ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, April 18, 2006

Weekly Top 10

Ssrn_logo_54 Few changes in this week's countdown, except that a second paper from Chase's Richard Bales makes the list.  Following are the top ten most-downloaded new articles from the SSRN Journal of Contract and Commercial Law for the sixty days ending April 16, 2006.

1 (1) Emerging Policy and Practice Issues (2005), Steven L. Schooner & Christopher R. Yukins (Geo. Washington).

2 (2) Contract Law Theory, Brian Bix (Minnesota).

3 (3) The Best Puffery Article Ever, David A. Hoffman (Temple).

4 (4) Reputations, Relationships and the Enforcement of Incomplete Contracts, W. Bentley MacLeod (Columbia-Economics).

5 (7) Contract Formation Issues in Employment Arbitration, Richard A. Bales (Northern Kentucky).

6 (5) Reading Wood v. Lucy, Lady Duff-Gordon with Help from the Kewpie Dolls, Victor P. Goldberg (Columbia).

7 (6) The Moral Impossibility of Contract, Peter A. Alces (Wm. & Mary).

8  (-) The Employment Due Process Protocol at Ten: Twenty Unresolved Issues, and a Focus on Conflicts of Interest, Richard A. Bales (Northern Kentucky)

9 (8) Modularity in Contracts: Boilerplate and Information Flow, Henry E. Smith (Yale).

10 (9) Creative Commons: A Skeptical View of a Worthy Pursuit, Niva Elkin-Koren (Haifa).

[Frank Snyder]

April 18, 2006 in Recent Scholarship | Permalink | TrackBack (0)

Participants in Clinical Drug Trial Sought Continued Treatment Based on Contract Theories

What if an individual who participates in a clinical trial of a drug wants to continue to receive that drug when the study is completed? Does the trial participant have a right to continued treatment based on theories of contractual obligation or promissory estoppel? Seems that the answer depends on whether, in addition to the clinicians, the drug company made any promises.

A group of individuals who suffer from Parkinson’s elected to participate in a clinical study of a drug to treat the disease. The company that developed the drug essentially commissioned the study, which was conducted by researchers at a university.  The drug company entered into a "Clinical Trial Agreement" with the university and researchers, which included a "Protocol" for the trial.  Among other things, the "Protocol" provided that the participants could elect to continue treatment up to 24 months after the study was completed.  The Protocol also allowed the drug company to terminate the study in specified circumstances. 

At some point during the clinical trial, the drug company terminated all clinical use of the drug, citing (1) a study that some trial participants developed neutralizing antibodies that caused irreversible damage to vital organs and (2) a long-term toxicology study of primates using the drug which found that the primates developed lesions on their brains. Some of the trial participants, however, believe that the drug is effective and that their physical, cognitive and emotional faculties have improved. These participants sought an injunction, requiring the drug company to continue to administer the drug to them. They sought the injunction, at least in part, based on breach of contract and promissory estoppel. The court did not issue the injunction and the Sixth Circuit held that the District Court did not abuse its discretion in denying the injunction.

The participants claimed that the drug company was contractually obligated to supply them with the drug. The court held that no contract ever existed between the participants and the drug company that required the company to continue to provide the drug. The participants primarily relied upon an "Informed Consent Document."  The participants had signed the consent form, but this document did not contain a drug company signature. The court held that this document, therefore, did not bind the drug company. The court also held that the Clinical Trial Agreement did not bind the drug company to continue to provide the drug to the participants because the participants were not signatories to that agreement -- rather, it was solely between the drug company, the researchers and the university.  Moreover, the court held that the researchers and university did not make promises to the participants on behalf of the drug company -- because the researchers were independent contractors and did not have apparent authority to bind the drug company.

The participants also claimed that the drug company was required to provide them with the drug based on promissory estoppel – that is, the researchers informed the participants that they would make decisions based upon the patients’ best interests and, if the drug proved to be safe and effective, the participants could continue to receive the drug beyond the trial period. Again, however, the court held that there was no evidence of a promise made by the drug company, and the promises of the university and researchers could not bind the drug company.

[Note: original post updated for clarification].

Abney v. Amgen, Inc., __ F.3d __ ( Mar. 29, 2006 6th Cir. 2006).

[Meredith R. Miller]

April 18, 2006 in Recent Cases | Permalink | TrackBack (0)

Monday, April 17, 2006

Did Prior Leave Prior to Completing Contract (?)

Mark Prior of the Cubs allegedly breached a contract to sign autographs at an art and home-décor store (he was paid $69,800 for his appearance).  The Chicago Tribune on-line (registration required) has the full story (quoted in part here):

Fans were disappointed, Prior acknowledged Monday while testifying in a breach-of-contract lawsuit filed by the store, but laid the blame on the event's lack of organization. He said he earned the $69,800 that he was paid. "I never behaved rudely in front of the fans," Prior said under cross-examination. "I tried to rectify a situation that, basically, was going south."

Testimony before Will County Circuit Judge Herman Haase showed Prior was paid $50,000 to sign 1,000 miniature porcelain replicas of Wrigley Field and $19,800 to sign 300 other pieces of memorabilia….

The store alleged Prior was rude and left after signing only 196 baseballs, pitching rubbers, bats, jerseys and the like, and 390 Wrigley replicas. The contract called for all 1,000 to be signed within 14 days of the event, the suit says.

Earlier in the trial, which will be continued until April 25 after more testimony Tuesday, a Just Ducky Too employee testified that Prior left with more than 30 people waiting for autographs.

Prior testified that an oral deal struck during the event allowed each photograph to be counted as an autograph. The agreement came after the first two dozen people in line met Prior and had their photo taken with him, the pitcher said.

But that was not how the event was supposed to work, he said. In addition, Just Ducky Too owners were asked to pull an Internet advertisement that stated each person who bought a signed stadium replica for $299 would get two "VIP tickets" to meet Prior. The ad was not pulled, he said.

"The way I read this was that there was going to be 2,000 people in front of me, versus signing 300 items—a big difference," Prior testified. "It wasn't what I agreed to do. ... It could get very lengthy."

Early in the event, a store employee "dragged" a young boy through the line, Prior said, and the boy appeared to be upset that he was told there would be no photograph with the player.

"The kid was lying there and crying and yelling," Prior said. "What I saw was kind of traumatic."

Prior said he stepped out from behind his table, signed a piece of memorabilia for the boy and allowed the two to be photographed together.

Then he excused himself and went outside, where he talked to his wife and then told the storeowners that the event was disorganized and unprofessional, he said.Prior denied using profanity, stating "absolutely not" when asked if he had done so.

Prior said when the line for autographs ended, he went to the rear of the store to sign more items and bring his total up to 300. He returned twice to the signing table after other customers showed up, before signing more items in back and leaving about 8:15 p.m., he said.

[Miriam A. Cherry]

April 17, 2006 in Celebrity Contracts | Permalink | TrackBack (0)

Winn on Adware Contracts

The Berkeley Technology Law Journal has published Jane K. Winn, Contracting Spyware by Contract, 20 Berkeley Tech. L.J. 1345 (2005), a follow-up to her presentation at the Boalt Spyware Conference in April 2005. 

Jane details the phenomenon that I’ve described as the “crisis of contract” online.  People may manifest assent to adware from a legal formalities perspective, but we don’t really believe that they manifested assent.  She thinks it would be a mistake to develop a one-off “solution” to the crisis of adware contracts (she analogizes such responses to the “dismal failure” of ad hoc solutions in the privacy context).  Instead, she favors an across-the-board change in American contract law to incorporate the principles of the EU’s Unfair Contract Terms Directive.

Unlike many other adware commentators, Jane carefully distinguishes between existing law (adware contracts usually enforceable) and her preferred policy result (adware contracts should usually be invalid as “unfair marketing”).  Thus, although she doesn’t like the existing contracting practices, she acknowledges that “in the absence of a conflict between contract terms and fundamental public policy of the forum, or evidence of misconduct so egregious that it might rise to the level of unconscionable, courts are likely to find that adware EULAs are enforceable contracts.” 

The abstract:

The question of what constitutes "spyware" is controversial because many programs that are adware in the eyes of their distributors may be perceived as spyware in the eyes of the end user. Many of these programs are loaded on the computers of end users after the end user has agreed to the terms of a license presented in a click-through interface. This paper analyzes whether it might be possible to reduce the volume of unwanted software loaded on end users' computers by applying contract law doctrine more strictly. Unwanted programs are often bundled with programs that the end user wants, but the disclosure that additional programs will be downloaded is usually buried deeply within dense form contracts. Even though this makes it difficult for end users to recognize that they are agreeing to have multiple programs installed at once and that some of those programs may be objectionable, US courts are unlikely to invalidate those disclosures. This is because in business to consumer online contracting cases in the US, courts have tended to be very deferential to the intentions of the merchants in designing the contract interfaces. In the EU, by contrast, such conduct by software distributors would not be binding on consumers. Under unfair contract terms laws in place in EU member states, consumer objections to bundled software could not be overridden by terms hidden in standard form contracts.

[Eric Goldman]

April 17, 2006 in E-commerce, Recent Scholarship | Permalink | TrackBack (0)

Saturday, April 15, 2006

Contracts Limerick

We all know the fascination that contracts profs have with poetry (it dates back at least as far as Karl Llewelyn).  For the past couple semesters at the two institutions where I have taught, I’ve run a poetry contest for my contracts class.  I’m sure that many of us have our particular favorites (written either by ourselves, from our law school days, or from our students).   

Over at the VC, Todd Zywicki recently posted the following contracts limerick, written by a student in his contracts class:

An ode to Cricket Alley Corp. v. Data Terminal Systems                        


DTS sold registers to Cricket’s

To automate bookkeeping wickets.

The shop owner said, “Dang!

These won’t talk to my Wang.

We’re stuck with hand entered sales tickets.”


Cricket’s needs were expressed or implied.

On salesmen’s claims Cricket had relied.

Damage was foreseeable

And so we’re agreeable

Consequence relief can’t be denied.

Enjoy.  If anyone has any funny contracts poetry that they’d like to send me, feel free….

[Miriam Cherry]

April 15, 2006 | Permalink | TrackBack (0)

Friday, April 14, 2006

Today in History: Nephew Gets the Money

Aab_16 On this date, April 14, 1891, the New York Court of Appeals decides the famous consideration case of Hamer v. Sidway, a staple of contracts casebooks.  It's the one where the uncle promises his namesake nephew $5,000 if the young man will "refrain from drinking, using tobacco, swearing, and playing cards or billiards for money until he became 21 years of age."  It doesn't sound like much of a deal today, but using the unskilled wage as a measuring stick that $5,000 in 1869 would be worth about $500,000 today.

The opinion in the case was written by Judge Alton Brooks Parker (left), who would become even more famous in 1904 when he was the Democratic candidate for President of the United States against Theodore Roosevelt.

[Frank Snyder]

April 14, 2006 in Famous Cases, Today in History | Permalink | TrackBack (0)

Thursday, April 13, 2006

Have a Nice Weekend

Aaa_21 If posts on the blog are a little spotty through the weekend, it's because me 'n' the family are down at the beach at Galveston, Texas.  Hope y'all have as  much fun as we will.

[Frank Snyder]

April 13, 2006 in About this Blog | Permalink | TrackBack (0)

Three Sheets to the Wind, or Less

Bed sheets are normally sold by "thread count" -- how many strands of fiber run horizontally or vertically through a given inch of the fabric.  Two large retailers, Bed Bath & Beyond and Wal-Mart, have been sued for selling sheets with lower thread counts than those marked on the packages.

It should be an interesting case, with a potential trade usage issue, given that the meaning of "thread count" used by manufacturers and that used by the Federal Trade Commission appear to be different -- a study reportedly showed that 8 out of 9 sheets had fewer actual threads than advertised.  Manufacturers appear to count a double-ply thread as 2 threads, while the FTC says it's only 1.  Stay tuned.

[Frank Snyder]

April 13, 2006 in In the News | Permalink | TrackBack (0)

Company Counseling

I think we've mentioned this site before, but those who like to keep up on what lawyers who advise businesses (both in-house and out-house) are thinking should regularly check out the Company Counselor blog.  A lot naturally focuses on things other than commercial law, but editors Denise Diaz and Linda Chan make it an interesting and eclectic mix.

[Frank Snyder]

April 13, 2006 in Miscellaneous | Permalink | TrackBack (0)

Today In History: Minneapolis Surplus Rides Again

Exactly fifty years ago today, on Friday, April 13, 1956, the Great Minneapolis Surplus Store shoots itself in the foot a second time, running the following ad:

2 Brand New Pastel Mink 3-Skin Scarfs
Selling for $89.50
Out they go Saturday ... Each $1.00
1 Black Lapin Stole, Beautiful, worth $139.50 ... $1.00
First Come First Served

When the store refuses to sell the items to Morris Lefkowitz, the result will be Lefkowitz v. Great Minneapolis Surplus Store, Inc., the classic case on whether an advertisement is an "offer" in contract law.

[Frank Snyder]

April 13, 2006 in Famous Cases, Today in History | Permalink | TrackBack (0)

Wednesday, April 12, 2006

A Host Without Peer…

A school thought they had a deal with Jon Stewart (host of the Daily Show and this year’s Oscars) to host their annual fundraiser. 

The school sent out invitations and sold tickets, but then, according to Yahoo News, they discovered that they had actually booked a motivational speaker and former professional wrestler also named “Jon Stewart.”

After discovering the mistake, several area theater groups offered to help out by performing.  The school also agreed to notify ticket-holders of the problem and to offer refunds.

[Miriam A. Cherry]

April 12, 2006 in Celebrity Contracts | Permalink | TrackBack (0)

Building With Boilerplate Blocks

Aaa_20 The terrific new Michigan Law Review symposium on "Boilerplate" is out.  One of the most interesting interesting contributions is by Henry Smith (Yale), called Modularity in Contracts: Boilerplate and Information Flow.  Here's the abstract:

Like property, contractual boilerplate is less tailored to its contractual and business environment than one might expect considering only the costs of producing it. Boilerplate, like all legal communication, requires actors to trade off the benefits of information-richness with the need for adaptability to a wide variety of contexts. One device for managing the complexity of contexts is modularity, under which a system is divided into information-hiding components which allow internal interaction but only limited interaction across component boundaries. Modularity helps boundedly rational agents to understand systems and to specialize in working on a subset of modules. Modularity also facilitates adaptability of systems in response to changes in the environment. Boilerplate utilizes modularity to allow for its addition, subtraction, and porting from one contract to another, without the need to worry about unforeseen interactions with other parts of the contract and the business context. Governing law and severability provisions provide particularly dramatic examples. Boilerplate is also intermediate between contract and property in terms of contexts not taken into account by the creators of boilerplate, and thus boilerplate requires less judicial intervention to maintain standardization than does property, but more so than in the case of contracts. The need for modularity also helps explain the role of "reading costs" in parties' choice of simpler contractual provisions over other more complex provisions that are not necessarily more costly to write. Modularity and formalism more generally are matters of degree, and underappreciated benefits of modularity help explain the incompleteness of the Realist revolution in contracts and the relationship of contracts to off-the-rack doctrines in civil and common law.

[Frank Snyder]

April 12, 2006 in Recent Scholarship | Permalink | TrackBack (0)

Construction Warranties and Liability to Tenants

United_kingdom_flag_8 An interesting recent British case involving a contractual warranty in a construction case presented a knotty question of interpretation.  In the case, Contractor had a contract with Developer, who in turn had a contract with Tenant.  The Contractor-Developer contract provided:

The Contractor shall owe no duties or have any liability under this deed which are greater or of longer duration in that which it owes to the Developer under the Building Contract.

The Contractor’s work was apparently not very good, and Tenant had to do some remedial work.  Developer went bust and owed Contractor more than the amount of the remedial work.  Could Tenant recover from Contractor?

No, said the court.  The point of the clause was to limit Contractor’s liability to the amount of its obligations to the amount it was to get from Developer.  Since it had a set-off against Developer for all claims, it couldn’t be liable to Tenant.

Jeremy Glover of London’s Fenwick Elliott LLP runs down the facts in Will a Warranty Always Enable an Employer to Pursue a Claim Against the Contractor if the Developer Becomes Insolvent?

[Frank Snyder]

April 12, 2006 in Commentary, Recent Cases | Permalink | TrackBack (0)

Alleged Fraud Cover-Ups and Employment at Will

New York has long been one of the great bastions of the employment-at-will doctrine.  One of the few groups of employees who get an exception to that are, interestingly enough, lawyers.   A state judge has ruled that the doctrine does not protect a law firm against a claim that it fired an associate who "refus[ed] to allow himself to be drawn into the cover-up of defendants' wrongful acts."

[Frank Snyder]

April 12, 2006 in In the News | Permalink | TrackBack (0)

Tuesday, April 11, 2006

Cubs Hurler Testifies in Contract Dispute

We've previously mentioned the breach of contract action being brought by a Chicago-area sports memorabilia store against Chicago Cubs pitcher Mark Prior.  The case is now at trial, and Prior was on the stand yesterday.  The 25-year-old right-hander, who was 11-7 for the Northsiders last year, was paid $67,500 for the appearance, but allegedly left early and failed to meet his contractual obligations.

[Frank Snyder -- hat tip to Bill Sjostrom]

April 11, 2006 in In the News | Permalink | TrackBack (0)

Contracts and Hierarchy

Aaa_8 And speaking of hierarchy, a new paper from Martin Boyer (HEC Montreal-Finance) explores the ways that firms use hierarchies to get around the problems inherent in organizing production through contracting.

It's On the Use of Hierarchies to Complete Contracts When Players Have Limited Abilities.  Here's the abstract:

Why do larger corporations have more layers in their hierarchy?  My contention in this paper is that hierarchies arise because economic agents have limited ability to anticipate and ascertain every possible contingency they are faced with. As a result, the complete contract may become too complex (or too costly) to devise and manage directly. My contention in this paper is that hierarchies may help a limited-ability principal (the organization's president) collect all pertinent information about the productive elements in the organization so that the complete is again possible. The contributions of the paper are six-fold: 1) it suggests a reason why hierarchies exist; 2) it develops a measure of the quantity of information that needs to be processed at each  level of the organization; 3) it measures endogenously the optimal number of layers in a hierarchy given the players' ability to process information; 4) it provides a rationale for having the most talented individuals at the top of the hierarchy; 5) it offers an explanation for the existence of an unique president in an organization; and 6) it explains how the number of layers and of managers may vary over time as the company grows and/or the players' ability changes.

April 11, 2006 in Recent Scholarship | Permalink | TrackBack (0)

Hooters and "Trade Dress"

As long as we're not talking about contracts anyway, we'll mention the recent decision about whether it's it a violation of Hooters Restaurants' “trade dress” (no pun intended) to hire only young, attractive female wait staff and make them wear short-shorts and tank tops?

No, according to a federal district court decision out of Florida, which Hooters is appealing.  Winghouse of Florida, a competitor, put its female wait staff in black short-shorts and tank tops (Hooters uses orange and white, respectively) with the Winghouse logo (not the Hooters owl) on the front.  Hooters cried foul, claiming that it had exclusive rights to this particular form of sexploitation.

Apparently, though, Hooters ran afoul of the rule that trade dress which is merely ornamental or functional is not protected.  The “ornamental” part seems to be a given, but Hooters also lost on the “functional” part, since the point of the dress, as it conceded, was to “provide vicarious sexual recreation, to titillate, entice, and arouse male customers' fantasies.”

Randy Broberg of L.A.’s Allen Matkins Leck Gamble & Mallory offers a rundown of the decision in Hot Wings and Hot Pants.

[Frank Snyder]

April 11, 2006 in Recent Cases | Permalink | TrackBack (0)

Blogging, Duncan Kennedy, and Me

It has nothing to do with contracts, but it's getting mentioned on some other blogs and I wrote it, so I'll plug it here.  It's Late Night Thoughts on Blogging While Reading Duncan Kennedy's Legal Education and the Reproduction of Hierarchy in an Arkansas Motel Room.  The title is self-explanatory.

[Frank Snyder]

April 11, 2006 in Recent Scholarship | Permalink | TrackBack (0)

What Do Editors Want?

Our colleagues over at TaxProf have a survey of what law review editors are looking for.  Few surprises for those who've been one.

[Frank Snyder]

April 11, 2006 in Law Schools | Permalink | TrackBack (0)

Monday, April 10, 2006

Writing v. Interpretation

Aab_28 A perennial battle in the contracts field is whether courts should enforce contracts "as written," or "interpret" them to get to the "real" deal the parties intended.  In a new article, On the Writing and the Interpretation of Contracts, forthcoming in the Journal of Law, Economics, and Organization, Steven Shavell (Harvard) takes the latter position.  Here's the abstract:

The major theme of this article is that the interpretation of contracts is in the interests of contracting parties. The general reasons are (a) that interpretation may improve on otherwise imperfect contracts; and (b) that the prospect of interpretation allows parties to write simpler contracts and thus to conserve on contracting effort. A method of interpretation is defined as a function whose argument is the written contract and whose value is another contract, the interpreted contract, which is what actually governs the parties' joint enterprise. It is shown that interpretation is superior to enforcement of contracts as written, and the optimal method of interpretation is analyzed.

April 10, 2006 in Recent Scholarship | Permalink | TrackBack (0)