December 23, 2005
Contracts, Sexuality and the (Un?)Ambiguous Principles of Divine Revelation
A lesbian teenager in
In the Georgia case, the (then) ninth-grader alleges that the school expelled her for having an “inappropriate relationship” in violation of the school’s standard of conduct on “sexual immorality.” From press accounts, it appears that the teenager’s legal theory is that the school breached the contract of enrollment, and the “sexual immorality” clause in the code of conduct is too vague to be enforced. The terms “inappropriate relationship” and “sexual immorality” apparently are not expressly defined in the code of conduct. The teenager’s lawyer stated:
Right now, the code doesn't tell you anything about what sexual immorality is, aside from a few vague Biblical references. . . .What [the teenager] did is not expressly forbidden in Scripture and a legal contract cannot be based upon vague principles of divine revelation.
This potentially thrusts into the judicial sphere the dubious task of interpreting whether “sexual immorality” unambiguously includes a same-sex kiss. Now, there's a thought to ponder over the holidays.
[Meredith R. Miller]
December 22, 2005
A Grinchly Contest for the Title of Uncivilest
Dahlia Litwick at Slate seeks stories about attorneys' most evil "pre-holiday shenanigans" -- a contest to determine the meanest thing done to an opponent right before the holidays. Here's her explanation:
So, here's a class they don't teach in law school: screwing over your opponent just in time for the holidays. They probably should. For anyone with even a lick of evil in their soul and a filament of creativity in their brain, the law offers a whole host of opportunities for wrecking the lives of others.
Consider the perfectly timed restraining order, or the spontaneous motion for an order to show cause—or in fact anything that could bury the other side in research and paperwork the day before Christmas. Think about the possibilities for 11th-hour changes in the visitation schedule for the children—requiring canceled plane tickets and Christmas Eve court appearances. Or the last-minute effort to have a local crèche or tree deemed unconstitutional.
Sure, we'd all like to pretend this stuff doesn't happen. Until they get a few drinks in us and we start to brag about all the vile and devious tricks we've pulled to wreck the other side's holidays. And for any lawyer reading this column who is shocked, shocked to learn that some attorneys deliberately file motions and pleadings in order to trash the Christmas season for others, well, just go back to saving the Mediterranean Monk Seal or whatever it is you do.
So, send in your submissions before it is too late: email@example.com.
[Meredith R. Miller]
No Immigrants Need Apply
The job of a spotlight operator is to, well, operate a spotlight. And spotlights are apparently extremely important to singer Stevie "Fleetwood Mac" Nicks. Since they must be able to take direction very well, Nicks prefers that only those born in English-speaking households be hired to do spot work on her gigs. Her performance contract prohibits the use of spotlight operators to whom English is a second language. (Image: Press Kit Photo, Wikipedia)
Doing Business in Turkey
Disgorgement as a Contract Remedy
The concept of efficient breach suggests that where one party can reap large gains by breaching the contract while causing relatively little loss to the other party the law ought to encourage breaches. There's a net gain even when the breaching party fully reimburses the other party for its loss.
But might the non-breaching party in such situations be entitled to more than its mere expectation damages? Mathias M. Siems of Cambridge's Centre for Business Research thinks so. In Disgorgement of Profits for Breach of Contract - A Comparative Analysis, forthcoming in the Edinburgh Law Review, he looks at disgorgement as an alternative remedy. Here's the abstract:
This article considers whether a contract-breaker is obliged not only to pay compensatory damages but also to disgorge to the innocent party the profits obtained from breach of contract. After an introduction to the topic, the approach of the courts in Common Law jurisdictions will be outlined. The main focus will be on English Law and the decision of the House of Lords in Attorney General v Blake, although judgments from other countries will also be mentioned. Thereafter the focus will be upon Germany as an example of a Civil Law jurisdiction. The German law of contract, negotiorum gestio and unjustified enrichment will be examined as to their ability to award disgorgement. The mixed legal systems of Israel, Louisiana and Scotland will also be studied. The similarities and differences between the different legal systems will then be compared and interpreted. In particular, the article will consider common starting points, exceptions and new legal concepts, as well as differences in judicial decision-making and in the freedom to draft contractual terms. Finally, it will be contended that disgorgement of the benefits resulting from a breach of contract should in principle be awarded. Moreover, this should not be restricted to certain cases. It is necessary only that the gains should be attributable to breach of contract.
December 21, 2005
Weekly Top Ten
Better late than never -- here's this week's top ten most-downloaded papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending December 19, 2005. (Last week's ranking in parentheses; t = tie.)
1 (1) Taking Information Seriously: Misrepresentation and Nondisclosure in Contract Law and Elsewhere, Richard Craswell (Stanford).
2 (2) Contracting in the Shadow of the Law, Nicola Gennaioli (IIES-Stockholm).
3 (3) Rethinking Spyware: Questioning the Propriety of Contractual Consent to Online Surveillance, Wayne Barnes (Texas Wesleyan).
4 (4) In Memoriam, John Cibinic, Jr., Ralph C. Nash (Geo. Washington) et al.
5 (5) One-Sided Contracts in Competitive Consumer Markets, Lucian Arye Bebchuk (Harvard) & Richard A. Posner (Chicago).
6 (6) From St. Ives to Cyberspace: The Modern Distortion of the Medieval 'Law Merchant,' Stephen E. Sachs (Yale-Student).
7 (10) How Law Affects Lending, Rainer F.H. Haselmann (Leipzig-Business), Katharina Pistor (Columbia), & Vikrant Vig (Columbia-Business).
8 (8) An Embedded Options Theory of Indefinite Contracts, George S. Geis (Alabama).
9-t (-) Reason, Self-Deception and Rational Frogs: Reconciling Comprehension and Responsibility in Law and Business Ethics, Jeffrey M. Lipshaw (Indiana-Indianapolis).
9-t (10) The Strategy of Boilerplate, Robert B. Ahdieh (Emory).
Yanks Buy Damon
Speaking of contracts, the New York Yankees have landed leadoff hitter Johnny Damon (batting, at left) from their arch-rival Boston Red Sox, offering the 32-year-old center fielder a four-year deal at $13 million a year. Damon had an on-base percentage of .366 and a slugging percentage of .439, along with 18 stolen bases. Yankee fans are ecstatic and Bosox fans are in despair. (Image: Wikipedia GNU License)
Interestingly, the Los Angeles Dodgers signed center fielder and leadoff hitter Kenny Lofton from Philadelphia to a one-year deal at about $4 million. Lofton's on-base percentage last year was .392, with a slugging percentage of .420 and 20 stolen bases. Dodger fans are yawning. Go figure.
Constitutional Contract Law
Although we spend most of our time wondering what the common law says about contracts, another aspect of contract law is ruled by Article I, Section 10 of the Constitution, "No state shall ... pass any ...Law impairing the Obligation of Contracts."
James Ely of Vanderbilt has this to say in his abstract about an upcoming article:
"This essay examines the origins and early construction of the contract clause of the Constitution. It points out that the contract clause must be understood in the context of the troubled economic circumstances of post-Revolutionary America. The clause, which was little debated at the Philadelphia convention, can be traced to language in the Northwest Ordinance of 1787. This paper focuses on the contested issue of whether the framers intended the clause to cover only contracts between private parties or to extend to public contracts between states and individuals. As asserted by the Progressive historians, it has long been the dominant position among scholars that Chief Justice John Marshall expanded the meaning of the contract clause when he ruled that the provision governed private contracts. This paper disputes that conventional wisdom and argues that the clause could fairly be construed to safeguard both public and private contracts from state abridgement. It gives attention to discussion at the state ratifying conventions as well as to the views of prominent members of the constitutional convention. The paper also considers pre-Marshall court cases that examined the meaning of the contract clause and the famous 1796 opinion letter by Alexander Hamilton. Although recognizing that it is difficult to establish a collective state of mind concerning the scope of the ban against contractual impairments, the paper concludes that there was ample support for the views later endorsed by the Marshall Court concerning the reach of this provision."
Ely, James W., "Origins and Development of the Contract Clause" (November 1, 2005). Vanderbilt Public Law Research Paper No. 05-36 http://ssrn.com/abstract=839904
December 20, 2005
Today in History: Lucy and Zehmer Get Drunk
On this date, December 20, 1952, two men were sitting and drinking at a table in A. H. Zehmer's Ye Olde Virginnie Restaurant, Garage & Service Station on U.S. Highway 1 in McKenney, Virginia. The contract that resulted from that drunken evening would go down in history as Lucy v. Zehmer.
McKenney (pop. c. 400) lies in Dinwiddie County, about 25 miles southeast of Petersburg. A. H. Zehmer was a prominent local resident. The site of the restaurant/service station is now Ye Olde Virginnie Home for Adults, a 36-unit assisted living facility, at 20918 Boydton Plank Rd. (U.S. Route 1) in McKenney, on the corner of what is now Zehmer Ave. Map is here.
It probably didn't help Zehmer's cause that he'd been an alternate delegate to the Republican National Convention in 1948, the year the Dixiecrat revolution in the Democratic party came uncomfortably close to giving Virginia to Tom Dewey. The opinion in the case was written by Archibald Chapman Buchanan, whose second most-famous opinion upheld the Virginia miscegenation law as a reasonable means of avoiding "corruption of blood." Also on the panel was Kennon Caithness Whittle, a former President of the Virginia Bar who, as a trial judge, supervised trial of the Martinsville Seven, in which seven young black men were convicted and executed for the rape of a white woman.
Weekly Top Ten
Our Weekly Top Ten is delayed this week because of technical difficulties with SSRN. We'll have the post as soon as we can.
Do Courts Matter?
Renting something is a contractual relationship. Owning something isn't -- it's a status relationship against the whole world. If a system isn't good at enforcing contractual rights, might we expect to see less renting and more owning? Does the state's contract law regime affect allocation of ownership rights?
Pablo Casas-Arce (Oxford-Economics) and Albert Saiz (Penn-Wharton) (left) look at that question in a new paper, Do Courts Matter? Rental Markets and the Law. Here's the abstract:
We argue that the allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement is costly, there will be a shift from
contractual arrangements that rely on such enforcement (such as a rental agreement) towards other forms that do not (such as direct ownership). We then test this prediction on data on the rental housing market, and show that costly enforcement of rental contracts hampers the development of such a market in a cross-section of countries. We argue that this association is not the result of reverse causation from a developed rental market to more investor-protective enforcement. The results provide supportive evidence on the importance of contract enforcement for the development of financial and other markets.
Dixie Chicks: More Toilets, Please
The audience at Dixie Chicks concerts is about 70 percent female, and that can lead to problems -- at least with respect to restrooms. The Chicks concert contract specifically requests arenas to take steps to ease the jam, by turning some men's restroom into temporary women's facilities, or using some backstage facilities ordinarily off-limits to patrons. The contract provides that this isn't "mandatory," though. You can see the contract at The Smoking Gun.
The obvious question would be whether a promoter would have a "good faith" obligation to at least try to fulfill a term that the contract says isn't "mandatory."
NYC Transit Strike
New York City transit workers are striking, shutting down the New York City subway system. From news reports it appears that the failure to reach a contract is centered around the issue of pension benefits. As reported by the New York Times, this type of strike has not happened in twenty-five years.
December 19, 2005
Beaver State Appellate Court Enforces Noncompete
In Oregon, ORS 653.295 provides that a noncompetition agreement is unenforceable unless certain conditions are met. For example, under the statute, a noncompete is only enforceable if it was signed at the initial time of employment. In a recent case, an Oregon appellate court addressed an employee’s suit to enforce a noncompete -- the employer was attempting to get out of its payment obligations under the noncompete by claiming that the agreement was executed during the course of employment and, therefore, was not enforceable.
Here's what happened:
Plaintiff was hired by defendant in 1973 to work as its chief engineer. In 1996, plaintiff planned to retire and informed defendant of that fact. To induce plaintiff to continue in its employ, defendant offered and plaintiff agreed to a two-year, part-time employment contract "following your retirement on August 3, 1996. The employment contract provided that plaintiff would work up to 300 hours per year at $1,040 per month, and would receive medical benefits equivalent to what he had received as a full-time employee during the two years of the contract and for an additional eight years following. The contract also specified that [plaintiff’s work would no longer include production engineering, field engineering or field service, but would include consulting on design and sales assistance.]
The part-time employment contract was also subject to plaintiff's entering into a noncompetition agreement with defendant. The noncompetition agreement recited that "[plaintiff] intends to retire on August 3, 1996, and [defendant] desires to have an agreement with [plaintiff] not to compete" and provided that defendant would pay plaintiff $30,000 per year for a period of ten years as consideration for the agreement, to begin on August 3, 1996. The noncompetition agreement specified that plaintiff would not directly or indirectly compete or disclose information he learned or obtained while working for defendant that was not already available to the public. In the event of plaintiff's death, payments due under the contract would be made to a person specified by plaintiff, provided that his estate was bound by the terms of the agreement. In 1998, the part-time employment contract was modified by the parties to extend it an additional eight years, until 2006. Under the modification, plaintiff agreed to work up to 200 hours per year for $1,200 per month, with medical benefits to continue throughout the period of the contract and up to eight years following its expiration.
The employer made the payments required under the noncompetition agreement until 2003, when it declared the agreement "void and not enforceable" under ORS 653.295. The employer argued that the noncompete was executed after the employee’s initial employment. The employee sued for breach of contract. The appellate court affirmed the decision of the trial court and enforced the noncompete.
After reviewing the statutory history of the phrase “initial employment,” the court held that:
because plaintiff's new employment relationship with defendant began after he retired and because his employment was as a consultant rather than as a chief engineer, the noncompetition agreement is enforceable under the statute. Here, plaintiff gave notice to defendant that he intended to retire on August 3, 1996. With his retirement on that day, plaintiff's employment relationship as chief engineer with defendant ended. But for the new agreement to employ plaintiff as a consultant, there would have been no employment relationship between them. The subsequent agreement to employ plaintiff in a different capacity as a consultant operated to create a new employment relationship that had not existed before. Under the agreement that employed him as a consultant, plaintiff's job responsibilities and working hours decreased dramatically, resulting in a completely different employment relationship from the one that had existed previously.
The court noted that its reasoning was consistent with “the legislature's intent to protect employees from the coercive effect of employers requiring a noncompetition agreement in the midst of the employment term as a condition of continued employment.” Because the employee intended to retire, the employer “lacked the leverage of a continuing employment relationship that concerned the legislature.”
McGee v. The Coe Manuf. Co. (Or. Ct. App. Dec. 7, 2005).
[Meredith R. Miller]
December 18, 2005
Canada and the CISG
When you live in a country where courts aren't particularly good at working with the U.N. Convention on Contracts for the International Sale of Goods, it's kind of nice to see your neighbors having the same difficulties.
Canada, for example. In the recent case of GreCon Dimter Inc. v. J.R. Normand Inc., the Supreme Court of Canada muffed it, says Antonin I. Pribetic (Steinberg Morton Frymer LLP) in a new paper on SSRN, The (CISG) Road Less Travelled. Here's the abstract:
At first glance, the Supreme Court of Canada's recent decision in GreCon Dimter Inc. v. J.R. Normand Inc. appears to be a case upholding the primacy of international commercial arbitration, choice of forum and choice of law clauses. Upon closer scrutiny, however, the Supreme Court of Canada failed to consider the application of the UN Convention on Contracts for the International Sale of Goods (CISG) to the overall dispute. Interestingly, the same choice of forum and choice of law clauses were considered by the United States Court of Appeals a year earlier in GreCon Dimter, Incorporated v. Horner Flooring Company, Incorporated. In either of the Canadian and American GreCon decisions, the parties' (and their respective counsel's) characterization of the legal issues, including jurisdictional arguments, ultimately guided the domestic forum court's jurisprudential analysis. Unlike GreCon v. Horner, choice of forum remained a live issue when it reached the Supreme Court of Canada in GreCon v. Normand. In both cases, the parties' choice of law remained an important, but not exclusive, factor in the domestic court's overall determination of proper forum. While the Supreme Court of Canada did not address the applicability of the CISG in GreCon v. Normand, perhaps another opportunity awaits Canada's highest court to contribute to the CISG's global jurisconsultorium.
Comic Sued by Manager
Actor/comedian Dave Chappelle has been sued by his ex-manager, who claims Chappelle owes him more than $800,000 in fees for jobs the manager negotiated. The Smoking Gun has a copy of the complaint here.
United Press International, which has only the vaguest idea of the rules of evidence and the statute of frauds, says that the manager has "no proof" of his claim, since the agreement wasn't reduced to writing.
Back on the Air
Typepad has apparently got its problems fixed, so we're back on the air as of today. To echo the old motto of the New York subway system, "We apologize for the inconvenience, and thank you for your cooperation."
Remember we're not liable for consequential damages for the downtime and your remedy is limited to the amount paid to visit the site.