworks near Merthyr Tydfil in Wales), but will have difficulty raising capital and will die penniless.

1852: Frank Winfield Woolworth is born at Rodman, New York. His first store will fail, but his second will not.

1873: John W. Davis (Washington & Lee Law 1895), the Wall Street (Davis, Polk) lawyer and Democratic presidential candidate whose 140 Supreme Court arguments will culminate with a loss in Brown v. Board of Education, is born at Clarksburg, West Virginia.

1902: On Frank Woolworth’s fiftieth birthday, James Cash Penney, a former farm boy from Hamilton, Missouri, opens his first store at Kemmerer, Wyoming, a one-room frame building where he and his family live in the attic.

1907: Harold Stassen (Minnesota Law 1929), a future president of the University of Pennsylvania, though not of the United States, is born at West St. Paul, Minnesota.

There ain't no such thing

The idea of the "penalty default" is a fairly hot top in the Contracts world.  Eric Posner, though, isn't buying it.  In a new paper, There Are No Penalty Default Rules in Contract Law, he argues that it's kind of like Santa Claus:  nice in theory, but hard to find in practice.  The abstract:

In an influential article, Ian Ayres and Robert Gertner introduced the concept of the "penalty default rule," a rule that fills a gap in an incomplete contract with a term that would not be chosen by a majority of parties similarly situated to the parties to the contract in question.  Ayres and Gertner argued that such a rule might be efficient in a model in which contracting parties have asymmetric information.  However, Ayres and Gertner did not provide any persuasive examples of penalty default rules; their best example is the Hadley rule, but this rule is probably not a penalty default rule.  It turns out that there are no plausible examples of penalty default rules that solve the information asymmetry problem identified by Ayres and Gertner.  The penalty default rule is a theoretical curiosity that has no existence in contract doctrine.

Scraping site implies assent to terms

Mike Madison of Pitt points out a new case being reported on the InternetCases.com web site.  In the case, a U.S. district court in California holds that an Internet site that repeatedly and automatically "scrapes" content from another site will be bound by that site's terms of use, including a forum selection clause, even where it has not manifested actual assent.  "[W]hen a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes acceptance of the terms, which accordingly become binding on the offeree."   The case is Cairo, Inc. v. CrossMedia Services, Inc., 2005 WL 756610 (N.D. Cal., April 1, 2005).

News in brief

Canada’s CBC broadcast network has decide to ax most of its in-house publicists and outsource the work to PR agencies.

Under a new nationwide contract, "junior doctors" in the U.K. will get the opportunity to work part-time for the National Health Service.

The Collegiate Licensing Company, which represents 200 major U.S. universities, has signed an exclusive football video game deal with EA Sports.

Philadelphia residents whose homes were destroyed in the MOVE bombing in 1985 have won a battle, collecting $3.6 million for breach of the city’s promise to repair their structures, and another $10 million or so in other damages.

It’s a buyers’ market for IT services, as firms are hammering their current suppliers for more favorable terms while threatening to let the contracts out for bids.

The Indian state of Gujarat has decided to introduce "contract farming," but that doesn’t include allowing farmers independently to enter into their own agreements with buyers.

The guy who was supposed to be the new baseball coach at Penn says he's "shocked" at being "stabbed in the back" by the school, which decided to let its current coach stay on another four years.  The school says it owes nothing because it hadn’t yet signed the contract with the new coach.

Shell Oil has inked a $10 billion deal to ship 2.5 billion tons of liquified natural gas a year from Australia to a new facility in Baja California.

Hospital contract bars lien on patient

The California Supreme Court Blog is reporting on a new case in which California hospitals have been bit by their own contracts. In Parnell v. Adventist Health System (decision here) the hospital tried to get a lien on a tort recovery by a patient whose insurance hadn’t paid the "actual charges" it incurred for treatment, but only the lesser "negotiated amount" it charged to insurers.  The court noted that since, in the contract, the hospital had agreed to accept the negotiated amount as "full payment," the patient owed the hospital nothing. Since he owed nothing, the hospital could not get a lien.

The court suggested that hospitals in the future could revise their contracts to protect their rights to such proceeds.

Today in history—April 12

1777: Future Kentucky lawyer and statesman Henry Clay is born at Hanover County, Virginia. One of his lesser-known later accomplishments will be his successful battle against anti-British elements to keep Kentucky a common-law state.

1902: Future Dutch prime minister Louis Beel (Nijmegen Law 1935) is born at Roermond, Limburg.

1908: Vibraphonist Lionel Hampton, the only jazz musician to have a university music department named for him (at the University of Idaho) is born at Louisville, Kentucky.

1937: At the British Thomson-Houston factory in Rugby, England, Sir Frank Whittle ground-tests the first jet engine designed to power an aircraft.

1945: President Franklin Delano Roosevelt (Columbia Law 1908) dies at Washington, D.C.

1949: Legal fiction writer Scott (One-L) Turow is born at Chicago, Illinois.

1961: Yuri Gagarin becomes the first man to go where only dogs and chimpanzees had previously ventured: outer space.

1989: Abbie (Steal this Book) Hoffman commits suicide by swallowing 150 phenobarbital tables.  Or else he was murdered by the government because he was about to reveal the real truth about Iran-Contra.  Or something.

1992: EuroDisney opens in Marne-la-Vallee, France.

2001: Harvey Ball, the freelance artist who was paid $45 in 1962 to design a morale-boosting pin for the State Mutual Life Assurance Company of Worcester, Massachusetts, dies at age 79.  His creation had by that time become known as the "Smiley Face."

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• Health Law Prof Blog (Betsy Malloy (Cincinnati) & Tom Mayo (SMU))
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Law books

From Lemony Snicket, The Bad Beginning 83-84 (1999):

There are many, many types of books in the world, which makes good sense, because there are many, many types of people, and everybody wants to read something different. . . .  But one type of book that practically no one likes to read is a book about the law.  Books about the law are notorious for being very long, very dull, and very difficult to read.  This is one reason many lawyers make heaps of money.  The money is an incentive—the word "incentive" here means "an offered reward to persuade you to do something you don't want to do"—to read long, dull, and difficult books.

Wives by the week

Cox News Service today is carrying an interesting piece about the prevalence of "contract marriage" in Indonesia.  The marriages are usually between local women and foreign workers who seek "temporary wives" during their stay.

News in brief

The average IT contract is getting smaller, a good deal smaller, according to a new survey.

Workers at Cooper Tire & Rubber have ratified a new five-year contract, ending a strike at its plant in Texarkana, Arkansas.

The NASA/Ames Research Center, facing a loss of work to competitive bidding, is gearing up to bring more contracts to the facility.

A major breach of contract suit against National Australia Bank may get revived, as lawyers get a cash influx from U.S. investors.

A British private school breached the contract of a teacher when it disciplined him for hacking into the school's computer system, says a hearing tribunal.

Weekly Top Ten

A new paper by MIT economist Birger Wernerfelt has rocketed to number 2 on this week's Top Ten Countdown, while two news papers also crack the chart and the latest from Emily Houh hits its highest position to date.  Following are the top ten contracts-related downloads from the Social Science Research Network for the 60 days ending April 10.  (Previous week in parentheses.)

1  (1) Emerging Policy and Practice Issues, Steven L. Schooner & Christopher R. Yukins

• 2 (-) Incomplete Contracts and Renegotiation, Birger Wernerfelt

3  (4) The Doctrine of Good Faith in Contract Law: A (Nearly) Empty Vessel?, Emily Houh

4 (5) Allegheny College Revisited: Cardozo, Consideration, and Formalism in Context, Curtis Bridgeman

5  (7) On the Efficiency of Standard Form Contracts: The Case of Construction, Surajeet Chakravarty & W. Bentley MacLeod

6  (8) The Limits of Lawyering: Legal Opinions in Structured Finance, Steven L. Schwarcz

7 (9) Strict Liability and the Fault Standard in Corrective Justice Accounts of Contract, Curtis Bridgeman

8  (10) Duty and Consequence: A Non-Conflating Theory of Promise and Contract, Jeffrey M. Lipshaw

9  (-) Fairness and the Optimal Allocation of Ownership Rights, Ernst Fehr, Susanne Kremhelmer & Klaus M. Schmidt

10 (-) Civil Contract Law and Economic Reasoning: An Unlikely Pair?, Aristides N. Hatzis

Hillman on standard forms

No one has been doing more interesting work on the issue of standard-form contracting than Bob Hillman of Cornell.  He has a new paper out on the subject, On-line Consumer Standard-Form Contracting Practices: A Survey and Discussion of Legal Implications.  In it, he reports on a survey of first-year law students about whether and how they go about reading boilerplate terms in on-line transactions.  Click on the link for the abstract.

ABSTRACT

In a recent article, Standard-Form Contracting in the Electronic Age, 77 N.Y.U. L. Rev. 429 (2002), Jeffery Rachlinski and I analyzed whether contract law's approach to the problem of paper standard forms can effectively govern electronic forms.  We thought the rational and cognitive reasons consumers fail to read their paper forms apply in the e-environment.  Further, although e-consumers do not face manipulative sales agents or impatient customers waiting in line but, instead, largely  contract at home in the evening without time constraints, e-consumers are impatient, even click happy, and therefore still do not read their forms or shop for the best terms.  Relying on these assumptions about how consumers treat their e-standard forms and evidence concerning how e-businesses use the Internet, we concluded that Internet contracting is not fundamentally  different from the paper world. Accordingly, major changes in the approach of contract law are not imperative.

This paper tests our assumptions about consumer behavior when agreeing to e-standard forms by offering some empirical evidence of consumer practices. I report on a survey of 92 contracts  students' e-standard form practices. The survey inquired about all aspects of their practices, including frequency of contracting, the place and time of such contracting, whether they read their e-forms or shop for terms, the reasons for reading or failing to read, and the factors that would promote reading.

Although the survey results reinforce our assumption that consumers generally do not read their e-standard forms, the truth is a bit more complicated. A large majority of respondents purchase at night and at home. Nevertheless, few respondents read their e-standard forms beyond price and description of the goods or services as a general matter. Further, beyond price and description, a large minority of respondents do not read their forms at all. However, more than a third of the respondents read their forms when the value of the contract is high and more than a third read when the vendor is unknown. Further, a small cadre of respondents read particular terms beyond price and  description, primarily warranties and product information warnings. On the other hand, virtually no respondents read choice of law/forum or arbitration clauses.

The survey also reveals that impatience accounts most often for the failure of respondents to read their forms. Not surprisingly, respondents rarely shop for advantageous terms, despite the greater availability of terms on the Internet.
The paper concludes by analyzing possible legal responses to e-standard form contracting in light of the survey results.

Today in history--April 11

1803: Afraid that the British will capture it anyway, French foreign minister Charles Maurice de Talleyrand-Périgord offers to sell Louisiana to the United States.

1856: U.S. lawyer, filibuster, and Nicaraguan President William Walker is defeated by Costa Ricans supported by Cornelius Vanderbilt (who believed that Walker had reneged on a business deal) at the Battle of Rivas.

1899: Spain cedes Puerto Rico to the United States.

1906: James Anthony Bailey, the business side of "Barnum & Bailey," dies at Mount Vernon, New York.

1921: KDKA Radio in Pittsburgh broadcasts the first live sports event in radio history, lightweight boxing match at Motor Square Garden between Johnny Ray and Johnny Dundee.  Pittsburgh Post sportswriter Florent Gibson thus becomes the nation's first sportscaster.

1941: General Electric puts the first outdoor hydrogen-cooled generator into service for the city of Glendale, California.  No, we don't know why this is particularly noteworthy, either.

1961: Nineteen-year-old Robert Allen Zimmerman of Duluth, Minnesota, makes his singing debut in New York City as "Bob Dylan."  His first number?  Blowin' in the Wind.

1962: The expansion New York Mets baseball club plays its first-ever game, losing 11-7 to the St. Louis Cardinals.  This season, as the team sets a record for losses, manager Casey Stengel will observe, "The only thing worse than a Mets game is a Mets double header."

Film clips

From Chicken Run (2000)

     Mr. Tweedy:  What . . . what . . . what's all this then?
     Mrs. Tweedy: This is our future, Mr. Tweedy.  No more wasting time with petty egg collecting and miniscule profits.
     Mr. Tweedy:   No more eggs?  But we've always been egg farmers.  My father, and his father, and all their fathers, they was all . . .
     Mrs. Tweedy:   Poor . . . worthless . . . nothings!  But all that is about to change. This will take Tweedy's farm out of the Dark Ages and into full-scale automated production.  Elisha Tweedy will be poor no longer.

News in brief

Cooks, janitors, and other service workers at the University of California are planning a one-day strike because they haven't had a raise in two years.
                               *    *    *
Six major shipping companies are locked in a competition to provide three liquified natural gas tankers to India's Petronet LNG.
                               *    *    *
The province of Alberta has been hit with a judgment for the "comedy of errors" surrounding its management of a tree-planting contract.
                               *    *    *
The Glasgow school district, fed up with indiscipline and attacks on teachers, may start requiring parents to sign contracts guaranteeing that their children will behave.
                               *    *    *
The dispute between rappers R. Kelly and Jay-Z, arising out of a busted concert tour, is now in court, where Kelly filed is seeking $75 million.

Where does property come from?

If you've ever wondered how private property came to exist, a new working paper, From Fur to Fish: Reconsidering the Evolution of Private Property, by Katrina Wyman of NYU might interest you.   If you're one of those who assume it came about because Og found a nice sharp rock and hit Gog when the latter tried to use it, well, it's a good deal more complicated than that.  Click on the link for the abstract.

ABSTRACT

One of the most enduring questions about private property is why it develops.  Strongly influenced by a short article by economist Harold Demsetz, property scholars recently have analyzed the evolution of private property in economic and social terms, as a response to factors such as changes in relative prices, measurement costs, and the size and heterogeneity of user groups. This Article argues that Demsetzian-inspired accounts of the evolution of private property tend to neglect the role of the state in property rights formation. Building on the extensive scholarship about the evolution of property rights, the Article emphasizes the need to take seriously the implications of the political process by which private property often is formed.

To underscore its theoretical argument about the evolution of private property, the Article also offers a case study of contemporary property rights formation. For over six decades an international movement has been underway to enclose the oceans, including marine fisheries. Drawing on original research, the Article examines why individual transferable quotas and similar instruments have been slow to develop in U.S. coastal fisheries in federal waters since national jurisdiction over fisheries was extended to 200 miles from the shore in 1976.

In closing, the Article underscores the richness of Demsetz's pioneering account of private property and the scholarship that it has spawned. But the Article also suggests that there remains a large gap between how private property actually evolves and many of the prevailing theoretical understandings of the development of property rights. The Article argues in turn that filling this gap requires developing a more robust positive theory of the evolution of private property that takes into account the political process through which private property often is formed, and more systematic empirical research into the development of property rights.

Today in history--April 10

1583: Jurist Huig de Groot (a/k/a Hugo Grotius), the founder of modern natural law theory and the first great exponent of international law, is born at Delft in the Netherlands.

1633: Grocer Thomas Johnson of Snow Hill, London, offers the first bananas for sale in England.

1816: The Second Bank of the United States is chartered.

1847: Joseph Pulitzer is born at Makó, Hungary.  During his lifetime Columbia University will find him too unsavory to allow him to endow a journalism school, but after his death they decide that money is, after all, money.

1849: Walter Hunt of New York City receives a patent for the safety pin.  Short of cash, he had thought up the idea, made the first model in three hours, and sold the rights for $400.

1912: The R.M.S. Titanic steams out of Portsmouth on its way to becoming the highest-grossing film of all time.

1931: Lebanese-born American poet Gibran Khalil Gibran (his original first name was lost as as the result of a registration snafu in a Boston public school) dies at New York City.

1937: A single issue of Collier's magazine contains two short short stories that will subsequently be made into classic motion pictures: Stage to Lordsburg by Ernest Haycox (later Stagecoach with John Wayne) and Bringing Up Baby by Hagar Wilde (later starring Cary Grant and Katharine Hepburn).

1944: Henry Ford II is named Executive Vice President of Ford Motor Co.  Yes, sometimes it's who you know.

1947: The Brooklyn Dodgers purchase the contract of infielder Jackie Robinson from the Montreal Royals, making him the first African-American in baseball's major leagues.

1957: The Suez Canal, whose closing triggered enough maritime claims to fill several volumes, reopens for traffic.

1962: Stuart Sutcliffe, bass player for the Beatles, dies of a brain hemorrhage.  He's replaced by Paul McCartney.  It was Sutcliffe who first adopted the "moptop" or "Beatles" haircut.

1985: Pitcher Dan Quisenberry signs a 40-year, $46 million (after tax) contract with the Kansas City Royals.