ContractsProf Blog

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

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Thursday, May 29, 2008

Pondering Unconscionability

Diligently avoiding grading the last of my exams, I ran across a couple of interesting-looking papers recently distributed by the Social Science Research Network -- each of which grapples with the ever-slippery concept of unconscionability.

OmriOmri Ben-Shahar, immediate past president of the AALS Contracts Section, late of the University of Michigan Law School and bound for a new post at the University of Chicago Law School, prescibes How to Repair Unconscionable Contracts.  Here's the abstract:

Several doctrines of contract law allow courts to strike down excessively one-sided terms. A large literature explored which terms should be viewed as excessive, but a related question is often ignored - what provision should replace the vacated excessive term? This paper begins by suggesting that there are three competing criteria for a replacement provision: (1) the most reasonable term; (2) a punitive term, strongly unfavorable to the overreaching party; and (3) the maximally tolerable term. The paper explores in depth the third criterion -- the maximally tolerable term -- under which the excessive term is reduced merely to the highest level that the law considers tolerable. This solution preserves the original bargain to maximal permissible extent, but brings it within the tolerable range. The paper demonstrates that this criterion, which received no prior scholarly notice, is quite prevalent in legal doctrine, and that its adoption is based on powerful conceptual and normative underpinnings.

Lima_3Meanwhile, from the home of the 2009 ABA Business Law Section's Spring Meeting and the 2010 Winter Olympics (Hmm, I wonder which will be a bigger financial boon for BC), University of British Columbia Faculty of Law doctoral student Augusto C. Lima (center) offers When Harry Met Kreutziger: A Look into Unconscionability Through the Lenses of Culture.  Here's the abstract:

When addressing unconscionability, the legal academy focuses almost exclusively on the transaction between the parties, analyzing the parties themselves only in passing, if at all. More importantly, the current writing on unconscionability does not analyze the parties in the context of their culture. In cases like the famed Harry v. Kreutziger[, 9 B.C.L.R. 166 (C.A. 1978)], now marking its 30th anniversary, the appropriate resolution to the unconscionability argument should rest not only on the transaction itself, but also on the culture of the parties and the effect that culture may have had on their dealings. By failing to conduct such a cultural analysis, the academy and courts have not only continuously provided little guidance to future litigants, but also failed to treat culturally like cases alike. The cultural approach shares outcomes with two more established approaches to unconscionability: the paternalistic and the economic approaches. The cultural view of unconscionability may result in contracts being rescinded in many (but not all and not for the same reasons) of the situations in which paternalism would have them rescinded. On the other hand, the cultural view also shares outcomes with the economic approach: unconscionability, applied through a cultural analysis, will also be a narrow doctrine of exceptional application (but for practical reasons, not purposely, as intended by the economic approach).

Happy reading!

[Keith A. Rowley]

May 29, 2008 in Recent Scholarship | Permalink | TrackBack (0)

Wednesday, May 28, 2008

Ding, Dong, the Which* is Dead

At its annual meeting last week, the American Law Institute approved an amendment, which NCCUSL (a.k.a. the Uniform Law Commission) had previously approved, replacing the oft-jilted text of Revised UCC § 1-301 with language consistent with pre-Revised UCC § 1-105:

§ 1-301. Territorial Applicability; Parties’ Power to Choose Applicable Law.

  (a) Except as otherwise provided in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties.

  (b) In the absence of an agreement effective under subsection (a), and except as provided in subsection (c), [the Uniform Commercial Code] applies to transactions bearing an appropriate relation to this state.

  (c) If one of the following provisions of [the Uniform Commercial Code] specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law so specified:

    (1) Section 2-402;

    (2) Sections 2A-105 and 2A-106;

    (3) Section 4-102;

    (4) Section 4A-507;

    (5) Section 5-116;

    [(6) Section 6-103;]

    (7) Section 8-110;

    (8) Sections 9-301 through 9-307.

In so doing, the bodies responsible for the Uniform Commercial Code followed the lead of thirty-two of the thirty-three states that have enacted Revised Article 1 to date. Only Louisiana — deferring to its Civil Code to ascertain the applicable law where the transaction does not fall within the scope of a more specific choice-of-law provision elsewhere in the UCC — has enacted a version of Revised § 1-301 that differs non-trivially from the new official version.

* - As in, "Which state's law do you want to govern our contract?"

[Keith A. Rowley]

May 28, 2008 in Legislation | Permalink | TrackBack (0)

Tuesday, May 27, 2008

Idiosyncratic Terms a la Monty Python

Groom: We want to buy a bed, please.

Mr. Lambert: Oh, certainly. I'll get someone to attend to you.  Mr. Verity!

Mr. Verity: Can I help you, sir?

Groom: Ah, yes. We'd like to buy a bed ... a double bed ... about fifty pounds?

Verity: Oh, no, I'm afraid not, sir. Our cheapest bed is eight hundred pounds, sir.

Groom: Eight hundred pounds!

Lambert: Perhaps I should have explained: Mr. Verity does tend to exaggerate; so, every figure he gives you will be ten times too high. Otherwise he's perfectly all right.

Groom: Oh, I see. So your cheapest bed then is eighty pounds?

Verity: Eight hundred pounds, yes, sir.

Groom: And how wide is it?

Verity: The width is sixty feet wide.

Groom: (Politely whispering to his wife) Six foot wide. And the length?

Verity: The length is ... Lambert, what is the length of the Comfydown Majorette?

Lambert: Two foot long.

Groom: Two foot long?

Verity: Ah, yes, you have to remember, of course, to multiply everything Mr. Lambert says by three.  It's nothing he can help, you understand.  Apart from that he's perfectly all right.

Groom: I see....

Verity: But, it does mean that when he says a bed is two foot wide, it is in fact sixty foot wide.

Groom: Oh, yes, I see.

Verity: And that's not counting the mattress.

Groom: Oh, how much is that?

Verity: Mr. Lambert will be able to help you there. Lambert, will you show these twenty good people the dog kennels, please?

Lambert: Certainly.

Groom: Dog kennels? No, no, no, mattresses, mattresses!

Verity: Oh, no, no. You have to say dog kennel to Mr. Lambert because, if you say mattress, he puts a bag over his head. I should have explained. Apart from that he's really all right....

from Monty Python's Flying Circus, Season 1, Episode 8 ("Full Frontal Nudity"), air date: Dec. 7, 1969.

[Keith A. Rowley]

May 27, 2008 in Film Clips | Permalink | TrackBack (0)

Limerick of the Week: Botticello v. Stafanovicz

CtThis is the case I use to teach the doctrine of ratification, even though in this case the court found no ratification.  It's a fun case to teach, and students are usually relieved to learn that the case is easier to understand than the parties' names are to pronounce.

It's fun to teach because it raises issues relating to a type of contract that we have had occasion to mention recently on this blog, namely marriage.  Mary and Walter Stefanovicz owned a parcel of land in Connecticut as tenants-in-common.  Botticello wanted to buy the land and he offered $75,000 for it.  Mary said "no way" but she also said that she would not sell the land for less than $85,000, which Walter construed as meaning "way" when Boticello offered to lease the land with an option to purchase for $85,000.  Several years and substantial improvements later, Botticello sought to exercise his option and Mary balked.

The court boldly found that, despite the fact that Walter handled much of the family's business affairs, Mary did not thereby make her husband her agent.  You go girl!  In addition, the court found that Mary had not ratified Walter's agreement with Botticello by accepting payments, as she was entitled to assume that such payments were nothing more than evidence of a lease.  A wonderfully just result, except that it leaves Walter and Botticello as tenants-in-common, an arrangement that the parties likely would not have agreed to.  I therefore take poetic license in the following Limerick in which I imagine where the story goes post-judgment.

Botticello v. Stefanovicz

Connecticut is one location
Where fam deals need ratification.
Walt sold out to Tony;
He now pays alimony
And owes Tony remuneration.

As reported earlier, I will be away for the rest of the week.  However, I will not be fishing.  I will be attending the Law & Society Association Meeting in Montreal. If time permits, I will report on any blogworthy events that arise.

[Jeremy Telman]

May 27, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Monday, May 26, 2008

Speaking of International Law ...

Moved by the spirit of Jeremy's recent shout out to the new International Law Prof Blog, I realized it has been more than a year since I last updated this blog's readers on the status of the U.N. Convention on Contracts for the International Sale of Goods (CISG) and the U.N. Convention on the Use of Electronic Communications in International Contracts (CUECIC).

Since last May, the number of CISG Contracting States stands fast at 70.  During that same span, the number of signatories to the CUECIC has increased from 10 to 18 with the additions of Colombia, Honduras, Iran, Montenegro, Panama, Philippines, Republic of Korea, and Saudi Arabia.  However, because none of the signatories have yet ratified or acceded to the CUECIC, it is not yet in effect in any country; whereas, depending on one's opinion on the effect of the U.S. Supreme Court's recent Medellin decision on the viability of the CISG in the United States, the CISG is in effect in either all of its Contracting States (except in transactions in which the parties have expressly contracted out of the CISG) or all of them except the U.S. (except in transactions in which the parties have expressly contracted into the CISG).

[Keith A. Rowley]

May 26, 2008 in Legislation | Permalink | TrackBack (0)

Speaking of Fishin' and Baseball Players ...

Here's one in honor of our fearless leader, Frank Snyder, who now spends his spare time as a minor league baseball mogul.  The recent trade that sent pitcher John Odom (no, not that John Odom) from the Calgary Vipers to the Laredo Broncos for ten maple baseball bats brought to mind similarly unusual minor league baseball trades of yore.

In July 1998, the Pacific Suns of the Western League traded right-handed pitcher Ken Krahenbuhl to the Greenville Bluesmen of the Texas-Louisiana League for an undisclosed amount of cash, a player to be named later, and "10 pounds of expertly filleted Mississippi River catfish."  Hank Hersch & Kostya Kennedy, Deal of the Week: A Trade with a Catch, Sports Illustrated, Oct. 10, 1998, at 18.  Krahenbuhl reportedly commented "I didn't think I deserved to get traded for fish.”  Id.... The Bluesmen had previously traded second baseman Sean Murphy to the Sioux Falls Canaries for fifty pounds of pheasant, and had sent a mint copy of a classic Muddy Waters album to the Meridi[a]n Brakemen for first baseman Andre Keen.  See id.

Keith A. Rowley, You Asked For it, You Got It ... Toy Yoda: Practical Jokes, Prizes, and Contract Law, 3 Nev. L.J. 526, 543 n.74 (2003).

Ironically, the bats seem not to have helped the Vipers out much so far, as they dropped their first two games of the season due to -- wait for it -- cold bats.

[Keith A. Rowley]

May 26, 2008 in True Contracts | Permalink | TrackBack (0)

The Antioch College Contract

Antiochcollegelogo Antioch College held its last commencement ceremonies (for a while) this month.  The school's Board of Trustees announced in 2007 that it would close this year, with plans to re-open in 2012.  More than half of the Antioch College faculty responded with a lawsuit, seeking to prevent the Board from firing them.  The Board of Trustees temporarily lifted its threat to shut down the College, allowing a group of faculty and alumni the opportunity to raise necessary funds to keep the place running.  When those efforts came up short, the Board re-imposed its (temporary) death sentence. 

In May, a group of alumni offered the Board $15.5 million to keep Antioch running ($6.5 million of which would go to other campuses of the Antioch University system).  The alumni asked for 10 seats on the 19-seat board in exchange for their offer of cash.  The Board refused the offer.

Although the faculty lawsuit cites to various breaches of contractual obligations by the Board, the real Antioch College contract is one that Antioch students make with themselves when they choose to attend a College whose motto was supplied by its first president, Horace Mann: "Be ashamed to die before you win some victory for humanity."

[Jeremy Telman]

May 26, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Sunday, May 25, 2008

Gone Fishin'

Gone_fishing_2
Posts are likely to be relatively light around here at ContractsProf Blog over the next week or so, while your humble contributing editors are traveling around the globe. No worries, we'll be back with BIGGER, BETTER and BOLDER content when we return. It's a money back guarantee.*

*Void where prohibited by law. Some restrictions may apply. See your local blogger for details. Must be over 18 to participate.

[Meredith R. Miller]

May 25, 2008 in Miscellaneous | Permalink | TrackBack (0)

Regulating Early Termination Fees

0507phone_x6001Terminating a cell phone service contract can be cost prohibitive because of the early termination fees charged by most carriers -- that is, the $175 or more the carriers charge if you cancel your service contract early. I have always wondered whether this fee is unconscionable or an unenforceable penalty. Well, the New York Times reports that the FCC chairman wants to regulate early termination fees, and take the matter out of the hands of state contract law (and a speckling of state class actions lawsuits). From the article:

Cellphone companies routinely charge customers $175 or more for quitting their service early. Under the wireless industry proposal, consumers would have the opportunity to cancel service without any penalty for up to 30 days after they sign a cellphone contract or 10 days after they receive their first bill.

The sticking point for consumer groups is that the proposal would take away states’ authority to regulate the charges. Consumers Union called the provision a “get-out-of-court-free card.”

Wireless companies say cancellation fees are necessary to recover the cost of cellphones, which they subsidize under long-term service contracts, and to defray their costs for signing up new customers. Consumer groups said the fees were unreasonable and intended to discourage customers from switching among providers.

[Meredith R. Miller]

May 25, 2008 in In the News | Permalink | TrackBack (0)

Saturday, May 24, 2008

Why Baseball Players Need Tenure

One of the overlooked advantages of tenure is that deans cannot trade law professors for players to be named later and the like.  More specifically, as the USA Today reports, no dean would think of trading a law professor for ten maple bats.  If professional ball players had the sort of protection we professors enjoy, pitcher John Odom would still be hurling for the Calgary Vipers rather than being sent down to the Laredo Broncos in return for ten maple bats, valued at about $650.  Oh, the indignity!

[Jeremy Telman]

May 24, 2008 in In the News | Permalink | Comments (1) | TrackBack (1)

Friday, May 23, 2008

"Well, my hope is that someday it won't be called a contract; it will be called marriage."

Ellen DeGeneres to Senator McCain earlier this week, in an exchange that made McCain visibly squirmy. Her remark is apropos of my previous post concerning the marriage as contract rhetoric. Here's a transcript of their exchange:

DeGENERES: We're back with Senator John McCain, and so let's talk about it. Let's talk about the big elephant in the room. So -- by the way, I was planning on having a ceremony anyway this summer, even though it wasn't legal. But I feel that at least I get to celebrate my love. Then it just so happened that I legally now can get married, like everyone should. * * * And what are your thoughts?

JOHN McCAIN: Well, my thoughts are that I think that people should be able to enter into legal agreements, and I think that that is something that we should encourage, particularly in the case of insurance and other areas, decisions that have to be made. I just believe in the unique status of marriage between man and woman. And I know that we have a respectful disagreement on that issue.

DeGENERES: Yeah, I mean, I think that it's -- it is looked at -- and some people are saying the same -- that blacks and women did not have the right to vote. I mean, women just got the right to vote in 1920. Blacks didn't have the right to vote until 1870. And it just feels like there is this old way of thinking that we are not all the same. We are all the same people, all of us. You're no different than I am. Our love is the same.

To me -- to me, what it feels like -- just, you know, I will speak for myself -- it feels -- when someone says, "You can have a contract, and you'll still have insurance, and you'll get all that," it sounds to me like saying, "Well, you can sit there; you just can't sit there." That's what it sounds like to me. It feels like -- it doesn't feel inclusive...It feels -- it feels isolated. It feels like we are not -- you know, we aren't owed the same things and the same wording.

McCAIN: Well, I've heard you articulate that position in a very eloquent fashion. We just have a disagreement. And I, along with many, many others, wish you every happiness.

DeGENERES: Thank you. So you'll walk me down the aisle? Is that what you're saying?

McCAIN: Touche.

DeGENERES: Well, my hope is someday it won't be called a contract; it will be called marriage.

(emphasis added).

On the one hand, you have gay marriage advocates attempting to distill marriage to an issue of contract law, and with that, framing the debate as a simple matter of allowing adults to contract without bias based on gender or sexuality. (Bouley's view in my previous post). On the other hand, you have the anti-same-sex marriage view, which says that gay people don't need marriage rights, because they can cobble together marriage rights with contracts. (McCain's position, above). To which the the same-sex marriage advocates say: we don't want a system of ad hoc contract rights, we want the equal footing of marriage. (Ellen's position, above). Everyone seems to be throwing around contract in a way that is supposed to suit them, and I don't think it works for either side of the debate.

Marriage it seems is not a contract, but rather a system of statutory default rules setting forth the bare minimum of the parties' obligations and what should happen in the event their relationship sours. Many of the marriage laws can be contracted around. But, unless there is a trust fund to protect, the overwhelming majority of couples do not have contracts (pre-nuptial agreements) but, rather, they take on (and probably many of them unknowingly) the system of statutory default rules. Which undermines the analogy/ rhetoric about marriage as contract. But it also undermines the argument that same-sex couples can and should (in McCain's words) "enter into legal agreements." They don't. It is expensive, time consuming, unromantic... And this is where the equality arguments come in. It seems that the argument should be that same-sex couples should be permitted to marry not because marriage is a contract but because it is a system of statutory default rules. Otherwise, the law is essentially saying that committed gay couples have to take on the expense and hassle of bargaining in a way that committed straight couples do not.

By the way, maybe McCain should have just danced:

[Meredith R. Miller]

May 23, 2008 in In the News, Miscellaneous | Permalink | Comments (1) | TrackBack (0)

Thursday, May 22, 2008

"Wow, rockstars ask for some stupid crap."

If you need a break from grading exams, check out the Foo Fighter's catering and hospitality contract riders at The Smoking Gun. Quite amusing, and definitely written with an audience in mind, including a clause which acknowledges: "Wow, rockstars ask for some stupid crap."

[Meredith R. Miller]

May 22, 2008 in True Contracts | Permalink | TrackBack (0)

Wednesday, May 21, 2008

Motorola Judgment Reduced from $4 Billion to Zero

Motorola

Business Week, picking up a story from the Associated Press, reports that a bankruptcy judge has approved a settlement in the Iridium case, reducing Motorola's liability from $4 billion to zero.  According to The Register, Iridium was and is a mobile phone system based on connecting cell phones directly to satellites.  Motorola made cell phones for Iridium's network of satellites.  Iridium filed for bankruptcy in 2001, and its creditors sought recovery from Motorola on a number of claims, including breach of contract.  The Register described the original damages estimate as a "whacking great sum."  Love those Brits!  The Register also suggests that the real cause of Iridium's bankruptcy has less to do with Motorola than with the extraordinarily high cost of making phone calls using satellite technology, which is also somewhat antiquated at this point.

This week, Judge James M. Peck approved a settlement agreement between Motorola and the creditors, according to which Motorola will pay nothing.

[Jeremy Telman]

May 21, 2008 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Oh, About Computation of Prejudgment Interest. . .

The introductory contracts course glosses over topics like the calculation of prejudgment interest (at least, my course does). Here is an excerpt from a recent case from New York's intermediate appellate court (3d Department) that demonstrates the potential complexity of computing interest. (This was a contract for "coal fly ash.").

On July 1, 2000, the parties entered into a contract under which defendant agreed to provide plaintiff with coal fly ash produced at its steam generating station in the Village of Johnson City, Broome County through December 31, 2004. Defendant provided plaintiff with coal fly ash on various dates between September 27, 2000 and November 20, 2000, but failed to do so thereafter. Plaintiff commenced this breach of contract action as a result. Following a trial, the jury rendered a verdict in favor of plaintiff and awarded damages in the amount of $184,456.94. Thereafter, plaintiff moved to fix the date of interest on the verdict as of July 1, 2000, the contract date, or alternatively, as of April 1, 2001, the date the summons and complaint were filed. Defendant, in turn, cross-moved to set aside the verdict or, alternatively, to have interest on the verdict computed in a different manner. Specifically, defendant sought to have interest computed on a monthly basis between December 2000 and December 2004 or from January 1, 2003, the intermediate date of the contract. Supreme Court declined to set aside the verdict and chose January 1, 2003 as the date from which to compute interest.

Plaintiff's sole challenge on appeal is to the date that Supreme Court utilized in computing preverdict interest. CPLR 5001 (b) provides that in a case like this where damages are incurred at various points in time, preverdict interest "shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date" (see e.g. Danka Off. Imaging Co. v General Bus. Supply, 303 AD2d 883, 886 [2003]). The statute vests the court with broad discretion in determining a reasonable date from which to award interest (see Conway v Ichan & Co., Inc., 16 F3d 504, 512 [1994]). In the case at hand, January 1, 2003 is the approximate halfway point between the time that plaintiff initially began to incur damages due to defendant's breach of the contract and the time that plaintiff ceased to incur damages due to the expiration of the contract. Supreme Court's selection of this date makes logical sense under the facts of this case. Accordingly, we find that Supreme Court chose a reasonable date from which to compute interest and did not abuse its discretion.

Pozament Corp. v AES Westover, LLC, -- N.Y.S.2d ----, 2008 WL 1901938 (N.Y.A.D. 3 Dept. May 1, 2008).

May 21, 2008 in Recent Cases | Permalink | TrackBack (0)

Tuesday, May 20, 2008

Welcome International Law Prof Blog!

Mark_e_wojcik_photo_5

Buys_cindy Peilm4 We at the Contract Profs Blog would like to welcome a new team to the Law Professor Blog Network family. 

Editors Mark Wojcik (left), Cindy Buys (center), and Michael Peil (right) have joined forces with Contributing Editor, Cyndee B. Todgham Cherniak, to create the International Law Prof Blog.

They started posting this week,and according to the opening post, the blog will cover numerous topics, including but not limited to the following:

  • Public International Law
  • Private International Law
  • International Human Rights Law
  • International Business Transactions
  • International Trade Law
  • International Legal Exchange
  • Comparative Law
  • Summer abroad programs
  • International Institutions
  • Canadian international law developments
  • Mexican international law developments
  • European international law developments
  • African international law developments
  • Chinese international law developments
  • Islamic international law developments
  • Latin American international law developments
  • South Pacific Islands and International Law
  • International Antitrust
  • International Environmental Law
  • International Moot Court Competitions
  • Submitting Articles to International Law Journals
  • LL.M. programs for international students
  • International Intellectual Property
  • International Commercial Dispute Resolution
  • NAFTA Tribunal Decisions
  • WTO Decisions
  • International Court of Justice
  • European Court of Human Rights
  • Inter-American Court of Human Rights
  • International Litigation
  • International Tort Law
  • Foreign Legal Consultants
  • International Art and Cultural Heritage Law
  • International Health Law
  • United Nations
  • Corporate Social Responsibility
  • Law of the Sea
  • International Employment Law
  • International Family Law
  • International Taxation
  • Transnational Legal Practice
  • Global Legal Skills
  • We wish them well.

    [Jeremy Telman]

    May 20, 2008 in Commentary | Permalink | Comments (1) | TrackBack (0)

    Limerick of the Week: Mill Street Church v. Hogan

    Thisis a useful teaching case because it covers both implied actual authority and apparent authority.  The Church is bound by Bill Hogan's decision to hire his brother, Sam, to do some work in the church both because a past course of dealing made it reasonable both for Bill to assume that he could hire Sam and for Sam to believe that Bill could hire him.  In this case, the authority issue was especially important because Sam fell off a ladder very soon after beginning work, and the church (or its insurer) was trying to avoid liability for Sam's injury. 

    Mill Street Church v. Hogan

    Could Bill Hogan, employed by his church,
    Hire his brother, who fell from his perch?
    Yes, Bill's authority is wide
    Even if just implied.
    Thus the court leaves the church in the lurch.

    [Jeremy Telman]

    May 20, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

    Saturday, May 17, 2008

    Not-Quite-Mid-Year UCC Legislative Update

    Out of deference to friends and colleagues updating casebooks and statutory supplements for publication prior to the start of fall classes, as well as friends and colleagues teaching contracts or commercial law courses this summer or preparing or updating their own teaching materials for the fall, here's the early edition of this year's Mid-Year UCC Legislative Update.

    Revised Article 1 (2001)

    As of January 1, 2008, twenty-nine states -- Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia -- had enacted Revised Article 1, and twenty-eight of those enactments were in effect (Kansas's version has a delayed effective date of July 1, 2008).

    As of May 17, 2008, four more states -- Pennsylvania (HB 1152), South Dakota (SB 93), Tennessee (SB 3993), and Vermont (HB 563) -- have enacted Revised Article 1 thus far this year.  All four enactments will take effect on or before July 1, 2008.  With only one other pending bill -- Illinois SB 2080 -- having made any progress (the Illinois Senate passed it unanimously on April 9 and it is currently scheduled for a hearing before the Illinois House Judiciary Civil Law Committee on May 20), it appears that 2008 will yield the fewest new enactments since 2004.  That said, Revised Article 1 will be law in at least two-thirds of the states by July 1.

    As I have discussed previously, the two primary bones of contention during the enactment process have been uniform R1-301's choice-of-law rules and uniform R1-201(b)(20)'s "good faith" definition.  None of the thirty-three enacting states has adopted uniform R1-301; instead, all have chosen to either leave their pre-revised 1-105 in place or to enact a substitute 1-301 with language consistent with pre-revised 1-105.  (Louisiana subsequently amended its substitute 1-301 to diminish the distinction between choice-of-law rules applicable to UCC and non-UCC transactions; but, a fuller exploration of that amendment is another topic for another day.)  There had been less uniformity with regard to defining "good faith."  Twenty-three states -- including Pennsylvania, South Dakota, and Vermont -- have enacted uniform R1-201(b)(20)'s "honesty in fact and the observance of reasonable commercial standards of fair dealing" definition; while ten states -- including Tennessee -- have retained pre-revised 1-201(19)'s "honesty in fact in the conduct or transaction concerned" definition, reserving the requirement of commercial reasonableness for merchants under 2-103(1)(b) & 2A-103(3).  If enacted as it currently reads, Illinois SB 2080 would make uniform R1-301 0-for-34 and would make Illinois the eleventh enacting state to retain the bifurcated good-faith standard.

    In response to the widespread failure of uniform R1-301, NCCUSL has approved and the ALI will consider later this month a substitute uniform R1-301, which -- as so many states have already done while enacting Revised Article 1 -- retains the essence of pre-revised Section 1-105.

    Amended Articles 2 & 2A (2003)

    The 2003 amendments to Article 2 and 2A continue to stagnate.  Bills proposing their enactment have died unceremonious deaths in Kansas and Nevada.  Oklahoma amended Sections 2-105 and 2A-103 of its commercial code to add that the definition of "goods" for purposes of Articles 2 and 2A, respectively, "does not include information," see 12A Okla. Stat. Ann. §§ 2-105(1) & 2A-103(1)(h) (West Supp. 2008), and amended its Section 2-106 to add that "contract for sale" for purposes of Article 2 "does not include a license of information," see id. § 2-106(1).  The net effect is similar to having enacted Amended §§ 2-103(k) & 2A-103(1)(n), both of which exclude information from the meaning of "goods" for purposes of Article 2 and 2A, respectively.  Attempts to further amend Articles 2 and 2A in Oklahoma have been unsuccessful and no other state's legislature has considered a bill proposing to enact the 2003 Article 2 and 2A amendments.

    Amended Articles 3 & 4 (2002)

    For several years now, those who teach UCC Articles 3 and 4 have had to caution students that New York and South Carolina had not adopted the 1990 revisions of Article 3 and 4, on which most payments teaching materials focus much of their attention.  More recently, we have had to decide how much emphasis to give the 2002 amendments to Article 3 and 4 -- which, until April 15, only five states (Arkansas, Kentucky, Minnesota, Nevada, and Texas) had enacted.

    By affixing his signature to SB 936 on April 15, Governor Mark Sanford made law a sweeping revision of South Carolina's Articles 3 and 4 that has the effect of enacting the 1990 revisions as amended by the 2002 amendments.

    New York SB 4120 proposes comparably sweeping changes to New York's versions of Article 3 and 4. However, SB 4120 has not made any progress since it was introduced and referred to the Senate Judiciary Committee on March 27, 2007, and re-referred to the Committee on January 9, 2008.

    The only other bill currently pending that proposes adopting the 2002 amendments to UCC Articles 3 & 4 (along with certain conforming amendments to other articles) is Oklahoma HB 2588, which was introduced on February 4, 2008.  On February 5, HB 2588 was referred to the House Judiciary and Public Safety Committee, which voted on February 28 to recommend passage.  No further action has been reported as of May 17, 2008.

    Revised Article 7 (2003)

    As of January 1, 2008, twenty-eight states -- Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Hawaii, Idaho, Indiana, Iowa, Kansas, Maryland, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Oklahoma, Rhode Island, Texas, Utah, Virginia, and West Virginia -- had enacted Revised Article 7, and twenty-seven of those enactments were in effect (Kansas's version has a delayed effective date of July 1, 2008).

    As of May 17, 2008, Pennsylvania (HB 1152) and Tennessee (HB 3950) have enacted Revised Article 7 thus far this year.  Both enactments will take effect on or before July 1, 2008.   

    The only other pending bills are Illinois SB 2080 and Massachusetts HB 4302 -- both of which combine Revised Articles 1 & 7.  As discussed above, Illinois SB 2080 appears to be making progress toward enactment.  Massachusetts HB 4302, by contrast, appears to be headed nowhere.

    [Keith A. Rowley]

    May 17, 2008 in Legislation | Permalink | TrackBack (0)

    Friday, May 16, 2008

    Patriots Fan Ordered to Pay $65,500 in Liquidated Damages for Breach of 10-Year Agreement for "Luxury" Stadium Seats

    This breach of contract story from the Boston Globe:

    If you want to buy those luxury seats at Gillette Stadium to enjoy Patriots games, better read the fine print first.

    A man who decided he wanted out of his 10-year agreement for two luxury seats after just one year must pay for the seats for the rest of the 10 years, the state Supreme Judicial Court ruled today.

    Paul Minihane, a real estate broker with experience as a contractor and developer, signed up for two $3,750 seats in the Club Level III section for 10 seasons, from 2002 to 2011.

    The contract he signed said that if he defaulted, he would have to pay the balance for all the remaining years.

    Minihane paid a $7,500 deposit and later made another $2,000 payment, using the seats for the 2002 season. But after that, he made no further payments to NPS LLC, the developer of the stadium.

    A lower court judge said the contract's provisions were unreasonable and ordered Minihane to pay $6,000.

    But the Supreme Judicial Court said today that Minihane hadn't shown that the provisions weren't unreasonable.

    The developers were entitled to the "liquidated damages" the contract required in case of a breach, the court said.

    The court noted that even though the Patriots had won a Super Bowl in early 2002, shortly before the contract was inked, demand for luxury seats "was then and remains variable and depends, according to the evidence, on the current performance of the team, as well as other factors, such as the popularity of the players and the relative popularity of other sports, that are unpredictable at the time of contract."

    The court said the terms "may be harsh," but Minihane -- who at the time of the Superior Court trial was chairman of the Boston Finance Commission -- hadn't shown that they were "unreasonably and grossly disproportionate."

    The court awarded the stadium developers the total amount of unpaid fees: $65,500, plus interest.

    UPDATE: Here's a link to the opinion of the Massachusetts Supreme Court. This would have made for a fun liquidated damages exam question.

    [Meredith R. Miller]

    May 16, 2008 in In the News, Recent Cases | Permalink | TrackBack (0)

    Jail Time for Breach of Contract?

    Today's New York Times reports that a 49-year-old Missouri woman has been indicted for driving a 13-year-old California girl to suicide through use of a MySpace account.  According to the indictment, Lori Drew created a MySpace account under the name Josh Evans.  She used this account to contact Megan Meier, who had been a friend of Ms. Drew's daughter.  After a few weeks of friendly chatting, "Josh" turned nasty, eventually driving Megan Meier to suicide, according to the indictment.  Ms. Drew denies having created the account, and Missouri law enforcement officials could not find sufficient evidence to bring charges against her. 

    But now federal law enforcement officials in Los Angeles have indicted Ms. Drew on charges of conspiracy and violations of the anti-hacking Computer Fraud and Abuse Act.  According to the Wired Blog Network, the feds are alleging violations of the Act because Ms. Drew set up the Josh Evans account in violation of the website's terms of service.  Wired views the indictment as "a potentially troubling precedent, given that terms-of-service agreements sometimes contain onerous provisions, and are rarely read by users."

    MySpace supports the indictment.  Wired cites Wharton Business School Professor Andrea Matwyshyn, who describes the indictment as a creative use of the Act, given that it is set up to protect businesses such as MySpace, but is now being used to criminalize conduct that really victimized Megan Meier.  Matwyshyn expresses concern that a breach of contract action is being turned into a criminal case.

    [Jeremy Telman]

    May 16, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

    "It's contract law, marriage, that's all it is, contract law."

    Charles Karel Bouley's reaction (at Huffington Post) to the California Supreme Court's marriage decision. Here's an excerpt of his reaction:

    Mayor Newsom, I was wrong. I apologize. This morning, May 15, 2008 at 10am, when the California State Supreme Court said nope, no reason to ban gay marriage in California that we can see, I cried. I cried for all those in my community that were happy today. I cried because having fought to be recognized as a couple myself and changing the only laws we had at the time, AB 25 and AB 205 that granted SOME rights, changing them to recognize those that had wrongful death cases pending before the legislation, well, today was my victory also, Andrew Howard's victory (my late partner).

    And it is. Andrew and I were the first gay couple on drive time radio on KFI Los Angeles. It was a big deal. Hasn't been done since, either, anywhere on talk radio to my knowledge. When he died, I saw marriage equality. Thousands of straight couples emailed in grief to say they felt as we were part of their marriage, and that we represented a normal couple to them. That's marriage equality. When the courts told me I couldn't sue, I said yes I can (when he died) and then did after changing law. That got media coverage and told people that the legislature and the courts favored granting rights to gays and lesbians.

    Then Gavin made his decision, right or wrong, to grant licenses. And in the aftermath, yes, some bigoted states allowed their people and legislatures to put bigotry in their state codes. But this state, my state, Gavin's state, did the right thing. And as a jaded gay male of 45 years, I didn't expect it to. That's why I've stated I'm all for Civil Unions with the exact same benefits of marriage. So, I'm all for marriage, but with a different name. Why? Because I believe that's what is nationally obtainable in the short term why states fight out the marriage issue.

    However, I'd be lying if I said today didn't feel good. Because while I would settle for Domestic Partnership, there's no reason for it. It's contract law, marriage, that's all it is, contract law. And just like you can't stop a person from entering a contract because they're black, Hispanic, a woman, etc., then you can't stop someone from entering the marriage contract based on gender. It's horrible for lawyers and judges, because in their legal hearts they know same sex marriage must be legal and available for all the couples that want it. But in their moral or religious hearts the vision gets cloudy. That's why we turn to the courts, to uncloud things. And when they do, as in today's case, they see that the law is in fact the law.

    (emphasis added).

    Is marriage really about contract law? Certainly, many New York cases describe marriage as a "civil contract." Or, is the description of marriage as a contract a metaphor that does not recognize the complexities of defining "contract"? (See Thomas Joo, The Discourse of "Contract" and the Law of Marriage). If it is a metaphor, is it an effective one for same-sex marriage advocates?

    [Meredith R. Miller]

    May 16, 2008 in In the News | Permalink | TrackBack (0)