ContractsProf Blog

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

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Monday, October 5, 2009

Contracts Limerick of the Week: Brackenbury v. Hodgkin

I promised last week that I would discuss Brackenbury v. Hodgkin, 102 A.2d 106 (1917), and provide a companion Limerick to go with Fitzpatrick v. Michael.  In that case, I suggested that specific performance might have led the parties to a reasonable settlement of their dispute.  Ms. Fitzpatrick had been serving as Mr. Michael’s live-in nurse and caretaker.  Apparently induced by his grasping, conniving relatives to oust her, Mr. Michael terminated the relationship.  The court felt uncomfortable ordering two people to live together.  I think the court could have done so confident in the knowledge that they would quickly come to an agreement that would give Ms. Fitzpatrick at least a partial benefit of the bargain but would not involve court-supervised cohabitation.

Witch But the next case suggests at least one reason why law professors might make lousy judges.   People have this nasty habit of not always behaving as rational choice theory suggests they should.  Sarah Hodgkin (pictured), an aging widow, had six children, none of whom were willing to look after her.   Her one daughter agreed to do so in return for income from the farm on which Sarah lived, use of the household goods and ownership after the property after Sarah’s demise.  So, the Brackenbury family moved from Independence, Missouri to the outskirts of Lewiston, Maine.

It took all of two weeks before “the relations between the parties grew most disagreeable,” and Sarah sought to get out of her promise by transferring ownership of the property to her son Walter.   The Supreme Judicial Court of Maine found: (1) a contract that (2) created an equitable interest, (3) that Sarah had breached her duty of performance because she was primarily at fault; and (4) that the Brackenbury family had no adequate remedy at law.

The parties were ordered to continue their arrangement, which included cohabitation.  If they had been rational, the parties ought to have either quickly settled or learned to get along.   They chose to do neither.  Poor Sarah was forced to eat with an old iron fork with two tines broken off and when she asked that food be passed her way at the table, it was passed in the Peyton Manning sense of the word.

This conduct is Limerickworthy.  As the Fitzpatrick Limerick is from the perspective of the judge, this one of from Brackenbury’s perspective:

Brackenbury v. Hodgkin

I’d sooner kiss a chimera
Than put up with my in-law, Old Sarah,
Now whenever she dines,
Her fork has but two tines,
And her home ain't no French Riviera.

[Jeremy Telman]

October 5, 2009 in Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)

One for the Contracts Profs – With a little Statute of Frauds and a little Varney v. Ditmars

CoaHall_postcard_Large
Back in April 2007, the WSJ Law Blog declared Snyder v. Bronfman “the best tabloid suit” of that year.  The lawsuit may not have lived up to that superlative (didn’t Anna Nicole Smith die that year?), but it certainly should be on the radar of Contracts Profs.  It will be argued before the New York Court of Appeals next week (10/14) – and there is an added bonus, because the Court website now features webcasts of oral arguments.

In the lawsuit, Richard Snyder, the former Chairman and CEO of Simon & Schuster, sues Edgar Bronfman, the CEO of Warner Music Group.  In a nutshell, Snyder claims that, while vacationing in the Carribean, he and Bronfman agreed to work together to “acquire companies using funds principally from sources outside the Bronfman family.”  However, after Snyder assisted in negotiating Bronfman’s 2003 takeover of Warner Group, Snyder alleges that Bronfman failed to compensate Snyder accordingly.  Snyder’s claims sound in (1) breach of joint venture agreement; (2) breach of fiduciary duty; (3) joint venture accounting; (4) unjust enrichment; (5) promissory estoppel; and (6) quantum meruit.  Bronfman moved to dismiss all claims.

Here’s the rub (or part of it at least): after Snyder and Bronfman discussed their business venture (over daquiris?), they did not put their agreement in writing.  Indeed, Snyder alleges that Bronfman said they did not need a writing because they were both “honorable men.”

One issue that has been percolating in the courts is whether Snyder and Bronfman’s deal comes within the statute of frauds, NY GOL 5-701(a)(10).  That provision provides, in pertinent part, that the following agreements must be in writing to be enforceable:

[A]  contract  to  pay  compensation  for  services  rendered  in negotiating  a  loan, or  in  negotiating the purchase, sale, exchange, renting or leasing of any . . .  business  opportunity, business, its good will, inventory, fixtures or an interest therein, including a majority of the voting stock interest in a  corporation  and  including  the creating  of  a  partnership interest.  "Negotiating" includes procuring an introduction  to  a  party  to  the transaction  or  assisting  in  the  negotiation  or consummation of the transaction. This provision shall apply to a contract implied in fact or in law to pay reasonable compensation . . . .

Bronfman argues that, because the deal was not in writing, the statute prohibits Snyder from recovering a finder’s fee or other compensation based on services rendered in connection with a corporate acquisition.  Synder argues that this section of the statute does not apply in this case, because Snyder was a joint venturer with Bronfman, not a finder or broker.  The trial court sided with Snyder, and held that Snyder’s allegations, when taken as true, allege that he “functioned as more than just a broker assisting defendant in a limited and transitory manner to find a company the latter could acquire and run.”  Accordingly, the trial court refused to dismiss the complaint based on the statute of frauds.

 The Appellate Division reversed.  The Appellate Division read NY GOL 5-701(a) (1) with a wider lens: 

In relevant part, this enactment renders void any oral agreement “to pay compensation for services in . . .  negotiating the purchase . . . of any . . . business opportunity.”  As is evident, the statute broadly applies to “any” business opportunity. 

Issue two at the Court of Appeals could be: even if Snyder’s claims do not come within the statute of frauds, should the breach of a joint venture agreement, breach of fiduciary duty and a claim for an accounting be dismissed because Snyder alleges an agreement that is too inherently vague to support a joint venture claim and the complaint fails to allege any agreement between the parties as to the sharing of losses?  Relying heavily upon Varney v. Ditmars, the trial court held that the agreement was too vague to create an enforceable contract.  Here’s a taste of its reasoning:

[A]s a matter of basic contract law, "[i]f an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract." Cobble Hill Nursing Home, Inc. v. Henry & Warren Corp., 74 NY2d 475, 482, (1989), citing Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher, 52 NY2d 105, 109 (1981); Restatement [Second] of Contracts §33).

In Varney v. Ditmars (217 NY 223 [1916]), the Court of Appeals affirmed a directed verdict in favor of the defendant where the plaintiff alleged that his employer, in addition to paying him $40 per week to work as an architectural draftsman, promised to pay plaintiff a "fair share" of defendant's profits through the end of the calendar year. Id. at 225-26. The Court ruled that this promise was "vague, indefinite and uncertain and the amount cannot be computed from anything that was said by the parties or by reference to any document, paper or other transaction." Id. at 227.

The contract in question, so far as it relates to a share of the defendant's profits, is not only uncertain but it is necessarily affected by so many other facts that are in themselves indefinite and uncertain that the intention of the parties is pure conjecture. A fair share of the defendant's profits may be any amount from a nominal sum to a material part according to the particular views of the person whose guess is considered. Such an executory contract must rest for performance upon the honor and good faith of the parties making it. The courts cannot aid parties in such a case when they are unable or unwilling to agree upon the terms of their own proposed contract.

It is elementary in the law that, for the validity of a contract, the promise, or the agreement, of the parties to it must be certain and explicit and that their full intention may be ascertained to a reasonable degree of certainty. Their agreement must be neither vague nor indefinite, and, if thus defective, parol proof cannot be resorted to.

* * *

This is not a case involving a missing "price term" where the amount can be determined objectively without input from the parties or by reference to an extrinsic event, commercial practice or trade usage. Nor is this an employment contract that contains an open additional compensation clause, as in Guggennheimer v. Bernstein Litowitz Berger & Grossmann LLP (11 Misc 3d 926 [Sup Ct, NY County 2006]), where sufficient guidelines could exist from past practices by the defendant law firm to allow the court to supply a bonus figure. It is the plaintiff's job to articulate the terms of the joint venture agreement upon which he sues, and if he cannot do so in his own pleading with sufficient definiteness, than the action is ripe for dismissal at this stage. See Freedman v. Pearlman, 271 AD2d 301, supra (breach of contract claim premised on promises of "fair compensation" dismissed, pre-answer, for failure to state a cause of action).

Having dismissed based on the statute of frauds, the Appellate Division did not reach the certainty issue. 

The promissory estoppel claim was likewise dismissed as “too inherently vague.”  The unjust enrichment and quantum meruit claims were also dismissed. 

[Meredith R. Miller]

October 5, 2009 in In the News, Recent Cases | Permalink | TrackBack (0)

Thursday, October 1, 2009

Bonus Limerick: Totten v. United States

Lincoln

I decided to bolster the section of my Contracts course devoted to public policy issues by introducing students to the Totten doctrine and the states secrets privilege, which we will discuss without reading any cases.  In Totten, a the administrator for the estate of William A. Lloyd brings a claim against the government seeking to recover for the breach of an espionage contract.   It is alleged that Lloyd entered into an agreement with President Abraham Lincoln in which Lloyd infiltrated enemy territory during the Civil War in order to provide the U.S. Government with vital information relating to the military forces and fortifications of the Confederacy.   For these services, Lloyd was to be paid $200/month plus expenses.  Honest Abe allegedly paid Lloyd only expenses.  

Justice Field, writing in 1875, found that the subject matter of the contract was a secret and that both parties must have known at the time of their agreement that their lips would be “for ever sealed respecting the relation of either to the matter.”  In order to protect the public interest in having an effective arm of the government that could engage in secret services, the Court ruled that there could be no claim for breach of a secret contract because the existence of the contract was itself a secret that could not be disclosed.

I am happy to report that Totten is a hit!  We only got to it in the last ten minutes of class, which I thought would suffice for a one-page opinion.  But when I suggested that we could continue the discussion in the next session, in addition to their now habitual groans of disapproval, a couple of students murmured: “Yes!”  And several students stuck around after class to explore the consequences of the Totten doctrine.  Giddy about this overlap of my teaching and research interests, I composed a celebratory Limerick:

Totten v. United States

 The President gamely employed
 But then stiffed an agent named Lloyd.
 Abe knew Lee’s plan
 Because of this man,
 But the court found his legal claims void. 

[Jeremy Telman]

October 1, 2009 in Famous Cases, Government Contracting, Limericks, Teaching | Permalink | Comments (0) | TrackBack (0)