ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, March 8, 2008

How Much Should a CD Cost?

Walmart_exterior Well, of course, a CD should cost whatever the market says it should cost.  It's a matter of supply and demand, as anybody familiar with the most basic economic principles will tell you.  Oh, wait.  That was in the days before Wal-Mart.  Now, it seems, CDs, like a lot of other products will cost whatever Wal-Mart says they should cost.  And according to new reports such as this one, CD's will now be subject to a five-tier pricing scheme. 

The top 15-20 hottest titles will cost $10; other hits and current titles will cost $12; top catalog CDs will cost $9, midline cataogue CDs will cost $7 and budget CDS will cost $5.  Since Wal-Mart accounts for something like 22% of the retail market in CDs, the big record labels may not have a choice but to agree to the Wal-Mart pricing structure.  Wal-Mart divisional merchandise manager for home entertainment, Jeff Maas, would not rule out the possibility that Wal-Mart might simply stop stocking CDs or greatly reduce the number of titles displayed if Wal-Mart cannot reach some agreement on a new pricing structure with the major record labels.

According to Maas, "The customer votes every single day in our stores, and based on what they want is how we merchandise our stores."  Apparently not enough customers are voting for CDs at the existing prices. 

For those curious about the CD-buying habits over at the ContractsProf Blog, I can disclose that the only popular music I have bought recently is that of the celebrated daughters of my colleagues.  You can cut out the middle man and listen to the music of Sarah Dooley here; you can hear Kate Myers here.  If Wal-Mart begins carrying them, I'll think about shopping there.

[Jeremy Telman]

March 8, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)

Georgia O'Keeffes to Stay at Fisk University

RadiatorbuildingnewyorknightIn 1949, Georgia O'Keeffe donated 101 of her paintings, including Radiator Building -- Night, New York (left) to Fisk University.  As CBS reports, O'Keeffe's donation required that the paintings not be sold and be kept on permanent display. Fisk University, however, is in financial distress and, according to The New York Times, a Tennessee judge last month enjoined Fisk from selling a half-interest in the artworks to the Crystal Bridges Museum in Bentonville, Arkansas, for $30 million.

The Georgia O'Keeffe Museum in New Mexico, representing Ms. O'Keeffe's estate, sued in Tennessee to recover the paintings from Fisk, alleging a breach of the terms of the 1949 donation.  Judge Ellen Hobbs Lyle ruled that Fisk may not sell the paintings, but it will not have to give them up.  The ruling may put Fisk's continued existence at risk.

[Jeremy Telman]

March 8, 2008 in In the News | Permalink | Comments (2) | TrackBack (0)

Friday, March 7, 2008

Consequential Damages Welcome Here!

NyIn two cases decided on February 18, 2008, the New York Court of Appeals permitted the award of consequential damages despite contractual provisions in insurance policies excluding consequential loss, so long as the damages were the "foreseeable" and "natural and probable consequence" of a policy breach and were "within the contemplation of the parties" at the time the policy was issued.  So reports James W.. Carbin on the Duane Morris LLP website

The cases are Bi-Economy Market, Inc. v. Harleysville Ins. Co. of N.Y., 2008 WL 423451, 2008 N.Y. Slip. Op. 01418 (N.Y. Feb. 19, 2008) and Panasia Estates, Inc. v. Hudson Ins. Co., 2008 WL 420014, 2008 N.Y. Slip Op. 01419 (N.Y. Feb. 19, 2008) and both can be found here.  In both cases, the policies in question excluded coverage for consequential losses, but the Court of Appeals held the insurers liable where the consequential damages flowed not from the event insured against but from the insurer's failure to timely pay the claim.

According to Mr. Carbin, "[t]he Court of Appeals' decision in Bi-Economy is the first recognition that a policy insuring 'business interruption' proves the foreseeability required for an award of consequential damages stemming from an insurer's breach of the policy contract by failure to timely pay a claim, even where the policy contains an exclusion for 'consequential loss.'"  The Court applied the same rule in Panasia Estates but remanded the case for a determination of whether the consequential losses at issue were foreseeable.

[Jeremy Telman]

March 7, 2008 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, March 6, 2008

Showdown in Minnesota

Bargill It's high noon in L’etoile du Nord, and the big guns are out and firing.  In its "Exchange" forum, the Minnesota Law Review is featuring lively contributions by NYU's Oren Bar-Gill (left) and the University of Chicago's Richard Epstein (below left). 

Bar-Gill's essay, The Behavioral Economics of Consumer Contracts, addresses the question of whether the fact that individuals make mistakes merits legal intervention.  In order to answer this question, Bar-Gill answers four sub-questions: (1) Do consumers suffer from systematic misperception of the costs and benefits associated with certain products?  (2) Do sophisticated sellers respond strategically to consumer misperception?  (3) Is consumer misperception and sellers' response thereto welfare-reducing? (4) Is legal intervention warranted and if so what type of legal internvetion is desirable?

Epstein In his response, The Neoclasical Economics of Consumer Contracts, Richard Epstein contends that "Bar-Gill overstates the level of consumer error by underestimating the corrective powers already at work."  Epstein further argues that both Bar-Gill and the behavioral economists on whom he relies "ignore more traditional explanations that better account for the apparently irrational behavior that they observe."  Finally, Epstein suggets that credit markets themelves, especially as aided by the introduction of new technologies such as the Internet, provide "the most powerful way to combat all sorts of consumer misperceptions."

[Jeremy Telman]

March 6, 2008 in Recent Scholarship | Permalink | Comments (0) | TrackBack (0)

Wednesday, March 5, 2008

To Deponents: More Contract Talk, Less Profanity

A federal judge has sanctioned a lawyer and his client for the client's stubborn and sustained use of profanity during his deposition in a contract dispute.  The story, from the WSJ Law Blog:

First thing we did this morning, after reading that a federal judge fined a lawyer and his client $29,000 for using a certain swear word (or variations thereof) 73 times during a deposition, was reach for our calculator.

That’s $367 per F-bomb!

In a 44-page opinion in GMAC Bank v. HTFC, a case concerning a contract dispute, Judge Eduardo Robreno found that Aaron Wider, the CEO of HTFC, a mortgage investor, engaged in “hostile, uncivil, and vulgar conduct, which persisted throughout the nearly 12 hours of deposition testimony.” According to Robreno, Wider’s lawyer, Joseph Ziccardi, “snickered” at his client’s conduct and failed to stop his client’s tirades and was therefore culpable as well. (Click here for the Legal Intelligencer story.)

As a matter of sheer empirics, the "f-word" was used in the deposition 73 times; the word "contract" was only used 14 times.  Lesson to deponents in contract disputes: more contract talk, less profanity.

[Meredith R. Miller]

March 5, 2008 in In the News | Permalink | TrackBack (0)

Tuesday, March 4, 2008

Peevyhouse Redux?


This story from Robert J. Ambrogi at's Legal Blog Watch:

It is debatable whether George Washington ever chopped down a cherry tree, but we can be certain he was never dragged into court over it. Not so the Martha's Vineyard property owner and his unfortunate landscaper who must pay $90,000 after chopping down 10 of his neighbor's trees. Boston lawyer Terry Klein, at his blog Decisionism, urges anyone considering chopping a neighbor's tree to read yesterday's Massachusetts Appeals Court decision, Glavin v. Eckman.

So who knew that Massachusetts has a law imposing treble damages on anyone who cuts down a neighbor's tree? Certainly not Bruce Eckman. His view of the ocean from the pricey Aquinnah section of this resort island off the Cape Cod coast was obstructed by trees inconveniently located on the lot of his neighbor, James A. Glavin. In 1996, Eckman asked Glavin for permission to cut the trees, but the neighbor said no. Five years later, apparently unable to endure his obscured view any longer, Eckman hired a landscaper and gave him his marching orders: cut down any trees that blocked the view. The landscaper complied and thus this litigation.

Complicating it all was that these weren't just any 10 trees. These were large, mature oak trees. In fact, the trees were a key part of the reason Glavin purchased the lot, which adjoined another lot on which he'd built his vacation home five years earlier. The trees, as the court explained, "were ideally situated to provide shade and serve as a backdrop to a pond that Glavin planned to restore."

That Massachusetts law against cutting your neighbor's trees is silent on how to measure the damages should such cutting occur. Courts generally use either the value of the cut timber or the diminution of property value. But Glavin argued that neither would compensate him. He asked for, and the jury awarded, damages based on what it would cost him to restore the trees. This came to $30,000, the jury concluded, and the trial judge tripled that to $90,000. This was OK, the Appeals Court said, given that "any diminution in market value arising from the wrongful cutting was of less importance than was the destruction of the special value that the land and its stand of mature oak trees held for Glavin."

If there is anyone comparable to George Washington in this tree-chopping tale, it may be the landscaper, who chose not to appeal the jury's verdict against him. It is almost as if the landscaper chose to say, "I cannot tell a lie."

Glavin v. Eckman

Hold back your chainsaws, Massachusetts!

[Meredith R. Miller - h/t Alan Hornstein]

March 4, 2008 in In the News, Recent Cases | Permalink | TrackBack (0)

Monday, March 3, 2008

Tom Stoppard on Formation Defenses (and Vic Goldberg's "Net Profits Puzzle")

Fennyman: Henslowe, do you know what happens to a man who doesn't pay his debts?   His boots catch fire!

Cut to playhouse interior where the proprietor, Henslowe, is trussed up with his boots being held to a burning brazier Fennyman's henchman, Lambert.   Fennyman, to whom Henslowe is indebted, interrogates Henslowe and instructs Lambert while Fennyman's clerk, Frees, watches.   Henslowe moans in agony.

Fennyman: Why do you howl when it is I who am bitten?   What am I, Mr. Lambert?

Lambert: Bitten, Mr. Fennyman.

Fennyman: How badly bitten, Mr. Frees?

Frees: Twelve pounds, one shilling, and four pence, Mr. Fennyman, including interest.

Henslowe: (moan)   I can pay you.

Fennyman: When?

Henslowe: (moan) Two weeks.   Three weeks at the most.   Oh, for pity's sake.

Fennyman: (gesturing to Lambert)  Take them out.

Lambert pulls a rope lifting Henslowe's boots away from the brazier.  Henslowe sighs with relief.

Fennyman: Where will you find ...

Frees: ... sixteen pounds, five shillings, and nine pence ...

Fennyman: ... including interest, in three weeks?

Henslowe: I have a wonderful new play.

Fennyman: (again gesturing to Lambert) Put them back in.

Lambert looses the rope, moving Henslowe's boots back toward the fire.

Henslowe: (moan) It's a comedy.

Fennyman: Cut off his nose ...

Lambert brandishes a knife and holds it under Henslowe's nose.

Henslowe: It's a new comedy by William Shakespeare ...

Fennyman: ... and his ears.

Lambert retrains the knife to the base of Henslowe's right ear.

Henslowe: ... and a share.  We will be partners, Mr. Fennyman.

Fennyman: Partners?

Fennyman motions for Lambert to desist.  Lambert does so grudgingly, then pulls the rope again to lift Henslowe's boots from the fire.

Henslowe: It's a crowd-tickler.  Mistaken identities, shipwreck, Pirate King, a bit with a dog, and love triumphant.

Lambert: I think I've seen it.  I didn't like it.

Henslowe: But this time it is by Shakespeare.

Fennyman: What’s it called?

Henslowe: "Romeo and Ethel, the Pirate's Daughter."

Fennyman: Good title.

Fennyman motions for Lambert to untie Henslowe.

Fennyman: A play takes time.  Find the actors.  Rehearsals.  Let's say we open in two weeks.

Fennyman throws open the stage curtain and walks toward where the audience would stand and sit.

Fennyman: That’s what, 500 groundlings at two pence a head; in addition, 400 backsides at three pence -- a penny extra for cushions.  Call it 200 hundred cushions.  Say, two performances for safety.  How much is that, Mr. Frees?

Frees: Twenty pounds to the penny, Mr. Fennyman.

Fennyman: Correct.

Henslowe: But I have to pay the actors and the author.

Fennyman: Share of the profits.

Henslowe: There's never any ...

Fennyman: Of course not.

Henslowe: Oh, Mr. Fennyman.  I think you might have hit upon something.

Fennyman: Sign there.

Fennyman gestures to a piece of parchment that Frees has prepared.  Henslowe, his hands still bound, does his best to make his mark while Frees tries to assist by moving the parchment around the stationary quill.

from Shakespeare in Love (Miramax Films 1998).

[Keith A. Rowley]

March 3, 2008 in Film Clips | Permalink | TrackBack (0)

Sunday, March 2, 2008

Legal Theory Blog Recommends . . .

For the first time since December 1, 2007, Lawrence Solum, the inspirator of the Legal Theory Blog, recommends a piece of contracts scholarship as his Download of the Week.  He recommends Curtis Bridgeman's Contracts as Plans.

Here is the abstract:

This paper offers an original theory of contract law that draws from recent work in the philosophy of action and legal theory. Human beings are essentially planning creatures. Making plans and following through with them is crucial to everyday practical reasoning both for individuals acting alone and individuals acting together. This somewhat intuitive point was not fully appreciated in the philosophy of action as recently as twenty years ago, when Michael Bratman began to point out the inadequacies of the then-dominant view of rationality. Recently, Scott Shapiro has been applying Bratman's insights on practical reasoning to debates in legal theory to great effect, developing what he calls the planning theory of law. According to the planning theory, laws are plans for citizens, developed and applied by legal institutions to solve coordination problems that result from individuals living together in otherwise unplanned communities.

In this paper, I propose a new theory of contract law informed by these insights. First I will survey the current leading theories of contract and explain why a new theory is needed. Then I will argue that viewing contracts as plans designed to solve a particular coordination problem better accounts for how we are able to make exchanges over time even in situations where the parties involved might otherwise not be able to trust one another. A planning theory of contract law takes the view that whatever ends a society might want to achieve, those ends are more likely to be achieved if the parties have the ability to create contracts, that is, to adopt legally obligatory plans to make exchanges. The theory does not seek to justify a particular body of contract law. Rather, as I will argue, it explains the fundamental doctrines of our current law better than do the presently available theories.

Once we view contracts as plans, it becomes clear that a better understanding of planning will give us a better understanding of contract law. It follows that advances in the philosophy of practical reasoning as it treats plans will give us insight into contract law. In the final part of the paper, I will show how these insights go beyond an accurate description of the established central doctrines of contract law and can lead to a better resolution of more controversial issues. For now I will be limited to offering a few indicative examples that offer suggestions for further study. At the very least, I hope to establish that contract scholars should pay attention to scholarship on practical reasoning just as they have long studied moral philosophy and economics.

[Jeremy Telman]

March 2, 2008 in Recent Scholarship | Permalink | TrackBack (0)