ContractsProf Blog

Surprise: Sexy + easy = popular

Our colleague Paul Caron over at TaxProf Blog reports on a study that teaching evaluations by students are correlated to the teacher's sexiness and how easy the course is.  This is bad news, even though we kind of expected it.

If you're curious about your "hotness" quotient, and that of your colleagues, you can find out here.

Cases: E-mail to employees doesn't create contract term

Ross Runkel's excellent employment blog LawMemo.com is reporting on an interesting contract formation case which raises the question whether an employer can create a contractual duty to arbitrate by sending a general e-mail to all employees announcing its new policy.

In the case, Campbell v. General Dynamics Government Systems Corp. (1st Cir. May 23, 2005), the court held that the employer failed to do so because the e-mail was not sufficiently clear to put employees on notice, but indicated that there's no reason why a better-drafted e-mail wouldn't have worked.  Runkel, an emeritus professor at Willamette, has some commentary here.  More commentary is on Michael Fox's blog Jottings By An Employer's Lawyer here.

Coudert eyes suit against Orrick

Few organizations like paying legal fees less than big law firms, so you don't often see legal leviathans go toe-to-toe over disputes.  But there's a potential blockbuster brewing as Coudert Brothers, one of the firms that invented international practice, is hopping mad over the defections of all its London and Moscow partners to Orrick, Herrington & Sutcliffe, a firm with whom it had been in merger negotiations.  Coudert is apparently investigating legal action against Orrick and the recently departed.

Today in history—May 28

1524: Ottoman Sultan Selim II is born at Constantinople.  He'll become known as Selim the Sot for his drinking, and will conquer Cyprus, massacring tens of thousands of unarmed people, to secure a supply of his favorite vintage.

1757: Forty Virginia militiamen surprise and defeat a small French detachment at Jumonville Glen, in what is now Fayette County, Pennsylvania.  The small skirmish ignites what will become the Seven Years' War (in America, the French and Indian War), and make the 22-year-old American commander, Major George Washington, famous.

1759: William Pitt is born at at Hayes, Kent, the son of Prime Minister William Pitt.  Pitt the Younger, a Lincoln's Inn barrister, will become the youngest and one of the longest-serving prime ministers in British history.

1897: Pearl B. Wait, a carpenter and cough medicine maker in LeRoy, New York, creates a new dessert that his wife names "Jell-O."  It flops, and he sells the company for $450 to a neighbor who has more marketing skill.

1928: Chrysler Corp. acquires with Dodge Brothers, Inc., in a deal worth $170 million.

1929: Warner Brothers debuts first all-color talking picture at the Winter Garden Theatre in New York City:  On With the Show, starring Ethel Waters, Joe E. Brown, and Arthur Lake.

1930: The Chrysler Building opens in New York City.  Architecture critics hate it and the owner refuses to pay the architect, claiming no contract was ever signed.  The architect, William van Alen, eventually gets his money but his career is ruined.

1936: Twenty-four year-old Alan Mathison Turing submits for publication his On computable numbers, with an application to the Entscheidungsproblem, the paper that is the foundation of modern computer science.

1944: Rudolph William Louis Giuliani III (NYU Law 1968) is born at Brooklyn, New York.

1947: Actress and director Sondra Locke, whose chief starring role for contracts profs is in Locke v. Warner Brothers, is born at Shelbyville, Tennessee.

1957: National League owners vote to allow the Brooklyn Dodgers and New York Giants to move to Los Angeles and San Francisco, respectively.

1998: NASA releases the photograph of TMR-1C, which they think might be the first planet ever discovered outside the Solar System.  Or else a background star, they're not sure.

Analyzing remedies

There's been a lot of law-and-economics exploration of contract remedies, but relatively little of it focuses on one aspect of the situation: the fact that remedies are cumulative and the party has a choice of which one to follow.

That's the thesis of Northwestern's Ronen Avraham (Law) and Zhiyong Liu (Management), in a new paper, Incomplete Contracts with Asymmetric Information: Exclusive v. Optional Remedies.  Click on "continue reading" for the abstract.

ABSTRACT

Law and economics scholars have always had a strong interest in contract  remedies.  Perhaps the most explored issue in contract law has been the desirability of various contract remedies, such as expectation damages, specific performance, or liquidated damages, to name the most common.  Scholars have been debating for years, from various perspectives, the comparative advantage of these remedies.  Yet, most scholars have assumed that each of these remedies is exclusive, and their work has compared a single remedy contract to another single remedy contract.  Interestingly, an analysis that assumes these remedies are optional (or cumulative) has not yet been explored, in spite of the fact that contract law provides the non-breaching party with a variety of optional remedies to choose from in case of a breach, and in spite of the fact that parties themselves write contracts which provide such an option.

In this paper we attempt to start filling in this gap by studying the relationship between these remedies.  Specifically, we study the conditions at which a contract that grants the non-breaching party an option to choose from optional remedies is superior to an exclusive remedy contract.  We show that under conditions of double-sided uncertainty and asymmetric information between a seller (who might breach) and a buyer (who never breaches) the interaction of the parties' distributions should determine whether a contract provides for exclusive or optional remedies.  Specifically, if the buyer's conditional expected valuation is larger than the seller's conditional expected valuation (in both cases - conditional that their expected valuation is above the buyer's mean valuation), then a contract which provides the buyer an option to choose between liquidated damages or specific performance (or actual damages) is superior. 

Our analysis in this paper informs transactional lawyers of the relevant economic factors they should consider when deciding the optimal composition of remedies in a given context.  Moreover, our analysis is relevant for courts that interpret contracts because it will help them to better understand whether rational parties would have agreed that a particular remedy would be an exclusive remedy or an optional remedy when the language of the contract is ambiguous.  Lastly, our analysis provides yet another economic rationale for why courts should enforce parties' liquidated damages clauses even if it seems ex-post over, or under, compensatory.

We present a model which shows when parties will agree on a non-exclusive liquidated damages clause.  Under such a contract the parties stipulate ex-ante that the buyer will have the option to choose upon breach whether she prefers an optional remedy, such as actual damages or specific performance, to the pre-determined liquidated damages.

We focus on the ex-ante design of the contract in light of the new information that the parties  anticipate they will gain after they draft the contract.  Therefore, we assume that no renegotiation or investments are involved.  We demonstrate the optimal way to design contract clauses which takes advantage of the information that the seller and the buyer receive between the time they enter into the contract and the time of the actual breach.  We further suggest that parties indeed use such clauses and that courts honor them.  After laying out the basic model we provide some extensions to it.  As is well known, an exclusive liquidated damages contract is equivalent to granting the seller a call option to breach and pay, where the exercise price is equal to the amount of the agreed liquidated damages.  What is perhaps less known is that a non-exclusive, or optional, contract, where the buyer can choose performance, is equivalent to giving the buyer a consecutive call option with the same exercise price.  Yet, the consecutive call option to the buyer does not have to have the same exercise price but can rather have a higher one.  We call this new contract a two-price contract and show that it is even more efficient than the basic contract we have explored before.  Next, we introduce more rounds of sequential options and show that while the regular ex-ante contract can achieve on average about 4 Indeed, in an environment of asymmetric information renegotiation costs are high.  More on this below.  90% of the first-best allocative efficiency, an n-rounds contract approaches the first best, as n goes to infinity.  We show numerically that within just 4 rounds, 96% of the allocative efficiency can be achieved.

Section two describes the legal background against which we have designed our model.  Section three surveys the literature that evaluates contract remedies from an economic perspective.  Section four presents a simple model with two-sided incomplete information and with a liquidated damages clause.  In section four we compare the performance of a regime with optional remedies with a regime of exclusive remedy and then determine the conditions at which each regime should be applied.  Section five discusses some interesting extensions meant to approach the first-best allocative efficiency.  The appendix provides a more rigorous mathematical demonstration of the model.

Great art isn't exactly priceless

One of the last wholly unregulated big-money areas of business is the art trade, where the norms range from simple collusion, insider trading, and deliberate misrepresentations to fake invoices.  And it's not just the sellers who're in the game.  The Art Newspaper offers a fascinating take on the art market, and notes that contract and fraud disputes are strongly on the increase.

Today in history—May 27

1703: Tsar Peter I founds the city of St. Petersburg at the mouth of the Neva on the Baltic Sea, to provide Russia with a "window on Europe."

1738: Nathanial Gorham is born at Charleston, Massachusetts.   He'll become one of America's great real estate speculators, buying (with his colleague Oliver Phelps) all of New York State west of Seneca Lake, about 6 million acres, for $1 million—provided he can extinguish existing Indian titles.

1794: Cornelius Vanderbilt, who will quit school at age 11 to begin working as a deck hand on ferry boats, is born at Staten Island, New York.  He'll buy his first boat at age 16.

1836: Jay Gould is born at Roxbury, New York.  His first job will be as bookkeeper to a blacksmith in exchange for board; but with a mixture of good management and criminal activity he'll end up by owning or controlling one-ninth of the railroad track in the U.S., the Western Union Company, and the New York Elevated Railway.

1923: Future Viacom conglomerate builder Sumner Murray Rothstein (Harvard Law 1947) is born at Boston, Massachusetts; he'll later change the surname to "Redstone."

1924: Jules Stein founds the Music Corporation of America as a booking agency.  As MCA it will be a major music producer from the 1960s to the 1990s.

1927: Faced with sagging sales, Ford Motor Co. stops production on the old Model T, relatively unchanged since 1908, and begins re-tooling its plant to make the Model A.

1933: The Century of Progress Exposition opens in Chicago, Illinois.

1935: The U.S. Supreme Court unanimously decides  A.L.A. Schechter Poultry Corp. v. United States, holding that the President cannot constitutionally create wage- and price-fixing industrial regulations.

1937: After four years of construction and only 11 deaths, the $27 million Golden Gate Bridge opens, connecting San Francisco with Marin County, California.

1963: Columbia Records releases "one of the most important recordings of the 20th century," The Freewheelin' Bob Dylan.  It's the first to feature primarily his own compositions, including "Blowin' in the Wind," Don't Think Twice, It's All Right," and "A Hard Rain's A-Gonna Fall."

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.

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.

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.

ABSTRACT

The United Nations Convention on Contracts for the International Sale of Goods, or CISG, has been adopted by more than 60 countries in an effort to harmonize the law that applies to international sales contracts.  In this paper, we argue that the effort to create uniform international sales law (ISL) fails to supply contracting parties with the default terms they prefer, thus violating the normative criterion that justifies the law-making process for commercial actors in the first instance.  Our argument rests on three claims.  First, we contend that the process by which uniform ISL is drafted will dictate the form that many provisions take.  Second, we contend that the legal form dictated by the drafting process has significant substantive consequences,  particularly for the policy objectives of uniform ISL.  That leads to our third claim.  We predict that in order to achieve uniform ISL that is widely adopted, those involved in the drafting process will systematically promulgate many vague standards that contracting parties would not choose for themselves.  These defaults cannot be justified as the inevitable cost of achieving an optimal level of uniformity.  If the products of a uniform ISL are default terms that parties do not want, then the underlying justification for the law-making function—reduction of contracting costs—vanishes.

We find significant correspondence between our predictions about the drafting of uniform international sales law and the CISG.  The CISG was drafted by parties whose objectives did not necessarily coincide with those of the commercial actors whose conduct the treaty was intended to regulate.  The result is a variety of vague standards and compromises that appear inconsistent with commercial interests.  We also illustrate the ways in which the CISG avoided potential correctives to these problems.  We conclude by suggesting that commercial actors involved in international sales would prefer to choose governing law from among legal regimes that compete to supply parties with more desirable substantive terms.

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.

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.

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.

Cases: Insurance exclusions

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).

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.

ABSTRACT

A heated national debate has developed over whether one type of high-cost predatory lender, commonly known as “payday lenders,” are targeting financially vulnerable military families and whether the law protects them from such predation.  Writing within the relatively new interdisciplinary “law and geography” movement, this article provides geographic evidence that payday lenders do aggressively target American military personnel, irrespective of most forms of legal regulation.  This paper first provides a comprehensive introduction to payday lending business practices and to the financial vulnerability of military personnel.  In conducting our empirical research, we examined 20 states, 1,516 counties, 13,253 ZIP codes, nearly 15,000 payday lenders, and 109 military bases.  We consistently found high concentrations of payday lending businesses in counties, zip codes, and neighborhoods in close proximity to military bases.  Our observations were controlled by comparing payday lender densities in military areas to statewide averages and also by comparing payday lender locations to bank locations.  Of the twenty states involved, the only legal strategy which prevented payday lender targeting of military personnel was New York’s aggressive enforcement of civil and criminal usury law.  Going beyond the debate over predatory lending to military personnel, our research provides a realist check on pure legal reasoning and unfounded faith in current consumer protection rules.

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.

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.

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.

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)

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).