December 10, 2005
Survivor Contract Renewed
Jeff Probst, the host of the CBS hit reality TV show "Survivor" has signed a new contract and will be returning to the show to preside over more cut-throat competition, physical challenges, and mind-games. Luckily (for those who like the show!) CBS has ordered two more seasons. The finale for this season will air on CBS tomorrow, and yes, I will be watching.
Speaking of cut-throat competition, physical challenges, and mind-games, good luck to all the law students cramming for exams!
Good Faith Down Under
Does Australian contract law include an implied duty of good faith in performance? The law seems to be in flux, and Tyrone M. Carlin of the Graduate School of Management at Macquarie University zeroes in on the cases, not the rhetoric, in Assertion Versus Evidence -- Taking a Closer Look at Implied Good Faith Performance Obligations in Australia. Here's the abstract:
The question of the status of implied good faith performance obligations as an element of the Australian law of contract continues to lurk as a vital yet unresolved jurisprudential puzzle. Given the vital importance of contract as a foundation for commercial exchange and the potential for a good faith performance doctrine to materially impact the operation of contracts, this is an undesirable state of affairs. The evidence presented in this paper suggests that the approach taken to good faith performance has fragmented along jurisdictional lines. Further, far from representing a well developed and established doctrine, it has been the project of a very limited number of judges primarily drawn from just one state. These observations raise significant questions as to the legitimacy of the alleged doctrine.
Cowboy Merchants in England
Christmas apparently brings with it more than snow and good cheer in the United Kingdom -- it brings squatter "cowboy" merchants who camp out in empty stores without paying rent to cash in on the Christmas bustle. Turns out, it can be hard (and expensive) to get rid of these folks; the police won't help, the courts are slow, and private "bailiffs" may use too much force and saddle you with a lawsuit.
Caroline Delaney and Danielle Drummond-Brassington of London's CMB Cameron McKenna LLP outline the issues in Unwanted Christmas Traders. One solution? Really good locks.
December 9, 2005
AALS Section Program Set
"Empirical Scholarship in Contract Law" will be the topic of the Section's panel at the AALS Annual Meeting in January. Section Chair David Snyder will lead the discussion, which will explore different approaches to empirical scholarship in contract law. The panel is slated for Friday, January 6, 2006, from 10:30 a.m. to 12:15 p.m., at the Godawful Marriott Wardman Park.
Steven Choi (Cal-Berkeley) and Mitu Gulati (Georgetown) will present results from their studies on boilerplate terms, particularly geared to the factors leading to innovation and change. George Geis (Alabama, left) will present an empirical study, based on marketing data, on the optimal precision of default rules. Stewart Macaulay (Wisconsin) will address the empirical side of policy issues, especially contract interpretation, and will put empirical work in the context of a new legal realism related to the law in action movement. Debora Threedy (Utah, right), one of the leading practitioners of qualitative empiricism in law -- through deep historical studies of important cases such as Alaska Packers -- will examine how the practice of legal archaeology illuminates contract law. The published symposium, which will appear in the Tulane Law Review, will also include an empirical study from Kate Litvak (Texas), discussing recent trends in venture capital contracts.
The format will allow time for questions and answers, including questions about what constitutes “empirical” work in the law and what role empirical study can play in contract scholarship. The annual Business Meeting will take place at the end of the panel.
Today in History: Sinking of the Peerless
On this date, December 9, 1870, the good ship Peerless (the "October" Peerless from Raffles v. Wichelhaus) is abandoned and sinks at night seventy miles north-north-west of Cape Horn. The ship was en route from Newport in Wales to Callao. Fortunately, all of the crew are brought away safely by the Norwegian barque Elise Mathilde.
December 8, 2005
Assent on Paper or Electronically
Once again a timely article on an issue near to the heart of consumers at this time of year.
Quoting from the abstract:
"This article takes a critical look at the developing body of cases that address the threshold issue in Internet contracting: the issue of assent."
What is assent in such cases?
"While the Internet is new, the challenges presented by Internet contracts are not. Traditional contract rules, based on the paradigm of two individuals meeting face-to-face to negotiate written terms, have been modified over the years to accommodate diverse methods of communicating contract terms. These modifications have been fashioned to account for the different signals sent to offerees by new methods of contracting.
Today’s courts, however, virtually ignore the fact that the common law of contracts has developed rules that account for the different signals sent by contract terms that are delivered in novel ways. This article argues that courts must consider the cautionary function that the paper contract form has traditionally served and account for the different signals sent by electronic contracts. To support this argument, the article reviews the electronic contracting case law and compares it to older cases addressing the issue of assent when contract terms are delivered by novel methods. The paper then discusses the factual differences between paper and electronic contracts, drawing on computer science and marketing scholarship examining the ways that individuals perceive electronic communications. The paper concludes by suggesting approaches to the assent issue that take these different perceptions into account."
Moringiello, Juliet, "Signals, Assent and Internet Contracting" . Rutgers Law Review, Vol. 57, No. 1307, 2005 http://ssrn.com/abstract=859485
John Lennon on Executing Contracts
George Harrison once refused to allow John Lennon to join him onstage during a concert and later denied him a backstage pass. Why? "At the time he was doing the concert, we were also finalizing the Apple papers [concerning the Beatles' beleaguered production company]," Lennon recalled. "And, actually, what happened was, at the last minute, I wouldn't sign it." Why not? "As I put it at the time, my astrologist said it wasn't the right time to sign..."
[Meredith R. Miller]
Supreme Beings Hear Contract Case
The Supreme Court heard arguments Tuesday in one of the rare contract cases that come before it. True, the issue in Domino's Pizza, Inc. v. McDonald is actually a civil rights question, but there is a contract involved. A recap of the briefs in the case is here, and a summary of what happened at oral argument is here.
In the case, Domino's allegedly breached its contract with a corporate franchisee. The corporation's claim against Domino's apparently was settled in bankruptcy. But the owner of the franchisee claimed that reason Domino's breached the contract is because because he was black, and therefore violated his civil rights under section 1981. He's therefore claiming a personal cause of action against the franchisor even though he was not individually a party to the contract.
As Ross Runkel of LawMemo notes, the contract issue is pretty plain: one who is not a party to or a third-party beneficiary of a contract can't claim a breach under it. The question is whether section 1981 would give a right of action for breach of the contract even where contract law wouldn't.
[Frank Snyder -- Disclosure: My friend and former partner Maureen Mahoney argued the case for Domino's before the Supreme Court.]
Moral Hazard and Private Evaluation
There are many situations involving agency contracts where the principal has information about the agent's performance that the agent doesn't have -- such complaints about the agent from third parties, or observations of the agent's activities of which the agent is unaware. Those are the sort of situations explored by William Fuchs of Chicago's Graduate School of Business in a new piece called Contracting with Repeated Moral Hazard and Private Evaluations. Here's the abstract:
A repeated moral hazard setting in which the Principal privately observes the Agent's output is studied. It is shown that there is no loss from restricting the analysis to contracts in which the Agent is supposed to exert effort every period, receives a constant efficiency wage and no feedback until he is fired. The optimal contract for a finite horizon is characterized, and shown to require burning of resources. These are only burnt after the worst possible realization sequence and the amount is independent of both the length of the horizon and the discount factor (δ). For the infinite horizon case a family of fixed interval review contracts is characterized and shown to achieve first best as δ → 1. The optimal contract when δ << 1 is partially characterized. Incentives are optimally provided with a combination of efficiency wages and the threat of termination, which will exhibit memory over the whole history of realizations. Finally, Tournaments are shown to provide an alternative solution to the problem.
Today in History: Ricketts v. Scothorn
On this date, December 8, 1898, the Nebraska Supreme Court issued its opinion in Ricketts v. Scothorn, 57 Neb. 51 (1898).
In the case, as all first-year law students know, young Katie Scothorn is working as a bookkeeper in a store, when her grandfather shows up. Distressed that any granddaughter of his should actually work for a living, he gives her a promissory note for $2,000 at 6 percent a year, telling her that, in effect, she no longer must soil her hands with sordid trade. She quits her job. But 6 percent interest on $2,000 ($60 a year) isn't really enough to live on even in 1891, so she goes back to work. Granddad subsequently dies before paying the money, and she sues the executor.
The court might have held that when one makes a gift of a promissory note, the gift is complete and the giver must make it good. But that would be too simple. Instead, the court holds that the promise was enforceable under contract law because Katie relied on it -- leaving open the rather absurd result that if she'd continued being a productive citizen she wouldn't have got the money at all. It does make for a good teaching case, though.
Selling Chickens Before They're Hatched
Selling something you don't have can be a risky business strategy, as stock speculator Daniel Drew once noted:
He who sells what isn't his'n
Must buy it back, or go to prison.
But selling off a piece of a company you haven’t yet bought is getting to be a more popular way of getting funding for takeovers. A firm contract in hand to sell part of the assets may in fact be crucial to making the deal work, as lawyers Aaron Kenavan and Weyinmi Popo of Sydney’s Freehills note in Selling Before You Buy in Public Market Deals.
December 7, 2005
The End of Sugary Soda Contracts?
The New York Times reports that, in
Apparently, half of all American public schools have
exclusive contracts with beverage companies. The contracts have been supported by those that argued that they are a
source of revenue for the schools. However, a study conducted by the Community Health Partnership in
"Some people have the perception that there is a huge amount of money in this for schools," said Nicola Pinson, a lawyer who was hired by the Community Health Partnership to do the study, the most extensive analysis done on school contracts to date. "But we need to put it in perspective with overall budgets and how much money the companies are getting."
For the 2005-6 school year, for instance,
Portland's school district has projected that it will receive $250,000 from vending sales at its 15 high schools, an amount representing 0.06 percent of a total district budget of $396 million, according to school budget documents.
Coke and Pepsi apparently get the larger cut of revenues:
Hillsboro school district's 12-year contract with the Coca-Cola Bottling Company of Oregon, for instance, requires the district to buy 420,000 beverage cases over the life of the contract; that translates into students spending a total of $10 million. Of that, $3 million will go to the district and $7 million will go to the bottler.
Further, some of the contracts apparently rewarded schools with higher revenues when students purchased unhealthier options:
The Portland school district's contract with the Coca-Cola Bottling Company of Oregon stipulates that schools get 50 percent from every 20-ounce bottle of Coke, but only 35 percent for a 12-ounce can and 30 percent for a bottle of water or juice.
The American Beverage Association countered that the "contracts involve 'two willing parties' and that schools have the ability to negotiate what they want to sell in vending machines."
[Meredith R. Miller]
It's a Waiver and a Breach
Over on the always-interesting LawMemo Blog, Russ Runkel notes yesterday's Ninth Circuit decision in Brown v. Dillard's, Inc., No. 03-56719 (9th Cir. Dec. 6, 2005). In the case, the Dillard's department store had a mandatory arbitration agreement in its contract with its employee. When the employee was fired, she initiated an arbitration proceeding, demanding $710 in lost pay and that certain representations made about her be found to be false. Dillard's refused to participate. Instead of moving to compel arbitration, the employee simply sued Dillard's in state court. Dillard's thereupon decided that arbitration was a good idea, so it removed the case to federal court and moved to compel arbitration.
The court had no trouble finding that Dillard's had waived its right to arbitrate, but it went a good deal further by holding in the alternative that Dillard's actions breached the contract, and that Dillard's breach meant that it could not rely on the arbitration agreement. Distinguishing some cases to the contrary, the court held that where the breach goes to the arbitration agreement itself, the arbitration agreement does not survive the breach.
Solan on Objectivity
The objective theory of contract has been dominant in legal thinking for the past century or so, despite the fact that there is always a good deal of subjectivity that sneaks into the cracks. Back in 1913, Judge Billings Learned Hand gave the classic expression of the idea:
A contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties. A contract is an obligation attached by the mere force of law to certain acts of the parties, usually words, which ordinarily accompany and represent a known intent. If, however, it were proved by twenty bishops that either party when he used the words intended something else than the usual meaning which the law imposes on them, he would still be held, unless there were mutual mistake or something else of the sort. [Hotchkiss v. National City Bank, 200 F. 287, 293 (S.D.N.Y. 1911), aff'd 201 F.2d 664 (2d Cir. 1912), aff'd 231 U.S. 50 (1913).]
Now Lawrence M. Solan (Brooklyn) takes up that argument head-on, in The Return of the Twenty Bishops: Toward a Subjective Theory of Contract Formation. Solan doesn't deny that objective manifestations are important, but argues that the law is best explained by focusing on the subjective intent of the parties. Click on "continue reading" for the abstract.
Broad theories of contract law, whether based upon the rights of the individual as an autonomous actor, the benefits to society of encouraging people to engage in bargained-for transactions, or the justice due those who have relied on the promises and representations of others, are intentional in nature. No one speaks, for example, of the freedom to be bound by something one didn't intend. Bargains imply volition. Acts in reliance come only after an understanding that someone has made a commitment. However contract law is constructed, at the very least one would expect it to take as its point of departure the players' actual psychological states underlying the various theories that motivate it.
Yet, for generations law students have been taught that the law governing the formation of contracts is by and large objective in nature, although it has some subjective elements. It is the appearance of intent that matters most. Many case books say so, as do texts and treatises. The Restatement incorporates a largely objective approach to contract formation as well, although its key provision dealing with the interpretation of contracts is both objective and subjective.
This article argues for an approach to contract law that is subjective in nature, although it privileges objective evidence of intent. The result of this shift in focus is much greater descriptive adequacy and greater coherence among contract doctrines. Most problematic for the objective account is that when both parties agree that a commitment has been made, the promisor is bound, and when neither believes that a promise has been made, the promisor is not bound. Objective considerations are irrelevant. By the same token, courts will enforce a promise to which both parties agreed, even if a reasonable person would not have understood it as a promise. When the additional scenarios generated by considering the promisee's state of mind and additional situations in which it is not reasonable to infer a promise are added to the mix, the objective theory has little explanatory power as a theory. Rather, what has been considered an objective theory reflects a sensible evidentiary rule amidst a system organized around the parties' actual intent.
The subjective account of contract formation brings the formation of contracts in harmony with the rules governing contract interpretation, consideration and gap filling. The result is a far more coherent account of contract law generally. For example, the Restatement's most basic rule of contract interpretation states: Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning. Other rules, such as the parol evidence rule and the four corners rule, limit the inquiry, but recognize discovering the parties' meaning as its goal. Since that meaning is measured as of the time of contract formation, it is very difficult to make sense of a system that insists that the parties' meaning at that point in time is irrelevant to questions of formation, but the only real inquiry for questions of interpretation. It further makes more sense of the debate over form contracts and other doctrines of contract law.
Today in History: The Argument in Carbolic Smoke Ball
On this date, December 7, 1893, the English Court of Appeal heard oral argument in Carlill v. Carbolic Smoke Ball Co. We recently had some information on the case here.
One of the interesting aspects of the case is that although the dispute involved only £100 (about £7,200 today), the counsel who argued it were among the most eminent in England. Carbolic's original lawyer, Herbert Henry Asquith, couldn't pursue the appeal because he had just been named Home Secretary. (He would later become Prime Minister.)
To replace him, Carbolic called on Robert Bannatyne Finlay, Q.C. (1842-1929). Finlay (left) had graduated in medicine from Edinburgh University before deciding to practice law, and had been a Liberal Member of Parliament for a nearly a decade at the time he argued the case. After Carlill Finlay would go on to bigger things: Solicitor General (1895), Attorney General (1900), and Lord Chancellor in David Lloyd George’s wartime government (1916). Later, he'd serve as a member of the Court of Arbitration at the Hague and a judge of the Permanent Court of International Justice under the League of Nations, would be raised to the peerage as 1st Viscount Finlay.
Lead counsel for Mrs. Carlill was Sir Henry Fielding Dickens, Q.C. (1849-1933), sixth son of the novelist Charles Dickens. Young Henry (above right) is often regarded as the only one of the writer's children to make a success of himself. By the time of the argument he had earned enough of a reputation and a living at the bar that he had repeatedly refused nominations for election to Parliament, for fear it will cut into his legal practice. Later, he became Common Serjeant at the Central Criminal Court in Londonl, presiding over trials at the Old Bailey for fifteen years. With Dickens was a junior counsel, Sir George John Talbot (1861-1938) (left), who took a double first at Oxford and later became a judge and a member of the Privy Council.
The legal firepower may have been unnecessary. After listening to the arguments the judges ruled for Carlill without even bothering to reserve decision.
December 6, 2005
Jim Croce on Economic Opportunity
Workin' at the Car Wash Blues
music & lyrics by Jim Croce (1973)
Well, I had just got out from the county prison,
Doin' ninety days for non-support.
Tried to find me an executive position,
But no matter how smooth I talked,
They wouldn't listen to the fact that I was a genius;
The man say, "We got all that we can use."
Now I got them steadily depressin', low down mind messin'
Working at the car wash blues.
Well, I should be sittin' in a air-conditioned office in a swivel chair,
Talkin' some trash to the secretaries,
Sayin', “Here, now mama, come on over here.”
Instead, I'm rubbin' these fenders with a rag,
And walkin' home in soggy old shoes
With them steadily depressin', low down mind messin'
Workin' at the car wash blues
You know a man of my ability,
He should be smokin' on a big cigar.
But till I get myself straight, I guess I'll just have to wait
In my rubber suit a-rubbin' these cars.
Well, all I can do is a shake my head.
You might not believe that it's true.
For workin' at this indoor Niagara Falls
Is an undiscovered Howard Hughes.
So baby, don't expect to see me
With no double martini in any high-brow society news,
Cause I got them steadily depressin', low down mind messin'
Workin' at the car wash blues.
Turkey to Get New Commercial Code
Turkey is in the process of making the first major updating of its commercial code since its enactment in 1956. Okan Gündüz and Mübeyyet Özgen of Istanbul’s Hergüner Bilgen Özeke provide a rundown of the provisions likely to be of most interest to foreign investors in Turkey.
Online ADR Conference Slated
This year marks the fifth anniversary of the International Competition for Online Dispute Resolution, and the University of Toledo College of Law is marking it with a conference, Enhancing Worldwide Understanding Through Online Dispute Resolution, which will be held April 21-22, 2006 at Toledo. Toledo's Ben Davis (left) led the group that created the Competition. Click on "continue reading" for the Call for Papers.
AND CALL FOR PAPERS
Enhancing Worldwide Understanding Through Online Dispute Resolution
April 21-22, 2006, Toledo, Ohio
Coinciding with the 5th Anniversary of the International Competitions for Online Dispute Resolution (ICODR), the University of Toledo College of Law will host on April 21-22, 2006, in Toledo, Ohio an international symposium on Online Dispute Resolution entitled, "Enhancing Worldwide Understanding through Online Dispute Resolution."
Interested scholars and practitioners from around the world are invited to present papers on topics such as, but not limited to:
" Online Dispute Resolution History (Where we have been)
" Evaluation of Online Dispute Resolution Methods (Negotiation, Mediation, Arbitration, Litigation, Hybrids)
" Comparative Online Dispute Resolution (Domestic, Multidomestic, Transnational)
" Online Dispute Resolution and Themes (Legal Education, Legal Profession, Access to Justice, etc.)
" Technical Aspects of Online Dispute Resolution (Surveys of technologies and their applicability to ODR)
" Alternative Dispute Resolution/Online Dispute Resolution: integration or separation
" Future Prospects for Online Dispute Resolution
Abstracts for papers are invited by January 15, 2006 and should be sent to Ben Davis at this e-mail address. Based on the abstracts received, panels for similar topics will be designed. Proposals of panels are also welcomed.
Final versions of the papers will be due by June 1, 2006 for publication in the University of Toledo Law Review in a 2006 Symposium issue.
December 5, 2005
The Latest in the T.O. Contract Saga
Old news: the Philadelphia Eagles have suspended wide receiver Terrell Owens and deactivated him for the rest of the football season. Also old news: in a lengthy opinion, an arbitrator recently upheld the suspension. More recent but nevertheless old news: Pennsylvania Senator Arlen Specter stated that he believed that the N.F.L. had treated T.O. unfairly and indicated that he might refer the matter to the antitrust subcommittee of the Senate Judiciary Committee (which he chairs). Specter ranted:
I am madder than hell at what he has done in ruining the Eagles' season. I think he's in flagrant breach of his contract and I believe the Eagles would be within their rights in not paying him another dime or perhaps even suing him for damages… I do not believe, personally, that it is appropriate to punish him (by forcing him to sit out the rest of the season). He's not committed a crime, he's committed a breach of contract. And what they're doing against him is vindictive.
The latest: the Eagles have requested (again) that T.O. repay part of the signing bonus that he received when he signed the 7-year $49 million contract. ABC / ESPN reports:
The Eagles crafted Owens' contract carefully and precisely, in part to protect themselves financially, and there is very specific "default" language which provided the team the prerogative to seek repayment of a prorated portion of his signing bonus if he was suspended for more than one game. As part of [the arbitrator's] ruling, which players feel might give teams far more latitude in matters of discipline, it was revealed that the Eagles first requested repayment of a portion of Owens' signing bonus in July.
In a letter to Owens signed by head coach Andy Reid, the club cited the wide receiver's absence from a mandatory mini-camp. That letter read in part: "Should you fail to repay that total amount by August 12, 2005, we will begin deducting the above amount in equal installments from your game checks, and any other compensation owed to you by the club, or we will initiate a non-injury grievance for repayment of money owed to the club due to your breach."
Despite that letter, the Eagles did not follow through in attempting to recoup the signing bonus money or in withholding paychecks.
If the Eagles do, indeed, garnish all or a portion of Owens' game checks over the final five weeks of the season, almost certainly will precipitate another non-injury grievance filed by the NFL Players Association on his behalf.
(For the uninitiated, here is a rough timeline of T.O.'s antics).
[Meredith R. Miller]
Kafka and Posner
Twenty years ago this month, the Harvard Law Review ran a fascinating article by Robin West on Posner and Kafka. Since that time, both of West and Posner have remained significant legal figures. I think it best to provide you the citation, and Robin West's own words:
AUTHORITY AUTONOMY AND CHOICE: THE ROLE OF CONSENT IN THE MORAL AND POLITICAL VISIONS OF FRANZ KAFKA AND RICHARD POSNER, 99 Harv. L. Rev. 384(1985).
"Posner concludes that the legal world should be governed by one overarching normative principle: the legal system ought to give people exactly what they think they want or, when that is not possible, what the legal system thinks they think they want. By doing so, Posner argues, the legal system will promote a more autonomous and wealthy world.
Through a series of contrasts, I will argue that Franz Kafka's fictional works on the nature of law dramatize a dark underside of Posner's argument that the fact of consent morally legitimates our legal, social, and personal worlds. Kafka's fictional characters typically consent to market transactions, employers' imperatives, and legal and familial authority, and thereby get exactly what they think they want. In Kafka's fictional and horrific world, as in Posner's theoretical and ideal one, victim, aggressor, and community all regard this consent as validating otherwise unappealing states of affairs. Consent insulates these situations from moral criticism and renders them, without more, morally attractive. In both worlds, consent is a moral trump. Kafka's fictional world thus provides a dramatic enactment of Posner's normative claim: Posner argues that consent morally legitimates all; Kafka illustrates what a world so legitimated might look and feel like. In both worlds, good and evil, and right and wrong, lose all meaning when all that matters is whether and to what extent people get exactly what they think they want."