Saturday, November 12, 2005
On this day 175 years ago, November 12, 1830, Edward Hall Alderson was named to the Court of King’s Bench. A native of Norfolk, the 43-year-old Alderson had been one of the most brilliant students in the history of Cambridge, one of only two men ever to finish first in his class in both mathematics (Senior Wrangler) and classics, and winning the top prizes for both physics and Greek odes. A friend and protégé of Lord Brougham, he went on to enjoy great success on the Northern Circuit, representing the great landowners and the Canal and Turnpike Trusts in their battles against the new railroads.
Alderson had frequently been mentioned as a likely future Lord Chancellor, but the death from overwork of his brother-in-law Lord Gifford (who had been Chief Judge, Attorney General, and Master of the Rolls) in 1826, following closely on the death of his eldest daughter and his own growing involvement in what would come to be called the Oxford Movement in the Church of England, led him to think seriously about the relative comforts and advantages of a simple puisne judgeship.
As it happened, the ascension of William IV in June 1830, led Parliament to create three new judgeships, one each on the Exchequer, the King’s Bench, and the Common Pleas. The Prime Minister, the Duke of Wellington, was a Tory. Alderson, though he had been raised in and around the radical Whig circles in Norwich and was particularly close to his radical cousin, the novelist Amelia Alderson Opie, had become a staunch High Church Tory while still in school. And he now decided he wanted one of those slots.
Nothing could be done, though, until the Parliamentary elections of July and August were sorted out. The House of Commons had become badly fractured. Most people assumed that Wellington would continue his ministry. On November 12, Alderson -- who had not yet taken the silk gown of a King’s Counsel -- was nevertheless named a Judge of the King’s Bench, the youngest judge in England. As it turned out, he got through just in time. Three days later, on November 15, the Wellington government unexpectedly lost a test vote on a minor civil list bill, and the King called on Earl Grey to form the first Whig cabinet in a quarter-century. Two days later Alderson received his knighthood.
Of course, Sir Edward Hall Alderson did not make his name on the King’s Bench. During the brief five-month stretch of Sir Robert Peel’s Tory government -- a rare window in a period of Whig rule -- he was translated to the Court of Exchequer in 1834, where his superior knowledge of equity was thought to make him of more value. He remained on the bench, a happy judge surrounded by a large family, whose home was a prominent gathering place for Tory intellectuals, until his death in 1857.
And so it was from the Exchequer bench in 1854, the 67-year-old Baron Alderson would announce the decision in one of the most celebrated contracts cases of all time, Hadley v. Baxendale.
A recent Ontario decision interpreting a “right of first refusal” clause in a shareholder agreement raises a nice issue of contract interpretation. Lawyer Stephen T.C. Warnett of of Toronto’s Borden Ladner Gervais LLP offers a nice rundown of the issues in BNY Capital Corp. v. Katotakis.
The Pareto Principle -- the idea that a solution is preferred if it makes some people better off and makes no one worse off -- has played a significant role in scholarship about contract law. In Pareto Principle and Competing Principles, forthcoming in the second edition of The New Palgrave Dictionary of Economics and the Law, Harvard's Louis Kaplow argues that sometimes this just isn't so. Here's the abstract:
The Pareto principle, the seemingly incontrovertible dictum that if all individuals prefer some regime to another then so should society, may conflict with competing principles. Arrow's impossibility theorem and Sen's liberal paradox are two notable examples. Subsequent work indicates more broadly that the Pareto principle conflicts with all non-welfarist principles. This essay surveys these results, including various extensions thereof, and offers perspectives on the conflict, drawing on classical and contemporary work in political economy and economic psychology.
A California Indian tribe that operates a casino is protected by sovereign immunity from breach of contract actions by casino employees, according to a new decision by the California Court of Appeals.
In the case, various employees had signed contracts with the tribe which contained provisions for severance pay and arbitration clauses. After they were fired without cause and without severance, they sued in state court. The tribe demurred. It claimed sovereign immunity from suit. The employees argued that the arbitration clauses waived sovereign immunity. The court disagreed:
“[T]o relinquish its immunity, a tribe’s waiver must be ‘clear.’” Waivers are “strictly construed,” and there is a “strong presumption” against them. “Because a waiver of immunity is altogether voluntary on the part of [a tribe], it follows that [a tribe] may prescribe the terms and conditions on which it consents to be sued, and the manner in which the suit shall be conducted." [Citations omitted.]
Here, the reference to arbitration could not be read as agreement to be sued in state court, and the complaint should have been dismissed.
Big Valley Band of Pomo Indians v. Superior Court, 2005 Cal. App. LEXIS 1700 (1st Dist. Nov. 1, 2005).
Friday, November 11, 2005
Is a "floating" choice of law clause -- one which provides that the contract will be governed by the law of a future assignee of the agreement -- effective under UCC Article 2A? A New York trial judge, in a recent opinion, ruled that it does not.
In the case, NorVergence, Inc., of New Jersey was a lessor of telecommunications systems. It leased systems to Kings Manor Estates in Florida. The contract contained the following choice-of-law provision:
This agreement shall be governed by, construed and enforced in accordance with the laws of the State in which the Rentor's principal offices are located [i.e. New Jersey] or, if the lease is assigned by Rentor, the laws of the state in which the assignee's principal offices are located, without regard to such State's choice of law considerations . . . .
NorVergence assigned the lease contracts to Sterling Bank, whose principal offices were in New York. NorVergence's operations were subsequently uncovered as a massive fraud scheme and the company went bankrupt. Sterling sued the lessee and the lease guarantor, claiming a right to be paid under the agreement's hell-or-high-water clause.
Sterling claimed that New York law applied, since it was the assignee. Manhattan supreme court Justice Diane Lebedeff rejected the claim. Under the UCC, she noted, where the contract bears a "reasonable relation to this State and also to another state . . . the parties may agree that the law of either . . . shall govern their rights and duties." The problem here is that at the time of contracting, the parties could not have specified New York law. At the time of formation New York did not bear a "reasonable relation" to the contract. The subsequent action of one party could not retroactively change that fact. Moreover, it is hard to say that the parties had a meeting of the minds on a choice of law provision that make it entirely uncertain what law would apply. Since New Jersey had a reasonable relationship to the contract, and the original clause specified New Jersey law, the court concluded that New Jersey law should govern the transaction.
Sterling National Bank v. Kings Manor Estates, LLC, 2005 NY Slip Op 51604(U) (Civ. Ct. N.Y. Cty., Oct. 6, 2005).
Law clinic students at the University of Wisconsin have apparently won a legal battle over whether pre-dispute arbitration clauses in credit card contracts are unconscionable. According to a release from the school, the students sued a credit card lender for making abusive telephone calls to collect debts. The company responded by invoking the arbitration clause in its contract, which said that it was governed by Delaware law.
The students apparently convinced a Dane County circuit judge that the specification of Delaware law, which ostensibly deprived customers of the protections of Wisconsin consumer law, was unconscionable.
Cyclist Lance Armstrong has settled various contract and tort claims brought against him by a former assistant who cleaned his house and maintained his bicycles.
France's Dassault Aviation SA has sued America’s Honeywell, claiming $60 million in damages for late deliveries on a contract.
Bank One and the securities firm of Jones Lang LaSalle have settled their long-standing fraud and breach of contract battle; terms were not disclosed.
A contractor who deliberately used cheaper rock in creating a driveway and put it in the wrong place was nevertheless entitled to recover under the doctrine of substantial performance, according to a recent decision by the North Carolina Court of Appeals.
In the case, two parties, Reaves and Hayes, agreed to a consent order under which, among other things, Hayes’s property would get a right-of-way across Reaves’s. Hayes agreed to pay for a driveway across the property, and the agreement provided that if Hayes did not do so, Reaves would, and charge Hayes for the costs. Reaves subsequently built the driveway, but did not put it exactly where the agreement specified. The agreement also had specified a “6 inch crush and run” driveway, but Reaves deliberately used a cheaper sandrock and washed stone method. When Hayes refused to pay, Reaves sued.
A consent order, said the court, is simply a contract entered on the books of a court, and must be interpreted like any other contract. The fact that Reaves did not comply precisely with the contract did not excuse Hayes. Under the doctrine of substantial performance, Reaves may still be able to recover if the type of road material and the location of the road were “dependent covenants” that did not go to the heart of the deal. Here, the road was plainly usable, even if not exactly where it was supposed to be, and even if not made from the right stone. Both of those requirements, said the court, were dependent covenants. Since Hayes got a usable driveway, he was not excused from the requirement to pay.
Reaves v. Hayes, 2005 N.C. App. LEXIS 2401 (Nov. 1, 2005).
Ninety-four years ago today, on November 11, 1911, New York City architect Isaac Edward Ditmars fired one of his employees, a decision that would lead to a casebook staple on the “indefiniteness” doctrine in contract law, Varney v. Ditmars.
Ditmars was a native Nova Scotian who at age 35 had become a partner with prominent New York City architect William Schickel in a Park Avenue office. Schickel & Ditmars did a great deal of work, much of it institutional or ecclesiastical, including the Church of St. Ignatius Loyola on Park Avenue (“a remarkable jewel of fin-de-siecle artistry”); The Chelsea Mercantile on 7th Avenue; Our Lady of Perpetual Help in Roxbury, Mass.; Stuyvesant Polyclinic Hospital, and St. Joseph’s Seminary.
In 1907 Schickel died and Ditmars continued the business on his own. The firm had several important commissions in progress, including the Main Building at the Lenox Hill Hospital, and the Cathedral of the Sacred Heart in Newark, N.J. By 1910, the Cathedral job was in trouble; after considerable construction delays the builder had been fired in February and work was again underway. (Upper left: The Cathedral in 1910)
In October, 1910, Ditmars hired George A. Varney, an architect and draftsman, as an assistant at $35 a week (about $3,000 in 2003 wages using the unskilled labor comparison). From Varney’s account of things, in early 1911 Varney was offered a better job, and Ditmars gave him a raise. He was so pleased with the work of Varney and a colleague that he said, “You boys go on and continue the work you are doing and the first of January next year I will close my books and give you a fair share of my profits.” When Varney was later fired and refused a share, he sued, and the question for the court was whether such a vague promise was enforceable. Held: No, the promise was too indefinite to be enforced. Click on “continue reading” for the opinion.
Thursday, November 10, 2005
Oh, and as long as we're talking about famous cases, we should note that the notorious Carbolic Smoke Ball (of Carlill v. Carbolic Smoke Ball Co.) wasn't a complete quack remedy. There were, it turns out, versions of carbolic acid sprayers and inhalers actually used by the medical profession. You can see one of them here.
I'm told it can be hard for accomplished, attractive women in their 40s to find the right guy. Many of us are self-absorbed jerks who are battling a mid-life crisis and can't commit to a relationship, while too many of the rest of us are too fat, wear our pants too high, and are starting to get hair growing in our ears.
An enterprising Denver woman, the CEO of her own company, has come up with a novel way to deal with the problem: A web site called "House With A Bride." She's offering to sell her $600,000 home to a single man, age 40 to 60 -- on the condition that she go along with it.
The prospective buyer should be “well educated and well spoken, and [have] a professional career. . . . Other important traits include love of travel and adventure, a good conversationalist, and a lover of animals. . . . It is important to me that a man be open and caring, kind in words and deeds, spontaneous to a certain extent, and takes pride in his appearance."
[Frank Snyder -- thanks to Kevin Greene and Ben Templin (Thos. Jefferson) for the tip]
In a case involving what is almost certainly the world’s most expensive roll of toilet paper, the manufacturer is suing its client, a marketing firm, for the allegedly unpaid half of the $137,139 bill.
The developer of the Roller Coaster Tycoon video game is suing Atari, the publisher, claiming $5 million in unpaid royalties.
Donald Trump has won a $3-4 million breach of contract suit against an excavating company that walked off the job after he refused to make further payments.
On this date in 1908, the famous Case of the Drunken Law Professor enters the pantheon of contracts classics, as the New York Court of Appeals decides the case of Clark v. West, 193 N.Y. 349; 86 N.E. 1 (1908).
William Lawrence Clark, Jr. (1863-1918), was a prolific legal writer. In 1894, West published the first edition of his Handbook of the Law of Contracts, a book still going strong over a half-century later when the 4th edition was relied on by the Virginia Supreme Court in Lucy v. Zehmer (1954). In 1897, he wrote the first edition of his popular Handbook of the Law of Private Corporations, which was published by West. Two years later he was hired to teach at the law school at Washington & Lee. His career hit a major speed bump a few weeks into his term at W&L, when he was fired because he was found to be “addicted to drinking” to such an extent that his carouses had made the New York papers.
Publisher John B. West wanted a new edition of Clark on Corporations. Clark agreed to do one, and the parties signed a contract under which Clark was to be paid $2 a page if he drank alcoholic beverages and $6 a page if he totally abstained. Clark, as might be supposed, did not stay long on the wagon. The book was published in 1907 but West refused to pay him more than $2 a page. Clark sued and won, in an opinion (click on "Continue Reading" to read it) that is still used to mystify students about what exactly a “waiver” is.
When a forum selection clause calls for the resolution of disputes in the "courts of the State of Colorado," does that include the federal court sitting in Colorado? In other words, is the "of" meant to designate sovereignty or geography? If the language refers to the state courts to the exclusion of the federal courts, it is a term of sovereignty. Otherwise, if the language encompasses Colorado state courts and the federal court sitting in Colorado, it is a term of geography. The Tenth Circuit recently held that the language refers to sovereignty, and concluded that the contract did not designate the federal courts sitting in Colorado as a forum.
The Tenth Circuit followed a Fifth Circuit decision in a similar case which involved a forum selection clause designating the "Courts of Texas." The court looked to Black’s Law Dictionary, which defined "of" as a term "denoting that from which anything proceeds; indicating origin, source, descent, and the like." The Fifth Circuit reasoned that "[f]ederal courts indisputably proceed from, and find their origin in, the federal government, though located in particular geographic regions."
American Soda, LLP v. U.S. Filter Wastewater Group, Inc., __ F.3d __ (10th Cir. Nov. 7, 2005).
[Meredith R. Miller]
Not all of the great cases for teaching contract law are in the casebooks. A perfect example is the battle fifteen years ago over the rights to a South Dakota dinosaur named "Sue" (left) now on display at the Field Museum in Chicago. (Image: Ancheta Wis, Creative Commons License)
The case, Black Hills Institute of Geological Research v. South Dakota School of Mines, 12 F.3d 737 (8th Cir. 1993), never actually reached the potential contract issues in the case. But, as Hofstra's Miriam Cherry argues in A Tyrannosaurus-Rex Aptly Named 'Sue': Using a Disputed Dinosaur to Teach Contract Defenses, it's a wonderful fact pattern for teaching contracts defenses. Here's the abstract:
This piece focuses on the discovery of a T-Rex skeleton, and the contract formed between the private fossil collectors and the Native American rancher who ostensibly owned the land where the fossil was situated. Although the fossil was eventually sold at auction for over eight million dollars, the fossil collectors paid the rancher only $5,000 for its excavation. In addition to the rancher, the Sioux tribe and the Department of Justice also became involved in the case.
As described in my work, the law school Socratic method has come under attack in recent years. In response to such criticisms, the lesson that I describe provides a constructive alternative, using problem-based learning and technology. When discussing the contract between the rancher and the fossil hunters, my students effectively analyzed the doctrines of unilateral mistake, unequal bargaining power, unconscionability, and the failure of a condition. Using the T-Rex case is a great way to get law students excited about learning contract defenses.
Wednesday, November 9, 2005
A group of independent cable companies is suing OLN (the former Outdoor Life Network), claiming that the network has unilaterally changed the terms of its agreements with the cable companies.
A former top executive of Caesar's Entertainment is suing Harrah's, claiming that the $47 million severance package he got as a result of Harrah's $9 billion takeover of Caesar's short-changed him.
The mother of teen star Hilary (Lizzie McGuire) Duff has been sued by a clothing manufacturer, who claims she violated an exclusive merchandising deal involving the "Stuff by Hilary Duff” clothing line.
A former member of the Sixties rock band Guess Who is suing his former bandmates, claiming they owe him money from at TV reunion special and subsequent recordings.
Philosopher Michel Foucault apparently said that a contract is a text with no "author." But then he probably never had to actually write one himself.
In a new article, What is a Contract?: The Absent Author of the Written Contract and the Function of Certain Conventions of Drafting and Construction, Princeton's Tal Krastner considers the thought. Here's the abstract:
This paper considers the concept of the "author" and its role in defining the nature of a text in light of Michel Foucault's essay "What is an Author?" Taking up his suggestion that the fictional, constructed author of literature functions to limit the possibilities of meaning of a text, the paper explores how it might apply to the genre of contracts. While Foucault explicitly identifies contracts as authorless texts, this paper aims to identify other generic manifestations of the "author function" that attempt to stabilize meaning in contracts' written forms. Specifically, this paper examines prevalent boilerplate provisions and conventions of drafting and construction that have emerged in written contracts in the absence of an author. In doing so, the paper considers the relationship between the agreement and the written contract in contract law and interpretation, with an eye to the importance of delimiting the meaning of language in the law, and in the texts of contracts, in particular, as ostensible manifestations of consensus. By examining the contemporary form of the written contract in terms of boilerplate and other drafting conventions that often inscribe fictions of stability or limitation of meaning into the contractual text, the paper seeks to further an understanding of the written contract as a genre in which the author function or an analogous limiting principle manifests itself without reference to the individual. Such an analysis seeks to shed light not only on the nature and function of the written contract but on the nature of the discourse of the law more generally and the ways in which it defines itself in contrast to that of literature.
Article 2046 of the Louisiana Civil Code provides that “When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties’ intent.” An inventor who claimed a residual interest in some patents he’d transferred found that the rule means exactly what it says, in a recent decision by the U.S. Court of Appeals for the Fifth Circuit.
It’s a complicated case with a variety of claims, but one of them was inventor Tommy Condrey’s claim that he had a right to reclaim patents he had assigned to Harrell Equipment Co., after Harrell’s assets were sold to a third party. Condrey and a Harrell employee both submitted affidavits claiming that this was the “understanding” of the parties at the time the original agreement was made. Trouble was, the agreement itself, though detailed, contained no such provision. The magistrate judge refused to consider the evidence.
Louisiana law allows for certain exceptions to Article 2046, said the Fifth Circuit. Parol evidence is admissible where it goes to the interpretation of ambiguous terms, or where the contract is incomplete, or where there is a claimed subsequent agreements. None of those apply here, though. The agreement is six pages long, carefully worded, and written very broadly. It contains a clause providing that it is the entire agreement of the parties. Since it’s fully integrated, parol evidence is inadmissible.
Condrey v. Suntrust Bank of Georgia, 2005 U.S. App. LEXIS 23721 (5th Cir. Nov. 1, 2005).
Yesterday's post entitled Sex and Contracts wasn't really about sex, but it certainly did wonders for our readership. Usually we run around 400-500 visitors on a weekday, but a single-sentence reference to the post on the Instapundit site netted us about 2,000 visitors within two hours, and a total of nearly 5,000 for the day. Click on the graph at left for a graphic representation.
That's well below our all-time daily record, though. We once got 24,000 visits in 24 hours for this post about a contract clause dealing with Kate Beckinsale's breast implants. There's a lesson there.