August 27, 2005
Quotes: Rob Roy on Insurance
From Rob Roy, by Sir Walter Scott:
“This is a very singular contract of assurance,” said Mr. Owen.
“It’s clean again our statute law, that must be owned,” said [Bailie] Jarvie, “clean again law; the levying and the paying black-mail are baith punishable: but if the law canna protect my barn and byre, whatfor suld I no engage wi’ a Hieland gentleman that can?--answer me that.”
“But,” said I, “Mr. Jarvie, is this contract of black-mail, as you call it, completely voluntary on the part of the landlord or farmer who pays the insurance? or what usually happens, in case any one refuses payment of this tribute?”
“Aha, lad!” said the Bailie, laughing, and putting his finger to his nose, “ye think ye hae me there. Troth, I wad advise ony friends o’ mine to gree wi’ Rob; for, watch as they like, and do what they like, they are sair apt to be harried [i.e., plundered] when the lang nights come on. Some o’ the Grahame and Cohoon gentry stood out; but what then?--they lost their haill [whole] stock the first winter; sae maist folks now think it best to come into Rob’s terms. He’s easy wi’ a’ body that will be easy wi’ him; but if ye thraw him, ye had better thraw the deevil.”
Illinois Appeals Court Enforces “Browse-Wrap Agreement”
An Illinois appeals court held that buyers who purchased computers over the Internet were bound to an arbitration clause contained in the "Terms and Conditions of Sale,” even though the buyers were not required to click on an “I agree” button specific to those terms of sale.
The computer purchasers brought an action against the computer manufacturer, Dell, claiming that it falsely advertised the Pentium 4 microprocessor was the fastest chip available. Dell moved to compel arbitration; the trial court denied the motion. Dell appealed, and the appellate court reversed.
The buyers had purchased the computers on Dell’s web site, which contained five pages of forms the buyers had to fill out to make the purchase. Each of these five pages contained a blue hyperlink to the “Terms and Conditions of Sale.” The “Terms and Conditions of Sale” included an arbitration clause. The “Terms and Conditions of Sale” were also included on the printed invoice that came with the computer.
Dell argued that the blue hyperlink to the “Terms and Conditions of Sale” was sufficient to make the purchasers aware they were agreeing to the arbitration clause. The purchasers argued, however, that Dell should have displayed on its order-confirmation web page an "I accept" box, on which the purchasers must click to manifest assent to the agreement before the purchase proceeded.
The appellate court held that the terms were conspicuous enough that the purchasers should have known what they were agreeing to:
The blue hyperlink entitled "Terms and Conditions of Sale" appeared on numerous Web pages the plaintiffs completed in the ordering process. The blue hyperlinks for the "Terms and Conditions of Sale" also appeared on the defendant's marketing Web pages, copies of which the plaintiffs attached to their complaint. The blue hyperlinks on the defendant's Web pages, constituting the five-step process for ordering the computers, should be treated the same as a multipage written paper contract. The blue hyperlink simply takes a person to another page of the contract, similar to turning the page of a written paper contract. Although there is no conspicuousness requirement, the hyperlink's contrasting blue type makes it conspicuous. Common sense dictates that because the plaintiffs were purchasing computers online, they were not novices when using computers. A person using a computer quickly learns that more information is available by clicking on a blue hyperlink.
Hubbert v. Dell Corp., 2005 Ill. App. LEXIS 808 (Aug. 12, 2005).
[Meredith R. Miller]
Today in History: August 27
1232: Hojo Yasutoki, regent to the Shogun, issues the Goseibai Shikimoku, or "Formulary of Adjudications," the basic legal code of the Shogunate.
1637: Charles Calvert, 3rd Baron Baltimore and proprietor of Maryland, is born. When he backs the wrong King during the “Glorious Revolution” the winner, William III, will confiscate the colony and put it under royal control.
1859: Edwin Drake, the first man to use drilling techniques for oil, finds it 69 feet below Oil Creek at Titusville, Pennsylvania. This is the beginning of the world's petroleum industry.
1865: Future Nebraska lawyer, U.S. Vice President, brigadier general, popular composer, bank president, and Nobel Peace Prize winner Charles Gates Dawes (Cincinnati Law 1886) is born at Marietta, Ohio.
1875: The body of San Francisco’s leading businessman, William Chapman Ralston, founder of the Bank of California, is found floating in the bay the day after a massive crash in the cash-strapped bank’s stock price.
1896: The Anglo-Zanzibar War, the shortest in recorded history (it's over in 45 minutes), ends with a British victory.
1928: The Kellogg-Briand pact makes war illegal.
1937: Toyoda Automatic Loom Works, a manufacturer of textile machinery, spins off its fledgling automobile division, which will be called “Toyota.”
1948: U.S. Chief Justice and one onetime Cornell law professor Charles Evans Hughes (Columbia Law 1884) dies at Osterville, Massachusetts.
1967: Brian Samuel Epstein, the Liverpool record store manager who at 26 will become manager of the Beatles and land them their first recording contract, dies of a drug overdose.
2003: Mars makes its closest approach to Earth in 60,000 years. Nothing in particular happens.
August 26, 2005
News in Brief
Former Guns N' Roses bandmates Duff McKagen and Slash have sued frontman Axl Rose, claiming he had no right to sign a $20 million deal with Sanctuary Group that included a license for the band’s back catalog.
LaVar Arrington and the Washington Redskins have resolved their dispute over his written contract, which he says failed to include a $6.5 million bonus he was promised orally.
Canada’s air traffic controllers have ratified a new four-year contract giving them 3% annual raises.
NHL teams are worried that the Columbus Blue Jackets’ offer of a $5 million-a-year deal to star Rick Nash will upset the league’s fragile salary structure.
The U.S. government says it’s meeting its overall goals in awarding contracts to small businesses, but not enough contracts are going to businesses owned by women and disabled military veterans.
Cleveland Browns wide receiver Braylon Edwards has been sued by a catering company which says he stiffed them on a $30,000 bill for two extravagant parties.
The Scots parliament is taking some heat for a decision to let contract go to a cheaper Polish shipyard rather than one in Glasgow.
Bids will be due October 12 from wireless companies vying for the right to provide cell phone service in New York City’s subway system.
After eight years of litigation, insurer Argonaut Group has landed a $45 million settlement of its contract claims against the Los Angeles Metropolitan Transit Authority.
Cases: Lender refusing extension isn't bad faith
A lender who refused to give a cash-strapped farm family an extension of time to get the harvest in before it foreclosed wasn't guilty of bad faith, according to a recent decision by the South Dakota Supreme Court.
According to the Sioux City Journal, the plaintiffs inherited the farm, which came with more than $700,000 in debt. They borrowed money from the lender, Farm Credit Services of America, to help them stay afloat. Following a drought and the crash in farm prices that followed the 9/11 attacks, the family asked for a extensions; the lender offered two months but refused to allow them as much time as they needed. Subsequently, when the farmers didn't pay, the lender foreclosed.
The farmers claimed that if they had been given a little more time, they would have been able to harvest their wheat and sell 100 horses at a fall sale, and it was bad faith for the lender to refuse to grant them an extension. But the court rejected that argument, noting that the lender was simply enforcing the agreed-upon provisions and there was no contractual right to more time. "Good faith and fair dealing," said the court, "ensures that contracting parties get the full benefit of their bargain, but no more."
Leib joins Hastings faculty
UC-Hastings this year added Ethan J. Leib to its arsenal of Contracts scholars. He joins a deep bench at California’s First Law School that includes Charles Knapp, Harry Prince, William Dodge, Ashutosh Bhagwat, Leo Martinez, and Frederick Lambert.
Leib, a native of New York City, earned four of his various degrees (B.A., M.A., J.D., Ph.D.) at Yale, and one (M. Phil.) at Cambridge. After law school, he clerked for Chief Judge John M. Walker, Jr., of the United States Court of Appeals for the Second Circuit, and then was a litigator at Debevoise & Plimpton in New York City.
His first book, Deliberative Democracy in America: A Proposal for a Popular Branch of Government, was published in 2004, and his most recent Contracts-related article is On Collaboration, Organizations, and Conciliation in the General Theory of Contract, which by coincidence we happened to note here yesterday. He’s also a regular contributor at the always-interesting group law professor blog, PrawfsBlawg.
Corporate governance by contract
Sarbanes-Oxley is usually thought of as falling within the ambit of corporate law, not Contract law. But for at least one category of firms, those who do business with the government, SOX can also create contractual problems and leave firms open to damages. Gregory Jacobs of Reed Smith outlines the issues in Sarbanes-Oxley and Government Contracts: What You Need to Know.
Ohio State’s Moritz College of Law is looking for at least one entry-level or very junior lateral who will teach Contracts -- and possibly two, depending on the other fields. Related areas, they say, include commercial law, corporations, and other business courses, as well as international/comparative law, intellectual property, environmental law, trusts and estates, property, and tax.
The chair of the appointments committee is Professor Camille Hébert.
A Negotiation Status Email is Neither a Contract Nor an A La Carte Menu
Yesterday, reversing the District Court, the Seventh Circuit held that a 572-word email summarizing the status of negotiations between Roberson and Volvo did not constitute a contract.
During the companies' negotiation of a "fleet agreement," an email was exchanged that set forth several items upon which the companies had agreed and, also, several other items which the companies would revisit. Judge Easterbrook wrote:
Roberson had not agreed [in the e-mail] to buy a single truck; it wants to treat the email as granting it a unilateral option. No reasonable jury could conclude that the items covered in the email were independent bargains to which Volvo had bound itself. The parties were negotiating a comprehensive arrangement, not a series of stand-alone contracts. The email was not something to which Roberson could respond "I accept" and move from the negotiation to the performance stage. Nor did Roberson say "I accept" or any equivalent; the parties negotiated for another two months, and when Volvo submitted its comprehensive proposal (at least 100 times longer than the email), Roberson refused to sign.
While Roberson argued that the parties could, for example, agree to terms concerning truck purchases separately from terms concerning truck maintenance, the court determined that the negotiations were global:
If people choose to negotiate and agree item by item, that is their privilege. But that is not what these negotiators were doing, and the email was not an a la carte menu from which Roberson could check off items it wanted.
According to the court, the parties were in pre-contract talks, and certain necessary specifics had not yet been agreed upon. Judge Easterbrook noted:
Parties may negotiate toward closing a deal without the risk that a jury will think that some intermediate document is a contract, and without "fear that by reaching a preliminary understanding they have bargained away their privilege to disagree on specifics."
[Meredith R. Miller]
What does love have to do with it: the resolution of the mailbox rule?
Goodrich, Peter, "The Posthumous Life of the Postal Rule Requiem and Revival of Adams v. Lindsell" . FEMINIST PERSPECTIVES ON CONTRACT LAW, London: Glasshouse Press, 2005 http://ssrn.com/abstract=760377
This article claims to authoritatively resolve the mailbox rule by tracing its origins to marriage proposals in England. The offeree was favored and protected because the offeree was a woman. When the roots of the doctrine were lost, the principle that the fiction expressed was also forgotten.
Today in History: August 26
55 B.C.: The long story of British interaction with the Roman civil law begins with Julius Caesar’s invasion of Britain.
1498: Michelangelo gets a contract from Cardinal Jean de Billheres to design statuary for the latter’s funeral chapel. He comes up with something called the Pietà.
1789: The French National Constituent Assembly adopts the "Declaration of the Rights of Man." It's one thing to declare them, as they will find, and another to achieve them.
1839: Officers of the U.S.S. Washington seize the Spanish brig La Amistad off the coast of Long Island, New York. They will take it to Connecticut to file a libel claiming salvage rights in the ship and its cargo, escaped slaves.
1935: Geraldine Ann Ferraro (Fordham Law 1960) is born at Newburgh, New York. She’ll work her way through law school at night by working as a public school teacher.
1935: Johnny Mercer is topping the charts with On the Atchison, Topeka & Santa Fe.
1950: Gertrude Moran, who shocked the tennis world a year earlier the year by wearing ruffled lace-trimmed knickers under a short skirt at Wimbleton, is signed to a $75,000-a-year contract by tennis promoter Bobby Riggs.
1957: The first of Ford Motor Co.’s widely publicized new model rolls of the assembly line. They call it the “Edsel.”
1987: The Fuller Brush Co., which had sold products strictly door-to-door for 80 years, announces plans to open its first two retail stores, in Dallas, Texas.
August 25, 2005
News in Brief
A California appellate court has reinstated the $500 million breach of contract case brought by an oil driller against the city of Hermosa Beach, California, after the city’s voters banned oil exploration in the city and forced termination of its contract.
Anheuser Busch, which previously announced a settlement of contract and defamation claims brought by the family of former baseball star Roger Maris, says it will pay $120 million in cash.
A Manhattan judge has ruled that a $53,000 ring given to a girlfriend is a “gift in contemplation of marriage,” even if the giver never actually said, “Marry me.”
Potato farmers in southeast South Australia have rejected a request by giant french fry (“chip”) maker McCain, to lower contract prices for this season.
Boeing’s machinists say the company’s opening offer to them is “an insult.”
A British retailer whose web site that erroneously took orders for heavily discounted goods that weren’t actually available says it will give customers their money back, but some are threatening breach of contract actions for the benefit of their lost bargains.
A businessman learned that e-mails are dangerous, after his breach of contract defense was blown out of the water in a case involving a “no shop” agreement in a business sale.
America’s EDS has restructured its troubled outsourcing contract with Britain’s Department of Work and Pensions, avoid the fate of its canceled deals with the country’s Inland Revenue and National Health Service.
Hewlett Packard has won a big symbolic contract, getting the deal to provide 1,000 work stations for George (Star Wars) Lucas’s cutting-edge Industrial Light & Magic.
The contractor that runs speed cameras for police in Victoria, Australia, will likely face contractual liability after one of its employees set them up with the wrong speed limits.
Cases: Indeminification for required bond
An arbitrator’s order to post a bond is a “binding arbitral decision” for purposes of a contract clause requiring indemnity for such decisions, according to a recent decision by the U.S. Court of Appeals for the Eleventh Circuit, applying Florida law.
In the case, UPS had bought Centurion Air Cargo in 1999. At the time, Centurion was locked in
litigation with another company, Carga Aerea. Under the terms of the deal, Centurion was to retain all liability for the litigation. The contract provided that if UPS were liable for any amounts in that litigation, Centurion would indemnify it. It further provided that “if [UPS] obtains a final, nonappealable judicial order or binding arbitral decision in [UPS’s] favor that [Centurion] is obligated to indemnify [UPS],” UPS could deduct those amounts from certain ongoing payments it was making to Centurion.
Subsequently, UPS’s assets were attached and its revenues garnished as part of the Carga Aerea litigation. UPS and Centurion were already in arbitration on other matters, and UPS filed an emergency motion with the arbitrator, asking him to order Centurion to post an $821,000 bond that would allow UPS to get its assets unencumbered. The arbitrator ordered Centurion to post the bond, but it refused to do so. UPS then took the money out of the payments it owed to Centurion, posted a bond in Centurion’s name, and freed up its assets.
The question before the court was whether an arbitrator’s order to post a bond pending final determination of an action is a “binding arbitral decision.” that Centurion was “obligated to indemnify” UPS. This was a case of first impression, said the court. It noted that UPS was obliged to show under the contract language that (1) the arbitral order was final, and (2) it obligated Centurion to indemnify UPS. The first part was easy; an arbitral order, said the court, is presumed final unless the parties have specifically agreed otherwise. As to the second, the court reasoned that the arbitrator’s order had given Centurion a duty to post the bond. UPS had undertaken to perform the duty that Centurion should have performed. Thus it was entitled to indemnity. Summary judgment for UPS was affirmed.
Centurion Air Cargo, Inc. v. UPS Co., 2005 U.S. App. LEXIS 16586 (11th Cir. Aug. 9, 2005). [Frank Snyder]
Emens joins Columbia
Emens earned her B.A. at Yale, then earned a Ph.D. in English at King's College, Cambridge, where she was a Marshall Scholar. After earning at J.D. at Yale in 2002, she worked as a law clerk for Judge Robert D. Sack on the U.S. Court of Appeals for the Second Circuit. For the past two years she’s been a Bigelow Fellow & Lecturer in Law at the University of Chicago.
In addition to Contracts, she’ll teach family law; antidiscrimination law; disability law; and law & sexuality. She's the author, among other things, of Monogamy's Law: Compulsory Monogamy and Polyamorous Existence.
The Commonality of Computers, French Fries and Arbitration
In 2001, McDonald's promoted the sale of its food by sponsoring a "Who Wants to be a Millionaire" game. Plaintiff Linda James purchased an order of french fries; she believed that her fries contained a million dollar prize ticket. When she attempted to redeem the million dollars, McDonald's refused, claiming that it was a "Low-Level Prize Game Card." Ms. James sued McDonald's and its marketing company.
McDonald's moved to compel Ms. James to arbitrate her claims. The District Court granted the motion. James appealed, and the Seventh Circuit affirmed. The court held that James was bound by the arbitration clause contained in the "Official Rules" of the contest.
James argued that she did not agree to arbitrate because she had not seen the "Official Rules." McDonald's argued that the arbitration clause was made public because the "Official Rules" were posted openly in participating restaurants, and the french fry cartons referred participants to the rules.
Relying on ProCD, 86 F.3d 1447 (7th Cir. 1996) and Hill v. Gateway, 105 F.3d 1147 (7th Cir. 1997), the court held that Ms. James was bound by the arbitration provision even though she had not read it. Gateway, for example, enforced arbitration clauses against purchasers who had not seen them in the supporting documentation that came with their computers. Following these cases, the Seventh Circuit held:
The situation faced by McDonald's presents an apt comparison [to ProCD and Gateway]. To require McDonald's cashiers to recite to each and every customer the fourteen pages of the Official Rules, and then have each customer sign an agreement to be bound by the rules, would be unreasonable and unworkable. The Official Rules were identified to Ms. James as part of the contest, and that identification is sufficient in this case to apprise her of the contents of the rules.
[Meredith R. Miller]
Today in History: August 25
1530: Russians are overjoyed when an heir, who is named Ivan after his grandfather, is finally born to Vasily III of Moscow. Only later will they start calling him “the Terrible.”
1609: Galileo Galilei demonstrates his new telescope for the Venetian authorities. He soon has a flourishing business selling them to local shipowners.
1718: Jean-Baptiste Le Moyne de Bienville finds a rare high spot on the banks of the flood-prone Mississippi, and found a settlement which he calls La Nouvelle-Orléans.
1796: James Lick, who will become the richest man in California during the Gold Rush by buying San Francisco land, not gold mines, is born at what is now Fredericksburg, Pennsylvania. He will also convince a former neighbor from Peru named Ghirardelli that there’s money to be made selling chocolate in California.
1835: The New York Sun inaugurates the Great Moon Hoax by reporting that life has been discovered on the Moon with a powerful new telescope that sees people and various animals there. It’s six days before the hoax is revealed.
1900: God may or may not be dead, but as of this date Friedrich Nietzsche is.
1910: The Shaw Livery Company is formed in Chicago from a merger of livery and taxicab companies. It will later change its name to Yellow Cab and its president John Hertz, will later leave to form his own car rental business.
1950: President Truman orders U.S. railroads seized by the Army to avert a potential strike.
1975: Bruce Springsteen releases his breakthrough Born to Run. Although it will later be voted the “most popular” album of all time and among the top 20 "greatest albums," it actually never hits the top spot on the Billboard charts.
1980: The Broadway version of 42nd Street -- a remake of the popular film that single-handedly kept Warner Bros. from bankruptcy in 1933 -- opens at the Winter Garden Theater in New York City.
Limits on Comprehensive Theories of Contracts
Leib, Ethan J., "On Collaboration, Organizations, and Conciliation in the General Theory of Contract" . Quinnipiac Law Review, Forthcoming http://ssrn.com/abstract=762905
A central shortcoming of all general contract theories is that they tend to exclude types of contracts to fit their theory. A focus on Types may point to a resolution of some of the ongoing debates in contract theory.
August 24, 2005
News in Brief
Singer Rod Stewart was in a Las Vegas federal court yesterday for the start of a lawsuit in which Harrah’s casino is trying to reclaim $2 million it paid for a canceled concert.
Anheuser-Busch and the family of former baseball star Roger Maris have settled their eight-year contract and defamation litigation over termination of the family’s Florida beer distributorship.
British Airways has reached a contract agreement with its caterer, Gate Gourmet, provided the latter can resolve the labor dispute that began when it fired 670 union workers who had led protests against the company.
San Diego Chargers tight end Antonio Gates, who signed a one-year, $385,000 contract with the club Sunday, signed one yesterday that replaces it, this one a six-year deal at a much higher (but undisclosed) amount.
Europe’s EADS says it will bid on the U.S. Army’s new light helicopter contract, a 300-copter deal that would be worth more than $2 billion.
The head of McDonald’s Australia says it was quality issues, not just price, that caused it to cut back 50 percent on its exclusive potato contract with Tasmanian farmers and buy the spuds elsewhere.
Unionized coaches 14 Pennsylvania universities have reached a contract deal with the state, which will give them 3 percent raises for 2 years, with additional small merit-based increases, that could total about $3,600 per coach.
Organizers for the 2008 Africa Cup in Ghana awarded a major contract to a Chinese company that had not bid for it, after it found that the companies that did bid were too high.
The Iranian government has pulled a $310 million contract from the U.S.’s Haliburton due to “bribes,” and has awarded it to its government-owned National Iranian Drilling Company.
Speaking of Iran, local joint venture partners are calling on Turkey’s TurkCell to go through with its commitments, even though the Turkish company saw its interest in the partnership involuntarily reduced from 70 to 49 percent.
UCLA, Cornell top new university rankings
Via our colleagues at TaxProf Blog, the Washington Monthly has released its ratings of the top universities in America, based not on prestige or faculty quality or student credentials, but upon their impact on society as a whole. The rankings cover research, but also include fostering public service and social mobility.
Top 10 public universities with law schools:
3. Penn State
4. UC-San Diego
8. U of Washington
Top 10 private universities with law schools:
7. Southern California
10. Case Western
Cases: Accepting late payments isn't modification
The family of a life insurance policy holder who died after his policy lapsed and before he could reinstate it lost out on their claim to benefits in a recent decision by the Georgia Court of Appeals -- even though the insurer had previously routinely allowed hime to reinstate after such defaults.
The insured, Stephen Ward, had a $250,000 policy with Guideone Life Insurance. He obviously had a problem with deadlines; he missed the payment deadline six times over the course of the policy. The first five times the company allowed him to reinstate, on payment of a late fee and filling out a form. The sixth time he died before he could do so. Ward’s son, after his death, slipped the payment under the door of the insurance agent’s office. Guideone refused the payment and refused to pay. Ward’s wife sued. The trial court found in her favor, holding that Guideone's previous actions in allowing reinstatement had modified the contract to require a notice to Ward before complete cancellation of the policy. No such notice was (or could be) given, since Ward was dead.
Wrong, said the appellate court. There was no notice requirement in the policy, which specifically provided that the policy would terminate a month after the payment deadline. It also specifically provided for reinstatement after that point, if Ward filled out new paperwork showing he was still alive and paid the late fees. Guideone's actions were therefore consistent with the contract, and therefore could not modify it. The policy had lapsed and it was properly terminated. Since Ward was not alive to reinstate it, the plaintiff’s claim failed.
Guideone Life Ins. Co. v. Ward, 2005 Ga. App. LEXIS 874 (August 8, 2005).