ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, May 5, 2011

Breaking Contracts News From Wisteria Lane


This blog has been subjected to searing criticism from certain quarters and has been dubbed "The People Magazine of Law Blogs."  Ouch.  Undeterred, we continue to bring our readers the good stuff.  If you want high-minded, wonky policy-oriented analysis, I suggest you try this blog -- and after you wake up drooling into your keyboard, you can move on to this one.  It won't be long before you come back to your famliar bookmark for the latest about Paris, Lady Gaga, Charlie Sheen and the remainder of our royal family. 

So, as we were saying.  Last year, Nicollette Sheridan sued Marc Cherry and various entities associated with the hit television series "Desparate Housewives."  Her first amended complaint can be found here.  As the New York Times reported today, some of the juicy allegations, including assault and battery and gender violence have been dropped, but the case is now set to proceed to trial on the juiciest allegations of all: wrongful and retaliatory termination.  Ahhh, that's the stuff!

Those who tend to confuse "Desperate Housewives" (DH) with the various "Real Housewives" reality television series might be confused by a lawsuit brought by a woman whose character, Edie Britt, was killed in a car crash during the show's fifth season, but Sheridan alleges that Cherry and the other people and entities behind the scenes at DH plotted to have her character -- not her, because she is desparate, not real -- killed off in breach of contract. 

The complaint alleges that Sheridan was guaranteed compensation on a per-episode basis through the show's seventh season.  However, Sheridan alleges that Cherry created a hostile work environment -- especially for her -- and that Cherry's hostility towards her culminated in September 2008 when he hit her with his hand across her head and face. She reported this conduct to ABC executives who concluded that Cherry "simply gave her a light tap on the side of her head for the sole purpose of privding direction for a scene they were rehearsing."  In February 2009, Sheridan was informed that her character was to be killed off.  She believes that this was a retaliatory act.   The judge found sufficient questions of fact on that issue to send the case to trial.

She alleges damages of $20 million.


May 5, 2011 in About this Blog, Celebrity Contracts, In the News | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 3, 2011

A Reminder From Tucson Arizona: The Fuzzy Logic Of Snap Mental Assessments

200px-Jared_Loughner_USMS[1] The heartwarming recovery of Representative Gabrielle Giffords who was inexplicably shot by a clearly troubled Jared Loughner has been an upbeat staple of news reports since January.  Hopes that Rep. Giffords would be recovered sufficiently to attend the launch of the space shuttle Endeavor this April ending have been realized – she travelled to Florida for the launch.  Although the launch is briefly postponed, she was well enough to receive a visit from President Obama, who was also at the launch site with the First Lady to witness the launch.  She plans to return for the rescheduled launch.

The shooter Loughner, who was arrested at the scene and charged with murder and attempted murder, is being assessed in the meantime for his mental fitness to stand trial. His mental state will feature prominently in his trial, and not only in terms of whether he is fit to stand trial.  Amid speculation that it is all but certain that the prosecution will seek the death penalty, it is expected that Loughner will plead insanity as a defense.   Loughner’s statements and journal entries to the effect that his actions were deliberate and premeditated will make the plea of legal insanity a difficult one for him to sustain.

The emerging timeline of Loughner’s movements reveals that he made two trips to Walmart in the early hours of the day of the shooting.   It seems Loughner tried to buy some ammunition at a Walmart store - but was unsuccessful - so he went to another Walmart nearby where he purchased ammunition and a black backpack-style diaper bag.  A similar black bag, now in the possession of the FBI, was later found in a dry riverbed near Loughner's parent’s home.  Seven boxes of ammunition - the same type used in the shooting – and a receipt for the purchase of the bag were found in the bag.  The awful incident has revived calls for more robust gun controls.  The father and fiancé of Representative Gifford’s aide Gabe Zimmerman, who was killed during the shooting, have thrown their support behind renewed campaigns for more restrictive gun control laws. 

This brings me to the contractual hook.  Reports suggest that Loughner was turned away from the first Walmart by a sales clerk.  Walmart demurred later that Loughner was not turned away – that Loughner merely left the store before completing the transaction.   Does it make a difference - is it important how Loughner came to leave the first Walmart empty handed?  , Why the careful clarification by Walmart, in other words?

If the ammunition seeking Loughner was in fact turned away from one Walmart but not from the other, the two transactions invite closer scrutiny.  What did Loughner do in the first store to motivate the rejection of the store clerk?  Did Loughner behave strangely, or did the clerk merely react instinctively to Loughner’s allegedly unnerving persona?  If the clerk in one Walmart store was sufficiently spooked to deny Loughner the sale of ammunition, why didn’t the clerk in the other Walmart store do so also? Was the same behavior perceived as normal by Walmart clerk #2 – or did a determined Loughner have the presence of mind to adjust his behavior to a semblance of normalcy on his second attempt?  The point this scenario highlights, is that it can be difficult for an ordinary person, e.g. someone who is not Dr Drew, to accurately assess the mental fitness of another person to enter into a contract – yet parties to a contract are expected to make snap decisions about the mental fitness of the other to enter into the transaction they are both contemplating..

 A person suffering from a mental illness or defect is given the choice of backing out from a contract in certain circumstances.   This power of avoidance is conditioned on a on a short list of alternative contingencies, including the requirement that the other party be without knowledge of the mental defect or illness.   A seller of weapons has even more sobering reasons to be wary of the mental health of a customer than the risk of avoidance.  It is an offence to sell weapons to mentally ill persons under existing and proposed laws.  It is an offence under s.922 of the federal Gun Control Act 1968, to sell or otherwise dispose of any firearm or ammunition to any person knowing or having reasonable cause to believe that such person has been adjudicated as a mental defective or has been committed to any mental institution for example (italics mine).  While the tests and policies underlying such rules in contractual and criminal contexts are different, the fact remains that a seller may be disadvantaged in either context because he did not respond to  the strangeness of a customer,  or he failed to refuse a sale in circumstances another seller deems strange enough to warrant a refusal.

The wholesomeness of a one party’s mental capacity to contract hinges on a cognitive test or a test of volition.  If a party is unable to understand in a reasonable manner the nature and consequences of the transaction, she fails the cognitive test.  It does not matter if this inability is known to the other party or not.  Even if the other party was unaware of the cognitive disability, the disabled party can avoid the transaction.  If, on the other hand, she is unable to act in a reasonable manner in relation to the transaction, she will fail the volition test.  The results of the volition test - unlike the cognitive test – depend on what the other party knew however.   Not only must the mentally impaired party be unable to act reasonably in relation to the transaction, the other party must be aware that the mentally impaired party is unable to act reasonably before avoidance will be permitted.  The disabled party will not be able to avoid the transaction because of his impaired volition, if the other party did not have reason to know (and did not know) that the disabled party was suffering from said impaired volition.  A cognitive disability confers a broad power to avoid, while a volitional disability confers a limited power to do so.  Whether broad or narrow, the power of avoidance may terminate where the contract was made on fair terms, and the other party had no knowledge of the defect/illness if the contract has in fact been wholly or partly performed.  The power will also be terminated  if the other party had no knowledge and it was made on fair terms if the circumstances has so changed that avoidance would be unjust. 

So, it all hinges on what the other party knew, or ought to have known about the mental fitness of the mentally disabled party – yet what the assessing party knew or ought to have deduced from the circumstances may be arguable or it may be hard to pin down - as in our Walmart situation.  In the contractual context where the objective is to shield a disabled person from obligations neither properly related to nor understood, the fuzzy logic of snap capacity assessments are more  defensible.   The aim is to protect a person of ‘feeble mind’ rather than secure perfect fairness for the perfectly sane other party.    The fact that one party might assess the mentally impaired other party as perfectly sane, whereas another in that situation would or did arrive at a different conclusion is not regarded as a major problem.  “All’ that hangs on the outcome is the ability of the sane party to enforce the transaction, and a court may still rule as it sees fit in the interests of justice (provided the sane party was unaware of the other party’s disability, and the contract was made on fair terms). 

Reliance on such fuzzy logic is less defensible where a wrong assessment of mental ability may result in the commission of an offence.  This may be one reason why some state gun control laws are worded more specifically to prohibit ownership or sale to person deemed mentally unfit by court order, by confinement to a mental hospital or institution,  or where the person is deemed a danger to himself or others pursuant to an unrevoked court order.  There are however some laws that simply prohibit sale to or ownership by persons who are mentally incompetent or of unsound mind.   Others do not even reference mental incapacity at all. 

It may be ultimately decided that the Walmart clerk that sold the ammunition to Loughner had no reason to be aware of Loughner’s alleged mental impairment.  If so, the fact that another clerk refused Loughner the sale will be harmless.  If however it is determined that Loughner was so strange that a reasonable clerk would have been alerted to his mental impairment, the different outcomes in the two stores will land Walmart in trouble.  Whether because the Walmart employee was unreasonably unobservant of Loughner’s alleged mental impairment, or because Walmart did not have in place (or its employees did not observe) safeguards designed to prevent the sale of ammunition to mentally disabled persons, Walmart may get into trouble for selling weapons to an unsuitable person.   

This throws some light on why Walmart would want to clarify that an employee did not find Loughner’s behavior strange - negative inferences may be drawn from the failure of the other Walmart clerk to arrive at the same conclusion, while questions may arise about what measures Walmart has in place to guard against just that type of mishap.

E. O. Akindemowo.

May 3, 2011 in Commentary, Current Affairs, In the News | Permalink | Comments (0) | TrackBack (0)

Weekly Top Tens from the Social Science Research Network

SSRN RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of LSN: Contracts (Topic)  

March 4, 2011 to May 3, 2011

RankDownloadsPaper Title
1 216 Contract is Not Promise; Contract is Consent 
Randy E. Barnett,
2 154 Contracts: Law in Action, Volume I: The Introductory Course – Introduction (Chapter 1) 
Stewart MacaulayJean BraucherJohn A. KidwellWilliam C. Whitford
3 98 Digital Evolution in Law School Course Books: Trade-Offs, Opportunities, and Vigilance 
Lawrence A. Cunningham
4 92 Intolerable Abuses: Rendition for Torture and the State Secrets Privilege 
D. A. Jeremy Telman
5 74 Optional Law: A Plea for Multiple Choice in Private Law 
Jan M. Smits
6 74 The Myth of Efficient Breach: New Defenses of the Expectation Interest 
Daniel MarkovitsAlan Schwartz
7 55 Delaware Dissolves the Glue of Capitalism: Exonerating from Claims of Incompetence Those Who Manage Other People’s Money 
Daniel S. Kleinberger,
8 33 Gambling by Another Name? The Challenge of Purely Speculative Derivatives 
Timothy E. Lynch
9 33 Equal Opportunity for Arbitration 
Hiro N. Aragaki
10 30 Beyond the Inevitable and Inadequate Regulation of Bankers: A Comment on Painter 
Lyman Johnson 

RECENT HITS (for all papers announced in the last 60 days) 
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal  
March 3, 2011 to May 2, 2011

RankDownloadsPaper Title
1 336 Keynote Address – Identifying and Managing Systemic Risk: An Assessment of Our Progress 
Steven L. Schwarcz
2 216 Contract is Not Promise; Contract is Consent 
Randy E. Barnett
3 212 FCPA Sanctions: Too Big to Debar? 
Drury D. StevensonNicholas J. Wagoner
4 194 Trust, Expert Advice, and Realtor Responsibility 
Brent T. White,
5 190 Introduction, Rehabilitating Lochner: Defending Individual Rights Against Progressive Reform 
David Bernstein
6 183 A Random Walk: The Federal Circuit’s 2010 Government Contracts Decisions 
Steven L. Schooner
7 156 Choice of Court Agreements, Coordination of Proceedings and Provisional Measures in the Reform of the Brussels I Regulation 
Christian A. Heinze
8 154 Contracts: Law in Action, Volume I: The Introductory Course – Introduction (Chapter 1) 
Stewart MacaulayJean BraucherJohn A. KidwellWilliam C. Whitford
9 127 The Honor of Private Law 
Nathan B. Oman
10 123

Privacy Law Fundamentals 
Daniel J. SolovePaul M. Schwartz


May 3, 2011 in Recent Scholarship | Permalink | TrackBack (0)

$100 Million Suit against Beyoncé Threatened

Beyonce New York Magazine here reproduces a "Summons with Notice" in which Gate Five LLC seeks to hold Beyoncé Knowles (pictured at right) and her company, Beyoncé, Inc. liable for what Gate Five calls a callous and bad faith breach of contract that put 70 people out of work before Christmas.

The parties are working out some issues before the complaint can be filed, but when it is is will allege a breach of a Services and Exclusive License Agreement into which she allegedly entered with Gate Five in June 2010.  The Agreement was to facilitate a joint venture to commercialize a video game called "Starpower: Beyoncé."  According to the summons Beyoncé'smorally reprehensible" conduct in demanding extra consideration for her participation in the venture led the project's financier to pull out on the ground that Beyoncé was "too erratic to do business with."

Gate Five claims that it lost $6.7 million invested ni the business venture, plus more than $100 million in profits that it would have earned under the agreement.  In addition to damages, Gate Five seeks to enjoin Beyoncé from associating commercially in any other video game or from using confidential information that she procured through her association with Gate Five. 

Stay tuned.  The complaint should follow shortly.


May 3, 2011 in Celebrity Contracts, In the News | Permalink | Comments (1) | TrackBack (0)

Monday, May 2, 2011

NY Times on Law School Merit Scholarships

As if our co-blogger Meredith Miller had not depressed us enough on Friday with her thoughts on job prospects for recent graduates, the New York Times piled on in its Sunday Business section with this article about merit scholarships that may not be all that they seem.

The story is about students who are lured to schools with merit scholarships that will free them from their obligation to pay law school tuition, so long as they maintain a certain grade point average.  Most students assume that this will be no problem, because they arrive at law school with gaudy GPAs.  As this chart compiled by Stuart Rojstaczer shows, the average undergraduate GPA was 3.11 in 2006-07.  In such a Lake Wobegon world where all the students are above average, it seems reasonable for newly admitted law students to think they can make the grade without breaking a sweat. 

The Times concludes that schools are luring students in with merit scholarships and then withdrawing those scholarships from a shockingly high number of students.  Why?  The answer is obvious to anyone inside the legal academy: to pump up their U.S. News numbers, of course. Law schools want high LSATs and undergraduate GPAs in their first year class.  So they use fellowships to draw in students whose test scores and GPAs would otherwise take them elsehwere. 

But is there injustice involved?  The report states that the phrase "bait and switch" comes up a lot and that students are "shocked when their scholarships disappear."  Would the injustice not be greater if an underperforming merit scholar got to keep her scholarship while a dark horse student with a 3.5 GPA still had to pay her way?  And is it really too much to expect students who are admitted with merit fellowships to ask about grade distributions or use -- I don't know, perhaps the internet -- to find out how likely it is that they will keep their fellowships?  Law schools frequently use current students to recruit newly admitted students.  Contacts with current students are an ideal way to get just this sort of information. 

Moreover, what U.S. News-conscious law schools take away, other U.S. News-conscious law schools may give.  That is, let's say a student went to a 4th-tier law school in order to get the free ride.  After the first year, the student loses her free ride because of a low GPA.  She likely can transfer to a 3rd-tier school, perhaps even one that wouldn't have taken her at all as a 1L -- let alone with a scholarship -- because the other side of gaming the U.S. News system is poaching transfer students from lower-ranked schools.  The student will still end up paying full tuition for two years of law school, but the alternative is paying full tuition for three years of law school.

Yes, law schools should be up front with information about the likelihood that students will lose their fellowships.  My guess is that, because of the optimism bias, providing that information would not hurt law school recruitment.  According to the Times, Chicago-Kent offers students the choice between a guaranteed $9000/year fellowship and a $15,000 fellowship contingent on maintaining a 3.25 GPA.  Ninety percent of the students assume the risk. 



May 2, 2011 in About this Blog, Commentary, Law Schools, Legislation | Permalink | Comments (0) | TrackBack (0)