Wednesday, February 15, 2006
This was the press release headline: Robert F. Kennedy, Jr. Kicked Off St. Thomas University School of Law's 2006 Distinguished Speaker Series.
No, that’s not what they meant. Kennedy wasn’t booted. In fact, Kennedy “kicked off” the series with a speech in which he noted that “We did not inherit the environment from our ancestors, we borrowed it from our children” and argued that “There is no civil right more basic that the right to a healthy environment.”
Nonprofit, the saying goes, is a tax status, not a business plan. Large amounts of money are controlled by nonprofit organizations -- and who's getting those benefits? That seems to be the intriguing question addressed by an upcoming CUNY Law Review is hosting, Who Profits from Nonprofits?
The program is slated for Friday, March 3, at CUNY’s law school. Admission is free.
No intellectual current has had more of an impact on contract theory in the past forty years than the law and economics movement. An important strand in that movement is utilitarian analysis. And utilitarianism, in a way, started on this date, February 15, 1748, when Jeremy Bentham was born at Houndsditch, London, the son and grandson of attorneys. Bentham was a prototype for the modern law professor: he qualified to practice at Lincoln's Inn but never actually practiced, spending his time instead writing about law.
He left his estate to help found University College, London, where his cadaver -- embalmed, dressed, and seated in a chair wearing a big hat -- still greets visitors. (Image: Michael Reeve, GNU License, Wikipedia)
Even if you aren’t a basketball fan (and I am not), check out Through the Fire. It is a documentary about Sebastian Telfair’s rags-to-riches jump from Lincoln High School straight to the NBA. Telfair grew up in a public housing project in Coney Island, Brooklyn and, passing up an offer to play at Louisville, he skipped college and entered the 2004 NBA draft directly out of high school. The movie is compellingly woven together by interviews with Telfair, his brothers, his high school coach and, also, intense high school game footage. The story follows Telfair’s high school basketball “career” to his eventual signing of a $15 million sneaker deal in his senior year – all this after Telfair emotionally mentions in an interview that he grew up without money to purchase sneakers, and had to borrow his sister’s sneakers to play out on the Coney Island courts.
And, the movie is at least marginally related to contract law for a few reasons. First, it shows the scouts and other forces of the seemingly lawless basketball culture in the lead-up to Telfair’s pre-NBA $15 million endorsement deal with Adidas. Second, it, perhaps, raises questions about sneaker companies’ donation of shoes and use of charismatic high school players to begin building brand loyalty in the schools (and, thereby, help competitive NYC high schools to lure agile teenage basketball players with the incentive of free sneakers). And, finally, it indirectly introduces what seems to be a hotly contested issue: whether a 20-year age requirement for the NBA draft should be included in the Collective Bargaining Agreement between the NBA and players.
[Meredith R. Miller]
Tuesday, February 14, 2006
Parenthesis: For generations we've used the oracular reading of oxen guts to predict our students’ careers, or lack thereof.
Hercules: Eeeyugh! Couldn't you use some sort of aptitude test instead?
Parenthesis: We tried that. The oxen guts were more accurate by 72 percent.
From: Hercules (TV Series)
The Virginia Law Review is hosting a symposium this weekend with a contracts flavor. It’s called Contemporary Political Theory and Private Law and it’s scheduled for this Friday and Saturday, Feb. 17-18, 2006, at Slaughter Hall on the UVA campus. Among the speakers are Jody Kraus, Kevin Kordana, and Steven Walt (all of Virginia), Daniel Markovits (Yale), and Barbara Fried (Stanford).
Three new papers join our Weekly Top 10 list this week, including an impressive fourth-place debut by a new piece from NYU's Oren Bar-Gill. Following are the top ten most-downloaded papers from the SSRN Journal of Contract and Commercial Law for the sixty days ending February 12, 2006. (Last week's ranking in parentheses.)
1 (1) Law and the Rise of the Firm, Henry Hansmann (Yale), Reinier Kraakman (Harvard) & Richard C. Squire (Yale).
2 (2) Contract as Statute, Stephen J. Choi (NYU) & G. Mitu Gulati (Georgetown).
3 (6) Choice, Consent, and Cycling: The Hidden Limitations of Consent, Leo Katz (Penn).
4 (-) Bundling and Consumer Misperception, Oren Bar-Gill (NYU) (left).
5 (7) Penalties and Optimality in Financial Contracts: Taking Stock, Michel A. Robe (American-Business), Eva-Maria Steiger (Humboldt-Business) & Pierre-Armand Michel (Liege-Management).
6 (7) Diversity of Contract Law and the European Internal Market, Jan M. Smits (Maastricht).
7 (9) A Bridge, a Tax Revolt, and the Struggle to Industrialize: The Story and Legacy of Rockingham County v. Luten Bridge Co., Barak D. Richman (Duke), Jordi Weinstock (Duke) & Jason Mehta (Harvard).
8 (-) Legal Infrastructure, Judicial Independence, and Economic Development, Daniel Klerman (Southern California).
9 (-) Courts and Contractual Innovation: A Preliminary Analysis, Mitchell Berlin & Yaron Leitner (Federal Reserve Bank of Philadelphia).
10 (10) The (CISG) Road Less Traveled: Case Comment on GreCon Dimter Inc. v. J.R. Normand Inc., Antonin I. Pribetic (Steinberg Morton Frymer LLP).
Monday, February 13, 2006
Here's a bit of classroom humor from Gary Neustadter (Santa Clara):
I use Dove v. Rose Acre Farms, 434 N.E.2d 931 (Ct. App. Ind. 1982), to illustrate the principle that substantial performance cannot satisfy a condition. In that case, a law student worked for Rose Acre Farms (a big Indiana egg producer) during the summer. He and others were promised a large bonus for doing some construction work, provided that, among other things, they were never even a moment tardy and didn't miss any work on account of illness. He got strep throat the last two days of the 10-week project and was denied the bonus even though the project was completed on time. The court denied him relief for his failure to satisfy the condition.
Rose Acre has a nice website at: http://www.roseacre.com/default.html. If you scroll down on it a bit, you can find the comfort that Rose Acre might have offered the law student in lieu of the bonus: "This is the day which the Lord has made; Let us rejoice and be glad in it. Psalms 118 verse 24."
A seller who wants to ensure that all its contracts incorporate its own terms can do so if it works hard enough at it. That’s the lesson of a recent decision by a federal district court in Pennsylvania.
In the case, British commodity broker Westbrook Resources had a series of four contracts with an American manufacturer, Globe, to supply manganese ore. Three contracts were on forms supplied by Westbrook, whose policy was to contract only on its own terms. On the fourth, Globe argued that an oral contract for sale of 22,000 metric tons of ore had been reached by January 6, 2005. After this date, the parties allegedly exchanged forms. Westbrook refused to sign a Globe form, and instead signed its own form and sent it to Globe. Globe refused to sign the Westbrook form. The parties subsequently performed, and Globe sued, claiming the ore was not of “acceptable size.” Westbrook moved to compel arbitration, based on a clause in its standard form requiring arbitration in the U.K.
Globe argued that there was an oral contract for the ore, and that the subsequent forms were “competing written confirmations of a prior oral agreement.” Under that theory, the arbitration clause would have been knocked out. District Judge Gary Lancaster disagreed. Noting the parties’ prior use of written agreements, he concluded that both parties had a practice of requiring contracts in writing. It seemed to him that Westbrook had, in fact, rejected Globe’s January 19 offer to sign a Globe form, and had sent its own form as an offer. Globe subsequently accepted the offer when it accepted the goods.
Globe Metallurgical v. Westbrook Resources, 2006 U.S. Dist. LEXIS 2307 (Jan. 23, 2006).
On this date, February 13, 1962, Karl Nickerson Llewellyn, principal architect of the Uniform Commercial Code, died at Chicago. In addition to his work in commercial law, Llewellyn had been the only person to have served as editor-in-chief of the Yale Law Review for three years, and the only American citizen to win the Iron Cross fighting for the Kaiser in World War I.
Sunday, February 12, 2006
On this date, February 12, 1900, Roger John Traynor was born at Park City, Utah. He earned his Ph.D. and J.D. from Cal-Berkeley in 1927, and spent his entire career working for the State of California, as a professor at Boalt Hall, as a state tax official (credited for introducing the vehicle registration fee, the state sales tax, the state income tax, the use tax, the state corporate income tax, and the state fuel tax), and from 1940-70 as a Justice and then Chief Justice (1964-70) of the California Supreme Court. In that latter position he authored such casebook staples as Drennan v. Star Paving and Pacific Gas & Electric Co. v. G. W. Thomas Drayage Co.
Friday, February 10, 2006
Mama's gonna buy you a mockingbird
And if that mockingbird won't sing,
Mama's gonna buy you a diamond ring
And if that diamond ring turns brass,
Mama's gonna buy you a looking glass
And if that looking glass gets broke,
Mama's gonna buy you a billy goat
And if that billy goat won't pull,
Mama's gonna buy you a cart and bull
And if that cart and bull turn over,
Mama's going to buy you a dog named Rover.
And if that dog named Rover won't bark,
Mama's going to buy you a horse and cart.
And if that horse and cart fall down,
You'll still be the sweetest little baby in town.
Thursday, February 9, 2006
An interesting new piece by Carl S. Bjerre (Oregon), Mental Capacity as Metaphor, will be forthcoming in the International Journal for the Semiotics of Law. Here's the abstract:
Despite its foundational role in contract law, the term mental capacity is entirely metaphorical, and a detailed analysis of three representative judicial opinions shows that courts' explanations of the term are equally metaphorical. As such, the term mental capacity nicely illustrates the cognitivist view that abstract concepts arise through an imaginative but orderly projection from the domain of bodily and social experience. Legal Realists, including notably Felix Cohen, condemned metaphors for their supposed failure to constrain judges, but this article and other recent empirical work indicates that metaphorical thinking is indeed constrained. I accordingly suggest that thinkers such as Cohen would probably have welcomed the cognitive analysis of metaphor in law, both for its methods and for its substantively progressive disposition.
Is it reasonable to believe that a person who sends an e-mail from an address ending in a company’s domain name has authority to act on behalf of that company? The District Court of Massachusetts recently held that, as a matter of law, it was not reasonable for the recipient of an e-mail sent from a company’s domain name to believe that the sender had authority to act on behalf of the company.
Albert Arillotta, representing to be both from Interstate Demolition and Recovery Express (“IDEC” and “Recovery”) sent an e-mail to Len Whitehead of CSX, a business that sells out-of-service railcars and parts. The e-mail (typos and all) proposed the following:
From: Albert Arillotta [firstname.lastname@example.org]
Sent: Friday, August 22, 2003 4:57 PM
To: Whitehead, Len Jr.
Subject: purchase of out service railcars
this is albert arillotta from interstate demolition and recovery express we are interested in buying rail cars for scrap paying you a percentage of what the amm maket indicator is there are several locations i suggest to work at the exsisting location of the rail cars. we will send you a brocheure and financials per your request our addressis the following:
180 canal street 5th floor boston mass 02114
fax number 617-367-3627
email address albert @recoveryexpress .com
thank you for your time
After some telephone conversations, Arillotta and Whitehead apparently proceeded with this proposed deal, and the railcars were delivered by CSX to a location specified by Arillotta. After delivery, CSX sent invoices to IDEC for the scrap railcars totaling $115,757.36. When IDEC and Recovery apparently refused to pay, CSX brought an action alleging, among other things, breach of contract and unjust enrichment.
Whitehead alleged that, at all times during his dealings with Arillotta, he believed that Arillotta was representing, and authorized to act on behalf of, Recovery and IDEC. Whitehead apparently based this belief on the e-mail's domain name (recoveryexpress.com) and the representations of Arillotta to him both in the e-mail and in subsequent telephone conversations. However, Recovery claimed that Arrillotta never worked for it, and was not authorized to represent or transact business on behalf of Recovery or IDEC.
Apparently, Arillotta obtained a Recovery e-mail address by becoming involved in the separate IDEC venture with Recovery’s president and treasurer. IDEC and Recovery shared offices and some resources, including e-mail services. Other than physical resources, there was no evidence that Recovery ever shared anything with IDEC -assets, funds, books of business, bank accounts, or insurance coverage.
The court noted that “CSX genuflects to the possibility that Arillotta was granted actual authority by Recovery,” but quickly dismissed any argument that Arillotta had actual authority to act on behalf of Recovery. Thus, the issue was whether Arillotta had apparent authority to act on behalf of Recovery. The court defined the issue narrowly as “whether a domain name, by itself, cloaks a purported agent with authority sufficient as matter of law to be called ‘apparent.’”
The court wrote:
Because apparent authority depends on that knowledge held by Whitehead and CSX of Arillotta's authority, which knowledge was derived from actions of Recovery, the only relevant conduct by Recovery is that it issued Arillotta an e-mail address with its domain name. Such associations as Recovery having the same offices, mailing address, phone number, or fax number are red herrings; these facts-if Whitehead even possessed them prior to entering the contract-emanated from Arillotta by way of his e-mail signature or telephone representations. There is no evidence of the manifestation of those facts by Recovery to Whitehead and CSX (i.e., by way of its website, as CSX asserted at oral argument) until after the contract was entered and collection efforts had begun.
The only act taken by Recovery known to Whitehead and CSX prior to entering the contract and upon which Whitehead could rely, was its issuance to Arillotta of an e-mail address sporting Recovery's domain name (@recoveryexpress.com). The Court holds that Whitehead and CSX were unreasonable, as matter of law, in their reliance solely on an e-mail domain name. Such a manifestation by Recovery cannot be sufficient to sustain a claim of apparent authority. Granting an e-mail domain name, by itself, does not cloak the recipient with carte blanche authority to act on behalf the grantee. Were this so, every subordinate employee with a company e-mail address-down to the night watchman-could bind a company to the same contracts as the president. This is not the law.
Though e-mail communication may be relatively new to staid legal institutions, the results in analogous low-tech situations confirm this conclusion. The Court could find no cases where, for example, giving someone a business card with the company name or logo, access to a company car, or company stationery, by themselves, created sufficient indicia of apparent authority … An e-mail domain name is sufficiently analogous to business cards, company vehicles, and letterhead for these cases to be persuasive. Those indicia of apparent authority all convey some degree of association between the purported principal and agent. By themselves, however, no reasonable person could conclude that apparent authority was present. The same is true with e-mail domain names.
The court chided Whitehead for his “gullibility,” and stated that
CSX and Whitehead should have been more suspicious of an unsolicited, poorly written e-mail that arrived late one Friday afternoon. There are means by which CSX could have protected itself (e.g., requiring a purchase order form from IDEC or Recovery). Before delivering goods worth over $115,000 to a stranger, one reasonably should be expected to inquire as to the authority of that person to have made such a deal. Given the anonymity of the Internet, this case illustrates the potential consequences of operating-even in today's fast-paced business world-as did CSX.
CSX Transp., Inc. v. Recovery Express, Inc. (D. Mass. Feb 1, 2006).
[Meredith R. Miller]
Wednesday, February 8, 2006
A manufacturer who keeps fixing defects in a product under a limited repair-and-replace warranty doesn’t violate the Magnuson-Moss Warranty Act even if the repairs don't solve the problem and the product continues to fail, according to a new decision by the Arizona Court of Appeals.
In the case, a car buyer got General Motors’s “limited express warranty” which provided that GM “will pay for repairs needed to correct defects in materials or workmanship,” and that “[w]arranty repairs, including towing, parts and labor, will be made at No Charge.” There was no dispute that GM repeatedly paid to fix problems with the buyer’s car, but the repairs never managed to fix whatever the problems were. The buyer argued that after a certain number of repeated failures, GM ought be found in violation of the MMWA.
The problem with that argument, said the court, is that the buyer confused the state UCC claims with the MMWA. It’s true that the seller’s repeated failures may cause a remedy to “fail of its essential purpose” under UCC § 2-719(2), and that the buyer may be entitled to one of the Code's default remedies if it does. But that has nothing to do with the MMWA. Since Congress explicitly included the right to full refund or replacement under such circumstances where a full warranty is given, it must (said the court) have meant that the same right did not apply to a limited warranty. Summary judgment was therefore appropriate for GM.
Chaurasia v. GMC, 2006 Ariz. App. LEXIS 1 (Jan. 3, 2006)
A fair amount of contract scholarship over the years has tended to assume (tacitly, anyway) that litigation to resolve contract disputes is costless. Default terms like "reasonable" and "good faith" may allow courts after the fact to better sort out the parties' dispute, but it's expensive to go to court. Do litigation costs cause contracting parties to change their behavior?
Yes, say Robert E. Scott and George G. Triantis (Virginia) in their new article, Anticipating Litigation in Contract Design, 115 Yale L.J. 814 (2006). Here's the abstract:
Contract theory does not address the question of how parties design contracts under the existing adversarial system, which relies on the parties to establish relevant facts indirectly by the use of evidentiary proxies. In this Article, we advance a theory of contract design in a world of costly litigation. We examine the efficiency of investment at the front end and back end of the contracting process, where we focus on litigation as the back-end stage. In deciding whether to express their obligations in precise or vague terms, contracting parties implicitly allocate costs between the front and back end. When the parties agree to vague terms (or standards), such as “best efforts” or “commercial reasonableness,” they delegate to the back end the task of selecting proxies: For example, the court selects market indicators that serve as benchmarks for performance. When the parties agree to precise terms (or rules), they invest more at the front end to specify proxies in their contract, thereby leaving a smaller task for the enforcing court. We explore the choice between rules and standards in terms of this tradeoff, and we offer an explanation for why contracts in practice have a mix of vague and precise provisions. We then suggest that parties can achieve further contracting gains by varying the procedural rules that will govern their disputes in court. We illustrate by examining provisions in commercial contracts that allocate burdens and standards of proof. If the parties can improve the cost-effectiveness of litigation in this manner, they can further lower contracting costs by shifting more investment to the back end through their increased use of vague terms. Although vague terms have fallen into disfavor with contract theorists, this Article offers a justification for their frequent use in commercial practice.
On this date, February 8, 1991, pitcher Roger Clemens of the Boston Red Sox signs the most lucrative contract in baseball history to that time: $5,380,250 a year for four years. That's more than $600,000 a year more than the previous record, held by Jose Canseco of the Oakland Athletics. Clemens’s record will last only a year, however, before the Chicago Cubs give $7 million a year to second baseman Ryne Sandberg. (Image: Clemens in 2004 as a member of the Houston Astros, by Rick Dikerman, GNU License, from Wikipedia)
Tuesday, February 7, 2006
The doctrine of consideration has received treatments from almost every angle over the past hundred years or so. Now Scott Pryor (Regent) offers a Christian take on the doctrine in Consideration in the Common Law of Contracts: A Biblical-Theological Perspective, 18 Regent U. L. Rev. 1 (2005-06). Here’s the introduction:
An approach to the study of the law of contracts must start somewhere. Some casebooks on contracts start with a very brief historical review and proceed directly to cases. A number start with the formation of contracts; others begin with remedies for breach of contract. One even begins with consideration. Sprinkled throughout most casebooks are some discussions of why contracts should be enforced, usually in the form of notes following cases or short excerpts from law review articles. Even those discussions, however, rarely deal with questions of the worldview that legitimates coercive state enforcement of contracts. And to my knowlege, non discuss questions of theology in relation to the law of contracts.
This article will discuss one aspect of contracts law -- consideration -- in light of biblical criteria. Such a move requires some preliminary groundwork. Application of biblical teachings requires more than citing a series of proof-texts. And application of biblical doctrine includes more than the Bible. I will thus begin by describing three Christian doctrines that are particularly relevant to legal analysis. I will then follow with three perspectives that demonstrate how to apply the doctrines as tools for legal criticism. With these foundations, I will then move on to address consideration in two parts: What purpose does it serve? And how should courts draw its boundaries? I will cite very few cases. This is primarily a work of critique; I am certainly not trying to plot a curve on the scattershot of judicial decisions. But there is also some theory here; I believe Christianity has something to say about what the law should be.
In the case, SouthTrust Bank issued a letter of credit on behalf of Skilstaf Inc., for the benefit of Skilstaf’s workers’ comp carrier, Continental Casualty. The LOC listed “Continental Casualty Company, c/o Risk Management Group, CNA Plaza, 333 S. Wabash, Chicago, IL 60685, Attn: Contract Administration,” as the beneficiary. It stated also that “This credit is subject to the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce, Publication No. 500.”
The LOC was renewable. Prior to the renewal date, December 14, SouthTrust notified Continental that it would not renew the credit. On December 10, after getting this notice, Continental presented a sight draft for $810,000 -- the entire amount of the LOC. The draft was to the order of “Continental Casualty Company,” with no address stated. SouthTrust rejected it on the ground that it did not include the address, as required. The relevant Alabama statute provides:
[A]n issuer shall honor a presentation that, as determined by the standard practice . . . appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided . . . and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.
But the failure to include the address specified in the beneficiary line wasn’t fatal, said the court.
The beneficiary of the sight draft was "Continental Casualty Company," at whatever address it might be using at the time it might seek to submit a sight draft drawn on the LOC. Taking SouthTrust's argument to its logical extreme, said the court, if Continental had changed its physical or mailing address in any way subsequent to its listing its address as beneficiary on the LOC and before the issuance of a sight draft, in order to comply strictly with the LOC in submitting a sight draft drawing against it, Continental would have to state its original, but now incorrect, address.
Continental Casualty Co. v. SouthTrust Bank, N.A., 2006 Ala. LEXIS 1 (Jan. 6, 2006).