February 26, 2005
Professor Spotlight: Lisa Bernstein
It may have been the economic aspects of commercial law. She came to law school having graduated Phi Beta Kappa from the University of Chicago with a B.A. in economics in 1986. She went to Harvard Law School, where she was a John M. Olin Fellow and graduated in 1990. She clerked for the U.S. District Court in Massachusetts, and started teaching as an associate professor at Boston University Law School in 1991. After a stint at Georgetown University and visiting gigs at Columbia and Pennsylvania, she joined the University of Chicago faculty in 1998. She is currently the Wilson-Dickinson Professor of Law and Co-Director of Institute for Civil Justice.
Lisa's research interests lies with private commercial law, and her re-thinking of many of the basic assumptions of the Uniform Commercial Code has had a substantial impact on modern scholarly thought. She is the recipient of a three-year $100,000 grant from the National Science Foundation to research a book on the same subject. Her studies focus on industries that utilize privately drafted commercial codes and arbitration tribunals to resolve disputes as opposed to the public legal system. She currently teaches Law and Social Science; Corporations; Academic Law; and Advanced Corporate Law: Theory and Practice.
Since 1998, Lisa has served on the Editorial Board for SSRN Contracts and Commercial Law Abstract. She is a former chair of the AALS Section on Law and Economics and has been a co-organizer of scholarly conferences on a wide range of topics, including Empirical Commercial Law, to be held at the University of Michigan Law School and published in the Michigan Law Review; Management and Control of the Modern Business Corporation, held at the University of Chicago Law School (February 2002) and published in the University of Chicago Law Review; Law, Economics and Social Norms, held at the University of Pennsylvania School of Law (Spring, 1996) and published in the University of Pennsylvania Law Review; The Internet and Legal Theory, held at the IIT-Chicago Kent School of Law (March, 1998) published in the Chicago-Kent Law Review; Formalism Revisited, held at the University of Chicago Law School (Feb. 1999) and published in the University of Chicago Law Review.
Among her recent publications are: Private Commercial Law in the Cotton Industry: Creating Cooperation Through Rules, Norms, and Institutions, 99 Mich. L. Rev. 1724 (2001); The Questionable Empirical Basis of Article 2's Incorporation Strategy: A Preliminary Study, 66 U. Chi. L. Rev. 76 (1999); On Compensation and Information: The Secrecy Interest in Contract Law, 109 Yale L. J. 1885 (2000) (with Omri Ben-Shahar); and Comment, Symposium on the New Chicago School: Myth or Reality, 5 U. Chi. Roundtable 1 (1999).
Recently, Lisa participated in the Law and Society Association’s 40th Anniversary Panel, Law on the Books and Law in Action--Legal Realism, New Formalism, and The New Legal Realism, which explored the inception of the formalism critique and engaged scholars who consider themselves “New Formalists” and “New Legal Realists.”
It is known to students at the University of Chicago that she dislikes the UCC. Her favorite number is 23, which perhaps coincidentally is Michael Jordan's old number with the Chicago Bulls.
Today in history--February 26
1797: The Bank of England issues the first one-pound banknote.
1808: Honoré Daumier, the French illustrator whose legal prints grace almost as many law offices as the ABA Journal, is born at Marseilles.
1829: Levi Strauss, future San Francisco gold rush dry-goods merchant and inventor of copper-riveted denim work pants, is born at Buttenheim, Bavaria.
1863: President Abraham Lincoln signs the National Currency Act, which creates the Office of the Comptroller of the Currency.
1870: Alfred Beach opens a pneumatic subway in New York, but the technology is disappointing and the venture is a failure.
1921: Economist and lawyer Carl Menger, whose Grundsätze der Volkswirtschaftslehre in 1871 is regarded by many as the start of the "Austrian School," dies at 81.
1932: Singer Johnny Cash is born at Kingsland, Arkansas. Auditioning for Sam Phillips at Sun Records in 1954, he will sing gospel songs. Phillips will tell him to "go home and sin, then come back with a song I can sell."
1991: Timothy John Berners-Lee develops the WorldWideWeb while working for the European Organization for Nuclear Research.
1995: England's oldest merchant bank, Barings Bank (founded in 1762) collapses after a single trader loses $1.4 billion gambling on derivatives. It subsequently is sold to ING for £1.
February 25, 2005
Yes Minister (BBC), "The Quality of Life," March 30, 1981 [Talking about a bank's building plans for a new skyscraper] James Hacker: I see, it's just profits, isn't it, Sir Desmond?
Sir Desmond Glazebrook: Not just profits, it's profits.
Hacker: Don't you think of anything but money?
Glazebrook: No, why?
Hacker: What about beauty?
Glazebrook: Beauty? This is a building, not an oil painting.
Hacker: And the environment?
Glazebrook: Oh yes, I promise you we'll make sure it is part of the environment. It is bound to be once it's there, isn't it?
Yes Minister (BBC), "The Quality of Life," March 30, 1981
[Talking about a bank's building plans for a new skyscraper]
James Hacker: I see, it's just profits, isn't it, Sir Desmond?
Implied term can't conflict with express term
An implied "good cause" termination clause in a contract is inconsistent with an express clause that provides the employee may be fired on one month’s notice, according to the Irish High Court. The employer, claiming a sluggish market, made 12 of 130 employees "redundant" and laid them off. The employee challenged that decision, claiming that it was "expressly or impliedly promised" that he would be fired only for cause. The contract, however, said nothing about grounds for termination. The court, by Justice Mary Laffoy, held that the just cause termination provision was inconsistent with the express terms of the employment contract, and that the express terms controlled. The court did, however, find an implied promise not to terminate the contract for one year after the plaintiff had accepted an assignment to Uruguay. McGrath v. Trintech Technologies Ltd.,  IEHC 342.
An implied "good cause" termination clause in a contract is inconsistent with an express clause that provides the employee may be fired on one month’s notice, according to the Irish High Court.
The employer, claiming a sluggish market, made 12 of 130 employees "redundant" and laid them off. The employee challenged that decision, claiming that it was "expressly or impliedly promised" that he would be fired only for cause. The contract, however, said nothing about grounds for termination.
The court, by Justice Mary Laffoy, held that the just cause termination provision was inconsistent with the express terms of the employment contract, and that the express terms controlled. The court did, however, find an implied promise not to terminate the contract for one year after the plaintiff had accepted an assignment to Uruguay.
McGrath v. Trintech Technologies Ltd.,  IEHC 342.
It's catchy and you can dance to it
From the Department of Contracts Musicology, this from Ben Davis's student Kate Hamilton at Toledo: 8 Ways to Avoid Enforcement (to the tune of Paul Simon's 50 Ways to Leave your Lover) You're just a Kid, Sid Make like you're Nuts, Gus,
They Misrepresent, Brent.
Under Duress, Jess, they Influenced me.
And they didn't Discuss much
And Bad policy.
From the Department of Contracts Musicology, this from Ben Davis's student Kate Hamilton at Toledo:
8 Ways to Avoid Enforcement
(to the tune of Paul Simon's 50 Ways to Leave your Lover)
You're just a Kid, Sid
Make like you're Nuts, Gus,
Today in history--February 25
1836: Samuel Colt receives a patent for his new multi-shot pistol, called a "revolver. "God made all Men," the saying goes, "but Col. Colt made them equal." 1845: George Houstoun Reid, a barrister who will become Australia's fourth prime minister, is born at Johnstone, Renfrewshire, Scotland. 1870: Hiram Rhoades Revels (R-Miss) becomes the first African-American elected to the U.S. Senate, filling the seat vacated in 1861 by Jefferson Davis. 1888: John Foster Dulles (George Washington Law 1911) is born at Washington, D.C. 1899: Paul Julius Baron von Reuter (born Israel Beer Josaphat), the founder of the the international Reuters news agency, dies at a villa in Nice, France. 1901: Financier J. P. Morgan incorporates United States Steel Corp. It turns out to be a bad long-term investment, since its net worth today (as USX Corp.) is less than its original 1901 capitalization. 1913: The 16th amendment to the U.S. Constitution is ratified. It creates the federal income tax. 2003: Tom O'Higgins, former Chief Justice of Ireland and twice candidate for president, dies at age 86. 2004: The biggest surprise hit in movie history, Mel Gibson's Passion of the Christ, opens on Ash Wednesday. Estimates are that Gibson will net some $400 million from the film, which is the ninth nighest-grossing film in U.S. history.
1836: Samuel Colt receives a patent for his new multi-shot pistol, called a "revolver. "God made all Men," the saying goes, "but Col. Colt made them equal."
1845: George Houstoun Reid, a barrister who will become Australia's fourth prime minister, is born at Johnstone, Renfrewshire, Scotland.
1870: Hiram Rhoades Revels (R-Miss) becomes the first African-American elected to the U.S. Senate, filling the seat vacated in 1861 by Jefferson Davis.
1888: John Foster Dulles (George Washington Law 1911) is born at Washington, D.C.
1899: Paul Julius Baron von Reuter (born Israel Beer Josaphat), the founder of the the international Reuters news agency, dies at a villa in Nice, France.
1901: Financier J. P. Morgan incorporates United States Steel Corp. It turns out to be a bad long-term investment, since its net worth today (as USX Corp.) is less than its original 1901 capitalization.
1913: The 16th amendment to the U.S. Constitution is ratified. It creates the federal income tax.
2003: Tom O'Higgins, former Chief Justice of Ireland and twice candidate for president, dies at age 86.
2004: The biggest surprise hit in movie history, Mel Gibson's Passion of the Christ, opens on Ash Wednesday. Estimates are that Gibson will net some $400 million from the film, which is the ninth nighest-grossing film in U.S. history.
February 24, 2005
News in brief
The European Aeronautic, Defense and Space Company (the Airbus folks) has apparently won "preferred bidder" status on a new British Royal Air Force contract worth some $25 billion.
Oakland Raiders owner Al Davis won't get a new trial of the verdict that he does not own the rights to a Los Angeles football franchise from the National Football League.
Groups in Liberia are protesting the transition government decision to grant a 38-year extension on Firestone Tire & Rubber's long-standing rubber concession.
Radio personality Howard Stern and Clear Channel Communications have settled the contract actions that arose when the company dropped Stern from several of its stations.
A South Carolina school board is suing a former school psychiatrist for breach of contract and return of all salary paid after it discovered that she forged her diploma and other professional credentials.
The Pakistan Cricket Board has fined fast bowler Shoaib Akhtar for breaches of contract during an Australian tour, including visiting nightclubs, issuing press releases without club approval.
Students debate big question: Coke or Pepsi?
Students at Rutgers University in New Brunswick are holding a public meeting today to decide who’ll get the school's 10-year soft drink contract. Under the previous contract, signed in 1994, Coca-Cola paid the University $1 million a year to be the exclusive beverage provider. The local AAUP chapter, however, has condemned Coca-Cola for its alleged labor practices in Colombia.
Some students, however, just want a choice. One noted that offering Coke but not Pepsi would be at odds with the University philosophy—"We are supposed to be about diversity," he said.
It's not nice to fool Mother Nature
The Breyer’s "All Natural Ice Cream" folks are being sued because they use milk that has been enhanced by growth hormones. A class action complaint has been filed in a Missouri state court. The suit also names a retail seller, Schnuck’s Markets, Inc.
The case may raise a nice interpretation issue. Breyer’s, a unit of the European Unilever combine, allegedly advertises that it uses "only the finest ingredients from all natural sources in the manufacture of Breyers All Natural Ice Cream." On its web site, it carries a "Pledge of Purity," which "means there are only pure ingredients—just natural, delicious taste." The plaintiffs, however, claim that the milk used by Breyer’s contains "recombinant bovine growth hormone (rBGH), antibiotics and other synthetic ingredients." The action alleges fraud, breach of contract, and unjust enrichment.
Magic words don't work
While putting the phrase "subject to contract" in a proposal will usually defeat the creation of an executory contract, one will still be found if the subsequent conduct of the parties demonstrates that they have concluded the deal, according to a recent decision by Britain's Queen's Bench.
In the case, both plaintiff and defendant signed a proposal for cleaning services which incorporated plaintiff’s standard terms, but also said it was "subject to contract." Except in a very strong and exceptional case, held Justice Field, those words prevent an executory contract from coming into force. But that standard was met in the case, he ruled, because because both parties subsequently engaged in the activities specified by the contract: the cleaner cleaned and the buyer paid. The Rugby Group Ltd. v. Proforce Recruit Ltd. (QBD Feb. 2, 2005).
Bahamian lawyer Errol Niles has some thoughts on the case here.
Earliest precursor of the UCC
The author of the first Anglo-Saxon contract statute, St. Ethelbert (or Æthelbert) of Kent, died on this day in 616. As king of the southern Saxons and hitherto a worshiper of Odin, he was baptized a Christian by Roman missionaries in 597, and became the chief patron of the Church in England. Under the influence of the Romans, he in 604 he promulgated the first written Anglo-Saxon code of laws in England, the ninety "Dooms of Ethelbert," which includes the first native English contract statute:
If a man buy a maiden with cattle, let the bargain stand, if it be without guile; but if there be guile, let him bring her home again, and let his property be restored to him.
Today in history—February 24
1582: Aiming to fix more precisely the annual date for Easter, Pope Gregory XIII promulgates the new and more accurate "Gregorian" calendar. The United Kingdom and its American colonies, distrusting such Papish mumbo-jumbo, won’t adopt it for another 170 years.
1786: Wilhelm Karl Grimm is born at Hanau, Germany. As a law student with his brother Jakob under Friedrich Karl von Savigny, he will be introduced to German folk tales by a book in his professor’s library.
1807: The number of U.S. Supreme Court justices is increased to seven.
1824: Farmer Seth Wyman writes to Daniel Mills, promising to pay his son Levi's expenses.
1868: Andrew Johnson becomes the first U.S. President impeached by the House of Representatives.
1909: The Hudson Motor Car Co., which will later combine with Nash Motors to form American Motors, is founded at Detroit, Michigan.
1932: Benjamin Nathan Cardozo, who has been nominated by President Hoover, is confirmed by the U.S. Senate for a seat on the U.S. Supreme Court.
1938: The man who will invent the modern sports/fashion industry, Philip H. Knight, is born in Portland, Oregon. He will begin by selling Japanese sneakers out of a trunk at high school track meets, and will later call his company "Nike" after the goddess of victory.
1942: Joseph Isadore Lieberman (Yale Law 1967), is born at Stamford, Connecticut.
1955: Computer visionary Steven Jobs is born at Green Bay, Wisconsin. Dropping out of college after a semester to design video games, he will co-found Apple Computer at age 21.
1970: National Public Radio is founded, allowing large U.S. corporations to bill some of their advertising costs as philanthropic donations.
February 23, 2005
News in brief
Some D.C. politicians are questioning the city’s contract with a red-light-camera firm, under which the firm makes more money the more tickets are issued.
Former New England and Buffalo quarterback Drew Bledsoe is close to signing a new contract with the Dallas Cowboys, coached by his old boss, Bill Parcells.
Perot Systems has lost a contract (and what had been thought to be a long-term partnership) with the Harvard Pilgrim HMO—a contact that makes up more than five percent of its business.
With Canada’s national sport already on ice due to a labor dispute, West Indian cricket may follow suit.
There is speculation that the U.S. government may decide to give the whole of its next contract for Navy destroyers to Mississippi’s Northrop Grumman Ship Systems, instead of splitting it with Maine’s Bath Iron Works.
Australian rugby players are concerned about the alcohol-related dismissal of a Newcastle Knights player, suggesting he was not given proper notice and a chance to defend himself before his contract termination.
A Belfast health trust employee who was caught working on a cruise ship while he was supposed to be out on sick leave claims his termination is a breach of contract.
Contracts for CEOs
One area of real-world contracting that gets little attention from contracts scholars is that of CEO compensation. Contracts between companies and CEOs are, for example, classic relational contracts, yet most of the debate on the subject assumes a model of arms’ length bargaining and is done by corporate law types, not contracts profs.
Nevertheless, there’s a good deal of interesting work being done by our corporate colleagues and economists. An interesting new paper on SSRN is The Good, the Bad and the Lucky: CEO Pay and Skill, by Robert Daines, Vinay B. Nair, and Lewis A. Kornhauser. The paper tries to model CEO pay and skill, and concludes that in some (but not all) situations, there is a strong correlation between the CEO’s ability and his or her pay. The abstract:
CEO compensation varies widely, even within industries. In this paper, we investigate whether differences in skill explain these differences in CEO pay. Using the notion that skilled CEOs are more likely to continue prior good performance and to reverse prior poor performance, we develop a new methodology to detect if skill is related to pay. We find that highly paid CEOs are more skilled than their industry counterparts when firms are small, especially when there is a large shareholder and the CEO has high incentives, or when firms face few environmental constraints on managerial discretion. By contrast, pay is negatively related to skill in firms constrained by environmental conditions, especially when there is no large shareholder to monitor management or the firm is large. We also examine CEO turnovers and show that the firm's post-turnover performance is related to differences between the two CEO's pay levels. Finally, we find that a portfolio that invests in firms managed by highly paid CEOs and sells firms managed by poorly paid CEOs generates an annualized abnormal return of 8% between 1994 and 2001, but only in conditions when pay and skill are related.
Throwing the book
A big plaintiffs’ class-action firm is going after Dell Computer and lender CIT, saying that the two "prey on" "unsuspecting" consumers by engaging in a variety of activities. The two chief complaints seem to be up-selling customers who are attracted by low advertised prices, and advertising favorable credit terms for which most consumers, as it happens, do not qualify. The complaint charges Dell and CIT with
violating California's Consumer Legal Remedies Act (CLRA) by false advertising and bait-and-switch practices; fraud and deceit in its sales and advertising representations; breach of contract by unilaterally modifying terms and conditions of sales and financing; violating the California Business and Professions Code by knowingly distributing false and misleading information; violating the Unruh Act with unlawful retail installment contracts; engaging in deceptive practices in its financing programs; and entering into unlawful contracts and charging excessive finance charges.
Battle over Good name
An ugly contract battle about who controls a major Chicago real estate brokerage and auction firm is over, but the hard feelings are still tearing up a family. Steven Good emerged the victor in Cook County court over his father, Sheldon Good, in the struggle for control of Sheldon Good & Co. International. But Dad is not happy.
Steven agreed to buy the 39-year-old firm from his father in 2001. He subsequently moved to expand by bringing in partners to the firm his father founded, giving ownership interests to brokers who could bring in business. Sheldon, who remained as a salaried chairman emeritus, making $158,000 a year on a promise not to compete, opposed the reorganization and sued for breach of contract. But he lost on all grounds. The pair have apparently still not spoken.
Kid Rock rolls
The U.S. Court of Appeals for the Sixth Circuit has handed rapper Kid Rock a victory in a breach of contract action by former associates who claimed a share of his songs and his performances under a 1989 contract. In the case, the Kid wrote a letter to the plaintiffs in 1990 saying that he did not intend to comply with the contract. The plaintiffs waited ten years to sue.
Too late, said the court. It adopted the "complete preemption" doctrine, noting that the claims arose out of the Kid’s use of the copyrighted materials. Hence, the three-year statute of limitations applied. Robert Ritchie v. Alvin B. Williams, No. 03-1279 (6th Cir. Jan. 11, 2005)
Today in history—February 23
1455: The first Western book with movable type is published, the Gutenberg Bible. It will take more than 400 years before the first casebook is set in movable type.
1836: Troops under Antonio López de Santa Anna begin their siege of rebels at the Alamo mission near San Antonio. The rebels, who are demanding adherence to the Mexican Constitution of 1824, are led by lawyer William Barrett Travis.
1848: Lawyer and former President John Quincy Adams dies in the Capitol Building at Washington, D.C. His most lasting contribution to American political life is replacing knee britches with long pants.
1854: The English Court of Exchequer issues its decision in Hadley v. Baxendale.
1854: Three thousand Boston merchants jam Faneuil Hall for a businessmen's protest meeting against the pending Kansas-Nebraska Act, which will re-introduce slavery into areas prohibited by the old Missouri Compromise.
1905: Three Chicago businessmen and a lawyer form a new luncheon group that they call "The Rotary Club."
1908: Future lawyer and Australian Prime Minister William McMahon is born at Sydney, New South Wales.
1947: The world’s most important standard-setting body, the International Organization for Standardization, known as "ISO," is founded.
1974: Trying to test the old writers' proverb that the most lucrative kind of writing is the ransom note, the Symbionese Liberation Army asks $4 million for the release of heiress Patricia Hearst.
2003: Sociologist Robert K. Merton, the man who coined "self-fulfilling prophecy" and "role model," dies at age 92.
February 22, 2005
Old blog posts never die
If you remember seeing something on this blog and can't find it, remember that while only three days of posts are kept on the main page, no posts ever go away. All of our posts are searchable through ordinary search engines like Google. If you want to find an earlier article and know roughly when it ran, you can also click on the "Archive" link on the right column, which will allow you to navigate to any previous week's postings.
If you want to post a link to a particular post, click on "Permalink" at the bottom of the post to take you to the page you should link to. Don't link to the main page because it changes several times a day.
Perillo on Pothier
Through an accident of history, the great French legal thinker Robert Joseph Pothier is best-known as the original author of the damages rule later adopted in Hadley v. Baxendale. But, as Joseph Perillo (left) writes in Robert J. Pothier's Influence on the Common Law of Contract, forthcoming in the Texas Wesleyan Law Review, the man's influence was far greater, reaching nearly every aspect of sales law.
The French author, Robert Joseph Pothier, had an enormous influence on the common law of contract. The whole structure of the Common Law of contracts and sales is based largely on Pothier's treatises on obligations and sales. The wisdom he passed on had its origins in ancient Rome but was reshaped by Aristotelian thinking in the Middle Ages, the Renaissance, as well as the humanism of the Enlightenment. It is well known that and that he was the o inventor of the rule in Hadley v. Baxendale. It is less well known that his influence on the common law of contracts was far more wide ranging.