June 4, 2005
Cows, part deux
Apropos of yesterday's cow case, reader Neil Wehneman sends long one that we missed somewhere along the line, the Ohio Court of Appeals' 2003 decision in Mayor v. Wedding. The opening paragraph is a classic:
In this case we are called on to determine whether a cow is an uninsured motor vehicle under appellants’ insurance policy. We hold that it is not.
Neil also sends us a reference to commentary about the case by a California appeals court justice.
Film Clips: Trading Places
Billy Ray Valentine: Okay, pork belly prices have been dropping all morning, which means that everybody is waiting for it to hit rock bottom, so they can buy low. Which means that the people who own the pork belly contracts are saying, "Hey, we're losing all our damn money, and Christmas is around the corner, and I ain't gonna have no money to buy my son the G.I. Joe with the kung-fu grip! And my wife ain't gonna f . . . my wife ain't gonna make love to me if I got no money!" So they're panicking right now, they're screaming "SELL! SELL!" to get out before the price keeps dropping. They're panicking out there right now, I can feel it.
From Trading Places (1983)
The glass is half-full
Those who practice commercial law are familiar with the fact that business people are almost always too optimistic. This is probably a good thing, because no one would ever launch a new venture if they really understood how difficult it would be.
But emotions play a role in all kinds of economic decisions, for individuals as well as businesses. In a new paper from the National Bureau of Economic Research, Optimism and Economic Choice, by Manju Puri and David Robinson (both Duke Finance), the authors explore the role of optimism:
This paper presents some of the first large-scale survey evidence linking optimism to major economic choices. We create a novel measure of optimism using the Survey of Consumer Finance by comparing a person's self-reported life expectancy to that implied by statistical tables. Optimists are more likely to believe that future economic conditions will improve. Self-employed respondents are more optimistic than regular wage earners. In general, more optimistic people work harder and anticipate longer age-adjusted work careers. They are more likely to remarry, conditional on divorce. In addition, they tilt their investment portfolios more toward individual stocks.
Today in history--June 4
470 B.C.: Socrates is born at Athens.
1760: New England planters arrive in Nova Scotia to claim lands confiscated from the Acadians.
1792: Captain George Vancouver claims Puget Sound for England.
1801: Frederick Augustus Conrad Muhlenberg, the German-trained Lutheran pastor who became the first Speaker of the U.S. House of Representatives, dies at Lancaster, Pennsylvania.
1876: The "Transcontinental Express" reaches San Francisco, California, after a record-setting 83-hour, 39-minute run from New York City.
1896: Thirty-two year-old Henry Ford drives an automobile for the first time. It's one he designed himself, and the drive is delayed because it is a foot wider than the door of the shed in which he built it.
1917: The first Pulitzer Prizes are awarded by the Columbia Journalism School.
1929: The Supreme Court of New Hampshire decides Hawkins v. McGee. A poll of law students will rate this "Hairy Hand" case as the most memorable contracts case of all time.
1937: The first shopping carts are put into operation at the Humpty Dumpty Supermarket in Oklahoma City. They're invented by the store's owner, Sylvan Goldman.
1942: Glenn Wallichs of Capitol Records starts a new marketing promotion, sending free copies of records to influential radio stations in hopes they will play them. The practice catches on.
1957: The first long-distance commercial coal pipeline (in which coal is transported by being mixed into a slurry with water) goes into operation, connecting the Hanna Coal Co. plant near Cadiz, Ohio, and the Cleveland Illuminating Company power station at Eastlake, Ohio. It can move 150 tons of coal an hour.
1974: Don Wetzel, Tom Barnes and George Chastain receive a patent for the ATM machine.
Law & Society Saturday
There are at least two interesting papers being presented today at the Law & Society Association Annual Meeting in Las Vegas. First up is Hila Keren's (UC-Berkeley) We Insist! Freedom Now: Does Contract Doctrine Have Anything Constitutional to Say? We've previously noted the piece here. It's part of the session "Law and the Public-Private Dichotomy: Public Regulation of the Private Sector," today (Saturday) at 10:15 a.m. local time.
Later this afternoon. at 4:30 p.m., Carl Stychin (Reading) will present De-Meaning of Contract:
This paper interrogates how lesbian and gay relationship forms have related to the institution of contract law and to the ideal of contract as a basis for the structuring of those relationships. First, the paper will examine the ways in which lesbian and gay politics in the UK has rejected the language of contract as it has emerged in the political process surrounding the Civil Partnerships Bill. For both the government and for gay political groups, the language of ‘status’ is preferred to ‘contract’. This rejection of contract sits uneasily with the way in which lesbian and gay relationships historically have been celebrated on the basis that they are formed through negotiated understandings between equal parties. In this explanation, relationships achieve and embody the very ideals of contract, and lesbian and gay relationships are radically different from those which fall within the parameters of Pateman’s critique of the ‘sexual contract’. Second, the paper interrogates a recent UK case, Sutton v Mishcon de Reya and Gawor & Co, a professional negligence suit involving a ‘master and slave’ cohabitation agreement, in which the parties demonstrate a remarkable faith in the power of law generally, and the power of contract law specifically, as a means to regulate human relationships. Finally, the paper will consider what this ambiguity regarding private law ordering and public law status suggests for a critique of wider claims regarding same-sex relationships and sexual citizenship as public status.
June 3, 2005
The case of the wandering cow
Andrew Oh-Willeke, who teaches at the College for Financial Planning in Colorado, passes along a very nice little damages case, involving cattle who break down a fence and wander into a field of young corn. The case is Harsh v. Cure Feeders, L.L.C., and while it's not a contract case it's a nice, straightforward discussion of how to prove damages when the injury is hard to see.
IP contracts at Southwestern
A major theme this year is the increase in huge and extremely costly IT project failures. These are obviously problems not merely for IT professionals and litigators, but for the transactional attorneys who draft the contracts on such projects. The conference has "created unique sessions featuring transaction lawyers, litigators, CIOs and expert witnesses to share their experiences on how to avoid failures and deal with them in court." An ounce of prevention is, of course, worth a pound of cure. Details on the conference, slated for June 9-10 in Shakeytown, are here.
Not our problem, says insurer
A big insurance-coverage battle is heating up between Federal Insurance Co. and insured alcoholic-beverage manufacturers, over whether policies will cover claims that the booze ads improperly target under-age drinkers. Federal is in court trying to get a declaration that it does not have to defend the firms in the popular and burgeoning class action industry that's arisen around such claims. Via Law.com, Pam Smith of The Recorder has the story.
Today in history—June 3
1098: The First Crusade recaptures Antioch, which had been conquered by the Seljuk Turks from the Byzantines just 13 years earlier. The Crusaders will hold it for nearly 300 years.
1621: The Republic of the Seven United Netherlands Provinces grants the Dutch West India Co. a trade monopoly for West Africa and the Americas.
1800: John Adams becomes the first U.S. President to take up residence in Washington, D.C., although the official residence still isn’t finished.
1861: Stephen Arnold Douglas dies of typhoid fever. If he’d been willing to agree to put pro-slavery language in the 1860 Democratic Party platform, he would probably have become President of the United States.
1864: Ransom Eli Olds, the only man two have two major automobile companies named for him, is born at Geneva, Ohio. He will sell Oldsmobile in 1904 and later found REO, which will become part of White in 1960.
1888: Ernest Lawrence Thayer’s Casey at the Bat is published for the first time in the San Francisco Examiner.
1889: The Canadian Pacific Railway is completed from coast to coast.
1924: Insurance lawyer Franz Kafka dies at a sanatorium near Vienna, apparently of starvation.
1953: Billy Joe McAllister jumps off the Tallahatchee Bridge.near Choctaw Ridge, Mississippi.
1969: The last episode of TV’s Star Trek airs.
1969: The Australian aircraft carrier HMAS Melbourne accidentally runs over the destroyer USS Frank E. Evans, cutting it in half and sinking it. It'd something of a habit for the Melbourne, which had five years earlier run over and sunk an Australian destroyer.
1973: Jamaica's Island Records releases Exodus by Bob Marley & the Wailers. Time Magazine will later name it the greatest record album of the 20th century. Trivia question: What was the greatest record album of the 19th century?
1975: Oswald George "Ozzie" Nelson (Rutgers Law 1930), who did bandleader gigs to pay for his law school courses, dies at San Francisco, California.
Law & Society Friday (cont'd)
Also on tap at today's LSA confab is a Roundtable on Law and Society in the Law School Curriculum. It should be a good discussion with a particularly good panel: Stewart Macaulay and Howard Erlanger (Wisconsin), Jeannine Bell (Indiana-Bloomington), Sam Kamin (Denver). Unfortunately it's running at the same time as the paper we just mentioned, 10:15 a.m. Here's the description:
The object of this roundtable is to explore how the Law and Society perspective (method, research, theory, etc.) "lives" (or doesn't?) in the Law School classroom/curriculum/setting. This will not necessarily be a conversation about pedagogical techniques or a syllabus swap, but instead, it is an occasion to engage in a broader discussion of the place of Law and Society in law schools at the beginning of the 21st century
Law & Society Friday
One of the things about boilerplate is its reliability. And its ubiquity. Okay, that's two things. But using the same term all the time has enormous advantages because everybody knows what it means. But what happens when some court decides that the universal term actually means something different? The repercussions go far beyond the particular case before the court.
That's the problem that Craig Hoffman (Georgetown) is tackling in a paper he's giving today at the Law & Society Conference in Las Vegas. His Interpreting Boilerplate: Parsing pari passu Clauses in Sovereign Debt Contracts is slated for this morning at 10:15, Vegas time. Click on the "continue reading" link for the abstract.
The following sentence, called a pari passu clause, appears in every bond contract under which countries today issue debt: "The obligations of the Guarantor hereunder do rank and will rank at least pari passu in priority with all other External Indebtedness of the Guarantor, and interest thereon." This clause is an example of boilerplate language. Provisions such as these migrate from contract to contract with little thought by the parties who are bound by them. As long as no one reads them, and nothing bad happens, these clauses remain unchanged in contracts for decades -- and, in some cases, even longer. Recently, the pari passu clause has become the focus of very contentious and expensive litigation. A Belgian court has recently interpreted this pari passu clause in a way that no one had imagined before. Interpreting the parties' rights under a Peruvian debt contract, which was governed by New York law, the Belgian court read the clause to require that the bondholders must be paid pro rata with other debt of the issuer. This shift from priority of ranking to pro rata payment has sent shock waves throughout the sovereign debt world. The boilerplate language of the clause is not merely unclear; it is opaque. In this paper, I examine the pari passu clause and propose an analysis that comports with both the syntax of the sentence and the contractual expectations of the parties.
June 2, 2005
Contracts in Law & Society
We’re sorry we didn’t give you any advance notice—blame the participants for not telling us about it—but there’s an interesting panel going on this afternoon at the Law & Society Association Annual Meeting in the City of Dreams, Las Vegas, Nevada.
Wisconsin's "Lord High Executioner," Stewart Macauley (left) is moderating a panel called Contract Rules and the Law in Action. There are three papers, each of which sound like they’ll be taking the audience outside the world of doctrine and into the practical world of business. Copies of the papers aren’t available online, but you can click on the author’s name to request a copy by e-mail.
This paper is concerned with the negotiation of music contracts and the extent to which traditional contract theory provides an appropriate analytical framework for such agreements. We will start with a contextual analysis of the music industry and the cultural and economic factors that inform both the bargaining process and the eventual contractual terms. Reference will be made to common terms and issues and the relevance of standard form models. We then consider how contractual disputes have been resolved and the implications that the system of resolution has for the integrity of classical contract law theory. This will test our idea that a classical model cannot adequately explain the process and form of such contracts and that we need to apply alternative contextual and theoretical perspectives to understand and explain this type of ‘agreement’.
Examining the "Black Sox" Scandal Through the Lens of Contract Law, by Keith A. Rowley:
In 1919, a massive breakdown in relations between the Chicago White Sox and the teams' players precipitated a scandal in which several members of the heavily-favored Sox conspired with gamblers to intentionally lose the World Series in exchange for a payoff far in excess of the players' meager salaries. But for the trade that sent Babe Ruth to the New York Yankees, triggering their ascendancy and turning one of the two best left-handed pitchers of his generation into the premiere power hitter and most popular player of the first century of major league baseball, the "Black Sox" scandal might have killed major league baseball. Contractual and quasi-contractual relations -- including Sox owner Charles Comiskey's refusal to allow star pitcher Eddie Cicotte to earn a bonus for winning 30 games by ordering him benched late in the season, Cicotte and the other players' parsimonious contracts with the Sox, the unavailability of free agency, Cicotte and the other players' agreements with the gamblers, the gamblers' agreements among one another, and the ownersâ€™ agreement establishing the office of Commissioner of Baseball, empowering Commissioner Kennesaw Mountain Landis and agreeing to be bound by his rulings "in the best interest of the game" -- were integral to the scandal and its aftermath. While a handful of scholarly articles, scholarly and popular books, and an excellent movie (John Sayles's "Eight Men Out") have explored the scandal, its contractual and quasi-contractual aspects have been overlooked or relegated to marginalia. I propose to remedy this oversight.
Forward Sales Contract, Windfall Gains, and Substantive Justice, by David Wood (Melbourne)
[No abstract available]
Cases: Prof shouldn't have relied on supervisor's promise
Promissory estoppel was a loser for a non-tenured medical school professor fired from his job in a recent decision by the Ohio Court of Appeals. Even if the professor relied on his supervisor's promise, it could not bind the Medical College.
In the case, Dr. Jacobson taught gynecology in a series of one-year contracts with the Medical College of Ohio. When his contract was not renewed, he discussed with his superior, Dr. Weinstein, the possibility of taking his accumulated vacation and sick time as "terminal leave." Weinstein agreed.
Even assuming that Jacobson relied on Weinstein's agreement, however, he loses, said the court. It is not reasonable to rely on a promise that is prohibited by law, and Ohio law vests all authority over professorial compensation in the Board of Trustees. Thus, Jacobson had no claim against the Medical College.
Jacobson v. Medical College of Ohio, 2005 Ohio App. LEXIS 2425 (Ct. App. Ohio, May 24, 2005).
War and commerce
Those with a historical bent will enjoy a new paper from the National Bureau of Economic Research, The Worldwide Economic Impact of the Revolutionary and Napoleonic Wars, by Kevin H. O'Rourke (Economics Department, Trinity College, Dublin):
The paper provides a comparative history of the economic impact of the Revolutionary and Napoleonic Wars. By focusing on the relative price evidence, it is possible to show that the conflict had major economic effects around the world. Britain's control of the seas meant that it was much less affected than other nations, such as France and the United States. Explicit welfare calculations are provided for four countries, Britain, France, Sweden and the United States. Welfare losses were largest in the US, where they were of the order of 5-6% per annum; by contrast, they lay between 3-4% per annum in France, and between 1.7-1.8% per annum in Britain. On the other hand, the conflict helped pave the way for the more liberal international economic environment of the long 19th century.
Drafting in the Windy City
As you make your summer plans, don't forget that Northwestern University's conference on Teaching Contract Drafting is coming up July 20-21. It should be an excellent look at a very undeveloped area. Registration will be open through June. Info is here, and a PDF of the conference brochure is here.
Today in history—June 2
455: A Germanic-speaking tribe enters the world's language as a term for "wanton or ignorant destruction," as the Vandals sack Rome.
1615: The first group of Franciscan Récollet missionaries arrives at Québec, where they will subsequently set up Canada’s first brewery.
1780: The first Derby Stakes is run at Epsom Downs in Surrey, England. Two horse owners who organize it flip a coin to decide whom it would be named after—and Sir Charles Bunbury loses to Edward Smith-Stanley, 12th earl of Derby, thus avoiding the "Kentucky Bunbury."
1835: Twenty-five year-old Phineas Taylor Barnum starts his show business career by touring with his first act: a 160-year-old slave woman said to have been George Washington’s nurse.
1855: Citizens rioting over Maine’s new law prohibiting alcohol are suppressed by the state militia in what comes to be known as the Portland Rum Riot.
1891: Thurman Arnold (Harvard Law 1914), whose career will demonstrate you can get famous working against corporations and rich working for them, is born at Laramie, Wyoming.
1924: President Coolidge signs the Indian Citizenship Act, which gives U.S. citizenship to Native Americans
1969: Thurman Arnold (see above) dies on his 79th birthday.
1985: R.J Reynolds and Nabisco announce plans for a merger.
1997: California voters overwhelmingly approve Proposition 227, which drastically curtails bilingual education in the state.
2004: Software engineer Kenneth Wayne Jennings III begins his record streak of 74 consecutive wins on the TV game show Jeopardy, which will net him $2.5 million in prize money.
June 1, 2005
News in brief
A price war for Internet service may be in the offing, as SBC has slashed fees for its high-speed internet service to $15 a month—$9 a month less than AOL's slower dial-up service.
England's Chelsea soccer club has been hit with a £300,000 penalty for making contract overtures to Arsenal's Ashley Cole, was was personally hit with a £100,000 fine.
Recriminations are already under way in Australia, where the federal government decided to award a $6 billion ship contract to a South Australia firm instead of one in Victoria.
United Airlines mechanics have ratified a new contract, and machinists have reached an "agreement in principle" with the bankrupt carrier.
A North Carolina judge says late auto racing star Dale Earnhardt's employment contract, an exhibit in an upcoming trial involving denial his wife's life insurance claim, will be made public.
America's Fluor Corp. has won the contract to engineer, design, and manage construction of a new $3.5 billion petrochemical complex in Saudi Arabia.
Tasmanian potato farmers, who are losing half their big french-fry contract with Australian McDonald's, are pushing for retaliation against New Zealand, which has undercut them. New Zealand, meanwhile, will probably bring at WTO action against Australia over restrictions on apples.
The little statehouse replicas sold in the Wisconsin State Capitol will no longer be made in China; the state has decided to turn production of over to a local "rehabilitative work" center.
The United Nations has finally found someone to fire for the oil-for-food scandal: Joseph Stephanides, who was planning on retiring in September anyway.
Contract trumps divorce law
It's the odd child-support agreement that will turn on questions of contract law rather than on the best interest of the child, but the Tennessee Court of Appeals got to consider one in a recent decision.
In the case, Mr. and Mrs. Arze divorced. Mr. Arze got primary custody of their four children, but in the settlement agreement nevertheless promised to pay Mrs. Arze $2,000 a month in child support, as well as $1,000 a month in alimony. Later, when the oldest child reached 18 and became emancipated, Mr .Arze tried to reduce child support to $1,500 a month.
Ordinarily, said the court, a settlement agreement like this would be merged into the divorce decree. But Tennessee law prohibits paying child support to noncustodial parents as part of a divorce decree, so it had to be analyzed as a pure contract. Under the circumstances, the court considered that Mr. Arze must have received something of value in exchange for making such payments, so the contract was valid. Under the circumstances, it seemed reasonable to conclude that Mr .Arze had paid $500 per child, so he was entitled to reduce the figure as each child became emancipated.
Arze v. Arze, 2005 Tenn. App. LEXIS 307 (Tenn. Ct. App., May 23, 2005).
To be, or not to be, or maybe
Ordinary business folks can be excused if they think it's the job of judges to make contractual liability as unpredictable as possible. In a recent decision, the U.K.'s Employment Appeals Tribunal has one of those decisions that will lead to nice fees for litigators and no end of head-scratching for businesses.
In the case, the EAT had to determine whether an employee of an agency supplied to a third-party user should be considered an "employee" of the third party user. There are presumably good reasons for answering either "yes" or "no," but that would have been no fun. Instead, "a very careful factual assessment" must be made in each case "before any such conclusion is reached." The lawyers of London's CMS Cameron McKenna have a brief summary.
Southwestern honors Hart
Southwestern's Danielle Kie Hart has been named by the school's Board of Trustees as the Irwin R. Buchalter Professor of Law for 2005-06. The awards are given "in recognition of outstanding teaching, professional accomplishment, and service to our law school and community."
Hart earned her J.D. in 1992 at the University of Hawaii, and an LL.M. in 1998 at Harvard. After clerking on the Hawaii Supreme Court, private practice, and a stint in Hawaii's Legal Aid Society, she joined the Southwestern faculty in 1999, where she teaches contracts, sales, and secured transactions. She's a member of the Executive Committee of the AALS Section on Gay and Lesbian Legal Issues.