November 27, 2010
Today in History -- November 28
1520 – Seeking a westward route to the Spice Islands that doesn’t impinge on Portuguese territory, Spanish ships under the command of Ferdinand Magellan become the first Europeans to sail from the Atlantic to the Pacific.
1660 – Twelve men gather together to found a new weekly meeting group to discuss scientific experiments. It’s originally called the "College for the Promoting of Physico-Mathematical Experimental Learning," but will later be come known as the Royal Society.
1843 – After several years of squabbling over the Hawaiian Islands, Britain and France agree to recognize the islands as an independent nation.
1851 – Albert Henry George Grey, 4th Earl Grey, is born at London. As Governor-General of Canada he will donate a cup, named in his honor, that will be given annual to the champions of the Canadian Football League.
1907 – Twenty-three year-old scrap metal dealer Louis B. Mayer opens the refurbished Gem Theater in Haverhill, Massachusetts, as his first motion picture theater, the Orpheum.
1914 – After a shutdown caused by the outbreak of World War I, the New York Stock Exchange reopens for business.
1919 – American-born Nancy Witcher Astor, 2 nd Viscountess Astor, becomes the first woman Member of the British Parliament, as a Conservative member for Plymouth.
1929 – Future Motown record entrepreneur Berry Gordy, Jr., is born at Detroit.
1984 – Over 250 years after their deaths, William Penn and his wife Hannah Callowhill Penn are made Honorary Citizens of the United States. They must be very happy about that.
Oral change orders and the NOM clause, part III
I agree with Steve Feldman's comments on P&D Consultants that we published yesterday. My point in the original post (which wasn't clear) is not that P&D Consultants is wrong, but that the same considerations that militate in favor of enforcing a no-oral-modifications clause in a government contract are present in private contracting.
Years ago in practice I was involved in a lot of litigation over oral change orders, and I know what an absolute mess they can cause. The government obviously does not want to be bound every time some employee (even if it's the contracting offier or the Air Force general in charge of the program) says something. But that's the same reason that private parties put those clauses in their agreements. My point was that courts seem to think those clauses serve a very valuable protective function when it's the government's money, but not when it's a private transaction. I don't see the distinction.
November 26, 2010
Today in History -- November 27
511 – Clovis I (right, middle), the first king to unite all the Franks, dies His conversion to Catholicism from the Arianism popular with other German tribes would go on have an immense impact on the future history of Europe.
1746 – Future lawyer, judge, and diplomat Robert Livingston is born at New York City. He is best remembered as one of the drafters of the Declaration of Independence and the man who negotiated the most profitable land deal in history, the Louisiana Purchase.
1839 – The American Statistical Association is founded in Boston. Among its goals are to "work for the improvement of statistical education at all levels" and to "promote the proper application of statistics." It will fail miserably in both of these efforts, though not from lack of effort.
1895 – Chagrined by a premature newspaper obituary that calls him a "merchant of death," Alfred Nobel signs a new will leaving his estate to create the Nobel Prizes—but not until after he dies and no longer needs the money.
1901 – Lawyer and U.S. Secretary of War Elihu Root establishes the U.S. Army War College at Washington Barracks in the District of Columbia.
1924 – Looking to jump start Christmas holiday sales, and stealing an idea from rival Gimbels (which had pioneered the concept in Philadelphia), the R.H. Macy Department Store on 34th Street creates the first Thanksgiving Day Parade in New York City.
1934 – Hit with six bullets in a gunfight with FBI agents, 25-year-old Lester "Baby Face" Nelson dies at Wilmette, Illinois.
1973 – The U.S. Senate votes 92-3 to confirm Gerald Ford as Vice President of the United States, replacing Spiro Agnew. Those were the days when politicians who engaged in tax evasion lost their jobs and went to jail. Hard to believe, I know.
Gamboling Through Gaming and Gambling
The folks at Aspen Publishing -- or Wolters Kluwer if they prefer it -- have a new title out, Gaming and Gambling Law: Cases and Materials, by Dean Kevin Washburn of New Mexico,
With gambling now viewed not as a vice that discourages thrift and responsibility but as an "industry" that "brings job to the community," the subject is only going to get more popular. Here's the publisher's synopsis:
Gaming and Gambling Law: Cases and Materials combines policy interrogatories and the application of legal concepts in a thoughtful examination of gaming and gambling, in casinos and on-line. Kevin Washburn has created a teaching vehicle that sparks students’ interest and prompts them to apply a range of legal concepts to current and real-world issues.
Illuminating issues of criminal law, federalism, regulation, due process, and contracts, Gaming and Gambling Law features:
- the expertise of Kevin Washburn in field and classroom
- key issues and policy questions that arise in both legal and illegal gambling
- up-to-date coverage of the fast-growing phenomenon of on-line gamgambling
- a comparative law and policy perspective looks at the different regulatory models that govern legalized gambling and highlights key differences
For a thoroughly engaging class experience with a high pay off in learning, Gaming and Gambling Law is a sure bet. A great draw for second and third-year law students, this concise coursebook engages students in the law, policy, and regulatory practices that surround an iconic industry.
Contract drafting: A narrative approach
One of the new books coming out this year that we're particularly interested in seeing when it comes out in a few weeks is Basic Contract Drafting Assignment: A Narrative Approach, by Sue Payne (Northwestern), published by the fine folks at our LawProf sponsor, Aspen Publishing. Here's the publisher's description:
Basic Contract Drafting Assignments: A Narrative Approach is a unique supplement of contract drafting exercises designed to be used with any contracts or drafting course book. Instructors who want to incorporate drafting exercises into the classroom experience will find an invaluable asset in his supplement, which provides students with the tools necessary to develop skills that can be applied to various types of advanced transactional work.
Divided into four interest-catching sequences, this concise paperback takes a narrative approach, and gives students the opportunity to learn by doing:
- The first assignment in each sequence introduces the clients, their businesses, and their needs.
- In the second and third assignments those clients evolve and grow, and their business needs change.
- Each sequence features assignments of varying lengths and types, including gathering information, interviewing the client, outlining the issues that need to be considered from both sides of the table, and drafting the necessary memos, letters, and final contract.
- The assignments focus on methodologies in four areas:
- How to conceptualize in writing the parties’ rights, duties, risks, and protections.
- How to organize a contract on both the macro and the micro levels.
- How to draft for clarity and enforceability.
- How to express boilerplate terms.
Additional resources for students and instructors include:
- Entertaining and informative appendices, among them
- What Deal Lawyers Say to Each Other: A Dictionary of Contract Negotiation and Drafting Slang
- Ten Tips for Interviewing a Client about a Transaction
- Decoding the Comments on Student Contracts: Some Samples with Illustrations
- A web-based Teacher's Manual that provides teaching tips, answers to the student exercises, and notes for the characters that the teacher plays.
Basic Contract Drafting Assignments will augment and enhance any book you are currently using by providing a wealth exercises that will help students learn real-world drafting techniques and skills.
Feldman on oral change orders
Our friend Steven Feldman, author of Government Contract Guidebook, 4th Edition and Government Contract Awards::Negotiation & Sealed Bidding knows a lot more about government contracting than we do. He takes issue with our [i.e., my] analysis of a recent California case that enforced a no-oral-modifications clause in a government contract. Here's his view:
I read with interest your recent posting regarding the opinion of the Court of Appeals of California in P&D Consultants, Inc. v. City of Carlsbad, 2010 WL 4680800 (Cal. App. 4th Dist. Nov. 19, 2010). In P&D Consultants, the court ruled that California public contracts requiring written change agreements cannot be modified orally or through the parties’ conduct.
I agree with your observation that courts construing private contracts commonly allow parties to modify such terms through conduct and to thereby waive the owner’s protection. But I do not fully accept your critique that the court “gave no apparent explanation for drawing a distinction between the same clause in private and public contracts . . . except to note that one who deals with a public official must at its own peril make sure that the official has the necessary authority.” While the California court did make this assertion, it also said, “The purpose of including a written change order requirement in a municipal works contract is obviously to protect the public fisc from the type of situation that occurred here.”
Other cases rely on this valid public policy in the control of scarce government resources. The former United States Court of Claims has ruled that the purpose of a standard contract clause requiring an order in writing from the Contracting Officer for extra work is to protect the Government against the cost of extra work ordered by a subordinate acting without authority. Standard Acc. Ins. Co. v. United States, 102 Ct. Cl. 770 (1945). Cf. also Kennedy v. United States, 965 F.2d 413, 420 (7th Cir. 1992)(“[the] government could scarcely function if it were bound by its employees' unauthorized representations”). This point becomes clearer upon the realization that most federal, state and local agencies have numerous employees. Public expenditures would be wholly uncontrollable if otherwise well-meaning employees could issue informal changes to government contracts. Courts in this camp reason that as an expression of sovereign immunity, written change order terms may not be overcome by waiver or estoppel. 64 Am. Jur.2d Public Works and Contracts § 202 (2010).
While the California court’s interpretation of the written change order requirement is the majority rule in the United States, some jurisdictions follow a different path. These cases allow recovery for alterations or extras without a written change order where it appeared that the work was performed with the knowledge of the proper officers or representatives of the public entity and where other circumstances also tended to show an intention on the part of the public entity to waive or otherwise derogate from the stipulation. C. P. Jhong, Annot., Effect of stipulation, in public building or construction contract, that alterations or extras must be ordered in writing, 1 A.L.R.3d 1273 (1965 & Supp. 2010). Unlike P&D Consultants, these cases do follow the private law concept that “Contractual clauses requiring written change orders can be waived by conduct.” See G.M. Harston Const. Co., Inc. v. City of Chicago, 371 F. Supp. 2d 949, 952 (N.D. Ill. 2005)(citing private law Illinois authority).
The upshot is that the California court in P&D Consultants did correctly construe the contract and its decision was consistent with California public contract law and policy. Nevertheless, some other jurisdictions do follow a more liberal view allowing contractor recovery despite a contractual written change order provision, which means that practitioners should consult applicable law for further guidance.
Steven W. Feldman
November 25, 2010
Today in History -- November 26
1607– Future clergyman John Harvard is born at Southwark, England. He will later become the first American college benefactor to have the college he endows change its name in his honor. There will be many others.
1789 – President George Washington declares a national Thanksgiving Day. Washington’s proclamation begins:
Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor, and whereas both Houses of Congress have by their joint Committee requested me to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness. Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be.
1842 – Fr. Edward Sorin of the Congregation of the Holy Cross and eight other brothers found a new college with two students in a log chapel in St. Joseph County, Indiana. It will be named Notre Dame du Lac..
1863 – President Abraham Lincoln, following Washington’s example, proclaims an annual Thanksgiving to be celebrated annually on the last Thursday of November.
1917 – At the Windsor Hotel in Montreal, representatives of three teams from the defunct National Hockey Association create a new "National Hockey League." The Montreal Canadiens, Montreal Wanderers, and Ottawa Senators will add a fourth team, the Toronto Arenas (later the "Blueshirts" and then "Maple Leafs") for the inaugural season.
1949 – The Constituent Assembly adopts a constitution for the new Republic of India.
1983 – Six men break into the Brink's-MAT warehouse at Heathrow Airport in London, inintending to steal what they think is £3 million in cash; instead they find three tonnes (6,800 gold bars) worth £26 million. Four of the robbers and most of the gold have never been recovered.
On a day like today, when the first icy (45° F) blast of winter is coming down the verdant Brazos Valley, chilling the rattlesnakes and rattling the Mexican junipers at Château Snyder, it's nice to sit in front of a fire with a steaming Tom & Jerry and think about . . . chicken feet.
Why chicken feet? Because they (along with chicken skin) are prominent features of what I think is the only U.S. Supreme Court case about Thanksgiving turkeys. The case is M. Kraus & Bros., Inc. v. United States, 327 U.S. 614; 66 S. Ct. 705; 90 L. Ed. 894 (1946). It's a criminal case, but it does have something to do with contract law.
The case takes us back to Thanksgiving 1943, when wartime price controls have led to a serious shortage of meat (and lots of other things) in the U.S. Because turkeys are in short supply, prices naturally tend to rise. The Roosevelt Administration responds with the Emergency Price Control Act of 1942, which makes it a criminal offense to sell certain things (including turkeys) prices above a price "established" by the Office of Price Administration. Because that price is fairly low, demand for turkeys at Thanksgiving 1943 far exceeds the supply.
The defendant operates a wholesale meat and poultry business in New York City. In prior years it has usually received 100-150 rail cars of turkeys, but in 1943 it only gets one (1) car, and must decide how to divide that relative handful among its customers. Because it can't raise prices, it decides to bundle the turkeys with chicken feet, chicken skin, and chicken gizzards, so that its customers who buy turkeys must also buy the other products.
The defendant is indicted. The prosecution claims that by tying the turkeys to other products of dubious value the seller had violated the Price Administrator's regulations, which provided:
Price limitations set forth in this Revised Maximum Price Regulation No. 269 shall not be evaded whether by direct or indirect methods, in connection with any offer, solicitation, agreement, sale, delivery, purchase or receipt of, or relating to, the commodities prices of which are herein regulated, alone or in conjunction with any other commodity, or by way of commission, service, transportation, or other charge, or discount, premium, or other privilege or other trade understanding or otherwise.
The jury convicted and the Second Circuit affirmed. The Supreme Court -- perhaps still not as friendly and accomodating to economic regulations as it would later become -- reversed the conviction 5-3 (Jackson did not participate), although the justices issued four separate opinions. Relying heavily on the fact that the Administrator in other regulations had specifically mentioned "tying agreements" but did not do so in Regulation 269, Justice Murphy,Stone, Rutledge, Frankfurter, and Douglas all more or less agreed that a tying arrangement in which the goods had some value was not an "evasion" of the regulations, although Douglas and Rutledge (joined by Frankfurter) wrote concurrences as well. Black wrote the dissent, joined by Burton and Reed.
It's interesting that only ten ears after unanimously striking down poultry price regulations in A.L.A. Schechter Poultry Corp. v. United States, 295 U.S. 495, 55 S. Ct. 837; 79 L. Ed. 1570 (1935), not a single justice even questioned the government's authority to set the price of every turkey in the United States. As Mr. Dooley noted, "No matther whether th' constitution follows th' flag or not, th' supreme coort follows th' iliction returns.”
P.S. In case you're wondering what value chicken feet would have, here's a tasty recipe..
Miller on the Law of the Turkey
Judge Frank Easterbrook may h as written the most famous article on The Law of the Horse, but ContractsProf blogger Meredith Miller (Touro) has no peer when it comes to the Law of the Turkey. Past Tanksgivings have featured her analysis of legal turkeys. Or rather, turkeys involved in legal disputes.
Here are some of her greatest hits from Turkey Days past. Enjoy!
The Law of the Turkey (2006)
ContractsProf Is Not Chicken (2008)
The Law of Turkey Leftovers (2008)
November 24, 2010
Texas Wesleyan names former law dean as President
I'm personally very happy to announce that Texas Wesleyan University in Fort Worth has just named Frederick G. Slabach, CEO of the Harry S. Truman Scholarship Foundation in Washington D.C., as the 19th president of the 120-year-old university.
Slabach was dean of TWU's law school from 2003 to 2006 He's continued as Dean Emeritus and Professor of Law while holding the top leadership position at the Truman Foundation. He replaces Harold Jeffcoat, who led the university for 10 years.
Before becoming dean at Texas Wesleyan, Slabach was vice dean and professor of law at Florida Coastal, associate dean for academic affairs at Mississippi College, and interim dean and associate dean at Whittier. He was an aide to Senator John Stennis and was Assistant Secretary of Agriculture for Congressional Relations in the Clinton Administration. He also served a term as Executive Director of the Mississippi Democratic Party. His wife is Pulitzer Prize-nominated writer Melany Nielsen.
Welcome back home, Fred.
There must be a better way of putting this . . . .
Homeland Security Secretary Janet Napolitano is thanking beleaguered Transportation Security Administration employees for their, um, "hard" work.
If explicit enough, court will enforce condition precedent
It is often said that conditions precedent are not favored in contract law, and must be stated extremely clearly if they are to be given effect. Cases like Peacock Construction Co. v. Modern Air Conditioning, Inc., 353 So. 2d 840 (Fla. 1977), are casebook staples. In Peacock Construction, a contract provision provided that a subcontractor would be paid after the prime contractor itself was paid by the owner (a "pay-when-paid" clause). The court held that this did not create a condition precedent, and thus that the prime was required to pay the sub whether it received money from the owner or not. The Peacock Construction court noted that a prime could make such a provision a condition precedent, but that the agreement "must unambiguously express that intention" and the contractor bears "the burden of clear expression."
Well, a recent decision by the Alabama Supreme Court, Lemoine Co. v. HLH Constructors, No. 1090847 (Ala. Nov. 19, 2010), 2010 Ala. LEXIS 215, shows an example of that clear expression. It was again a prime-sub dispute, and it included a pay-when-paid clause. But this time the contract contained the following clause:
Notwithstanding anything else in this Subcontract or the Contract Documents, the obligation of [Prime] to make any payment under this Subcontract . . . is subject to the express and absolute condition precedent of payment by [Owner]. It is expressly agreed that [Prime] and its surety shall have no obligation to pay for any work done on this Project, until [Prime] has received payment for such work from [Owner]. . . . [Sub] expressly assumes the risk of nonpayment by [Owner].
This, said the Court in an opinion by Justice Thomas Woodall, is pretty darned clear. While Sub cited a host of condition precedent cases, all had relied on birnak pay-when-paid clauses. Where, as here, the parties have expressly allocated the risk of nonpayment, said the court, those cases do not apply.
News in Brief -- Wednesday, Nov. 24, 2010
LOS ANGELES (Calif.): "Axl Rose of Guns N' Roses has filed a $20 million suit against Activision, charging that it broke its promise not to feature former bandmate Slash in "Guitar Hero III" as a condition for obtaining the rights to feature Welcome to the Jungle' (below) in the game.
BOSTON (Mass.): "Cape Wind may become the first U.S. offshore wind farm after Massachusetts regulators approved a contract permitting it to sell electricity, overcoming critics including the Kennedy family and Wal-Mart Stores."
SANFORD (Fla.): "A judge has dismissed a lawsuit against the Florida Republican Party by its ousted chairman. . . . [Jim] Greer had accused the party of reneging on a $124,000 secret severance deal."
YAOUNDE (Cameroon): Dutch footballing great Arie Haan has been ordered by FIFA to pay the Cameroon Football Federation (Fecafoot) 500,000 euros for breach of contract, the national federation announced on Tuesday
OKLAHOMA CITY (Okla.): "Leave it to Oklahoma City Thunder general manager Sam Presti to conceive a contract extension for glue-guy forward Nick Collison that forces me to consult every salary-cap reference book I can find. This is a fun one."
ATLANTIC CITY (N.J.): "New Jersey school officials are challenging Governor Chris Christie in state Superior Court about using his administration's proposed salary cap to freeze current contracts which are under negotiation."
PROVIDENCE (R.I.): "Detroit’s money was sweeter, and so Boston’s veteran catcher, clubhouse leader, and lineup mainstay Victor Martinez is leaving Fenway for the Detroit Tigers and Comerica Park."
Kelly gets Inside Contract Law
- ;basic coverage of the main themes of contract law in theory and practice
- ;a straightforward and informative writing style
- ;Overviews -a brief introduction to each chapter that positions the topic within the course
- ;FAQs-frequently asked questions with complete answers-many of which address common mistakes and ambiguities
- ;Sidebars-text boxes that contain interesting asides touching on history, policy, and law
- ;visual aids, such as tables and flow charts, that illustrate key concepts
- ;Chapter Summaries and boldfaced legal terms
- ;Connections-a bulleted list at the end of each chapter that connects key points to related topics in other chapters
- ;attractive, uncluttered, two-color page design
November 23, 2010
Today in History -- November 24
1632 – Philosopher Baruch Spinoza is born at Amsterdam in the Dutch Republic. He will turn down numerous academic appointments to keep his job as a lens grinder, even though that job didn’t promise him tenure.
1642 – On a voyage for the Dutch East India Co., Abel Tasman’s crew become the first known Europeans to spy Van Diemen's Land (later renamed Tasmania) in Australia.
1835 – The Texas Provincial Government authorizes the creation of the oldest law enforcement agency in North America, the Texas Rangers. Their original badges were hammered out of Mexican peso coins.
1859 – Charles Darwin publishes On the Origin of Species. He didn't have tenure, either.
1877 – Future lawyer, judge, Senate Majority Leader, and Vice President Alben William Barkley is born at Graves County, Kentucky.
1916 – Hiram Stevens Maxim—inventor of the first practical portable machine gun—dies at London. Hillaire Belloc would later comment on the gun’s effect on colonialism:
Never fear the Hottentot.
Whatever happens we have got
The Maxim gun, and they have not.
1963 – In the first shooting death to be broadcast live on national television, bar owner Jack Ruby kills Lee Harvey Oswald in the basement of Dallas police department headquarters. Viz:
Ms. Quinn, Mr. Lonnegan is on line six . . . .
I've never watched Dancing With the Stars and probably couldn't tell Bristol Palin from Bristol Myers in a police line-up, so I have absolutely no interest in whether she wins the TV competition or not. But you don't have to know anything about it to appreciate the unintentionally hilarious column by the Washington Post's Sally Quinn, The unholy (s)election of Bristol Palin.
In her column -- which weirdly enough appears in the religion section of the paper -- Quinn explains that she watches the show every week. The show's rules allow you to vote no more than five times from a home telephone line. But since Quinn has six separate home lines, she happily casts 30 votes each episode for her favorite dancer.
But now she's learned that some unscrupulous people (who are obviously poorer but more tech-savvy than she is) have exploited loopholes in the rules to vote as many as 300 times for Palin by registering additional email addresses! That's . . . that's cheating! "I never remember all Ten Commandments," says the Post's religion writer, "but there should be one that says, "Thou shalt not cheat while voting on 'Dancing with the Stars.'" (emphasis in original). I can't help thinking of this classic scene from The Sting:
I can imagine Quinn's response to the last question:
Doyle Lonnegan: What was I supposed to do -- call him for cheating better than me, in front of the others?
Sally Quinn (thinking): Uh, yeah. Why not?
Quinn is of course getting hammered in the blogosphere all the way from Wisconsin law prof Ann Althouse.to Wonkette to the Huffington Post. My favorite from the various reader comments: "It's idiotic to claim that a popularity contest is unfair."
And yes, I'm reading this stuff because I don't want to finish writing my exams.
A Wrench in One Judge's Mortgage Modification Revolution: Reversal on Appeal
In an April 2010 post titled One Judge’s Mortgage Modification Revolution, we wrote:
In Suffolk County, New York, in the Residential Mortgage Foreclosure Conference Part, Justice Jeffrey Arlen Spinner is waging his own mortgage reform revolution. Back in November, Justice Spinner canceled a $292,500 mortgage on unconscionability grounds, describing IndyMac Bank’s behavior as “harsh, repugnant, shocking and repulsive.” Then, just last week, he ordered the Emigrant Mortgage Company to pay $100,000 to the homeowners as compensation for the bank’s “deplorable” mortgage agreement and its bad-faith foreclosure negotiations. The judge "forever barred" Emigrant from collecting interest on the $302,500 mortgage, as well as any legal fees, costs "or any sums other than the principal balance."
About a year after Judge Spinner cancelled the IndyMac mortgage, the Appellate Division (Second Department) has reversed his decision. The appellate court reasoned that Judge Spinner did not have the authority to cancel the mortgage:
Here, the severe sanction imposed by the Supreme Court of cancelling the mortgage and note was not authorized by any statute or rule (see Tewari v Tsoutsouras, 75 NY2d 1, 5-7), nor was the plaintiff given fair warning that such a sanction was even under consideration (see Matter of Harner v County of Tioga, 5 NY3d 136, 140; Barasch v Barasch, 166 AD2d 399, 400). The reasoning of the Supreme Court that its equitable powers included the authority to cancel the mortgage and note was erroroneous [sic], since there was no acceptable basis for relieving the homeowner of her contractual obligations to the bank (see First Natl. Stores v Yellowstone Shopping Ctr., 21 NY2d 630, 637; Levine v Infidelity, Inc., 285 AD2d 629, 630), particularly after a judgment had already been rendered in the plaintiff's favor.
My colleague, Tom Maligno, Executive Director of the William Randolph Hearst Public Advocacy Center and Director of Public Service at Touro, commented in Newsday: “The way the banks have been dealing with homeowners has not been fair. I wish all courts would take the fairness part of the equation into account more.”
On the other hand, the lenders can now let out a biiiig-slooooow-sigh-of-relief....
[Meredith R. Miller]
"No oral modification" clause dooms claim under public contract
Courts are often reluctant to enforce contract clauses that prohibit the parties from making oral modifications to contracts and require that all changes be in writing signed by the parties. California courts tend to ignore these "no oral modification" clauses in private transactions, as we’ve noted before.
But when it comes to public contracts, the rules are different, according to a recent decision by the California Court of Appeal, which as usual refuses to publish its contract decisions. In P&D Consultants, Inc. v. City of Carlsbad, No. D054810 (Cal. App. 4th Dist. Nov. 19, 2010), 2010 Cal. App. Unpub. LEXIS 9209, a contractor (P&D) racked up costs in performing work authorized orally by the city. The contract had a provision that prohibited oral modifications. The trial judge gave what look to be normal "no oral modification" instructions:
P&D . . . claims that the original contract was modified, or changed. P&D . . . must prove that the parties agreed to the modification. [The] City . . . denies that the contract was modified.
The parties to a contract may agree to modify its terms. You must decide whether a reasonable person would conclude from the words and conduct of P&D . . . and [the] City . . . that they agreed to modify the contract. You cannot consider the parties' hidden intentions.
A contract in writing may be modified by an oral agreement to the extent the oral agreement is carried out by the parties.
The jury found for P&D and the city appealed.
Wrong, said Presiding Judge Judith McConnell, holding that P&D’s claim was barred as a matter of law by the contract provision. While courts may ignore that "no oral modification" language in private agreements, the writing requirement in a public contract is apparently critical:
We reverse the judgment on the first amended complaint (hereafter complaint) based on the contract's requirement of a written change order. Unlike private contracts, public contracts requiring written change orders cannot be modified orally or through the parties' conduct. Thus, even if P&D's evidence pertaining to the oral authorizations of a city employee for extra work are fully credited, P&D cannot prevail. The court erred by submitting the matter to the jury; it should have granted the City's motion for nonsuit. Because the contract issue resolves the matter, we need not address Government Code section 406021 or the sufficiency of the evidence.
What is particularly interesting in the decision is that the court relied solely on the contract language for its decision. The court gave no apparent explanation for drawing a distinction between the same clause in private and public contracts—that’s presumably one of the advantages in issuing opinions that can't be cited back to you later if you change your mind—except to note that one who deals with a public official must at his own peril make sure that the official has the necessary authority.
Given that at one point in the opinon Judge McConnell notes that "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties," I'm not sure why the same language indicates different intent in public vs. private contracts.
News in Brief -- Tuesday, Nov. 23, 2010
WHITE PLAINS (N.Y.): "The U.S. Tennis Association is suing Olympus Corporation of the Americas for $11.65 million for breach of contract, saying the camera company wants to get out of their sponsorship agreement for 2011."
TORONTO (Ont.): "Shoppers Drug Mart Corp. said Monday it's being sued for $1 billion by two of its licensed associate_owners. The suit claims breach of contract by the pharmacy company."
FLINT (Mich.): "As you drive through some of Flint's neighborhoods, do you ever wonder why there are so many vacant, dilapidated homes?"
TRENTON (N.J.): "With Gov. Chris Christie blocking Jersey’s public schools from giving superintendents overpaid new contracts, the state Assembly on Monday passed a bill, 78-0, that would subject top school executives to standardized contract guidelines.
DAYTON (Ohio): "Boeing Co. will have to wait until 2011 to learn the fate of a $35 billion U.S. Air Force contract for tanker refueling planes, according to several reports."
DUBLIN (Eire): "Contracted Bohemians [F.C.] players will receive one week's wages today, but the Dubliners remain engaged in a race against time to agree redundancy packages after making progress with respect to their tax bill."
MADISON (Wisc.): "Before their session ends, the Democrats in the Wisconsin Legislature are attempting to approve labor contracts for unions in a special session in December. Gov. Jim Doyle [right] reached a tentative labor contract with six labor unions this month, despite requests from Governor-elect Scott Walker that Doyle refrain from making contract agreements in the final six weeks of his tenure as governor."
SÃO PAOLO (Brazil): "Enap, Chile’s state-owned oil company, will sign a new contract with Ecuador on Tuesday amid speculation that two foreign oil majors are poised to leave the country. Petrobras of Brazil, and Repsol of Spain, have refused to comment on negotiations before midnight on Tuesday local time—Ecuador’s deadline for foreign companies to accept a demotion to service_provider status or agree to hand over their operations to the state."
Ribstein on discouraging venture capitalists
Larry Ribstein (Illinois) has some thoughts at Truth on the Market about new SEC rules designed to bring hedge funds and venture capital outfits under regulation. Here's his take:
The [new] rule grandfathers existing funds that have represented themselves as venture capital funds “because it could be difficult or impossible for advisers to conform existing funds . . . to the new definition.”
But the SEC feels comfortable locking new funds into terms that could constrain their activities for long periods in a dynamic investment environment. . . . The costs associated with this inflexibility are especially problematic given VC funds’ need to adjust to the drop in initial public offerings, which traditionally provide a critical opportunity to exit from investments.
Real unemployment is climbing toward 20% and new firms with new ideas can create jobs. Venture capital is a key mechanism for funding start-ups. Somebody should pass this information onto the SEC.