January 18, 2007
The Carnival Cruise Line Ticket
One of the great things about contract law, as I think we've mentioned before, is that you almost never have to read U.S. Supreme Court cases. An exception is Shute v. Carnival Cruise Line, 499 U.S. 585 (1991), found in many casebooks, where the court held a choice-of-forum clause in a cruise ticket binding on the passenger even though the terms were on a ticket she didn't get until after she'd bought it.
Here, courtesy of Irma Russell (Tulsa), is a copy of the Carnival ticket. The yellow sticker on the right shows the bit of boilerplate that managed to momentarily distract the court from more important stuff, like whether the Founders intended a Constitutional right to lap dances, and exactly what clothing restrictions the State can put on them.
Pitfalls in Executive Employment Contracts
When top executives of big companies negotiate employment contracts, you tend to get experienced, sophisticated counsel on both sides of the deal. Yet even the most carefully crafted agreements won't necessarily keep a party from a nasty surprise in subsequent litigation.
In Negotiating Bonus Provisions, a recent piece in the New Jersey Law Journal, lawyer Steven H. Sholk (left) of Newark's Gibbons, Del Deo, Dolan, Griffinger & Vecchione takes a look at the case of HealthSouth's Richard Scrushy, who saw an Alabama court hit him with an order to repay some $50 million. The case, says Sholk, offers a good object lesson for those negotiating such deals.
January 17, 2007
N.D. Ill.: Letter of Intent Created Duty to Negotiate in Good Faith
The Northern District of Illinois recently held that a letter of intent (“LOI”) created a duty for the parties to negotiate exclusively and in good faith. In negotiating a deal for the purchase of a local television station, the parties signed a LOI. The LOI detailed the price and timing of the potential sale and specified that it was non-binding. When negotiations did not consummate in a deal, the prospective buyer sued for breach of contract. The court held that the parties’ clearly did not intend that the LOI bind them to the sale of the television station. However, the court addressed a closer question, holding that the non-binding LOI created a duty for the parties to negotiate exclusively and in good faith. The court reasoned:
Based on the above precedent, and on a fair reading of the letter of intent in this case, we find that the parties did intend the letter of intent to bind them to exclusive and good faith negotiations. Defendants argue that the letter is not binding in its entirety because the phrase "non-binding letter of intent" is not limited to one specific term or provision, but encompasses the entire letter (def. reply, at 6). We do not agree. The phrase defendants refer to occurs in a paragraph introducing the terms upon which defendants were prepared to sell the station. This paragraph ends with a colon and following that colon are paragraphs setting out all the general terms of the potential sale. These headings include "Purchase Price," "Deposit," and "Timing." The next paragraph begins with the phrase: "Should the above terms be acceptable to Weigel...." Reading the letter as a whole, it is clear that the non-binding clause refers only to the terms set out after the colon. After those terms are set forth, the letter concludes that if those terms are satisfactory to Weigel--indicated by Weigel's signing of the document--defendants would "cease all negotiations to sell to any other party and not enter into or entertain any such similar negotiations pending completion of a definitive and binding SPA." We find support for this conclusion in that the language of the exclusivity clause is taken verbatim from the plaintiff's letter offer, which predicated going forward with the sale on defendants providing written asurance of exclusivity.
Weigel Broadcasting v. TV-49, ___ F. Supp.2d __, 2006 WL 3486861 (N.D. Ill.Nov. 29, 2006).
[Meredith R. Miller]
Deadline Approaches for International Conference on Contracts
The deadline for submitting abstract proposals for the Third International Conference on Contracts is coming up January 26. The two-day conference, hosted by South Texas College of Law in balmy Houston, Texas, will take place February 23-24, 2007. (Left: The award-winning Fred Parks Library at STCL.)
The conference is unique, in that it bring together senior and junior scholars who are working in any aspect of contract law and practice. Papers that examine contracts from any perspective are welcome. Proposals from junior scholars, those who work in non-law-school environments, and those whose work focuses on non-U.S. legal systems are especially encouraged. The Conference web site, which includes the Call for Papers and registration and hotel information, is:
The $129 conference fee includes a Continental breakfast and lunch on both Friday and Saturday, as well as the conference dinner on Friday night at a local landmark famous for its Southern cuisine, Treebeard's on Market Square.
This year's conference is co-sponsored by South Texas College of Law and Texas Wesleyan Law School, along with Lexis/Nexis Publishing and International Law Conferences LLC.
Previous conferences were held in Gloucester, England, in 2004, and Fort Worth, Texas, in 2006.
Relational v. Legal Enforcement
At different times and in different cultures people have found different ways to enforce contractual agreements. In many societies, enforcement comes primarily through a network of relationships. Some argue that this is simply the result of cultural preferences, others that it is caused by an inadequate legal system . Some argue that it deters economic development, others disagree. Fali Huang of Singapore Management University’s School of Economics & Social Science, takes a look at the issues in The Transition from Relational to Legal Contract Enforcement. Here’s the abstract:
This paper studies the transition of contract enforcement institutions. The prevalence of relational contracts, low legal quality, strong cultural preference for personalistic relationships, low social mobility, and highly unequal endowment form a cluster of mutually reinforcing institutions that hinder economic development. The cultural element per se does not necessarily reduce social welfare though it may slow down the legal development, while the real problem lies in endowment inequality and low social mobility. Thus a more equal distribution of resources may be the ultimate key to unravel the above interlocking institutions. These results are generally consistent with the empirical evidence.
The Man Behind Mills v. Wyman
Not many contract cases are more famous than Mills v. Wyman, 20 Mass. (3 Pick.) 207 (1825) in which the Massachusetts Supreme Judicial Court held that a father's promise to pay a stranger for the care of his dying son was unenforceable for lack of consideration. The author of the opinion was Chief Justice Isaac Parker (1768-1830) (left).
Parker was born in Boston, graduated from Harvard in 1786, studied for the bar, and started practicing in Castine, Maine (then still part of Massachusetts), and later moved to Portland. He served as a U.S. Congressman in the Fifth Congress (1797-99), and then was U.S. Marshal. In 1806 he was appointed Associate Justice of the Supreme Judicial Court, and became Chief Justice in 1814. He remained on the court until his death in 1830. From 1815-30 he taught law at Harvard, and was also an overseer of that institution for 20 years. He was a trustee of Bowdoin College for eleven years. In 1820 was President of the State Constitutional Convention. Yet history largely remembers him for this one short opinion in an insignificant case. Generations of law students have read his opinion of defendant Seth Wyman and his explanation of the rule of law:
General rules of law established for the security of honest and fair-minded men, who may inconsiderately make promises without any equivalent, will sometimes screen men of a different character from engagements which they are bound in foro consicentiae to perform.
. . . On [the son's] return from a foreign country he fell sick among strangers, and the plaintiff acted the part of the good Samaritan, giving him shelter and comfort until he died. The defendant, his father, influenced by transient feelings of gratitude, promised in writing to pay the plaintiff for the expenses he had incurred. But he has determined to break that promise, and is willing to have his case appear on record as a strong example of particular injustice sometimes necessarily resulting from the operation of general rules.
. . .
A deliberate promise in writing, made freely and without any mistake, one which may lead the party to whom it is made into contracts and expenses, cannot be broken without a violation of moral duty. But if there was nothing paid or promised for it the law, perhaps wisely, leaves the execution of it to the conscience of him who makes it.
The photo at left is of an original pastel portrait of Parker, probably by Felix Sharples, that I bought at an auction in New Orleans last month. Feel free to use the image for any educational or nonprofit purpose.
January 16, 2007
Seinfeld Loses K Case
Comedian Jerry Seinfeld isn't laughing today. Yesterday a Manhattan judge ruled that the comedian owed a real estate agent about $100,000 in commissions relating to Seinfeld's purchase of a $3.95 million New York townhouse. Seinfeld's lawyers apparently argued that the agent, Tamara Cohen, wasn't licensed, and that the oral contract with her should therefore be unenforceable.
Weekly Top 10
Cyberspace, international views, and two papers Jay Feinman are the top features in this edition of the Top Ten. Following are the top 10 most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending January 21, 2007.
1 Busting Blocks: Appropriate Legal Remedies for Wrongful Inclusion in Spam Filters under U.S. Law, Jonathan I. Ezor (Touro).
2 The Perpetual Anxiety of Living Constitutionalism, Ethan J. Leib (Cal-Hastings).
3 Solvency Tests, J.B. Heaton (Bartlit Beck Herman Palenchar & Scott LLP).
4 The Economic Loss Rule and Private Ordering, Jay M. Feinman (Rutgers-Camden).
5 Party Autonomy and Private-Law Making in Private International Law: The Lex Mercatoria that Isn't, Symeon C. Symeonides (Willamette).
6 Contracts as Reference Points, Oliver Hart (Harvard-Econ) & John Moore (Edinburgh-Econ).
7 Is an Advertisement an Offer? Why it is, and Why it Matters, Jay M. Feinman (Rutgers-Camden) & Stephen R. Brill (Fox Rothschild LLP).
8 Mutually Assured Protection: Toward Development of Relational Internet Data Security and Privacy Contracting Norms, Andrea M. Matwyshyn (Florida).
9 The Structure of Good Faith: A Comparative Study of Good Faith Arguments, Marietta Auer (Munich).
10 Principles of Equity and Contracts, Shaswata Dutta (West Bengal NUJS).
January 15, 2007
Limerick of the Week
Coretta Scott King's defiance
Could not overcome legal science.
The gift is a fact
Because it was backed
By consideration (or reliance).