August 28, 2009
Another Blood Contract
We reported earlier this year about a contract written in blood. In that case, Plaintiff Kim opened his appellate brief with the statement, "Blood may be thicker than water, but here it's far weightier than a peppercorn." Both at the trial and appellate level, California's courts disagreed and refused to enforce a gratuitous promise, even if memorialized in the defendant's blood.
Perhaps business schools ought to develop a course called Blood and Contracts, because today's New York Times reports on another blood contract. According to the Times, the Chief Financial Officer of Stanford Financial asserts in a plea agreement that his boss, R. Allen Stanford, and the chief regulator of his Antigua Bank swore a "blood oath" by cutting their wrists and mixing their blood in a "brotherhood ceremony." Unlike the Kim case, however, here other consideration is alleged. The bank regulator allegedly received Super Bowl tickets and regular bribe payments from a Swiss bank account. In return, he is alleged to have ensured that regulatory bodies in Antigua would not interfere with what is now being described as a $7 billion international Ponzi scheme.
August 26, 2009
The First Week: A Hypothetical
As I indicated in my last post, on the first day of class, I discuss with my students a case, Ray v. William G. Eurice Bros., in which a party is held to the terms of a contract signed by one of its principals, although another principal claims that he never saw the agreement and would never have agreed to its terms had he seen it. As expected, my student were not all that sympathetic to the Brothers Eurice, who were, after all, in the construction business and should have read the construction specifications at issue before signing the agreement to which they were attached. But when I threw out the follow-up question, "What kind of person signs a contract without reading it," my students surprised me by volunteering that they all do. This took some of the wind out of my sails, but that's alright. We proceeded nonetheless to a discussion of the Google Terms of Service, which are included in the Farnsworth (ed.) statutory supplement that I use with the course.
After we acknowledge that we all agree -- without reading or understanding them -- to the terms of license agreements by clicking the "I agree" icon that appears as we install the software that we download, I present them with the following hypothetical that requires them to look at the Google Terms of Service in some detail:
I download Google software so I can set up a gmail account, and in so doing I agree to the Terms of Service.
After I have been using the product for one month, the software interacts poorly with Microsoft software on my computer. The result is the complete and irreparable destruction of my hard drive, containing my only copy of a scholarly work in progress which would undoubtedly have brought me everlasting fame as a contracts master scholar.
I immediately use my office computer to access my gmail account and tell the world how dangerous, unreliable, odious and vile Google is, and of course I sue.
Do I have a remedy under the terms of service?
Google responds by immediately closing off my access to my gmail account and by forwarding to my wife my extensive correspondence with my mistress, all of which I composed and received on my gmail account. Google also brings suit against me seeking to enjoin me from further negative comments about its services.
Can Google do these things?
We had a good discussion of the hypothetical today. My students got the obvious point that "I" was likely without a remedy against Google, and even if I could bring a claim I would have to do so in California. Views were divided as to whether Google could distribute my e-mails without my permission. The students also recognized how unlikely it was that Google would do so for reasons that have nothing to do with its legal rights. So, believe it or not, we got into a discussion of law and social norms in the first week of law school because the students brought it up!
The rest of the discussion was more or less as I had planned. We discussed form contracts and the troubles they raise in terms of fairness to consumers who lack information and bargaining power. We also discussed the benefits that consumers enjoy because courts permit businesses to reduce transactions costs by enforcing form contracts.
Both this year and last year I have had the benefit of the perspective of students who come to us with training and experience in non-U.S. law. I have learned from these students that in both Europe and Latin America the law is less deferential to the terms of form contracts. I've found that foreign students are often astonished by the difference in approaches in the area of consumer protection law. They find it hard to believe that U.S. courts enforce, for example, the arbitration and choice of forum clauses that have become a standard component of contracts of adhesion in the U.S.
P.S. I apologize for the varying font sizes. I am having a hard time adjusting to the new Typepad.
August 25, 2009
"Roxanne's Revenge": A PhD on Warner Music [File This In: Awesome Contracts Stories]
Heartwarming story of the day: Back in the 80s, Warner Music tossed a clause in then-teenage rapper Roxanne Shante's contract saying they'd pay for her education for life. So she got a psychology Ph.D from Cornell. Cost: $217K. Ha.
A little more detail from the Daily News:
After two albums, Shante said, she was disillusioned by the sleazy music industry and swindled by her record company. The teen mother, living in the Queensbridge Houses, recalled how her life was shattered.
"Everybody was cheating with the contracts, stealing and telling lies," she said. "And to find out that I was just a commodity was heartbreaking."
But Shante, then 19, remembered a clause in her Warner Music recording contract: The company would fund her education for life.
She eventually cashed in, earning a Ph.D. in psychology from Cornell to the tune of $217,000 - all covered by the label. But getting Warner Music to cough up the dough was a battle.
And, Roxanne's Revenge:
Here's to you, Dr. Shante!
[Meredith R. Miller]
August 24, 2009
Timeless Topics: Insects and Real Estate Contracts
Bed bugs! From the New York Times:
According to the law, sellers and their brokers must acknowledge a problem if asked. But conflicts of interest aside, neither can be expected to know whether an infestation exists elsewhere in the building.
The problem is so pervasive that some lawyers have begun incorporating sellers’ representations about bedbugs into sales contracts, adding to now-standard ones about leaks, mold and noise issues. And buyers are having to determine if the pests are a deal-breaker or just one more headache on the road to a new home.
[Meredith R. Miller]
August 23, 2009
Now in Print
Kristen David Adams, Promise Enforcement in Mortgage Lending: How U.S. Borrowers and Lenders Can See Themselves as Part of a Shared Goal, 28 Rev. Banking & Fin. L. 507 (2009).
Henry Deeb Gabriel, The Advantages of Soft Law in International Commercial Law: The Role of UNIDROIT, UNCITRAL, and the Hague Conference, 34 Brook. J. Int'l L. 655 (2009).
Gregory Klass, A Conditional Intent to Perform, 15 Legal Theory 107 (2009).
Boris Kozolchyk, Modernization of Commercial Law: International Uniformity and Economic Development, 34 Brook. J. Int'l L. 709 (2009).
Ramona L. Lampley, Is Arbitration Under Attack?: Exploring the Recent Judicial Skepticism of the Class Action Arbitration Waiver and Innovative Solutions to the Unsettled Legal Landscape, 18 Cornell J.L. & Pub. Pol'y 477 (2009).
Howard Munro, The "Good Faith" Controversy in Australian Commercial Law: A Survey of the Spectrum of Academic Legal Opinion, 28 U. Queensland L.J. 167 (2009).
Note, On Enforcing Viral Terms, 122 Harv. L. Rev. 2184 (2009).
C. Scott Pryor, Principled Pluralism and Contract Remedies, 40 McGeorge L. Rev. 723 (2009).
[Keith A. Rowley]