ContractsProf Blog

W. C. Fields on Getting the Benefit of the Bargain

This story about W. C. Fields from anecdotage.com:

Late one night on the set of Francis Martin's Tillie and Gus, W. C. Fields found himself shooting a scene in a diver's costume. According to the script something had gone wrong and Fields was to be hauled up in a diver's bell, half dead, and then gasp, "is there a doctor in the house?" Instead of uttering the scripted line, however, Fields pointed at his gigantic diving footwear and exclaimed: "[Boxer] Primo Carnera's carpet slippers!" Fields was promptly reprimanded for changing the line. "Why? That's funny," he replied. "Everybody knows about Carnera's big feet." Nonetheless, with the hour approaching midnight, it was agreed that the scene should be reshot.

Coming up a second time, Fields pointed to his feet again and quipped: "Charlie Frobisher's bedroom slippers!" Again, he was scolded for changing the line. "What's the matter with you?" Fields cried. "Don't you know the name 'Charlie Frobisher' always gets a laugh? People will howl at it!" The director, astonished by Fields's terrible judgement, began to wonder whether he was losing his mind. As the clock struck midnight, Fields was sent into the tank again. Upon rising this time, he promptly spoke the proper line and went home.

The explanation soon became apparent: Fields's contract stipulated that he be paid an $800 bonus every time he worked past midnight!

[Meredith R. Miller]

Buying a Contract Problem

You can find almost anything on eBay, even an interesting contract interpretation problem.  Take, for example, the 1960 contract between actor Cliff Robertson and Paramount Studios regarding how Robertson's name will be credited in a television episode.  The original contract (left) is for sale now on the auction site.  It was obviously prepared by Paramount, and it has this interesting clause:

"No casual or inadvertent failure to comply with the provisions hereof shall be deemed a breach of this agreement by us."

The “by us” at the end is what is curious.  Without it, it’s a kind of sensible substantial performance clause that applies to both parties.  Adding the “buy us” seems deliberately intended to make it one-way -- but which way?  Since it’s a movie studio, you’d expect them to mean, “No casual or inadvertent failure by us will be deemed a breach.”  But it can also be read to mean, “A casual or inadvertent failure will not be deemed by us to be a breach of the agreement” -- which would seem to mean that that Paramount’s own inadvertent failure would, if substantial, be a breach.

[Frank Snyder]

An Increase in the Number of "Contract Attorneys"

Law.com reports that, increasingly, the nation's largest 250 law firms are turning to temporary attorneys -- "contract attorneys" -- to wade through seemingly infinite piles of discovery documents.  The article explains:

Firms commonly bring in contract attorneys through agreements with staffing agencies that do much of the screening for them. Firms generally charge the client by the hour, with a markup for what they pay the temp agency.

With growing frequency, however, corporate clients themselves are taking bids from staffing agencies and guiding the selection of contract attorneys who will work with law firms, said Robert Singer, former executive director at Weil, Gotshal & Manges of New York, who in August became chief executive officer of De Novo Legal, a staffing company in New York.

In addition, he said that more corporate counsel are supplementing their own staffs with contract work.

The firms report that the "greatest advantage to the arrangements is saying goodbye to the extra labor -- and their wages -- when the job is finished."  Some contract attorneys say that they like the freedom of choosing when to work, or the ability to supplement income when solo practice is slow.

The firms hand down large discovery-related tasks to contract lawyers -- an "unwelcome" task for most associates.  This arrangement provokes the question: what are first year associates doing these days?

Moreover, the additon of contract attorneys creates another tier in the hierarchy of attorney labor at these law firms, which raises issues of employee "integration."

[Meredith R. Miller]

Boilerplate

"The Hidden Roles of Boilerplate in Standard Form Contracts" Michigan Law Review, Vol. 104, March 2006 by David Gilo, Tel Aviv University Buchmann Faculty of Law and Ariel Porat, Tel Aviv University Buchmann Faculty of Law.

This article focuses on benefits the supplier can derive from the transaction costs that boilerplate language creates, most of which have been ignored by courts and legal writers. As the Article demonstrates, transaction costs generated through boilerplate language could have different impacts on different types of consumers, enabling, inter alia, screening out unwanted consumers, price discrimination, cartel stabilization and the studying of consumer preferences.

On other occasions, the transaction costs are imposed in order to hide benefits granted to certain consumers. On yet other occasions the transaction costs are self-imposed by the supplier, in order to signal to buyers or to his competitors that negotiation of the contract would be very costly. There are also cases in which boilerplate language does create asymmetry of information between the supplier and his consumers, as in the classic discussions of boilerplate language, but the asymmetry is used as a cartel-facilitating tool, an anticompetitive signaling device, or a tool for creating the appearance of a fair contract, rather than to merely extract surplus from uninformed consumers.

One of this Article's conclusions is that the law's concernshould not be only with harsh boilerplate terms, but also with beneficial boilerplate terms. At times, beneficial boilerplate terms extract surplus from uninformed consumers, exactly as harsh terms do, but by using a different technique. Another conclusion of the Article is that boilerplate language should be carefully reviewed even when no particular terms are hidden in it, neither beneficial nor harsh, because the boilerplate provisions could be used just for the sake of artificially complicating the transaction. The Article also inquires whether the various uses of boilerplate language are desirable from a social perspective, and if not, it asks how the law should discourage them.

The Article shows that the lack of awareness of the various uses of boilerplate language on the part of courts, legislatures and administrative agencies has resulted in a lack of sufficient legal tools to handle these uses. One of the Article's goals is to develop such tools. Document: Available from the SSRN Electronic Paper Collection:

http://papers.ssrn.com/paper.taf?abstract_id=798308

Today in History: October 14

1066: On a hill six miles from Hastings, King Harold II takes an arrow in the eye and loses the battle that will change the course of English history.

1586: Queen Mary I of Scotland goes on trial in England for conspiracy against Queen Elizabeth I.  Things won’t go well.

1651: Outraged members of the Massachusetts legislature pass a new sumptuary law:

And, although we acknowledge it to be a matter of much difficulty, in regard of the blindness of men's minds and the stubbornness of their wills, to set down exact rules to confine all sorts of persons, yet we cannot but account it our duty to . . . commend unto all sorts of persons the sober and moderate use of those blessings which, beyond expectation, the Lord has been pleased to afford unto us in this wilderness.  And also to declare our utter detestation and dislike that men and women of mean condition should take upon them the garb gentlemen by wearing gold or silver lace, or buttons, or points at their knees, or to walk in great boots; or women of the same ran to wear silk or tiffany hoods, or scarves which, though allowable to persons of greater estates or more liberal education, we cannot but judge it intolerable.

1906: German-American political theorist Hannah Arendt is born at Hanover.  Her thesis that fascism and communism are related will be very controversial for many years.

1911: Supreme Court Justice John Marshall Harlan dies at age 78.  He accomplished the judicial equivalent of the Daily Double, dissenting in both Plessy v. Ferguson and Lochner v. New York.

1912: John Schrank, acting on spectral orders from the dead William McKinley, shoots former President Theodore Roosevelt during a campaign stop in Milwaukee, Wisconsin.  The bullet grazes TR, who goes on to deliver a 90-minute speech despite the bullet hole in the manuscript.

1996: The Dow Jones Industrial Average closes above 6,000 for the first time in history.  It will nearly double again in less than four years, creating many investment geniuses.

News in Brief

A European consortium has won the controversial $7.2 billion contract to build the world’s longest suspension bridge, which will link Sicily to the toe of Italy.  (International Herald Tribune)

Bridgestone Firestone has agreed to pay $240 million to Ford Motor Co. to settle claims arising out of Ford’s recall of Firestone tires because of safety problems.  (Associated Press)

Guitarist Eric Clapton has signed a book deal with Random House Group to write a tell-all memoir; terms were not disclosed but it’s likely a multi-million dollar deal.  (PR Newswire)

BT Group Plc is running nine months behind on a massive $1.74 billion phone contract with the U.K. health service, and may be hit with another “fine” under the contract.  (Bloomberg)

Greyhound owners in Connecticut are suing a local track for breach of contract after it announced it would end live racing.  (Norwich Bulletin)

The Philippine Justice department says it reviewed the loan documents for the controversial NorthRail project, but wasn’t informed that the loan was tied to a no-bid contract with a Chinese firm.  (Manila Times)

[Frank Snyder]

Express Conditions Precedent in the Context of Substantial Performance

Does the doctrine of substantial performance excuse a contractor’s failure to comply with an express condition precedent to final payment that is unrelated to completion of the building?  An appellate court in the Lone Star Sate held: no; while the substantial performance doctrine permits a contractor to sue under the contract, it does not ordinarily excuse the non-occurrence of an express condition precedent.

TA Operating Corporation (“TA”) contracted with Solar Applications (“Solar”) to construct a prototype multi-use truck stop in San Antonio.  The parties expressly agreed that, even after the work to construct the truck stop was completed, Solar was not entitled to final payment until it provided TA with a release of all liens filed in connection with the work.  The parties called this document an “all-bills-paid affidavit,” and they agreed that, as a condition precedent to final payment, Solar had to provide this affidavit to TA. 

When Solar’s work on the truck stop was substantially performed, TA terminated the contract because Solar had not completed certain "punch list" items.  Solar sued TA for breach of contract on the theory of substantial performance.  TA counterclaimed for breach of contract and requested damages due to delays in the construction, alleged defects, and the liens filed against the project by subcontractors.  The trial court severed TA’s counterclaim based on the liens and awarded Solar final payment for the project, less the cost of remediable defects in the construction. 

TA appealed, arguing, among other things, that the doctrine of substantial performance did not excuse Solar’s failure to comply with the express condition precedent to final payment – provision of the all-bills-paid affidavit.  The appellate court sided with TA; quoting Williston’s treatise, the court held:

if the terms of an agreement make full or strict performance of an express condition precedent to recovery, then substantial performance will not be sufficient to enable recovery under the contract.

The court noted that, had Solar provided TA with the affidavit, it would have met the express condition precedent of the parties’ contract, it could have relied upon the doctrine of substantial performance.  The court noted:

[w]hile we recognize the harsh results occasioned from Solar’s failure to perform this express condition precedent, we recognize that parties are free to contract as they choose and may protect themselves from liability by requesting literal performance of their conditions for final payment.

TA Operating Corp. v. Solar Applications Engineering, Inc., 2005 Tex. App. LEXIS 7908 (Sept. 28, 2005).

[Meredith R. Miller]

Jordan Has New Casebook

Georgetown commercial law prof Emma Coleman Jordan (left) has a new casebook out.  It’s Economic Justice: Race, Gender, Identity and Economics, co-authored with Angela Harris of UC-Berkeley and published by Foundation.

[Frank Snyder]

Drafting Dispute Resolution Clauses

Once upon a time, dispute resolution clauses in contracts used specified arbitration.  Then folks started to add a mediation component that the parties had to go through before arbitration could be invoked.  Now, it's getting more common to see clauses that require some kind of “discussion” before even the mediation is triggered.

Are such “discussion” requirements enforceable?  And what exactly is required?  A take on the question from the U.K./Hong Kong perspective is Agreement to Negotiate/Mediate: A Matter for Careful Drafting by Chee Yean Choy of Jones Day in Singapore.

[Frank Snyder]

Today in History: October 13

1307: King Philippe IV, who apparently never heard the story of the goose with the golden eggs, arrests all the members of the Knights Templar in France so he can seize their lucrative banking property.

1694: Jurisprude Samuel von Pufendorf dies at Berlin in Brandenburg.  The first university chair in international law was created for him at the University of Heidelberg, but he had to move to Sweden after he criticized a new tax.

1845: Republic of Texas voters approve a new constitution that will allow the republic to join the United States.

1890: Samuel Freeman Miller, one of the few physicians to serve on the U.S. Supreme Court, dies in harness at Washington, D.C.

1925: Future chemist, barrister, Prime Minister, and co-inventor of soft-serve ice cream, Margaret Thatcher, is born at Grantham in Lincolnshire.

1957: Ford Motor Co. sponsors a gala television show featuring Bing Crosby and Frank Sinatra to introduce its much-touted new car, the Edsel.

1983: Ameritech Mobile Communications puts the first U.S. cell phone network into operation in Chicago, Illinois.  Ameritech is now Cingular, and that particular network is now part of Verizon.