February 4, 2006
Long Term Contracts
"Determinants of the Optimal Degree of Pro-activeness in Contracting"
An interesting new paper on whether or not parties should include future contingencies in their contract or not. The abstract states:
Whether or not a contingency or specific clause in a contract should deal with future contingencies depends upon three factors:
- how important any deviation from the fully elaborate contract is in terms of the essential functions served by the contract, including securing efficient risk-allocation, incentives, and reliance investments
-whether the contingency is sufficiently likely and important for it to be worthwhile to spend time on drafting a clause concerning it
- whether something approaching the clause may come about as the result of renegotiation of the contract under the shadow of default rules and contract interpretation by the court (including the possibility of invalidation of unfair contract terms) as well as under the shadow of the parties’ concern for their reputation.
Lando, Henrik, "Determinants of the Optimal Degree of Pro-activeness in Contracting" . http://ssrn.com/abstract=877049
Today in History: Levi Gets Sick
On this date, February 5, 1824, beached sailor Levi Wyman got sick -- likely from over-consumption of alcohol -- at the house of Daniel Mills in Hartford, Connecticut. Contrary to the suggestion in the opinion in the later Mills v. Wyman, he didn’t die.
Lack of Privity Dooms Sub
One area where privity of contract is alive and well is the field of government contracts. The long-standing rule in government contract claims is that only a “contractor” -- one who is a “party” to the contract -- can sue the government under a contract. This means that if the government’s actions cause extra costs for the sub, the sub has no direct action against the government. In such cases, the prime contractor usually sponsors the claim, which avoids the problem. But what happens when the prime has “absconded with all the moneys” and has no intention of sponsoring a claim?
Well, the subcontractor loses. Attorney Gregory S. Jacobs of Pittsburgh’s Reed Smith runs down the lessons to be learned from recent decision of the Armed Services Board of Contract Appeals in Alpine Computers Inc., ASBCA No. 54659, 05-02 BCA ¶ 32,997, in When Can a Subcontractor Sue? Less Often Than You Would Think.
Today in History: Justice Marshall I
On this date, February 4, 1801, John Marshall -- who was still, as it happens, serving as President Adams's Secretary of State -- took his seat as the fourth Chief Justice of the United States. His later decision in Fletcher v. Peck, 10 U.S. 87 (1810), held that states cannot revoke contract rights enjoyed by their citizens even where the state claims that the legislature was bribed into making the agreement.
February 3, 2006
"Material Compliance" with Leases
What exactly is “material compliance” by a tenant with respect to the covenants in its lease? The issue is gaining in importance in the U.K., where a tenant’s ability to get out of a lease may rest on whether it’s in “material compliance” or has “reasonably performed” at the time it tries to exit. A recent High Court decision discusses the issue, Fitzroy House Epworth Street (No. 1) v. The Financial Times  EWHC 2391 (TCC). Caroline Potter of Cameron McKenna in London takes a look at the case here.
Today in History: Sir Henry Sumner Maine Dies
On this date, February 3, 1888, Sir Henry Sumner Maine, the Whewell Professor of International Law at Cambridge, died at Cannes, France. Maine is perhaps best known for his thesis in his Ancient Law (1861) that the history of “progressive societies” has been “a movement from Status to Contract” -- in other words, that free contract was supplanting older, restrictive status-based relationships derived from family, clan, and crown.
Maine's thesis likely played a major role in giving a moral component to the freedom-of-contract ideology of the late 19th century.
Reflections of an Inside Lawyer
It's not really a contracts issue, but the Seattle Times is carrying a speech by Doug Bain, the general counsel of Boeing Corp., reflecting on the legal and ethical problems his company is facing. As Steven Schooner (Geo. Washington) said in drawing our attention to it, it's a fascinating read.
February 2, 2006
Practicing lawyers may pay attention to the annual American Lawyer rankings of their firms, but they don't obsess about them the way that we law professors do. There's hardly any topic more sure to pique the interest of a law professor than that of rankings and (especially) where his or her school fits in the pecking order.
So there'll be a lot of readers for the Indiana Law Journal's new symposium, The Next Generation of Law School Rankings. The symposium is the brainchild of two of our LawProf Blog colleagues, Paul Caron and Rafael Gely of Cincinnati. Paul has the rundown here. (Want confirmation of the "obsess" point above? Richard Posner's contribution to this symposium is his second most-downloaded paper from SSRN -- 2,300 downloads and counting.)
It's interesting, but perhaps coincidental, that nobody from a fourth-tier school participated in the symposium.
PA Judge Refuses to Enforce Class Action Preclusion Clauses
According to the Legal Intelligencer, a Philadelphia judge recently held that class action preclusion clauses in contracts of adhesion are "unconscionable and unenforceable." The decision in Thibodeau v. Comcast addressed two consolidated cases, one brought by a proposed class "who rented cable boxes and remotes from Comcast, allegedly unaware until they did so that those items were not needed in order to receive basic cable." The other case involved "AT&T cell phone customers who claim they did not know until they signed up for service that they could not use their phones on non-AT&T networks." As with most consumer class actions, each of the individual plaintiff's monetary claims is rather small. The judge held that the mandatory clauses have the effect of "immuniz[ing] large corporations from liability by allowing them to preclude all class action litigation." The article reports that the decision (of which I could not yet seem to find a copy) begins with a prefatory quote from French novelist Anatole France:
The law in its majesty prohibits rich and poor alike from sleeping under bridges.
[Meredith R. Miller]
February 1, 2006
Landfill on Land Equals Misrepresentation?
From Arkansas, an interesting case of alleged misrepresentation. The parcel in question (near Fayetteville) which runs along a highway was advertised as “having commercial potential.” Unfortunately, for the buyers, it turns out the most valuable part of the property – that is, the portion fronting the highway – had in the past been used for a landfill. The buyers also allege that they asked questions about environmental liabilities and withdrawn bids, and were not told the truth.
Now how much does that stink?
[Miriam Cherry, hat-tip Gariel Nahoum]
How Many Lawyers Does it Take to Screw in a Light Bulb?
Longtime U of Wisconsin contracts prof Marc Galanter (left) will give a talk about his new book on lawyer jokes, Lowering the Bar: Lawyer Jokes and Legal Culture, at Vanderbilt University on February 21. Galanter's book uses jokes about lawyers to trace popular perceptions of the legal profession throughout the country's history. The talk is free and open to the public. Rotten tomatoes are optional. Here's a sample story from the book:
An ancient, nearly blind old woman retained the local lawyer to draft her last will and testament, for which he charged her two hundred dollars. As she rose to leave, she took the money out of her purse and handed it to him, enclosing a third hundred dollar bill by mistake. Immediately the attorney realized he was faced with a crushing ethical question: Should he tell his partner?
Cooley Expands Digs
Thomas M. Cooley Law School has opened the last two floors of its state-of-the-art building in Lansing, Michigan. At a formal ribbon-cutting, the school opened the third and fourth floors of its Cooley Center (left) on Tuesday. This is the final piece of the ten-story, $50 million project, which houses the largest law school in the country.
Today in History: Sir Edward Coke
On this date, February 1, 1552, the great champion of the common law, Sir Edward Coke, was born at Mileham, in Norfolk. He had a meteoric rise under Elizabeth I and James I, becoming successively Member of the House of Commons (1589), solicitor-general (1592), Speaker of the House (1593), attorney-general (1594), judge (1606), and Chief justice (1613). James turned on him in 1617, and he left office to return to the Commons, and wound up spending a little time in prison. His Institutes of the laws of England began to come out in 1628.
Coke was also a notable entrepreneur, one of the creators of the Virginia Company, the private company that got a royal charter to found settlements in America, and was a director of the London Company.
January 31, 2006
Elon Gets Faculty
The new law school at Elon University in Greensboro, N.C., has announced its founding faculty. The first contracts teacher at the new school is George R. Johnson, Jr. (left).
Johnson, a former academic dean and professor of law at Howard University, spent six years as president of LeMoyne-Owen College in Memphis, Tenn. He previously served as assistant general counsel in the Executive Office of the President in the Carter Administration, and as assistant counsel to the Committee on Banking, Finance & Urban Affairs in the U.S. House of Representatives. Most recently he practiced law in Washington, D.C.
Johnson is a graduate of Amherst College and earned his J.D. at Columbia. Among other activities, he’s served on the board of trustees of Amherst and the boards of directors of the United Negro College Fund, the Council of Independent Colleges, the Economic Club of Memphis, and Universal Life Insurance Company.
Okay, the folks at Yale know a good topic for a conference when they see one. The Yale Journal of Law and Feminism will host a conference, Sex for Sale. There are two panels in the one-day session, scheduled for Saturday, February 4, one on pornography and one on prostitution. The issue of whether interactive sex software is a good or a service under the UCC doesn’t seem to be covered.
To register for the conference, e-mail Erin Bradrick at Yale, with "Sex for Sale Registration" in the subject line. You'll either get signed up for the conference or find yourself on an FBI list.
Goldman on A Million Pieces
To follow up on Meredith's post, ContractsProf contributing editor Eric Goldman has been unaccountably shy about posting a link to his thoughts on the case over at his Technology & Marketing Law Blog. So we'll do it for him.
Eric also has a link to one of the complaints.
A Million Little Fact Checkers
In addition to this lawsuit, yesterday’s Wall Street Journal mentions yet another lawsuit
over James Frey’s
sham exaggerated memoir A Million Little Pieces. The lawsuits raise the issue of what precautions publishers should take in publishing memoirs. Should publishers undertake
extensive fact investigations? Should they include warranty clauses in contracts with
authors? The Wall Street Journal article reported:
Some publishers say the "Million Little Pieces" incident may well result in some changes in how books are vetted. "The entire process will have to be rethought," says James Atlas, president of Atlas Books LLC and the author of "My Life in the Middle Ages: A Survivor's Tale" a memoir published last year by News Corp.’s HarperCollins imprint. "Publishers will scrutinize far more closely what they publish, especially in the realm of memoirs. But short of having some kind of honor code I don't see what can really be done except to exercise far greater vigilance."
Some do. Jeff Kleinman, an agent with Folio Literary Management, said publishers could add a clause to the author's warranty section in their contracts, stating that to the best of the writer's knowledge the facts in the book are true. "The point being, if the author's found to egregiously misrepresent the facts, the author could be sued for breach of contract," said Mr. Kleinman via email. "Wouldn't that be a lot simpler than asking an agent, or even a publisher, to verify and fact-check every book?"
The article points out that having a million little
fact-checkers is expensive. However,
would a warranty clause really deter an author from
telling lies exaggerating the truth?
Even if deterrence could potentially be costly for publishers, it seems
that Oprah exacted her own dose of retribution by
humiliating questioning Frey in a recent
most interesting question here seems to be: has demand for the
book increased since the "controversy" broke?
[Meredith R. Miller]
January 30, 2006
Weekly Top 10
Three new papers have made this week's Weekly Top 10. Following are the ten most-downloaded papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending January 29, 2006. (Last week's rank in parentheses; t = tie.)
1 (1) Law and the Rise of the Firm, Henry Hansmann (Yale), Reinier Kraakman (Harvard) & Richard C. Squire (Yale).
2 (5) The Return of the Twenty Bishops: Toward a Subjective Theory of Contract Formation, Lawrence M. Solan (Brooklyn).
3 (7) Signals, Assent and Internet Contracting, Juliet Moringiello (Widener).
4 (6) Do Courts Matter? Rental Markets and the Law, Pablo Casas-Arce (Oxford-Economics) & Albert Saiz (Penn-Business).
5 (9) Penalties and Optimality in Financial Contracts: Taking Stock, Michel A. Robe, (American-Business), Eva-Maria Steiger (Humboldt Berlin-Business) & Pierre-Armand Michel (Liege-Management).
6 (10) Diversity of Contract Law and the European Internal Market, Jan M. Smits (Maastricht).
7 (8) 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 (-) Choice, Consent, and Cycling: The Hidden Limitations of Consent, Leo Katz (Penn).
9-t (-) Courts and Contractual Innovation: A Preliminary Analysis, Mitchell Berlin & Yaron Leitner (Federal Reserve-Philadelphia).
9-t (-) The (CISG) Road Less Travelled: Case Comment on GreCon Dimter Inc. v. J.R. Normand Inc., Antonin I. Pribetic (Steinberg Morton Frymer LLP).
Barnett, Adams to Give Talks
Boston University's Randy Barnett (left) has been slated to present the 2006 William Howard Taft constitutional law lecture at the University of Cincinnati College of Law. Barnett’s topic will be Scalia’s Infidelity: A Critique of "Faint-Hearted" Originalism. The lecture is slated for 1:30 this Thursday, February 2, 2006, at the law school. It’s open to the public. If you can’t make it to the Queen City on Thursday, you can listen to the talk live here.
The same day, Valparaiso contracts prof Mark Adams will give his inaugural address as a full professor at the Indiana school. He’ll talk on the history and future of tenure. Adams’s presentation is slated for 4:00 p.m. in Wesemann Hall. It’s also free and open to the public.
Contract to Waive Jury Trial Not Enforceable
The California Supreme Court has held that a contractual agreement to waive a jury in the event of a contract dispute is unenforceable. Relying on Cal. Code Civ. Proc. § 631(d), the unanimous court held that a contractual agreement was not a method authorized by the state legislature for a waiver, and thus that the waiver was ineffective.
The case arose out of a PriceWaterhouseCoopers LLP engagement letter with respect to the audits of two partnerships. The engagement letter, signed by the plaintiffs, said:
In the unlikely event that differences concerning [PWC's] services or fees should arise that are not resolved by mutual agreement, to facilitate judicial resolution and save time and expense of both parties, [the parties] agree not to demand a trial by jury in any action, proceeding or counterclaim arising out of or relating to [PWC's] services and fees for this engagement.
When the plaintiffs subsequently sued and demanded a jury trial, PWC moved to strike it.
No can do, wrote Chief Justice Ronald George. The right to a jury trial is provided for in the state constitution, and is to be "inviolate." Under section 631(d), it is true, a party can accidentally lose the "inviolate" right in several ways, such as by failing to appear, failing to make jury demand at the right time, or failure to pay the necessary fees on time. But under the statute the only two ways to knowingly waive a jury trial are by filing a written consent with the clerk or the judge, or by oral consent in open court. "Pre-dispute contractual waiver" isn't listed. Ergo, it's not effective.
PWC argued that it makes no sense to allow an inadvertent waiver by, for example, forgetting to speak up at the right time, but to prohibit a knowing waiver by a sophisticated party -- especially when the parties could have agreed to go to arbitration and not gone to court at all. The court disagreed, noting that the legislature has decreed a public policy in favor of arbitration, and the state constitution has decreed a public policy in favor of jury trials, but there's no public policy in favor of bench trials.
Grafton Partners v. Superior Court, 36 Cal. 4th 944, 116 P.3d 479, 32 Cal. Rptr. 3d 5 (2005).
[Frank Snyder -- thanks to Gerald Caplan for the tip]