ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, December 1, 2011

All I Want for Christmas Is a Chinese Opt-Out Clause

NuggetsWhen NBA owners and players tentatively agreed to end the lockout and begin the NBA season on Christmas Day, their agreement resolved many contractual issues, such as the maximum number of years permitted in a player's contract. One issue left unresolved involves the fate of three players who played for the NBA's Denver Nuggets last year--Kenyon Martin, J.R. Smith, and Wilson Chandler (Martin and Chandler pictured here). The three Nuggets signed contracts to play for teams in the Chinese Basketball Association. Unlike the international contracts signed by dozens of other NBA players, the Nuggets' contracts reportedly contained no "opt-out" clause that would permit the players to return to the NBA if and when the lockout ended. Some commentators initally suggested that the players could return to the NBA anyway. After all, there is no specific performance available for breach of contract. The problem with that approach, however, is that the NBA, as a member of the International Basketball Federation, requires its teams to recognize international contracts. This relationship presumably would bar any NBA team from contracting with the three former Nuggets due to their Chinese contracts. All three players reportedly have been doing quite well on the court (averaging 15, 22 and 32 points per game, respectively) and even enjoy some decent off-court perks, such as a driver and personal chef. Although they likely won't make it home for Christmas, all three players' contracts end in March, well before the NBA playoffs.  

[Heidi R. Anderson, h/t SB Nation and WSJ Online]

December 1, 2011 in Celebrity Contracts, Sports | Permalink | TrackBack (0)

Wednesday, November 30, 2011

Criminal Suspect Sues Couple Alleging Breach of Contract to Hide Him from Police

Punch CardAccording to this story, brought to us from via the Charlotte School of Law's Jason Jones, Jason Dimmick held a Kansas couple hostage while fleeing from the police who sought to question him in connection with the beating death of a Colorado man.  The couple, Jared and Lindsay Rowley, fed Mr. Dimmick snacks and watched movies with him until he fell asleep.  Then they fled.  He was convicted of holding the couple hostage and sentenced to an eleven-year prison sentence.

And then the couple really pissed off Mr. Dimmick.  They sued him for invading their home and causing emotional distress.  They seek $75,000 in damages.  He has counterclaimed.  According to KMBC, this is his theory:

I, the defendant, asked the Rowleys to hide me because I feared for my life. I offered the Rowleys an unspecified amount of money which they agreed upon, therefore forging a legally binding oral contract. . . .

Mr. Dimmick seeks $235,000 in damages, largely arising from the fact that he was hospitalized after the police shot him while trying to arrest him.  

The Rowleys' attorney is seeking to have the counterclaim thrown out.  Given the facts, which of the following arguments would you lead with if you were the Rowleys' attorney:

A. The alleged oral contract is illegal and therefore void
B. Because the Rowleys knew that Mr. Dimmick was armed, the Rowleys were under duress and any alleged oral contract would be void
C. Contracts to aid and abet a criminal suspect who is seeking to avoid the police must be in writing in order to be enforceable 
D. Because the parties never agreed on a price term, there was no meeting of minds and any alleged oral agreement would be unenforceable
E. Under the parol evidence rule, any evidence of the alleged oral agreement cannot be presented to the trial court until Mr. Dimmick is paroled.

You'll have to read the whole story to find the answer.


November 30, 2011 in In the News | Permalink | Comments (2) | TrackBack (0)

Tuesday, November 29, 2011

Weekly Top Tens from the Social Science Research Network

SSRNRECENT HITS (for all papers announced in the last 60 days)
TOP 10 Papers for Journal of Contracts & Commercial Law eJournal

September 25, 2011 to November 24, 2011

Rank Downloads Paper Title
1 292 The Corporation as Social Contract
M. Kaptein, Johan Wempe,
Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM), Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)
2 190 Incentive Contracting
Ralph C. Nash,
George Washington University - Law School
3 186 Codification and Flexibility in Private International Law
Symeon C. Symeonides,
Willamette University - College of Law
4 174 The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design
G. Mitu Gulati, Robert E. Scott,
Duke University - School of Law, Columbia University - Law School
5 143 Analyzing Law - A Framework for Understanding Law of All Sorts and for All Purposes (Cases, Exercises and Commentary)
Neil K. Komesar,
University of Wisconsin - Madison
6 130 Bijzondere Overeenkomsten in Kort Bestek (Specific Contracts in a Nutshell)
Alain-Laurent Verbeke, Pieter Matthias Brulez, Nicolas Carette, Nele Hoekx,
University of Leuven, Faculty of Law, Department of Private Law, Unaffiliated Authors - affiliation not provided to SSRN
7 118 Keynote Address: A Regulatory Framework for Managing Systemic Risk
Steven L. Schwarcz,
Duke University - School of Law
8 117 Lochner and Constitutional Continuity
David Bernstein,
George Mason University - School of Law, Faculty
9 115 A Theory of Redressive Justice
Andrew S. Gold,
DePaul University - College of Law
10 105 Arbitral Power and the Limits of Contract: The New Trilogy
Alan Scott Rau,
University of Texas at Austin School of Law

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

September 25, 2011 to November 24, 2011

Rank Downloads Paper Title
1 174 The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design
G. Mitu Gulati, Robert E. Scott,
Duke University - School of Law, Columbia University - Law School
2 105 Arbitral Power and the Limits of Contract: The New Trilogy
Alan Scott Rau,
University of Texas at Austin School of Law
3 102 The General Principles of Civil Law: Their Nature, Roles and Legitimacy
Martijn W. Hesselink,
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
4 94 How to Opt into the Common European Sales Law? Brief Comments on the Commission’s Proposal for a Regulation
Martijn W. Hesselink,
University of Amsterdam - Centre for the Study of European Contract Law (CSECL)
5 80 The Law of Contract: An Introduction
Jan M. Smits,
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
6 72 Classical Contract Law, Past and Present
Anat Rosenberg,
Interdisciplinary Center (IDC) Herzliyah - Radzyner School of Law
7 70 Introduction: The Three and a Half Minute Transaction: Boilerplate and the Limits of Contract Design
G. Mitu Gulati, Robert E. Scott,
Duke University - School of Law, Columbia University - Law School
8 60 The Architecture of Post-National European Contract Law from a Phenomenological Perspective – A Question of Institutions
Kai Peter Purnhagen,
University of Amsterdam Law School
9 57 The Missing Elements of Contract Damages
Mitchell L. Engler, Susan Schwab Heyman,
Yeshiva University - Benjamin N. Cardozo School of Law (faculty), Roger Williams University School of Law
10 45 Contract Versus Statute in Internet Governance
Lee A. Bygrave,
University of Oslo



November 29, 2011 in Recent Scholarship | Permalink | TrackBack (0)

Don't Buy This: 'Tis the Cyber Season of Reverse Psychology

Yesterday, now widely known as "Cyber Monday," I received a marketing email from Patagonia.  The message: "Don't Buy This Jacket."  The email read in part:

Because Patagonia wants to be in business for a good long time - and leave a world inhabitable for our kids - we want to do the opposite of every other business today. We ask you to buy less and to reflect before you spend a dime on this jacket or anything else.

The advertisement reminded me to "think twice" and instructed not to "buy what [I] don't need."  The jacket, "[m]ade of warm, breathable, compressible and stretchy high-loft fleece," is apparently one of Patagonia's bestsellers; retail price of $149.

Ha! Nice try, Patagonia. I will not be manipulated by your reverse psychology. Though, it did remind me of a contracts exam fact pattern I used a few years back that involved an email where the sender said something like "I'm selling my house but, trust me, you don't want to buy my house because it has been a real money pit."  Seller also says all sorts of funny and brutally frank things about the house.  One of the questions raised was whether this email constitued an offer to contract.  I am also reminded of the parking lot of a Grateful Dead show in the early 90's and a gentleman wandering around saying "bad [acid] trips, who wants 'em? I got 'em!"  But I digress, though only slightly (e.g., Ship of Fools, see below).

Elvis Costello is also participating in this season of reverse psychology.  His message: "don't buy my new box set."  In fact, Costello apparently wrote on his website: "Unfortunately, we at find ourselves unable to recommend this lovely item to you as the price appears to be either a misprint or a satire."  The price?  $225.  NBC reports:

Costello tried to get the record company to knock the price down, but was unsuccessful. So he is recommending buying the work of another legendary artist.

"If you should really want to buy something special for your loved one at this time of seasonal giving, we can whole-heartedly recommend, 'Ambassador of Jazz' -- a cute little imitation suitcase, covered in travel stickers and embossed with the name 'Satchmo' but more importantly containing TEN re-mastered albums by one of the most beautiful and loving revolutionaries who ever lived – Louis Armstrong," Costello wrote. "The box should be available for under one hundred and fifty American dollars and includes a number of other tricks and treats. Frankly, the music is vastly superior."

It may be earnest, but I read it as a brilliant marketing ploy.  Who would have known that Elvis Costello was issuing a new box set?  I mean, who buys physical CDs anymore?  And it even comes with a vinyl record... but it is overpriced and you don't want it.

[Meredith R. Miller]

November 29, 2011 in E-commerce, In the News, Miscellaneous, Music, Quotes | Permalink | Comments (1) | TrackBack (0)

Fourth Circuit Invalidates Fraudulently-Induced Settlement Agreement

On Novmeber 10, 2011, the Fourth Circuit issued its unpublished per curiam opinion in Paul Morrell, Inc. v. Kellogg, Brown & Root Services in which it affirmed a nearly $20 million fraudulent inducement judgment against Kellogg Brown & Root (KBR) and related entities.  The judgment included prejudgment interest and $4 million in punitive damages.

MREThe suit arose out of a contract dispute and settlement between KBR and Paul Morrell, which was doing business as The Event Source (TES) and was a sub-contractor on a contract in which KBR and TES provided dining services for US troops in Iraq.  A government audit revealed that KBR was charging the government for more meals that were actually served and so the government decided to withhold nearly 20% of its payments to KBR.  KBR passed this loss on to its subcontractors.  For reasons that are unclear but were based on fraudulent misreprentations that KBR made to TES, TES agreed to payments of $24 million for its services under the contract when it was in fact entitled to $36 million.

The district court determined that KBR made material false statements in order to induce TES to accept a settlement payment that was approximately $12.4 million less than what KBR had previously acknowledged it owed TES.  Applying Texas law in this diversity case, the Court of Appeals had to determine whether TES's reliance on KBR's fraudulent misrepresentations was reasonable.  That issue raises a mixed question of fact and law, but in this case, the trial court's ruling turned on factual determinations that could only be not clearly erroneous.  

The Fourth Circuit also rejected KBR's additional challenges to the District Court's judgment.


November 29, 2011 in Government Contracting, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Monday, November 28, 2011

"The Implied Covenant of Good Faith and Fair Dealing Is Not a License for a Court to Make Stuff Up"

StrineThus Delaware Chancellor Strine (pictured) in Winshall v. Viacom Int'l Inc. This case emerged as a result of a merger through which Viacom International (Viacom) became the parent corporation of Harmonix Music Systems (Harmonix), the company that brought us Guitar Hero, Rock Band, among other happy diversions.  Under the terms of the 2006 merger agreement, Mr. Winshall and other selling shareholders were paid $175 million plus an uncapped right to certain earn-outs based on the extent to which Harmonix exceeded certain earnings goals in 2007 and 2008.  

Rock Band was a huge success, causing its distributor, Electronic Arts, Inc. (EA) to want to re-negotiate its agreement with Harmonix so as to secure broader distribution rights over Rock Band and its sequels.  Harmonix elected to do so, but the way Harmonix negotiated distribution fees did not have the positive impact on Mr. Winshall believed it could have had.  Harmonix elected to front-load the distribution fees paid to EA in order, so Mr. Winshall argued, to avoid having to share the benefits of Rock Band's success with the selling shareholders.  Based on that belief, Mr. Winshall sued Viacom for breach of the covenant of good faith and fair dealing, but Chancellor Strine was having none of it.

Chancellor Strine's view of the case is that Mr. Winshall believes that Viacom and Harmonix were obligated to take advantage of their increased bargaining power with EA, derived from Rock Band's success, to lower the distribution fees paid to EA in 2008 and thus to increase the 2008 earn-out payment to the selling shareholders.  The Chancellor rejected this argument: 

I find that Winshall has failed to allege facts that support a reasonable inference that the Selling Stockholders did not get the benefit of their bargain under the Merger Agreement. On these facts, even viewed in the light most favorable to Winshall, the Selling Stockholders could not conceivably have had a reasonable expectation that Viacom and Harmonix had a duty to renegotiate the Original EA Agreement to increase the amount of earn-out payments the Selling Stockholders would receive.


November 28, 2011 in Recent Cases | Permalink | Comments (0) | TrackBack (0)