ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, October 1, 2008

Maybe It's Actually a Conditional Gift

Aaa_11 I don't know why I keep getting annoyed by companies that claim that you can deal with them without having "a contract."  This report of a release from Verizon Wireless, for example, reprinted in a reasonably reputable newspaper:

Verizon Wireless today turned up the heat on Sprint and other competitors, offering its regular wireless plan prices to customers without a contract.

The new plan allows customers to snag a no-strings wireless plan using their own handsets or by purchasing a phone at full retail -- no discounts, but no termination fees if they decide to drop the service after a couple of months.

The company said the month-to-month deal would be offered on all of its nationwide voice and data plans to new and existing customers.

The plan is undoubtedly an outgrowth of consumer complaints and an FCC inquiry into early termination fees charged by wireless companies. It also is likely to spur competitors to match the Verizon plan as wireless companies try to add customers from an increasingly smaller pool.

"The new month-to-month agreement is an extension of the company's overall commitment to delivering its customers quality products and services over the nation's most reliable wireless network, while providing the industry's best customer service," Verizon said in a release.

It's nice that there are no termination fees, but it would be even nicer if they used the word "contract" correctly.

[Frank Snyder]

October 1, 2008 in In the News | Permalink | TrackBack (0)

Court Addresses Modification of Clickwrap Agreement

The U.S. District Court for the District of Maryland (Titus, J.) recently had occasion to address the modification of a clickwrap agreement. Plaintiffs, real estate appraisers, used defendant FNC’s internet-based service, “Appraisal Port.” Plaintiffs brought a class action against FNC, alleging that FNC falsely claimed that information entered in Appraisal Port would be kept private and would be transmitted securely. FNC moved to stay the proceedings pending arbitration of plaintiffs’ claims, pointing to an arbitration provision contained in the user agreements that plaintiffs acknowledged when joining the service.

Plaintiffs argued that they were not parties to a valid arbitration agreement because FNC amended their user agreements during their memberships, replacing them with a new agreement that did not include any arbitration clause. FNC recognized that it “attempted” to so amend the user agreements but argued that its attempt “failed” because plaintiffs did not acknowledge the changes. Based on the language of the original clickwrap agreement, which included a clause about modification, the court concluded that the modification was effective and, thus, plaintiffs were not bound to arbitrate. The court denied the motion to stay.

(Note the interesting posture here. Usually, the party seeking arbitration is arguing effective unilateral modification to include arbitration terms; here, it is the parties opposing arbitration that point to a unilateral modification as effective, because the modification did not include arbitration terms).

(The court's reasoning is after the jump).

Continue reading

October 1, 2008 in E-commerce, Recent Cases | Permalink | TrackBack (0)

Poetic Meter and Fault in Contracts Law

CohenOur own Keith Rowley was on the program for the conference on Fault in Contract Law held this past weekend at the University of Chicago Law School, with the papers to be published in the Michigan Law Review. I will therefore leave it to Keith to report on those proceedings in detail. But I do feel that one aspect of the conference falls clearly within my jurisdiction -- that is, the intersection between contracts law and poetry. George M. Cohen (pictured) noted at the beginning of his presentation that the title of his conference paper, "The Fault that Lies within Our Contract Law," is iambic pentameter. Judge Richard Posner's title, on the other hand, "Let Us Never Blame a Contract Breaker," is also pentameter, but beginning with a stressed syllable, Posner's meter is trochaic rather than iambic. The difference, Cohen remarked, between those who, like him, believe that there is room for discussion of fault in contract law and those who, like Posner, would banish notions of morality from the law, is really one of emphasis. Professor Cohen had a very good day when he realized that he could indicate that point by contrasting his own title with that of Judge Posner.

Another highlight of the conference: Judge Posner praised Oliver Wendell Holmes' The Common Law and especially the option theory of contract contained therein. Chicago's Richard Epstein objected that Holmes' book is incoherent, and he could not imagine why anyone would seek to rely on Holmes as a source for a comprehensive approach to contracts. There was some uneasiness in the room as these formidable scholars prepared to lock horns, but Judge Posner evaded the controversy, conceding that there was only one person in the room about whom people living 127 years now from would say that he had a completely coherent approach to the law. Professor Epstein received Judge Posner's bon mots with his wonted grace.

[Jeremy Telman]

October 1, 2008 in Conferences, Contract Profs | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 30, 2008

Fruehwald on Reciprocal Altruism as the Basis For Contract

Ftfac_fruewaldEdwin S. Fruehwald (Hofstra) has posted to SSRN a piece titled Reciprocal Altruism as the Basis for Contract. Here's the abstract:

Behavioral Biology illuminates the basis of contract. Behavioral biologists believe that genes are selfish; they are only interested in their survival. However, reciprocal altruism - "I'll scratch your back if you scratch mine" - provides a basis for cooperation among humans that promotes survival. If two humans cooperate in obtaining and allocating resources, they will have greater resources and a greater chance to survive and reproduce, thus continuing their genes. Contract law reflects and reinforces this reciprocal altruism from our evolutionary past.

Connected with reciprocal altruism is a human instinct for equity in reciprocal exchanges. Humans can detect unfair situations and rectify them. Evolutionary fairness is reflected in the contract rules of frustration, unconscionability, and mistake, as well as the good faith duty in performance and unconscionability. Also connected with reciprocal altruism is the need to punish cheaters. In contract law, cheaters-those who breach the contract-are punished through contract remedies. Finally, contract law helps deal with the evolutionary problem of time-shifted rationality, where individuals value what they have over what they can gain in the future.

Part II of this paper will discuss traditional theories of contract law, including the objective theory of contract formation, deontological and consequentialist approaches, redistributive theories, and more recent theories by Professor Solan (contract as agreement) and Professor Markovits (contract as collaboration). Part III will introduce behavioral biology and explain reciprocal altruism and related doctrines, such as cheating and time-shifted rationality. It will also show that neuroscientific studies support the existence of reciprocal altruism and related behavioral mechanisms. Part IV will then analyze the relationship between reciprocal altruism and contract law. It will argue that reciprocal altruism is the best explanation for the formation of contracts, compare reciprocal altruism as the basis of contract to the theories discussed in Part II, examine the other necessary element for contract validity - consideration - under reciprocal altruism, and give a justification for courts to enforce contracts under reciprocal altruism. Part V will demonstrate that contract damages are the glue for reciprocal altruism and that expectation damages are the proper measure of damages under this approach. Finally, Part VI will deal with reciprocal altruism and other contract issues-gap filling, unallocated risks, good faith in performance, and unconscionability.

[Meredith R. Miller]

September 30, 2008 in Recent Scholarship | Permalink | TrackBack (0)

Business Associations Limerick of the Week: Francis v. United Jersey Bank

Poor Lillian Pritchard gave in to depression after her husband's death. Her husband, loving father that he was, tried to warn Lillian of the vipers she had raised. "He'll steal the shirt off your back," Mr. Pritchard warned Lillian, speaking of one of the sons. Lillian did not heed that advice, and she fiddled while the reinsurance brokerof which she was a director, Pritchard & Baird, burned. Her sons, co-owners of the enterprise, gave themselves loans out of the business's coffers and never repaid them. After the company went bankrupt, creditors sought to recover from Mrs. Pritchard's estate.

One might think that the business judgment rule would protect Mrs. Pritchard, but not so where there was no business judgment made. Indeed, the court noted that the Pritchard boys hatched their fraudulent scheme "in the backyard of Lillian's neglect." That's the line that inspired the Limerick:

Francis v. United Jersey Bank

In the backyard of Lilly's neglect
Spawned a fraud that a company wrecked:
Her boys stole the booty
While she breached her duty
Through her failure their fraud to detect.

[Jeremy Telman]

September 30, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

Monday, September 29, 2008

Selling Your Patrimony?

Aaa_6 Ordinarily we don’t pay much attention here to the kind of cosmic questions that show up frequently in moot court competitions, like whether there’s some sort of constitutional right not to become a "genetic parent."  But when the question becomes whether you ought to be able to contract to do so, that’s another story.

In a paper forthcoming in the Southern California Law Review, The Right Not to Be a Genetic Parent? [sic], Harvard’s Glenn Cohen first argues that courts ought to recognize the right to be free from genetic parenthood, because of the "harm that stems from the social assignment of the status of parent to the provider of genetic material that persists notwithstanding the fact that the legal system has declared him or her a non-parent."

But that’s neither here nor there. Cohen goes on to argue that whatever the source of the right, you ought to be able to contract in advance to surrender that right, so long as suitable mechanisms are in place to ensure consent. Here’s the abstract:

Should the law recognize an individual's right not to be a genetic parent when genetic parenthood does not carry with it legal or gestational parenthood? If so, should we allow individuals to waive that right in advance, either by contract or a less formal means? How should the law's treatment of gestational and legal parenthood inform these questions? Developments in reproductive technology have brought these questions to the fore, most prominently in the preembryo disposition cases a number of courts have confronted - disputes over the use of stored frozen preembryos that couples have fertilized in the course of In Vitro Fertilization (IVF) - but other examples abound.

In this Article, I argue that in analyzing these cases it is essential to unbundle the possible rights not to be a genetic, gestational, and legal parent, and to recognize that the three rights do not stand and fall together. I show that we cannot move from the discourse surrounding the rights not to be a gestational and legal parent to a justification for a right not to be a genetic parent. Instead, I argue that the normative mooring of the right not to be a genetic parent is best understood as a way of protecting individuals from what I call "attributional parenthood," a harm that stems from the social assignment of the status of parent to the provider of genetic material that persists notwithstanding the fact that the legal system has declared him or her a non-parent.

Using this framework, I argue for the recognition of the right not to be a genetic parent. However, I reject the claim, common among courts and commentators, that this right should not be capable of advance waiver. I instead conclude that we should permit advance waiver of the right through contract, with several interventions aimed at improving contractual consent. In preembryo disposition disputes where the parties have not contracted, I argue for a general default rule of non-use, perhaps with a sub-rule permitting use when non-use would mean the impossibility of one party ever having any genetic children.

[Frank Snyder]

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

Weekly Top 10

Ssrn Two new papers make our top ten list this week, Alan White's study of voluntary mortgage modifications and Stephen A. Smith's review of an important recent book by James Gordley.  As always, there's a good deal of interesting stuff here.  Following are the top ten most-downloaded new papers from the SSRN Journal of Contract and Commercial Law for the 60 days ending September 28, 2008.  (Last week's rank in parentheses.)

1 (1) Freedom of Contract, David E. Bernstein (Geo. Mason).

2 (2) Contract Enforcement and Institutions Among the Maghribi Traders: Refuting Edwards and Ogilvie, Avner Greif (Stanford-Econ)

3 (3) Consent in Contract Law, Brian Bix (Minnesota).

4 (4) Law's Illusion: Scientific Jurisprudence and the Struggle with Judgment, Jeffrey M. Lipshaw (Suffolk).

5 (-) Rewriting Contracts, Wholesale: Data on Voluntary Mortgage Modifications from 2007 and 2008 Remittance Reports, Alan M. White (Valparaiso).

6 (6) Resolving the Foreclosure Crisis: Mortgage Modification in Bankruptcy, Adam Levitin (Georgetown) & Joshua Goodman (Columbia-Econ).

7 (5) The British Approach to Consumer Financial Disputes: A Model for Reform in Insurance Law and Beyond, Daniel Schwarcz (Minnesota).

8 (-)  Troubled Foundations for Private Law: A Review Essay of 'The Foundations of Private Law' by James Gordley, Stephen A. Smith (McGill).

9 (8) Intellectual Property and Restrictive Covenants, Orly Lobel (San Diego).

10 (9)  Spanish and International Judicial Interpretation of CISG, Anselmo M. Martinez Canellas (Islas Baleares).

[Frank Snyder]

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

Contracts Limerick of the Week: Oliver v. Campbell

Lit_bag Attorney Oliver agreed to represent Dr. Roy Campbell for a stated fee of $750.  Okay, it was the 1950s, but even then $750 was a bit low for divorce proceedings that led to a 29-day trial.  Things went pretty well at trial, but Dr. Campbell came in second and was not pleased with the silver medal.  So, Dr. Campbell fired Mr. Oliver before the final hearing and the entry of judgment.  Campbell was probably disappointed by that, until he realized that under the First Restatement ss. 347 and 350 (now R.2d s. 373), he could recover in restitution for the value of benefits conferred on Dr. Campbell, but only if Mr. Oliver had not completed performance. 

Alas for Mr. Oliver, the majority of California's Supreme Court found that performance had been completed, and so he could only recover the unpaid portion of the contract price ($300) rather than the $5000 that the dissenting justice would have granted in quantum meruit.

Oliver v. Campbell

Campbell wasn't unjustly enriched
By the lawyer whose contract he'd ditched.
Counsel could have earned more
If he'd been fired before
Or claimed Campbell's wife was bewitched.

[Jeremy Telman]

September 29, 2008 in Famous Cases, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

International Cycling Union and The Grand Tours Reach Accord

Csc_teamYou may have noticed that this year's Tour de France was missing something. Like, for example, all of the top riders. However, ESPN reports that the International Cycling Union (UCI) and the organizers of the most famous cycling races, the Tour de France, the Giro D'Italia and the Vuelta a Espagne, have reached an agreement that will permit coordination of the various bodies that seek to govern professional cycling.

The parties have been feuding since UCI established its pro tour series in 2004. This year, the Tour de France's organizers fell out with the UCI, with disputes centering on controls over doping and authority to invite various cycling teams to enter the race. As reported in, The Tour organizers excluded from the race the Astana team of defending champion, Alberto Contador, on the grounds that some members of Astana had been disqualified for doping in 2007. I've already groused about this injustice here. Contador, by the way, proved his mettle again this year by winning both the Giro and the Vuelta. The race was run under the authority of the French Cycling Federation. And still, still, the French could not win!

But all of that is water under the bridge, or so it is to be hoped.

[Jeremy Telman]

September 29, 2008 in In the News | Permalink | Comments (0) | TrackBack (0)