ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, October 16, 2010

Today in History -- October 17

1448 – A Muslim army under Sultan Murad II defeats Hungarian and Wallachian forces at the Second Battle of Kosovo. As a result, the Christian Balkan states and eventually Constantinople will fall under Muslim control.

1456 – Germany’s fourth oldest institution of higher learning, the University of Greifswald is officially established in a ceremony in the town’s cathedral.

1662 – Charles II of England sells Dunkirk—captured from Spain by Oliver Cromwell just five years earlier and awarded to it in the subsequent peace treaty—to France for 5 million livres.

A 1814 – At Meux & Co.'s Horse Shoe Brewery on Tottenham Road, London, bursting vats release more than 300,000 gallons of beer into the streets in a flash flood, killing eight. A subsequent lawsuit holds the disaster to be an "Act of God."

1907 – The Marconi Company inaugurates the first commercial transatlantic wireless service between stations in Glace Bay, Nova Scotia, Clifden, Ireland.

1965 – The New York World's Fair closes. More than 50 million people had attended the fair over its two-year run.

1973 – OPEC starts an oil embargo against a number of western countries, considered to have helped Israel in its war against Syria.  The U.S responds with gas lines, price controls, and new taxes to discourage American oil production.

1979 – The Department of Education Organization Act is signed into law, creating the U.S. Department of Education. Its goal is to improve American public schools. It will fail.


October 16, 2010 in Today in History | Permalink | Comments (0) | TrackBack (0)

Bedbugs Have Crept into Contracts

634 Bedbugs and real estate contracts seems to be a topic in regular rotation in the New York Times.  (See previous post, Timeless Topics: Insects and Real Estate Contracts). Today's paper reports on the pesky little bedbug problem and the emerging practice of bedbug disclosure riders: 

BEDBUGS have infiltrated more and more places in New York City, and now they’ve even found their way into co-op and condominium contracts.

The New York State Legislature passed a law this summer requiring city landlords to disclose any history of bedbug infestation before leasing an apartment. Real estate lawyers and brokers say that even though the law was intended to address rentals, bedbug disclosure has become an issue in the sales market as well.

The law requires landlords to give renters written notice before a lease is signed indicating whether the apartment being considered, or any other apartment in the building, has been infested within the last year. Anyone renting out an apartment in a co-op or condo would also have to comply with the law.

There has been confusion in the real estate industry over the scope of the law, but Nancy Peters, a spokeswoman for the state’s Division of Housing and Community Renewal, said last week that co-ops must also follow the law when there is a sale, because new buyers enter into a proprietary lease.

The division has issued a form ( with a checklist that clearly states whether there has been any bedbug infestation in the apartment or in the building within the last year, and also whether any “eradication measures” have been taken. There is no penalty for not complying, although renters who do not receive a disclosure form can file a complaint requiring disclosure.

In recent weeks, some lawyers representing co-op and condo buyers had already made bedbug disclosure a part of contract negotiation.

In early September, about a week after the law went into effect, Daniel Farris, a senior vice president of Brown Harris Stevens, said he came across a bedbug rider while reviewing a client’s proposed contract to buy a two-bedroom co-op on the Upper West Side.

The rider, which was proposed by the buyer’s lawyer, read, “The seller has no knowledge of the existence or presence of bedbugs in the unit either currently or in the past.” The seller signed the rider, and Mr. Farris’s buyer is now in contract for the apartment. Mr. Farris said he routinely counseled buyers to ask whether a unit has had a history of leaks or other problems and to have the building checked for rodents. He said he thought the rider made perfect sense, “for your own level of comfort; a buyer should know what they’re getting into.”

You can read the rest here.

[Meredith R. Miller]



October 16, 2010 in In the News, True Contracts | Permalink | Comments (0) | TrackBack (0)

Shortfalls are bustin' out all over

Via Tyler Cowen at Marginal Revolution, a grim story of pending budget cuts and tuition increases in the United Kingdom.  The bad news -- tuition looks like it will double.  The good news -- it will still be only about $11,000.  This year.


October 16, 2010 in Law Schools | Permalink | Comments (0) | TrackBack (0)

A good time was had by all

A I'm on the way back to Fort Worth -- enjoying the free WiFi at Philadelphia International Airport -- after a great one-day conference at Western New England’s Blake Law Center. The conference marked the 35th anniversary of one of the casebook staples on fiduciary law, Wilkes v. Springside Nursing Home, Inc., 370 Mass. 842 (1976).


Wilkes involved four men who had gone into business together to run a nursing home. They began as a partnership in 1951, then (on the advice of an attorney) formed a corporation to protect themselves from liability. Each of the four owned an equal share of the venture, each too a salary, and each served as a director. Some time later, the four had a falling-out. Wilkes’s fellow shareholders—Quinn, Riche, and Conner—excluded him from the board and fired him, leaving him with no way to get any economic value from his investment.

Under partnership law, Wilkes’s expulsion would have triggered a dissolution, and he would have been able to get the fair market value of his shares or even (if he chose to outbid the other three) take over the nursing home. Under corporate law, however, Wilkes had no claim. Shareholders ordinarily do not owe each other fiduciary duties; a shareholder has no right to sit on the board, nor does he have the right to employment. The case looked like a sure loser.

But the Massachusetts Supreme Judicial court held that a closely held corporation was essentially just a partnership which incorporated to get limited liability. The court ruled that the other shareholders in the nursing home owed Wilkes fiduciary duties, and that he was entitled to show that his "reasonable expectation" was that he would be entitled by his ownership interest to continued employment and a role in management.  Since the decision more than half of U.S. states have adopted some version of the Wilkes approach.

Eric Gouvin of WNE did a terrific job of putting the panels together. All of the papers presented at the conference will be published in a symposium in the Western New England Law Review, which will be a must-read for those of us who teach Business Organizations.  When I get a few minutes I’ll give you my take on the most interesting aspects of the conference.


October 16, 2010 in Conferences | Permalink | Comments (1) | TrackBack (0)

Hourly wage v. piecework: Guess which employee is more productive?

A Workers paid on a piecework basis were 20 percent more productive than workers paid on an hourly wage -- and they produced the same level of quality -- according to a recent study of tree-cutting workers.  The paper, Incentive Effect of Piece-Rate Contracts: Evidence from Two Small Field Experiments, is by Lan Shi of the University of Washington's Department of Economics.  Here's the abstract:



We conducted two field experiments in a tree-thinning setting. In one experiment, we switched the pay of a randomly chosen half (the treatment group) from hourly wages to piece-rate pay. Workers in the control group were paid hourly wages throughout. In the second experiment, workers were switched from hourly to piece-rate pay all at once. The difference-in-difference and before-after estimates suggest that the productivity increase was on the order of 20-23 percent. Although the sample size is small, the estimates are statistically significant and robust. While the quality did not drop, the study highlights the measurement costs in setting up the right level of piece rates. We also discuss the strengths and weaknesses of using randomized control (and treatment) groups or not in conducting field experiments within firms.


October 16, 2010 | Permalink | Comments (0) | TrackBack (0)

Friday, October 15, 2010

Today in History -- October 16

A 1841 – The Church of Scotland establishes Queen's University in Kingston, Ontario, under a charter from Queen Victoria..

1846 – Dentist William Morton makes the first public display of anaesthesia before a skeptical audience at Massachusetts General Hospital in Boston. A surgeon uses inhaled ether to remove a tumor painlessly from the neck of a patient.

1869 – The College for Women (now Girton College, Cambridge) is founded as the first residential college for women in England.

1875 – Brigham Young University is founded by the Church of Jesus Christ of Latter-Day Saints in Provo, Utah.

1882 – The New York, Chicago & St. Louis Railroad—known mostly by its nickname, the Nickel Plate Road—opens for business.

1898 – Future U.S. Supreme Court Justice William Orville Douglas is born at Maine Township in Otter Tail County, Minnesota.

1923 – Two young men from Chicago, Roy (age 30) and Walt (22) found the "Disney Brothers Cartoon Studio" in their uncle’s garage in Los Angeles.


October 15, 2010 in Today in History | Permalink | Comments (0) | TrackBack (0)

Best law schools for big-firm partners?

A THe indefatigable Paul Caron at TaxProf has a rundown on some work by Loyola-L.A.'s Ted Seto (left) on which law schools produce the most partners at America's biggest law firms.  The list looks a lot like what you'd expect, but there are some big surprises.  If you want to go the big-firm route, long-established (but not "elite") big-city schools like Fordham, Hastings, Boston College,Loyola-Chicago, and SMU are heavily represented among big-firm partners.   Some schools (USF, Loyola-L.A., and Loyola-Chicago) do much better on this metric than they do in the U.S. News rankins.  Seto's description of his initial findings on the MoneyLaw blog is here.

A perceptive comment, though, from one reader of the TaxProf blog:  "This is like looking up at the stars. All you see is an image of the past. How long ago were these partners in school?"



October 15, 2010 in Law Schools | Permalink | Comments (0) | TrackBack (0)

Sure, Red Sox lost, but owner Henry wins

A We noted yesterday that a British judge refused to stop the acquisition of the Liverpool FC football (soccer) club by Boston Red Sox owner John W. Henry.  Looks like Henry has closed the deal.  Story here.

The Liverpool purchase is the second attempt to get a major soccer franchise for Henry's New England Sports Ventures.  A year ago the group lost the bidding for Frances Olympique de Marseilles.


October 15, 2010 in In the News | Permalink | Comments (0) | TrackBack (0)

Integration Issue Not Appropriate for Resolution on 12(b)(6)

A Can a contract action based on an alleged oral contract be dismissed for failure to state a claim where the defense claims the parties subsequently entered into a fully integrated written agreement? No, says the U.S. District Court for the District of Hawaii. In Yamagishi v. Sato, 2010 U.S. Dist. LEXIS 106905 (D. Hawaii Oct. 4, 2010), the parties entered into a transaction described by the complaint as follows:

The Complaint alleges that on August 31, 1999, Plaintiff and Defendant entered into a written agreement (1) to merge Hatsuhana USA with Hatsuhana International such that Hatsuhana USA was the only surviving entity and owned all [*3] the stock in Hatsuhana Shoji and Hatsuhana Hawaii; (2) for Plaintiff to surrender his shares in Hatsuhana USA to Defendant in return for Hatsuhana USA transferring all shares of Hatsuhana Hawaii to Plaintiff; and (3) to extinguish a debt in the amount of $1,006,000 owed by Hatsuhana Hawaii to Hatsuhana USA. Id. P 11.

To make the transfer equitable, the Complaint alleges that the parties also entered into an oral agreement on this same date in which Defendant individually agreed that (1) Plaintiff would receive one half of the net proceeds for the sale of the Chicago Property, and (2) Defendant would pay Plaintiff $5,000 a month until the Chicago Property was sold, representing a portion of the rent proceeds. Id. The parties entered these agreements in Hawaii, and the oral agreement was witnessed and confirmed by other individuals. Id.

The problem in the case was that the written agreement was detailed and contained a merger clause, so the defendant moved to dismiss the claimed oral agreement.

Judge Michael Seabright, applying Hawaii law and relying on § 209 of the Second Restatement, held that whatever the language, the question whether the agreement was integrated was one of fact that could not be resolved on a motion to dismiss. He quoted comment b to § 210: "[A] writing cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into circumstances bearing on the intention of the parties."


October 15, 2010 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Thursday, October 14, 2010

Today in History -- October 15

70 B.C. – Publius Vergilius Maro is born at Antes, near Mantua in Cisalpine Gaul. He will give up the study of the law to write poetry under the name of "Virgil."

1582 – Pope Gregory XIII implements the Gregorian calendar. In Italy, Poland, Portugal, and Spain, October 4 of this year is followed directly by October 15.  The new American colonies, with their doctrine of separation of church and state, refuse to go along.

1783 – Jean-François Pilâtre de Rozier becomes the first man to fly in a hot air balloon. The craft is designed by the Montgolfier brothers.

A 1810 – Former U.S. Supreme Court Justice Alfred Moore dies at his plantation in Bladen County, North Carolina. Moore, who wrote only one opinion during his term on the Court, is the last resident of the Old North State to serve on the Court.

1844 – Philosopher Friedrich Nietzsche is born at Röcken (now part of Lützen) in Prussia. He will go on to have one of the most impressive mustaches in the history of philosophy.

1878 – With financial backing from financier J.P. Morgan members of the Vanderbilt family, the Edison Electric Light Company is created. Some 130 years later, now called the General Electric Company, it will have more than 300,000 employees worldwide.

1935 – Future folk singer Barry McGuire is born at Oklahoma City. His 1965 hit, "Eve of Destruction" will prove premature.

1989 – Wayne Gretzky becomes the all_time leading points scorer in the National Hockey League.

October 14, 2010 in Today in History | Permalink | Comments (0) | TrackBack (0)

Heat have LeBron, but not enough radio coverage

A The Miami Heat, the NBA team that earlier this year made headlines by adding former Cleveland star LeBron James to its roster, is now suing Clear Channel, the radio company that broadcasts Heat games.

The Heat claim (claims?) that the Clear Channel stations give the NFL's Miami Dolphins more extensive coverage then they give the heat, including long pregame shows and more coach and player programs,  The Heat claims that it has a "most favored nation" clause in its contract that requires it to get at least the same level of coverage as any other team carried by Clear Channelin the Miami market.


October 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Bosox group wins round in Liverpool acquisition

A It keeps getting worse for former Texas Rangers owner Tom Hicks -- whose team just won the first playoff series in its 39-year-history the year after he was ousted.

Hicks's bid to stop a group of Boston Red Sox investors from buying the Liverpool football (soccer) club out from under him has lost a round in court, the British judge holding that he and his fellow investors have no right to block the sale.


October 14, 2010 | Permalink | Comments (0) | TrackBack (0)

I'll gladly pay you Tuesday . . . .

A What social practice has been condemned by Christian, Jewish, and Moslem tradtions, as well as the ancient Greeks, and yet forms one of the cornerstones of modern life?  The answer, of course, is usury -- the lending of money at interest.  Marc DiGirolami at PrawfsBlawg has an interesting discussion of the point.

DiGirolami asks if any other practice so widely condemned in antiquity is so important a part of modern life.  Best answer from the comments so far:  "Pride, Lust, and Envy."


October 14, 2010 | Permalink | Comments (0) | TrackBack (0)

Wednesday, October 13, 2010

Today in History -- October 14

1066 – Troops led by William, Duke of Normandy, kill English King Harold II at the Battle of Hastings. William assumes the crown, leading to two things that will bedevil future generations of law students:  law french and feudal tenures.

1644 – Future American real estate tycoon William Penn—perhaps the only man to own an entire U.S. state—is born at London.

1834 – Armed warfare breaks out in Philadelphia as Whigs and Democrats contest an election, leaving 1 man dead and many injured. The New York Times subsequently decries the growing lack of civility in American civil discourse.

A 1882 – The Senate of the new British-founded University of the Punjab meets for the first time.

1884 – Inventor and entrepreneur George Eastman gets a patent for his new invention, photographic film.

1894 – Poet edward estlin cummings is born to a family so poor they cannot even afford to give their children capital letters.

1911 – U.S. Supreme Court Justice John Marshall Harlan, the former Know-Nothing politician who became the lone dissenter in The Civil Rights Cases and Plessy v. Ferguson, dies in Washington, D.C.

October 13, 2010 in Today in History | Permalink | Comments (0) | TrackBack (0)

The Hardest Law Schools to Get Into

Those of you who only like to go to restaurants where it's hard to get a reservation and buy cars where the dealer has a waiting list will be interested to know that the Princeton Review has a list of the hardest law schools to get into.  Like anyone is going to be surprised by the list . . . .  Via the Huffington Post.


October 13, 2010 | Permalink | TrackBack (0)

Barnett Talk at NYU

A A If you're in the Big Apple tomorrow (Thursday, 10/14/10), you might want to catch Contracts/Con Law scholar Randy Barnett, who's delivering the 6th annual Friedrich von Hayek Lecture at New York University.  Barnett's topic is Commandeering the People: Popular Sovereignty and the Health Insurance Mandate, which isn't perhaps as interesting has his work on consent in contracting, but is rather timely.

The session is scheduled at Vanderbilt Hall, 40 Washington Square South, at 6:00 p.m. -- and you can even get CLE credit.  (Barnett is the one on the left.)


October 13, 2010 in Commentary, Law Schools | Permalink | Comments (0) | TrackBack (0)

Mistaken Representation is not an "Accident"

A The Sixth Circuit has affirmed, in an unpublished opinion, a district court case holding that a commercial general liability carrier was not obligated to defend partners in a family limited partnership who were sued for conversion and "constructive fraud.  The opinion held that a mistaken material misrepresentation was not an "accident" under the policy.

In Ashley v. Valley Forge Ins. Co., 2010 U.S. Dist. LEXIS 46401 (E.D. Ark. May 11, 2010), Judge James Moody was faced with policy language that covered "[p]hysical injury to tangible property, including all resulting loss of use of that property. . . , or . . . [loss] of use of tangible property that is not physically injured," if it was the result of "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The policy excluded liability incurred "by the reason of the assumption of liability in a contract or agreement."

When father J.D. Ashley and his daughter Charlotte sued his sons Richard and J.D. Junior over various allegedly fraudulent activities with the family limited partnership, Richard and Junior sought to have their CGL insurance carriers defend the action. Judge Moody held that the claims against the two—which involved allegations that they had abused their position to cut off their father’s income and had made material false statements—were not accidental. "Whether one wrongly exercises control over another's property or makes a material misrepresentation by mistake, or with malfeasance in his heart," wrote Moody, " makes little difference as both are intentional acts and neither can be called an accident."

The Circuit Court’s affirmance is at 2010 U.S. App. LEXIS 20806 (October 7, 2010): "We agree with the district court that, based on the allegations in a state court suit brought against appellants in connection with their conduct towards one of their partners, appellees had no duty to defend appellants against that lawsuit under the terms of the insurance policies at issue."


October 13, 2010 in Recent Cases | Permalink | Comments (0) | TrackBack (0)

Fiduciary Duties in Closely Held Firms

1908RandallCountyCourthouseCanyonTexas907TJnsn The 1975 Massachusetts decision in Wilkes v. Springside Nursing Home is one of the staples of the Business Associations course.  Its holding -- that shareholders in closely held corporations owe each other fiduciary duties -- has been controversial from the start.  The rise of what Larry Ribstein calls the "uncorporation" (LLCs and such) has changed the face of fiduciary duty law drastically.  (Left: Springside Nursing Home today.)

So the Western New England College Law and Business Center is hosting a 35th birthday bash for the case this coming Friday at the Blake Law Center.  It's called Fiduciary Duties in the Closely Held Business 35 Years after Wilkes v. Springside Nursing Home.

The panelists look to be terrific:  Eric Gouvin (W. New England), Lyman Johnson (Washington & Lee), Mark Loewenstein (Colorado), Bob Thompson (Georgetown). Brian Quinn (Boston College), Dan Kleinberger (Wm. Mitchell), Benjamin Means (South Carolina), Doug Moll (Houston), René Reich-Graefe (W. New England), Deborah DeMott (Duke), Larry Ribstein (Illinois), and Mark Ramseyer (Harvard). A special treat will be the lawyers who represented the two sides in the case, the Hon. William Simons and David Martel. The lunch speaker is Justice Francis X. Spina of the Massachusetts Supreme Judicial Court.


October 13, 2010 | Permalink | TrackBack (0)

Tuesday, October 12, 2010

Today in History -- October 13

54 – Nero becomes emperor of Rome. Things will not turn out well.

409 – Two German tribes, the Vandals and the Alans, cross the Pyrenees into Roman Hispania, where they are given lands to settle in exchange for military service.

1307 – In an early example of "strategic default," King Philip IV of France—deeply in debt to Knights Templar who have loaned money to finance his English wars—has them all arrested and executed.

1792 – The cornerstone of the new U.S. Executive Mansion is laid.  Several future President will also get laid there.

1845 – Voters in the Republic of Texas approve a new constitution that will allow them to join the Union.

A 1890 – U.S. Supreme Court Justice Samuel Freeman Miller—who had been confirmed by the Senate a half-hour after his appointment by President Lincoln in 1862—dies in Washington, D.C.

1946 – France adopts the constitution of the Fourth Republic. It is not a success.

1967 – The Oakland Oaks defeat the Anaheim Amigos 134-129 in the first-ever American Basketball Association game. The league will survive and later merge with the NBA, but both of these teams will fold.

1983 – Ameritech Mobile Communications (later part of SBC and even later of AT&T)  launches the first cellular telephone service in Chicago.


October 12, 2010 in Today in History | Permalink | Comments (0) | TrackBack (0)

Employer Alleges that GPS Caught Employee Breaching Contract

Cell phones make a lot of things easier, but cheating on your spouse or your employer simply is not one of them.  Case in point: a story posted at (a website affilliated with the Houston Chronicle). Apparently, a local resident, Kevin Wendt, is being sued by his former employer, Brant Electrical, for claims of breach of contract, theft and misappropriation of trade secrets.  According to the website, Brant Electrical alleges that Wendt was working "behind the company's back for a potential client.”  How did Brant Electrical find this out?  Apparently the company discovered Wendt's activities by tracking the GPS on his company cell phone.  If the allegations are true, Wendt would be in violation of a confidentiality and non-compete agreement.  According to the story:

[Brant] claims that on Aug. 10, 2010, customer Chris Williams called the company and requested that worker Charles Reisner visit his property for an estimate, but since he was away, they sent Wendt instead.

They claim that when Wendt returned, he mentioned to several employees that the job Reisner wanted done would be good for his new company, Wendt Electric. Wendt called in sick to work the next few days, but through some clever detection, his bosses claim they used GPS tracking on Wendt's company cell phone to discover that he was really working at William's property under his own company. Execs of the company allegedly found him there and fired him on the spot.

[Brant] claim[s that] they found evidence that Wendt never submitted a bid from their company, and that Wendt used confidential information to solicit the client.

Wow!  With GPS tracking, why bother to post your status to Facebook: “Just scored awesome new client away from my employer…”?

[Meredith R. Miller]

October 12, 2010 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)