January 21, 2006
Today in History: Alphonsus Liguori Graduates
Relatively few commercial lawyers have managed to make their way to sainthood, but one of them is Alphonsus Mary Antony John Cosmas Damian Michael Gaspard de' Liguori (left), who as St. Alphonsus Liguori became one of the Doctors of the Catholic Church. On this date, January 21, 1713, the sixteen-year-old Alphonsus took his degree as Doctor of Laws at Naples. The spectators apparently laughed when the pint-sized teenager appeared in his doctor's gown.
By 27, he was one of the leaders of the Neapolitan bar. One story -- no one knows if it's true -- is that he gave up practice after he found himself committing a fraud on the court as a result of the actions of a dishonest client. (Right, Church of St. Alphonsus Liguori, from Diocese of St. Louis, Missouri.)
Katz on the Limits of Consent
The idea of "consent" is one of the cornerstones of classic contract theory. Contractual obligations, according to the classic account, rest on their voluntary assumption by a party, who consents to their enforceability by a third party, usually the state. Contract profs, however, know that a great many contractual obligations today do not rely on anyone's consent, and they also know that a great many things to which people may consent voluntarily are nevertheless not enforceable.
So most of us probably won't be startled by the thesis of Leo Katz (Penn), in Choice, Consent, and Cycling: The Hidden Limitations of Consent, forthcoming in the Michigan Law Review. But it's still an interesting exploration of the issues. Here's the abstract:
Most legal scholars assume that if V consents to allow D to do something to him, such consent makes D's actions legally and morally acceptable. To be sure, they are willing to make an exception when consent is given under a specified list of conditions: Force, fraud, incompetence, third-party effects, unequal bargaining power, commodification, paternalism - all of these may be grounds for rejecting the validity of V's consent. We might call scholars who take this view of consent quasi-libertarians. In this Article, I argue against the quasi-libertarian view of consent.
My central claim is that the validity of consent must be significantly more restricted than the quasi-libertarians assume, if the law is to avoid inconsistency in a number of domains. In particular, I claim that the law will encounter problems of cycling with respect to its core values if consent is allowed the relatively unrestricted scope quasi-libertarians assume for it.
The law has avoided such cycles because courts and legislatures in fact restrict consent far more widely than the familiar list of exceptions suggests, although usually without realizing what they are doing. The law is actually not quasi-libertarian. I explore several examples of this: our wariness of tradable pollution permits, our restriction on the assumption of risk defense, the ubiquity of so-called victimless crimes, and the impossibility of enforcing a personal service contract by specific injunction. These examples are far from exhaustive.
Further, I argue that the additional restrictions on consent I identify have implications for the recent debate concerning the proper role of welfare economics in law. They suggest that the Pareto principle (which says that policies which benefit some and hurt no one are to be pursued) is an unreliable guide for public policy.
January 20, 2006
So. Cal. District Court Refuses to Enforce Cell Phone Companys' Arbitration Clauses
A District Court in the Southern District of California recently held that the arbitration clauses in the cell phone contracts of T-Mobile and Cingular are unconscionable and, therefore, not enforceable.
In a putative class action, customers sued various cell phone companies alleging that companies improperly charged sales tax on the full, undiscounted price of phones that were free or significantly discounted as part of a bundled cell phone and service package. Defendants T-Mobile and Cingular moved to compel arbitration pursuant to clauses in the customer contracts. The court denied the motion, holding that the arbitration provisions were unconscionable.
It was not disputed that the plaintiffs were presented with non-negotiable, take-it-or-leave-it form contracts. The court held that these types of contracts are procedurally unconscionable, leaving only the question “where on the continuum of procedural unconscionability do the subject agreements fall?” The court addressed the contracts of the lead plaintiffs. Plaintiff Laster had contracted for T-Mobile’s services, and plaintiff Voorhies had contracted for Cingular’s services. The court explained:
With respect to T-Mobile, the one page Service Agreement [plaintiff] Laster signed does not include any reference to arbitration or waiver of class action participation. Rather, Laster was theoretically notified of the arbitration clause through T-Mobile's fifty-two page “Welcome Guide”, which was placed inside the sealed box containing her new phone. Laster claims she neither signed nor acknowledged the arbitration provision, because she never knew it existed. Nevertheless, T-Mobile contends Laster accepted the terms of arbitration by activating her phone because she “had time to review and understand” the Welcome Guide and its arbitration provision, and “she was allowed to return her phone and cancel her T-Mobile service within 14 days, with no penalty.”
Under these circumstances, Laster had no meaningful opportunity to negotiate the terms of the service contract before purchasing the phone. In other words, she had no opportunity to switch to another competitor until after she purchased the phone. On this record, it appears Laster's ability to “negotiate” depended upon her ability to discover the arbitration provision on her own and then cancel her service within 14 days of purchasing and activating her phone. The manner in which the T-Mobile's arbitration provision was presented to Laster clearly suggests procedural unconscionability at a heightened level.
Cingular's arbitration clause, on the other hand, presents a closer call. In contrast to Laster, [plaintiff] Voorhies was provided with both Cingular's Service Agreement (which specifically references arbitration) and its Terms of Service at the time she purchased the phone. As Cingular notes, “At that time, Voorhies had neither invested in a telephone nor become reliant upon the telephone number obtained when she entered into her agreement.” In other words, Voorhies could, at that point, elect to “leave it” and go with a competitor, such as Verizon.
However. . . Cingular nonetheless presented Voorhies with a take-it-or-leave-it form contract that is deemed to be adhesive and thereby, procedurally unconscionable. Similar to Laster, Voorhies had no real opportunity to “negotiate” the arbitration provision, as it was non-negotiable. She was, however, able to negotiate the transaction in the sense that she could at an early stage reject Cingular's terms and choose a competitor. As Cingular concedes, “At most, [under these circumstances] adhesiveness. . . puts Cingular's contracts on the low end of the spectrum of procedural unconscionability.” This Court would agree.
T-Mobile and Cingular next argue that Laster and Voorhies fail to show the “surprise” element of procedural unconscionability. In support, Defendants argue the terms of the arbitration agreements are adequately disclosed in their service contracts. As noted, Laster was not made aware of the terms of the arbitration clause until after she had purchased the phone. The surprise element is therefore clearly established by Laster against T-Mobile.
Cingular argues, however, the “surprise” element is lacking because it “gave its arbitration provisions special prominence in its [Service] Agreement.” While it is true Cingular's Service Agreement provides notice of arbitration, the agreement fails to mention the terms of arbitration or its classwide arbitration bar. In addition, the actual arbitration clause and class action waiver can only be determined by the customer by reading a separate document-specifically, pages ten through twelve of Cingular's thirteen page Terms of Service booklet. A modicum of surprise therefore exists under these circumstances.
Next, the plaintiffs argued that the provisions were substantively unconscionable because they provided for the waiver of plaintiffs' rights to bring a class action suit. The court agreed with plaintiffs. The court noted that a class action waiver is substantively unconscionable when: “(1) the class action waiver is contained in a consumer contract of adhesion, in which small amounts of damages are at issue; and (2) it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.” The court held that plaintiffs established these factors.
Laster v. T-Mobile USA, Inc., ___ F.Supp.2d ___ (S.D.
[Meredith R. Miller]
January 19, 2006
Contracts Conference Slated
More than 40 panelists and presenters will gather in Fort Worth (left) in February for the inaugural International Contracts Conference. The two-day session, which will be held in Texas Wesleyan's new Amon Carter Auditorium, features a mix of senior and junior scholars and panels on a wide range of subjects, both doctrinal and theoretical.
The conference is scheduled for Friday and Saturday, February 24-25, 2006. Registration is $99. The conference program and information on registration and lodging are available at the Conference web site. We expect that CLE credit will be available for those who need it.
Canada and the CISG
It's complicated enough for the average judge of general jursidiction to have to deal with both the common law and various domestic commercial statutes and codes. It gets harder when you add the U.N. Convention on Contracts for the International Sale of Goods to the mix. Peter Mazzacano
(Osgoode Hall) takes a look at Canadian courts' struggles with the CISG in Canadian Jurisprudence and the Uniform Application of the UN Convention on Contracts for the International Sale of Goods, a paper forthcoming in the Pace International Law Review. Here's the abstract:
In 1980 the United Nations Convention on Contracts for the International Sale of Goods ("CISG" or "Convention") came into being because of a growing need for certainty in international sales contracts. As a result, functional uniformity should be at the core of the CISG. This suggests that there should be a growing international convergence of interpretations and applications of the CISG by tribunals and national courts. In this respect the purpose of the CISG is not only to create new, state-sanctioned law, but also to give recognition to the rules born of international commercial practice and to encourage national courts to apply them in a functionally uniform manner. However, to what extent are national courts heeding to the mandate of the CISG and considering international jurisprudence when deciding cases under the Convention? More specifically, this paper analyzes the extent to which Canadian courts have looked beyond domestic law when interpreting the
provisions of the Convention. It considers whether they have become unsuspecting victims of the "homeward trend", by failing to implement the CISG requirement for autonomous, internationally-focused interpretations of the CISG. As the cases analyzed in this research paper illustrate, Canadian courts have tended to treat the CISG in a cursory manner, and have ultimately made decisions reflexively, on the basis of domestic law. Not only have they ignored the mandate of the Convention, but no Canadian court decision to date has treated the CISG in a serious manner, that is, without reference to domestic legal concepts. In other words, Canadian CISG jurisprudence is still permeated with domestic gloss. To the international community, this suggests that Canadian legal practitioners lack a certain analytical sophistication with international law, or suffer from legal parochialism.
Film Clips: The Art of the Deal
From Network (1976):
[The UBS television network has reached a deal with Communist Party rep Laureen Hobbs and a group called the Ecumenical Liberation Army (headed by the Great Ahmed Khan) to to produce a weekly television series involving footage of "an authentic act of political terrorism." The Party and the ELA, including their lawyers and agents, are in negotiations on the deal.]
Ed: We're on Schedule A, page seven, small c small i --
Helen Miggs [flipping through her copy of the contract]: Have we settled that sub-licensing thing? We want a clear definition here. Gross proceeds should consist of all funds the sublicensee receives not merely the net amount remitted after payment to sublicensee or distributor.
Stein: We're not sitting still for overhead charges as a cost prior to distribution.
Laureen Hobbs: Don't fuck with my distribution costs! I'm getting a lousy two-fifteen per segment, and I 'm already deficiting twenty-five grand a week with Metro. I'm paying William Morris ten percent off the top! And I'm giving this turkey [indicates Khan] ten thou a segment, and another five for this fruitcake [indicated Gifford] -- and, Helen, don't start no shit with me about a piece again! I'm paying Metro twenty percent of all foreign and Canadian distribution, and that's after recoupment! The Communist Party's not going to see a nickel out of this goddam show until we go into syndication!
Miggs: Come on, Laureen, you've got the party in there for seventy-five hundred a week production expenses.
Hobbs: I'm not giving this pseudo insurrectionary sectarian a piece of my show! I'm not giving him script approval! And I sure as shit ain't cutting him in on my distribution charges I --
Gifford [screaming]: Fuggin fascist! Have you seen the movies we took at the San Marino jail break-out demonstrating the rising up of a seminal prisoner-class infrastructure?
Hobbs: You can blow the seminal prisoner-class infrastructure out your ass! I'm not knocking down my goddam distribution charges!
[The Great Khan fires a pistol off into the ceiling. This gets everyone's attention.]
Khan: Man, give her the fucking overhead clause! Let's get back to page twenty-two, number 5, small 'a'. "Subsidiary rights."
January 18, 2006
Contracts Profs Boozing and Chatting
The Contracts Section Happy Hour at the AALS was a success, as a group of remarkably attractive, witty, and charming folks gathered for a pleasant mixture of alcohol and conversation. Dean Tadas Klimas of Lithuania's Vytautas Magnus School of Law took some photos and shares them with us.
The get-together was at Harry's Bar in the Marriott Wardman Park. The service was slow but they serve very good Manhattans.
Fairfax to Speak at WNEC
U of Maryland contracts prof Lisa Fairfax (left) will be a featured speaker at Western New England's new Law and Business Center for Advancing Entrepreneurship this February 9. Fairfax, who also teaches business associations and securities, will speak on Achieving the Double Bottom Line: A Framework for Corporations Seeking to Deliver Profits and Public Services. The program is free to the public. It will start at 5:30 p.m. in the S. Prestley Blake Law Center.
January 17, 2006
Weekly Top Ten
Downloads are still slow this time of year, but one new paper has joined the list this week. Following are the top ten most-downloaded papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending January 16, 2006.
1 One-Sided Contracts in Competitive Consumer Markets, Lucian Arye Bebchuk (Harvard) & Richard A. Posner (Chicago).
2 How Law Affects Lending, Rainer F.H. Haselmann (Leipzig-Business), Katharina Pistor (Columbia) & Vikrant Vig (Columbia-Business).
3 The Strategy of Boilerplate, Robert B. Ahdieh (Emory).
4 Beyond Reason and Rational Frogs: Intuitional Business Ethics in a Scientific World, Jeffrey M. Lipshaw (Indiana-Indianapolis).
5 Do Courts Matter? Rental Markets and the Law, Pablo Casas-Arce (Oxford-Economics) & Albert Saiz (Penn-Wharton).
6 The Return of the Twenty Bishops: Toward a Subjective Theory of Contract Formation, Lawrence M. Solan (Brooklyn).
7-t The Frontiers of Contract Law--Contract Formation and Mistake in Cyberspace--The Singapore Experience, Andrew Phang (Vienna-Economic).
7-t 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).
9 Diversity of Contract Law and the European Internal Market, Jan M. Smits (Maastricht).
10 Signals, Assent and Internet Contracting, Juliet Moringiello (Widener).
Congrats to Roger Williams
In the hustle and bustle of the holidays, AALS annual meeting, the end of vacation, and the start of school, we've neglected to send our congratulations to Roger Williams University's Ralph R. Papitto School of Law. On January 4, the Rhode Island school was "enthusiastically" elected the newest member of the Association of American Law Schools. Roger Williams, the only law school in the Ocean State, achieved that status after only fifteen years of operation.
Memphis to Get New Home
Good news for the University of Memphis's Cecil C. Humphreys School of Law: the U.S. Postal Service has agreed to sell the beautiful and historic Front Street Station (left) to the school to serve as the institution's new home. The riverfront building is close to courts and the heart of the city's legal community. A satellite photo/map of the school's location (corner of Front and Madison streets) is available here.
More on the UK Contract Killer
Our friend Andrew Tettenborn (Exeter) writes with a different take on the contract killer case reported below:
It might be worth pointing out that, in reporting the case of the would-be English suicide who got back £2,000 from the dishonest hitman provider, The Times has (not for the first time) got its legal knickers in a twist. This wasn't in any way an action for a breach of contract, but a criminal prosecution for fraud. And it succeeded on perfectly orthodox grounds. Just as I am guilty of fraud if I get £2,000 from you in exchange for crack cocaine which I don't actually have and know I can't provide, so also with obtaining money to have you illegally killed.
If Mrs Ryder had brought a civil suit for breach of contract, she would undoubtedly have lost (there's a nice C17 case, Allen v Rescous (1676) 2 Levinz 174, dismissing an action by a disgruntled plaintiff who'd paid the defendant £1 to have someone beaten up and then complained the job hadn't been done). So also, I suspect, a civil action in tort for fraud would have failed, on the basis that it was an indirect attempt to enforce an outrageously illegal contract.
The reason the plaintiff here got her £2,000 was that a criminal court in England has statutory jurisdiction to order a convicted defendant to compensate his victim. Perhaps oddly, it is well established that this exists even where there would be no civil liability.
January 16, 2006
UK Court Enforces Contract to Kill
Is a contract to kill enforceable? The UK Times Online reports that a Maidstone Crown Court held that a contract to kill is enforceable, at least in this scenario:
Christine Ryder, 53, met [Kevin] Reeves[, 40,] when both were being treated for mental health problems at Medway Maritime Hospital in Gillingham, Kent, in 2003. Mrs Ryder, from nearby Strood, had been admitted after attempting suicide. She formed a friendship with Reeves and told him that she was depressed and desperate to end her life. Could he find her a hitman? Reeves, from Snodland, near Rochester, made a telephone call and told her that he could get a professional killer for £2,500.
After they left hospital she contacted Reeves and repeated her request. The price, Reeves told her, had gone up to £5,000. She wrote him a cheque.
Reeves banked the money and told Mrs Ryder that she would be killed in a drive-by shooting on June 11, 2003. She wasn’t; Reeves telephoned her to cancel the arrangement, saying that he had had to kill the hitman himself and pay Mrs Ryder’s money to his widow, the court was told.
Mrs Ryder, growing increasingly keen to depart this life, asked Reeves if he would do the deed himself. Reeves agreed, but said it would cost her another £10,000; she wrote him another cheque. But then she lost contact with him for some time. When he eventually contacted Mrs Ryder, he claimed that her £10,000 had been seized by his bank because he was bankrupt, but he could still kill her if she gave him another £10,000. She refused but agreed to pay him £5,000; Reeves promised to kill her on November 28.
The day before the promised killing, Mrs Ryder received a letter from Reeves saying that the situation had changed, but “things are still on, so don’t panic”. At the end of the appointed day Mrs Ryder was still alive.
Fiona Moore-Graham, for the prosecution, told the court that once again there was a period of no contact, largely because Reeves had taken his wife, Jean, on an expensive holiday to Tenerife. “You may think, therefore, that there was no intention of killing Mrs Ryder on November 28.”
Ever more frustrated at being still alive, Mrs Ryder contacted Reeves’s wife, who said that her husband had told her that his windfall had come from a lottery scratch card, a maturing insurance policy and an Isa. “He simply had the money for his own purpose and had no intention of using it for the purpose she directed: to have her killed or kill her himself,” Ms Moore-Graham told the jury.
Steven Hadley, for the defence, conceded: “It is a mean offence, preying on somebody who is vulnerable.”
Ryder sued for breach of contract. A jury found Reeves "guilty of deception." Reeves was imprisoned for 15 months, but could not be prosecuted for murder or manslaughter because he never attempted anything. The court ordered Reeves to repay £2,000 to Ryder.
Should this contract be void as against public policy? If the contract is void, is the result (Reeves keeping all the money) fair? Or, was Ryder's theory really a straight fraud claim, independent of whether the contract itself was enforceable?
[Meredith R. Miller]
My First Wish? Fewer Terms and Conditions on My Wishes!
This funny New Yorker article, Your Three Wishes: F.A.Q., spells out the oft-overlooked T&Cs of the "three wish" offer made by the genie in the bottle. This might be an amusing way to get students thinking about the ambiguity--and unintended consequences!--of the words they choose in contracts.
The Genie says to Aladdin: "Rule number one: I can't kill anybody. Bleurk! [Slices own head off] So don't ask. [Sticks head back on] Rule number two: I can't make anybody fall in love. [Kisses Aladdin] You little punim there! Rule number three! [Lies flat on back then rises, transforming into hideous 'undead' creature] I can't bring people back from the dead. It's not a pretty sight [clutching at Aladdin] I DON'T LIKE DOING IT! [Transforms back to normal] Other than that, you got it."
(As you may recall, Aladdin uses these putative limitations of the Genie's powers to trick the Genie into granting an extra wish).