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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Friday, March 2, 2012

Live Blogging from the Spring Contracts Conference: Contracts in Action I

Our colleauge here at the blog, Meredith Miller moderated the first of three panels united under the broad rubric of Contracts in Action.

ZalesneProfessor Debra Zalesne began her presentation by noting that "non-traditional families" have become the norm.  Despite that, and despite the advances in recognition of same-sex marriage, family law remains relatively heteronormative and often assumes traditional family structures.  Her presentation focused on cohabitation agreements.  Some courts treat such agreements as commercial contracts, ignoring the relationship between the parties and attendant family law issues. Other courts focus on the non-marital relationship and refuse to enforce the agreement, either because they are contrary to public policy or because they lack consideration.  So cohabitation agreements that refer to the love and companionship at the heart of the relationship is likely to be struck down, while those couched in purely commercial terms (housekeeping, nursing, etc.) are more likely to be enforced.  As a result, the law treats non-married couples differently from married couples, since commercial agreements between married partners would ordinarily be set aside as lacking consideration.

Courts similarly disagree about the status of co-parenting contracts, but most commonly, courts ignore such agreements in favor of the best-interests-of-the-child standard.  Professor Zalesne would like to see courts doing the work and trying to give effect to contractual agreements while also looking out for the best interests of the child.

Zacks-webProfessor Erich Zacks presented a paper on cognitive bases of judges and juries in the context of contract preparatio nand execution.  There is large literature on how cognitive biases affect our contracting behavior, and we know from that literature that an actor (say an advertising executive) aware of our cognitive biases can manipulate us to get us to behave in certain ways, e.g. to purchase products that we would not purchase if we were acting raionally.  But Professor Zacks more or less flips this literature around to see if parties who are themselves engaged in a contracting process can do so with an eye to the cognitive biases of judges and juries in order to improve the likelihood that a court will enforce an agreement in the way they want, in part by getting the judge or jury to feel a certain way about the parties.  

So, for example, let's say that I signed a car rental agreement with unfavorable terms because I had just completed a five-hour flight, had no opportunity to negotiate the terms, and had a long line of people waiting behind me.  What the court sees is that I signed in four different places on a form with bold face terms just above or next to my signature.  The very form of the contract sends signals that situate the contract in a good posture for enforcement, rendering my tale of traveling woe relatively unimportant.

Similarly, recitals are a good locus for framing language that can signal to the court the nature of the agreement and the positions of the parties.  Disclosures can be in plain English so that a judge or a jury looking at the disclosure will think, "Hmmm, I understand this and I would not have agreed to it."  All of this suggests that courts are influenced to find consent when there was no substantive consent in part because contracts are designed to exploit cognitive biases so as to promote their enforcement.  

Aaron Goldstein proposes that courts, when considering a facially unambiguous contract, should permit extrinsic evidence only of public and conventional meaning of terms, like trade usage, but they should exclude extrinsic evidence of the parties' subjective intent, such a course of performance and course of dealing.  Mr. Goldstein points out the dangers of a strict imposition of the plain meaning rule in such contexts because it permits parties with more bargaining power (especially in the context of form contracts) to impose one-sided terms in their favor.  But letting in all sorts of extrinsic evidence also creates dangers given the unreliability of people's membories of the facts and circumstances surrounding the formation of the contract.

Goldstein0a
Mr. Goldstein advocates a middle path, what he calls the public meaning rule.  When interpreting facially unambiguous contractual provisions, courts should permit the introduction of extrinsic evidence of the public and conventional meaning of the contract terms.  They should not permit introduction of extrinsic evidence that illuminates nothing more than subjective intent.  Such evidence is relevant in the equitable context, where the court is less interested in the meaning of the agreement than in enforcing the parties' agreement in a way that accords with fundamental fairness.  Recognizing that consumers have no opportunity to bargain for terms when they agree to form contracts, Mr. Goldstein acknowledges that his public meaning rule approach would be inappropriate in the context of consumer contracts of adhesion.  There again, courts must be more attuned to the sorts of extrinsic evidence of subject understandings relevant to determining the equity and fairness of such agreements.  

[JT]

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Comments

Thanks for posting, Jeremy. The presentations sound like they were very interesting. Are the papers available somewhere?

Posted by: Nancy | Mar 4, 2012 2:24:40 PM

Participants got summaries of the articles, in addition to the usual SWAG -- Gucci bags, single malt scotch, rolex watches, and the obligatory mini-skirt so that we could get past the bouncers at the hotel's rooftop bar. If you ask Eniola, maybe she can provide a copy (but no SWAG for you).

Posted by: Jeremy Telman | Mar 5, 2012 4:53:34 AM

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