January 9, 2009
Stephen Colbert's Misconceptions about Contracts
Stephen Colbert (pictured before he discovered that he is a Winter) has done the world of contracts a tremendous favor by mentioning contracts on his television show, The Colbert Report, which is fast becoming America's favorite source for fake news commentary. Unfortunately, much of what he has to say about contracts is (dare I say it?) wrong! And this is the first time that I can recall that Stephen has been wrong about anything. Well, I'm a loyal viewer, but still, I have to stand up for what I believe in -- or teach -- or something like that. So, here we go.
The episode in question can be found here. About six-minutes into the episode, right after the bit about reports that Sanjay Gupta might become Surgeon General and change the shape of our food pyramid to reflect his own eating habits, comes a report on the Obama transition. According to Colbert, the Obama website says "We need to update the social contract." Colbert objects in the following terms:
I have negotiated a great social contract for myself. I'm famous, I'm rich, and I've got dental. . . [*ching*]. Besides, the main point of a contract is that you can't change it. That's why I had to fake my own death to get out of my endorsement deal with "GOOD- on-Ya" Australian cologne: "Splash It 'Down Under'" . . . . I was starting to attract dingoes.
There are many problems with this statement. First, it's not clear that the social contract is really a contract at all. Second, Restatement s. 89 permits the modification of an existing contract without additional consideration in circumstances that might apply to the social contract, if it is a contract. The UCC's s. 2-209 is more permissive still on the subject of modifications. Stephen, it's like you've never heard of Karl Llewellyn! Third, contracts doctrine provides many excuses other than faking one's own death to permit celebrities to get out of their endorsements. Most celebrities choose the DUI route, but there are plenty of other activities that can trigger a morals clause. Finally, faking one's own death is rarely effective when one announces having done so on national television -- even if it is cable.
Stephen, obviously your show needs a writer with some genuine legal expertise. You know where to reach me. Just check the caller ID from when I called you at 1-800-OOPSJEW last Yom Kippur.
January 8, 2009
Minnesota Bridge Collapse Victims Sue Consultant and Contractor for Breach of Contract
A bridge collapse sounds like an foray into tort law. And the attorneys for victims of the Interstate 35W bridge collapse in Minneapolis are suing two private companies (a consultant who anlyzed the bridge and the contractor) for negligence. But they are apparently also suing for breach of contract. According to the Minneapolis Star-Tribune:
The victims' attorneys say the companies' contracts with the Minnesota Department of Transportation required them to protect the public, and those hurt by the collapse have standing to sue over the breach of that protection.
Sounds like an intended third party beneficiary analysis. Actually, while not squarely analogous, it sounds like Illustration 10 to Restatement Second section 302:
10. A, the operator of a chicken processing and fertilizer plant, contracts with B, a municipality, to use B's sewage system. With the purpose of preventing harm to landowners downstream from its system, B obtains from A a promise to remove specified types of waste from its deposits into the system. C, a downstream landowner, is an intended beneficiary under Subsection (1)(b).
See, in contract law, it all comes back to the chickens.
[Meredith R. Miller]
January 6, 2009
Business Associations Limerick of the Week: Deutschman v. Beneficial Corp.
There's not really much reason to teach this case, except that it helps students learn the difference between a put and a call and that options are securities for 10b-5 purposes. If you have troubles remembering the difference between put and call, this Limerick might help:
Deutschman v. Beneficial Corp.
An option, be it put, be it call,
Gives you standing a fraud to forestall.
A call is a bet
A stock hasn't peaked yet;
Buy a put when the stock's gonna fall.
January 5, 2009
Reminder: Annual Meeting Panel
For those of you attending this week's AALS annual meeting, please remember the Contracts Section's program Friday, January 9, 2009, at 8:30 am in Marina Salon G, South Tower/Level 3, San Diego Marriott Hotel & Marina. The program features a panel of speakers -- Kenneth Ayotte (Northwestern), Robert P. Bartlett, III (Georgia), and Tom Joo (UC-Davis) -- addressing "Immutable Rules and Contract Law." Click here for more details. A brief business meeting will follow the panel.
[Keith A. Rowley]
Interesting At-Will Employment Case from West Virginia
As reported in the West Virginia Record, Williamson Memorial Hospital hired Crystal Hatfield in 2005 as a benefits and special projects coordinator. Her wage -- $14/hour -- angered other employees who had not applied for the position because they were told it would pay only $7-9/hour. Rumors swirled that Hatfield lacked the requisite qualifications for the job and that her hiring was the result of nepotism. The hospital administration was facing a mutiny and so the responsible parties decided to fire Hatfield after she had worked at the hospital only four days. She sued, claiming breach of contract, among other things.
On December 12th, in a per curiam opinion, the West Virginia's Supreme Court of Appeals, affirmed the dismissal of Hatfield's claims based on its view that Hatfield was an at-will employee. Ms. Hatfield alleged a promise for long-term employment based on an offer letter citing an annual salary of $29,120 and informing Ms. Hatfield of the hospital's employee benefits program. The court found nothing in the letter suggesting anything other than an offer of at-will employment and thus dismissed Ms. Hatfield's breach of contract claim. The court dismissed her claim for breach of the duty of good faith and fair dealing in a few brief paragraphs, noting that West Virginia does not recognize any such duty in the context of at-will employment. And since Ms. Hatfield was apprised of her at-will status, the court also rejected her claim based on detrimental reliance.
In order to take the position with Williamson Memorial, Ms. Hatfield had resigned a position at a firm in Charleston that paid her $12/hour. After she lost her position at Williamson, she was unemployed for five months before her old firm re-hired her. Unless Ms. Hatfield was somehow a party to a scheme to hire her for a position for which she was unqualified, it seems clear that an injustice was done to her, but it may well be the sort of injustice that law courts cannot address.