ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

A Member of the Law Professor Blogs Network

Friday, March 30, 2007

Fifty Years Ago

Fifty years ago reading. THE UNIFORM COMMERCIAL CODE AND CONTRACT LAW: SOME SELECTED PROBLEMS, 105 U. Pa. L. Rev. 836 (1957). This is an interesting and long article on Article 2. If you are wondering about the changes to Article 1 and Article 2 and the adoption of the changes by the states, it is worth remembering that in 1957, six years after Article 2 was approved, only one state, Pennsylvania, had adopted it.

Stephen Safranek

March 30, 2007 in Today in History | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 28, 2007

Technology, Offer and Acceptance

Today the Wall Street Journal (print edition) reported that customers of UPS will be able to recall packages after they have been sent.  As the story describes:

The package-delivery giant rolled out UPS Delivery Intercept, which uses technology to find a package anywhere in the Atlanta company's delivery system, including on a delivery truck.  The package can then be returned to the shipper, sent to a different address, held for a future delivery date or held until the recipient picks it up.

Apparently the new service is now available, for a $10 fee.

[Miriam Cherry]

March 28, 2007 in In the News | Permalink | TrackBack (0)

House of Lords Okays Hindsight Limitation on Damages

Uk_flag A case from the English Court of Appeal that was featured here on October 28, 2005, has been affirmed affirmed today by the House of Lords.  The case offers a fascinating question about the point at which damages should be calculated.  Andrew Tettenborn (Exeter) sends us this report:

The case is Golden Strait Corporation v. Nippon Yusen Kubishiki Kaisha, [2007] UKHL 12 (available on LEXIS, Westlaw or on http://www.bailii.org).

In July 1998, NYK chartered a tanker at a high rate for seven years through July 2005.  The charter had a specific provision about war:

   33.  If war or hostilities break out between any two or more of the following countries: U.S.A., former U.S.S.R., P.R.C., U.K., Netherlands, Liberia, Japan, Iran, Kuwait, Saudi Arabia, Qatar, Iraq, both Owners and Charterers have the right to cancel this charter.

In December 2001, NYK  repudiated the charter and the owners accepted the repudiation by taking the ship back.  In 2003, the Second Gulf War started; had the charter still been going NYK could, and undoubtedly would, have invoked Clause 33 to cancel.  Question: when the owners sued for damages, were they entitled to an award reflecting lost hire till the end of the charter (July 2005), or only till NYK could have canceled (March 2003)?  The Court of Appeal held, with the charterers, that the
latter was correct. The owners appealed, but the Law Lords affirmed.

Hindsight showed that in fact the owners wouldn't have received charter hire after 2003: hence that was the measure of their loss and there was no reason to give them any more.  The two dissenters (the two commercial lawyers sitting) argued that the contract rights infringed should be valued at the time of the breach: that since no-one knew then about the imminence of the Gulf War the value of those rights should reflect the full period of the charter: and that the events of 2003 should therefore
be ignored.

[Frank Snyder]

March 28, 2007 in Recent Cases | Permalink | TrackBack (0)

Tuesday, March 27, 2007

Contracts Prof Spotlight: Martín Hevia

Spotlight_2_6_6Martín Hevia (Escuela de Derecho, Universidad Torcuato Di Tella at Buenos Aires)

SJD, University of Toronto

Pix_februar_2007_015_3Martín is a Post-Doctoral Fellow at the Escuela de Derecho, Universidad Torcuato Di Tella at Buenos Aires, Argentina, where he teaches Contracts, Obligations and Principles of Private and Commercial Law.

Martín is a 2001 graduate of the Escuela de Derecho, Universidad Torcuato Di Tella, where he was the first Editor-In-Chief of Revista Argentina de Teoría Jurídica, a theoretically-minded journal of law. In 2000, he was an exchange student at Chicago Kent College of Law. In 2003, he was directly admitted to the SJD programme at the Faculty of Law, University of Toronto. He recently got his SJD under the supervision of Profs. Arthur Ripstein and Peter Benson.   At the University of Toronto, Martín was Co-Editor-In-Chief of the Journal of Law & Equality (2004-2006) and President of the Graduate Law Students´ Association (2004-2006). He was awarded the Gordon Cressy Student Leadership Award for his extracurricular contributions to university life.

Martín's areas of research interest include the philosophical foundations of both the civil and the common law, comparative private law, and legal and political philosophy.  In his doctoral dissertation, he explores the following question: if, as John Rawls famously suggests, justice is the first virtue of social institutions, how are we to understand the institution of contract law?

Further, Martín's “Kronman on Contract Law and Distributive Justice” is forthcoming in the Journal of Contract Law.

In accordance with the general spirit at the Escuela, as a private law professor, Martín aims at breaking down the disciplinary and idiomatic barriers that isolate private law scholarship by taking advantage of theoretical tools available in fields like philosophy, economics, and history to gain a deeper understanding of private law Martín can be reached at mhevia@utdt.edu.

[If you would like to be featured in the Contracts Prof Spotlight, or have a recommendation for someone who should be featured, send an email to Meredith R. Miller: mmiller -at- tourolaw.edu]

March 27, 2007 in Contracts Profs Weekly Spotlight | Permalink | TrackBack (0)

Monday, March 26, 2007

Limerick of the Week

Sometimes you really can sum up a case in five lines:

Normile v. Miller

As if sensing what lay ahead,
The counterofferor said,
You snooze, you lose!"
That's enough to excuse
Her for selling to Segal instead.

[Jeremy Telman]

March 26, 2007 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Sunday, March 25, 2007

Contracts as Organizations

Gordon Smith (Wisconsin, Law) and Brayden King (BYU, Sociology) have posted to SSRN a paper entitled Contracts as Organizations. Here's the abstract:

Empirical studies of contracts have become more common over the past decade, but the range of questions addressed by these studies is narrow, inspired primarily by economic theories that focus on the role of contracts in mitigating ex post opportunism. We contend that these economic theories do not adequately explain many commonly observed features of contracts, and we offer four organizational theories to supplement - and in some instances, perhaps, challenge - the dominant economic accounts. The purpose of this Article is threefold: first, to describe how theoretical perspectives on contracting have motivated empirical work on contracts; second, to highlight the dominant role of economic theories in framing empirical work on contracts; and third, to enrich the empirical study of contracts through application of four organizational theories: resource theory, learning theory, identity theory, and institutional theory.

Outside the economics literature, empirical studies of contracts are rare. Even management scholars and sociologists, who generated the four organizational theories just mentioned, largely ignore contracts, both in theoretical and empirical analysis. Nevertheless, we assert that these organizational theories provide new lenses through which to view contracts. While economic theories of contracting focus primarily on one purpose of contracts - mitigating ex post opportunism - the four organizational theories help us understand the multiple purposes of contracts.

[Meredith R. Miller]

March 25, 2007 in Recent Scholarship | Permalink | TrackBack (0)

Thursday, March 22, 2007

Jim Cramer: Insert Foot in Mouth?

Jim Cramer, the host of CNBC's Mad Money, may have said too much in a recent interview. He is getting quite a bit of attention for his discussion of hedge fund managers manipulating stock prices. From the NY Times:

In the December interview with the site’s “Wall Street Confidential” Webcast, Mr. Cramer describes at least two strategies, including a way of driving stock futures up or down that he explicitly said was legal. “A lot of times when I was short, I would create a level of activity beforehand that would drive the futures. … It’s a fun game,” he told TheStreet.com’s executive editor, Aaron Task.

But Mr. Cramer spends most of the interview describing a practice called “fomenting,” where a hedge fund manager essentially creates a false impression about a company in order to drive its stock one way or another — which he says is “blatantly illegal,” but adds that “the Securities and Exchange Commission doesn’t understand it.” While he claims this practice is widespread, he never says he has used it himself.

Here’s how fomenting works, according to Mr. Cramer: Say a hedge fund manager is holding a short position — a bet that a stock will decline — in Research in Motion, which has just announced blockbuster quarterly earnings results. An enterprising fund manager might call several brokerage houses and either feed them bad information or order a slew of short sales. Then he or she could call up a “bozo reporter” with a fake news tip about Resarch in Motion rival Palm.

The result, he says, is a perfect storm of bad news that temporarily lowers R.I.M.’s stock price, long enough for the manager to reap a tidy profit. He recommends a similar procedure with Apple (the video was filmed before the company introduced its iPhone at its annual Macworld convention in January).

“These are all the things that you should be doing on a day-to-day basis and if you’re not doing it, maybe you shouldn’t be in the game,” Mr. Cramer tells Mr. Task.

Mr. Cramer sums up his philosophy this way:

What’s important when you are in that hedge fund mode is to not do anything remotely truthful, because the truth is so against your view, that it’s important to create a new truth, to develop a fiction.

Whether this turns heads over at the SEC is one question. But whether Cramer breached his contract with CNBC is another. If you watch the video, you'll see that Cramer describes his rumor spreading strategy and names CNBC correspondent Bob Pisani, who reports from the NYSE. There is talk that naming Pisani may have breached a "disparagement clause" in Cramer's employment contract with CNBC. The disparagement clause bars employees from publicly criticizing on-air talent.

[Meredith R. Miller]

March 22, 2007 in In the News | Permalink | TrackBack (0)

Tuesday, March 20, 2007

From the Shameless Commerce Division . . .

A shameless plug for a new teaching supplement in which one of our members had a hand, Global Issues in Contract LawThe book is sending shockwaves across the legal academy, as contracts professors succumb to its moral and intellectual force.  Many of us have long known that we have a duty to incorporate more international and comparative perspectives into our first-year contracts courses.  Now, professors are acknowledging that we no longer have an excuse for not doing so.

The first time I taught conracts, I made no attempt to incorporate international or comparative perspectives.  But after attending an all-day session at the AALS in January 2006 on Integrating Transnational Perspectives into the First-Year Curriculum, I have become a true-believer.  The key to my conversion was the materials shared with us at the panels, including edited cases and lecture notes from William S. Dodge (for references, look here) that made incorporating the new material into my course very easy.

[Jeremy Telman]

March 20, 2007 in Recent Scholarship, Teaching | Permalink | TrackBack (0)

Free Land!

Here's this interesting story about a free land give-away in Anderson, Alaska, part of the state's frozen interior:

City phones were ringing nonstop all weekend and were still going strong Monday. Thousands of people called from all 50 states and other places, including Canada, Taiwan, India and South America, according to locals including Anderson high-school teacher Daryl Frisbie, whose social studies class developed the homesteading idea to boost the town's dwindling population.

Frisbie said his own residential phone has been ringing round the clock. Interest was high despite the brutal winters of the interior, where temperatures can plunge to 60 below. Never mind that there's no grocery store or gas station in Anderson, 75 miles from the regional hub of Fairbanks.

Callers from around the world were all focused on two words: free land.

According to the story there were 26 lots being given away, and those who showed up in person, waited in line, paid a $500 fee (toward their taxes?), and agreed to build a house on the land received preference.  I just wonder how much this land was actually worth?  Was this really such a jackpot or more like a gimmick (hey, free land!) even though it was probably not worth all that much, given the remote, rural, cold nature of the area?

[Miriam Cherry]' 

March 20, 2007 in In the News | Permalink | TrackBack (0)

Monday, March 19, 2007

Limerick of the Week

Every once in a while, an important case comes out of my state of residence.  Here's one that I think reflects very nicely on the Hoosier medical profession:

Hurley v. Eddingfield

Though his patient's complexion was green,
The doctor would not intervene.
This no-house-calls sort
Was indulged by the court,
Which considered his conduct obscene.

[Jeremy Telman]

March 19, 2007 | Permalink | Comments (0) | TrackBack (0)

University of Memphis Looking for Vistors

The University of Memphis Cecil C. Humphreys School of Law is seeking to fill several visiting positions for the 2007-2008 academic year.  Primary course needs include Contracts I (fall semester), Contracts II (spring semester), Business Organizations (fall semester), Civil Procedure I (fall semester), and Secured Transactions (spring semester).  Other possible areas of need include Remedies, Advanced Civil Procedure, Professional Responsibility, and Environmental Law. 

At this point we have substantial flexibility regarding one-semester or full-year visitorships.  The School of Law has a strong institutional commitment to the diversity of its faculty and is very interested in receiving expressions of interest from persons who will add to its diversity.  Please contact Professor Kevin H. Smith, Chair, Faculty Recruitment Committee, Cecil C. Humphreys School of Law, The University of Memphis, Memphis , Tennessee 38152 .

Electronic expressions of interest are strongly encouraged and should be submitted here.  The University of Memphis , a Tennessee Board of Regents institution, is an EEO/AA University. The School of Law does not discriminate on the basis of race, color, religion, national origin, sex, age, handicap or disability, or sexual orientation.

[Miriam Cherry]

March 19, 2007 in Help Wanted | Permalink | TrackBack (0)

Saturday, March 17, 2007

UCC Article 1 Legislative Update (3/17)

By affixing their respective signatures to North Dakota HB 1035 and Utah SB 91, Governors John Hoeven and Jon Hunstman, Jr. made North Dakota and Utah the 23rd and 24th states to enact a version of Revised Article 1.  As do all 22 of their predecessors, North Dakota's and Utah's enactments eschew uniform R1-301 for language tracking pre-Revised 1-105.  North Dakota becomes the 17th enacting state to adopt the unitary good faith standard of uniform R1-201(b)(20); Utah becomes the 7th to retain the bifurcated good faith standard of pre-Revised 1-201(19) and 2-103(1)(b) & 2A-103(3).  Utah's version of Revised Article 1 should take effect on April 30, 2007, while North Dakota's should take effect on August 1, 2007.

Elsewhere, Indiana SB 419 has passed the Indiana Senate and the House Financial Institutions Committee has unanimously recommended its adoption. Kansas SB 183 has passed the Kansas Senate and was the subject of a March 8 hearing before the House Judiciary Committee. As yet, the Kansas Legislature's web site has not reported any action by the committee.  Both bills passed their originating chambers only after the responsible committees amended the introduced bills to replace uniform R1-301 with language tracking pre-Revised 1-105.

Florida HB 151 and SB 252 continue to wend their ways through their respective originating chambers.  No action has been reported on Rhode Island SB 105 since its introduction.  The drafters of South Dakota SB 85 have, for all intents and purposes, withdrawn it.

Knowledgeable sources I spoke to at this week's unseasonably chilly ABA Business Law Section Spring Meeting in Washington, DC told me that new bills were imminent in Massachusetts and Pennsylvania.

Erin go bragh!

[Keith A. Rowley]

March 17, 2007 in Legislation | Permalink | TrackBack (0)

Tuesday, March 13, 2007

Blogger Quoted

One of our own ContractsProf bloggers is quoted in this story, about a spate of reversals for a judge in Manhattan:

Contract law and leases are not necessarily any more complex in New York than in other states, despite the rabid real estate market and complaints that tenants have unusually powerful rights under laws governing leases in New York City. One thing that can make it more challenging is that there is simply a bigger volume of decisional law in New York courts than in other states.

“That has the potential to make things more complicated,” says Meredith Miller, a professor at Touro Law School who teaches contracts.

[Miriam A. Cherry]

March 13, 2007 in In the News | Permalink | TrackBack (0)

Saturday, March 10, 2007

Houston, We Have a Mistake

Here's an interesting "mistake" case about some overpayments in the Houston school district (full story from the AP here):

The school district that runs the nation's largest merit pay program gave oversized bonuses to nearly 100 teachers and is asking them to give it back. The president of Houston's largest teachers' union is telling members not to return the overpayments, which range from $62.50 to $2,790.

A total of almost $75,000 was overpaid because a computer program mistakenly calculated the bonuses of part-time personnel as if they were full-time employees, according to the Houston Independent School District. Less than 1 percent of teachers were affected, the district said.

Gayle Fallon, president of the Houston Federation of Teachers, said the district can't force the 99 teachers to sign forms authorizing it to deduct the money from their paychecks, and promised legal action if it attempts to do so.

"If it's the district's error, then the district should bear the loss," she said.

District spokesman Terry Abbott, however, said the money must be repaid.

[Miriam A. Cherry]

March 10, 2007 in In the News | Permalink | TrackBack (0)

Friday, March 9, 2007

Limerick of the Week

I know I'm a bit ahead of schedule, but I will be traveling on Monday and unable to post.

The best scenarios out there for explaining the doctrine of restitution are provided, IMHO, by Seinfeld and The Incredibles.  In a late Seinfeld episode, the Elaine character, suffering from back pain, offers to give anything to anyone who could relieve her of the pain.  Kramer grabs Elain's head, and as she objects, proceeds to twist it until her neck cracks.  Elaine feels immediate relief and thanks Kramer, at which point he demands payment for his services.  In my book, he was an officious intermeddler who deserved no payment for his services.  In any case, Elaine's pain soon returned with a vengeance.  But Elaine didn't ask my advice.  I believe the dispute was settled by Newman.

The Incredibles provides two illustrations of the doctrine.  In the first, Mr. Incredible saves the life of a suicide, but in so doing causes some bodily harm to the man.  The would-be suicide then files suit for damages, and the improbable success of this suit is then the vehicle for the film's premise -- a world in which plaintiffs' attorneys destroy the entire culture of the superheroes.  But if Mr. Incredible were simply in the habit of demanding payment for his good deeds, he would have a slam dunk defense, just as a doctor who causes some injuries in reviving an unconscious patient could not be sued for assault. Inded, rather than being sued, Mr. Incredible would likely succeed on a restitution claim.

In the second, Edna Mode, having prepared a new supersuit for Mr. Incredible, prepares matching clothing for the rest of the family.   Mr. Incredible's wife, Helen (aka Elastigirl), at first expresses shock and outrage that Edna would make such a presumption, but then, for reasons that need not concern us here, ends up using Edna's supersuits.  This may well illustrate ratification, but it can also be a basis for a good discussion of restitution. 

Alas, I have yet to find a casebook that includes discussions of these scenarios, perhaps because Newman does not publish his opinions and it is not clear whether Helen paid Edna for the supersuits or if Edna needed to bring suit to collect.  So, I am left teaching the Pelo case, which is not nearly as entertaining. 

Credit Bureau Enterprises, Inc. v. Pelo

Does the doctrine of restitution
Provide a fair resolution?
It keeps doctors secure
When consent is obscure
And thus prevents self-execution.

[Jeremy Telman]

March 9, 2007 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Thursday, March 8, 2007

Gordley from Boalt to Tulane

Law school rankings and faculty movement blog master Brian Leiter reports: "James Gordley, one of the country's leading authorities in comparative law and contracts at Boalt Hall School of Law at the University of California at Berkeley, has accepted a Chair at Tulane Law School, to start next fall.  That's a huge coup for Tulane!"

Indeed, it is.  Gordley's The Philosophical Origins of Modern Contract Doctrine (Oxford 1991) should be on every Contracts professor's "must read" list.  Alas, it is unavailable for purchase except from used book dealers.  Those unable to locate a copy may have to satisfy themselves with his new book: The Foundations of Private Law: Property, Tort, Contract, Unjust Enrichment (Oxford 2006).  While not as contracts-centric as its predecessor, Gordley's new book is available from the publisher and from online commercial bookstores, including Amazon and Barnes & Noble.

[Keith A. Rowley]

March 8, 2007 in Contract Profs | Permalink | TrackBack (0)

Wednesday, March 7, 2007

Just Doing Business or Tortious Interference?

800pxnyscourtofappeals1jpgYou can only keep Contracts and Torts separate for so long… This month, New York’s highest court will hear oral argument on a question certified by the Second Circuit in White Plains Coat & Apron Co. v. Cintas Corp. The case raises an interesting question about what X Corporation may permissibly do to solicit the clients of Z Corporation when the corporations sell the same service but X Corporation has no existing relationships with the solicited clients.

Here are the facts: White Plains Coat & Apron Co. (WPL) rents napkins, tablecloths and other “laundered articles” to bars and restaurants. Generally, using a form contract, WPL enters into 5-year exclusive deals to provide customers with the laundered linens. Cintas Corp. (Cintas) rents, among other items, similar linen products as WPL. WPL claims that Cintas tortiously interfered with WPL’s existing linen rental contracts when Cintas sales representatives intentionally solicited and induced dozens of WPL customers to breach agreements with WPL and enter into agreements with Cintas.

Cintas moved for summary judgment on the age old theory: “that’s business.” In legalspeak, Cintas asserted the economic interest defense – which, if proved, requires WPL to demonstrate malice or illegality in order to establish the tortious interference claim. WPL’s response: the economic interest defense does not apply because Cintas did not have any existing relationships with any of WPL’s customers and the best Cintas can claim is a general economic interest.

The district court granted Cintas summary judgment in an oral decision, reasoning that Cintas had “a legitimate economic interest as a competitor to go sell or rent the linens.” On appeal, the Second Circuit certified the following question to the New York State Court of Appeals:

Does a generalized economic interest in soliciting business for profit constitute a defense to a claim of tortious interference with an existing contract for an alleged tortfeasor with no previous economic relationship with the breaching party?

In other words, does Cintas’ general economic interest in soliciting WPL’s clients allow Cintas to assert the economic interest defense to tortious intereference? If so, WPL would be required to show that Cintas acted with malice.

New York precedent does not provide coherent guidance. The economic interest defense allows a third party to procure a breach of contract if that third party is exercising an “equal or superior right” to the party alleging the interference. What constitutes an “equal or superior right” to trigger this defense? Is it enough that the businesses sell the same products? Or, must Cintas allege a specific economic interest in these clients? What would form the basis of that specific interest?

White Plains Coat & Apron Co. v. Cintas Corp.

[Meredith R. Miller]

March 7, 2007 in Recent Cases | Permalink | TrackBack (0)

Montana Looking for Visitor

Per Scott Burnham (Montana):  If you are interested in teaching contracts at The University of Montana for the 2007-2008 school year, contact Associate Dean Fritz Snyder

[Miriam Cherry]

March 7, 2007 in Help Wanted | Permalink | TrackBack (0)

Implied Warranty of Merchantability

We just studied this warranty in my sales class, and this morning I got to contemplate whether and how the concept applied to Trader Joe's brand toilet paper.

[Miriam Cherry]

March 7, 2007 in True Contracts | Permalink | TrackBack (0)

I Am Shocked, Shocked to Learn of Payola

Adelstein But it seems to be true.  According to Wikipedia, "payola" is a practice whereby record companies pay radio stations to play specified songs.  The practice is illegal if the payments are undislosed.(see 47 U.S.C.§ 317).  Apparently, this practice is quite widespread and was going on even before I got grounded for playing my Kiss records too loudly (and spitting fake blook on our new shag carpeting).  Accordingly, the reason you cannot get that Milli Vanilli song out of your head may not be its inherent tunefulness and their extraordinary vocal talent.  It may be that some record label paid the radio station to play the same song over and over until you danced yourself into a coma and awoke to think that you actually enjoyed it.

Although nobody is admitting any wrongdoing of course, four radio broadcast companies, Clear Channel Communications Inc., CBS Radio, Entercom Communications Corp. and Citadel Broadcasting Corp., have tentatively agreed to a settlement with the FCC.  According to media reports (like this one), the radio companies will pay $12.5 million and reserve 8.400 half-hour segments of air time for independent artists in order to counteract the effects of "payola."

Who really benefits from this deal?  FCC Commissioner Jonathan Adelstein (pictured above), that's who!  Fox News reports that Adelstein is himself an amateur musician and "has been in the forefront of the payola fight."  According to the AP, Adelstein complains that "payola gets in the way of authenticity because money drives the music, not its quality."  Uh-huh.  Very nice, Mr. Boo-Hoo, the radio stations won't play my indie band's music.  He'll change his tune when we are all forced to listen to the latest single from Johny A and the Commissioners.

[Jeremy Telman]

March 7, 2007 in In the News | Permalink | Comments (0) | TrackBack (0)