Thursday, March 15, 2012
We learned yesterday from the University of Wisconsin Law School website that Professor Emeritus John Kidwell died last week. Here is the text from the Wisconsin website.
The University of Wisconsin Law School is deeply saddened by the loss of Professor Emeritus John Kidwell, who passed away in Madison last week.
Professor Kidwell was born in Denver, Colorado and grew up in Custer, South Dakota. After high school he attended the South Dakota School of Mines and Technology for two years, contemplating a degree in physics, but changed plans when, in his own words ". . . I encountered The Calculus, and The Calculus won." He transferred to the University of Iowa and majored in English, receiving his B.A. from the University of Iowa in 1967 (With Distinction, Honors Program, Phi Beta Kappa). He then attended Harvard Law School and received his J.D. in 1970 (cum laude). He took a job as an associate with the Denver, Colorado law firm of Dawson, Nagel, Sherman & Howard.
Professor Kidwell joined the University of Wisconsin Law Faculty in 1972 as an assistant professor, and except for a year as a Fellow in Law and Humanities at Harvard University in 1976-77, was here continuously. He served as Associate Dean for Academic Affairs from 2002-2005 before retiring from the full-time faculty in June 2005.
Professor Kidwell regularly taught courses dealing with the law of contracts, remedies, copyrights, and trademarks. He was the recipient of the Emil H. Steiger award for teaching excellence, and had been chosen Teacher of the Year by the Wisconsin Law Alumni Association. He was a co-author of Wisconsin Law School’s
signature “Contracts: Law in Action,” a casebook published by Lexis/Nexis, as well as a co-author of "Property: Cases and Materials," published by Aspen. Among his many service activities, he served as a member, and ultimately Chair, of the Wisconsin Board of Bar Examiners. He was a member of the Testing Policy Committee of the National Conference of Bar Examiners, and continued working on bar examination issues for that body up until the very last weeks before his death.
John Kidwell leaves behind his wife and son, Jean and Ben Kidwell. A man of broad and eclectic interests, he characterized his interests and activities as “reading, listening to music, idle conversation and the game of poker.”
Wednesday, March 14, 2012
In my first post about my observations of contracting culture in New Zealand, I mentioned the unusual lack of contracts that consumers are forced to sign compared to in the States. Why wasn't I forced to sign a scary, multi-page, fine print form before my family was carried away on (very) rocky waters to swim with sea creatures in the open ocean? (Where was the laundry list of potential hazards that the company was not liable for, e.g. jumping in before the propeller blades were shut off, drowning, shock from the freezing water, hypothermia, being suffocated by too tight wetsuit and rubbery head cover, getting kicked in the face by flippers worn by German tourist....) Why didn't our visit to a traditional Maorian village include a standard form releasing the village from all liability if we fell into a steam vent or ate one of the very alluring, perfectly round and unusually blue berries that were tradiitonally used for dye - and which are very poisonous?
And then I found out about New Zealand's tort reform law. Back in the early seventies (the heyday of consumer regulatory reform everywhere, it seems), New Zealand adopted the Accident Compensation Act which basically abolished the ability to sue for personal injuries (providing a comprehensive no-fault benefits and rehabilitation scheme instead). I found this article by Peter Schuck which does a great job of outlining the kiwi approach to tort reform (which is, incidentally, called "Tort Reform, Kiwi-Style).
The case of the missing SFC. Mystery solved!
We are happy to see new publications by two of our colleagues (Danielle Kie Hart, below left) and Cheryl Preston (below right) who presented at the annual Spring Contracts Conference earlier this month.
Ayoub M. Al-Jarbou, Administrative Contracts under Saudi Arabian Law. 41 Pub. Cont. L.J. 75 (2011).
Debra D. Burke, and Angela J. Grube, The NCAA Letter of Intent: A Voidable Agreement for Minors? 81 Miss. L.J. 265 (2011)
Lauren Groth, Transforming Accountability: a Proposal for Reconsidering How Human Rights Obligations Are Applied to Private Military Security Firms. 35 Hastings Int'l & Comp. L. Rev. 29 (2012).
Michael Holt & Gregory Klass, Implied Certification under the False Claims Act, 41 Pub. Cont. L.J. 1 (2011)
Cheryl B. Preston & Brandon T. Crowther, Infancy Doctrine Inquiries. 52 Santa Clara L. Rev. 47 (2012).
Gabriella M. Racca, Roberto Cavallo Perin & Gian Luigi Albano, Competition in the Execution Phase of Public Procurement, 41 Pub. Cont. L.J. 89 (2011)
Claudia T. Salomon, & J.P. Duffy, Enforcement Begins When the Arbitration Clause Is Drafted, 22 Am. Rev. Int'l Arb. 2714 (2011).
Nadine Tushe, U.S. Export Controls: Do they Undermine the Competitiveness of U.S. Companies in the Transatlantic Defense Market? 41 Pub. Cont. L.J. 57 (2011).
Robert P. Wise, Finding the Mississippi UCC Sales Contract amid the RFQ, Quotes, Phone Calls, Emails, Purchase Order and Acknowledgement Forms, 30 Miss. C.L. Rev. 491 (2012)
Tuesday, March 13, 2012
The newly formed LSU Journal of Energy Law and Resources at the Louisiana State University Paul M. Hebert Law Center invites submissions of scholarly articles and proposals for articles for publication in its inaugural issues, slated for publication in the Fall of 2012 and the Spring of 2013. The LSU Journal of Energy Law and Resources is a student-edited journal devoted to the promotion of legal scholarship in energy law. The Journal is committed to publishing a variety of energy law topics, including articles focusing on energy law contracts and transactions.
Submissions: For publication in our Fall 2012 issue, please submit a completed paper, along with a cover letter and CV, to email@example.com by April 15, 2012. All completed papers submitted after April 15th will be considered for the Spring 2013 issue and should be submitted no later than October 15, 2012. If you wish to submit a proposal for a paper, please submit your proposal of no more than 500 words briefly describing the issue along with a CV by attachment to firstname.lastname@example.org. Proposals for papers will be considered on a rolling basis, but will not be considered for the Fall 2012 issue.
As reported in the Miami Herald, the Florida legislature attempted to close a budget gap through Senate Bill 2100, which cut state and local workers’ salaries by three percent, eliminated cost of living adjustments, and shifted savings into the general revenue fund to offset the state’s contribution to the workers’ retirement account. State worker and their unions challenged the law.
Last week, on cross-motions for summary judgment in Williams v. Scott, Circuit Court Judge Jackie Fulford ruled against the Florida legislature. Judge Fulford found that the three percent salary cut is an unconstitutional taking of private property without full compensation. Permitting the cut would condone a breach by the state of the workers’ contracts in violation of the workers’ collective bargaining rights. To rule otherwise, Judge Fulford noted, “would mean that a contract with our state government has no meaning, and that the citizens of our state can place no trust in the work of our Legislature.” Judge Fulford ordered the money returned with interest.
Judge Fulford first distinguished this case from a 1981 Florida Supreme Court (pictured) case, Fl. Sheriffs Ass’n. v. Dept. of Admin., 408 So. 2d 1033 (Fl. 1981), in which the court found no impairment of contract when a special risk credit was reduced from 3% to 2%. While that case implicated only individual elements of future accruals within the state retirement plan, this case involves a complete change of that system from a noncontributory to a contributory plan. In this case, Judge Fulford found an impairment of contractual rights and found that the impairment is substantial. State impairment of contractual rights is nonetheless permissible if the state can demonstrate a compelling interest. But Judge Fulford found that the state was unable to make such a showing. A significant budget shortfall is not enough.
Judge Fulford also found that Senate Bill 2100 would effect an unconstitutional taking under the Florida state constitution. Bill 2100 also violates collective bargaining rights protected under Florida’s constitution, according to Judge Fulford.
According to the Miami Herald, this ruling leaves a $1 billion hole in the state budget for the 2011-12 budget year, another $1 billion hole for the 2012-13 budget year, and also delivers a $600 million blow to the Florida Retirement System. Governor Rick Scott vowed to swiftly appeal the “simply wrong” decision so that it has no effect on the current budget. Scott called Judge Fulford’s ruling “another example of a court substituting its own policy preferences for those of the legislature.” For what it's worth, Judge Fulford was appointed by Governor Scott’s Republican predecessor as Governor of Florida.
[JT & Christina Phillips]
Monday, March 12, 2012
We wondered a few months back whether Alabama's immigration law might give rise to a Contract Clause challenge. Section 27 of that law, with a few exceptions, bars Alabama courts from enforcing a contract to which a person who is unlawfully present in the United States is a party. Section 30 of the law makes it a felony for an alien not lawfully present in the United States to enter into a “business transaction” with the State of Alabama or any political subdivision thereof. The Contract Clause provides that "No State shall . . . pass any . . . Law impairing the Obligation of Contracts." Sections 27 and 30 seem facially problematic, but Contract Clause challenges have rarely succeeded since the Lochner era.
For some more detail, see the Constitutional Law Prof Blog.
The Eleventh Circuit has now enjoined the enforcement of those two provisions, pending the Supreme Court's ruling later this term in a case challenging Arizona's new tough immigration law. In a previous decision (before a different panel for some reason), the Eleventh Circuit also enjoined two other provisions of the law, which do not relate to contracts.
For some more detail, see the Constitutional Law Prof Blog.
For more information on the Supreme Court case, Arizona v. United States, check out the coverage over at the SCOTUSblog. The Arizona law has a provision that makes it a misdemeanor for an undocumented immigration to apply for a job or to work in Arizona. The contracts clause claim does not appear to be part of the Arizona case, but the Supreme Court's ruling (expected this summer) will certainly provide guidance to the 11th Circuit on the question of federal preemption of state immigration laws.
Saturday, March 10, 2012
Anyone searching for an amusing example of anticipatory repudiation (or almost any other Contracts topic) need look no further than CBS sitcom, The Big Bang Theory. The show prominently features a "roommate agreement" between the two main characters, Sheldon and Leonard, physicists who struggle a bit in the romance department. I asked students to view this clip and then fill in the blanks in the following sentence: ________________ does not have to _____________ because ______________ repudiated when he ________________. It was a bit too easy, of course, but it did seem to help them remember the concept.
[Heidi R. Anderson]
This time, the contract is a lease for an apartment. The article, which can be found here, covers typical issues that may arise when trying to terminate leases early and basically reminds tenants to treat their leases seriously.
Wednesday, March 7, 2012
The standard historical account begins with the Federal Arbitration Act, but the practice of extrajudicial dispute resolution has a much longer history. Mid-19th century Americans across several territories and states — including Florida, California and New York — engaged in a nearly forgotten debate concerning “conciliation courts.”
Read the rest here.
[Meredith R. Miller]
Tuesday, March 6, 2012
At the wonderful contracts conference this past weekend at Thomas Jefferson (yes, thanks again, Eniola), I learned that, when they excavated to build the school's fabulous new building, remains of a wooly mammoth were discovered. Coincidentally, just this fall, my final exam concerned a contract for the sale of real property. After contract but before closing, the seller had sprinkler repairs done on the lawn and the repair company discovered the skeleton of a dinosaur. Neither buyer or seller was aware of the skeletal remains at the time of contract. Seller wants to rescind. Mutual mistake?
This semester we walked through a hypo about a lease that allows the tenants to keep one "household pet." "Household pet" is nowhere defined in the lease. Tenant obtains a kangaroo to keep as a pet. Our task was to discuss how a court would go about figuring out whether a kangaroo is a "household pet." I thought this imaginative until today, when this story came to my attention. It doesn't answer the question whether a kangaroo is a "household pet," but it does suggest that maybe my imagination isn't that imaginative.
[Meredith R. Miller]
Shortly after the New Year, the Supreme Court of the United States decided Minneci v. Pollard, regarding whether a plaintiff could bring a Bivens action (that is a claim for damages arising directly under the U.S. Constitution) against employees of a privately operated federal prison. In short, can government contractors be considered state actors for Bivens purposes?
Richard Lee Pollard filed his claim pro se in a California district court alleging that prison personnel employed by the Wackenhut Correctional Corporation, a private company operating a federal prison, deprived him of proper medical care. Pollard asserted that the prison violated his Eighth Amendment right to freedom from cruel and unusual punishment by failing to provide adequate medical care and subjected him to humiliating treatment after he fell, sustaining possible fractures to both elbows. The District Court dismissed Pollard’s complaint, concluding that there could be no Bivens action arising from the Eighth Amendment against a privately managed prison’s personnel. The Ninth Circuit reversed. We went out on a limb last June when the Court granted review and predicted that (echoing Lyle Denniston of SCOTUSblog) that the Supremes would reverse the Ninth Circuit.
In an 8 to 1 decision, the Court refused to apply Bivens on these fact, because state tort law provides an adequate alternative and thus deters prison official from engaging in tortious misconduct. The majority relied on Wilkie v. Robbins, 551 U.S. 537 (2007) In Wilkie, the Court developed a two-step process for determining whether to recognize a Bivens remedy: whether (1) there is an “alternative, existing process for the protection of constitutionally protected interests;” and (2) “any special factors [counsel] hesitation before authorizing a new kind of federal legislation.” Responding to Pollard’s argument that any available state tort law remedy is inadequate when compared to the federal remedy, the Court stated that state law remedies and federal remedies do not have to be congruent.
In his concurrence joined by Justice Thomas, Justice Scalia characterized Bivens as “a relic of the heady days in which [the] Court assumed common-law powers to create constitutional powers by implication.” The concurring Justices would limit Bivens to the narrow factual circumstances in which the Court has previously recognized its applicability.
Justice Ginsberg dissented, noting that private officials operating prisons on license from the federal government are agents of the federal government, and thus ought to be subject to Bivens actions. Whether or not a prisoner has a cause of action for certain conduct should not turn on whether the prison guards are government employees or government contractors, as state remedies may well be in adequate in any case.
[JT & Justin Berggren]
Monday, March 5, 2012
The Spring Contracts Conference was a huge success, thanks largely to the hard work of our co-blogger Eniola Akindemowo. She was so busy dealing with logistics during the conference that she did not have enough time to hang out with many of the conferees, and we were remiss in failing to thank her properly. But it was a great event, and it ran very smoothly, despite the fact that, through no fault of Professor Akindemowo, we got a late start on planning the conference this year. As is always the case, the conference featured the usual heady mix of familiar faces, up-and-coming scholars, and practitioners with a scholarly bent. We delighted in the opportunity to recognize Mel Eisenberg with a lifetime achievement award and Omri Ben-Shahar for his award-winning article, Fixing Unfair Contracts.
San Diego was a great location for the conference, and the Thomas Jefferson School of Law did a great job of hosting. They have a truly magnificent new building, and rooms and tech support could not have been better for a conference such as ours. The conference ran on time from start to finish, we all received well-organied binder with short versions of the conference papers, and I don't think I've ever attended a conference at which all of the PowerPoint presentations came off without a hitch.
So thanks to Professor Akindemowo for all of her hard work in setting up and hosting the conference. Until next year.
The last panel of the conference (well, one of two final panels, as the conference usually had two going at once) was dedicated to the doctrine of unconscionability. We regret that we could not do justice to all of the panels at the conference, as we had to choose in each case which of two panels to attend. Similarly, not all of the presentations lent themselves to blogging, so here we will just focus on one of the papers from the unconscionability panel.
Melissa Lonegrass, Associate Professor of Law at LSU's Paul M. Herbert Law Center, presented a version of her article, soon to be appearing (we hope) in a law review near you, "Finding Room for Fairness in Formalism: The Sliding Scale Approach to Unconscionability." She has noted courts' increasing use a sliding scale approach to unconscionability analysis. That is to say, rather than looking at the procedural and substantive prongs of unconscionability independently, courts view both elements in tandem. For example, even if there is little procedural unconscionability, a court might find a contract or a provision in a contract unconscionable if there is a great deal of substantive unconscionabiility (and theoretically vice versa).
Professor Lonegrass's research suggests that there has been relaxation of both prongs in the sliding scale analysis. So courts find procedural unconscionability satisfied whenever there are contracts of adhesion. Courts find substantive unconscionability when the terms are unreasonable. Nobody's conscience needs to be shocked these days.
Professor Lonegrass defends the sliding scale on the ground that it enables courts to be more sensitive to disparities of bargaining power that are inherent in consumer transactions. It also addresses formalist concerns regarding the doctrine of unconscionability and have prevented the doctrine from gaining wider currency. The sliding scale approach retains the procedural inquiry but better enables courts to identify evidence of the lack of genuine consumer assent. By setting aside unhelpful markers of deficient assent, the sliding scale actually makes the application of the unconscionability doctrine more predictable, thus answering concerns about the doctine's effect on the enforceability of commercial agreements.
She recommends a retention of the dual prong approach, but would de-emphasize consumer characteristics of markers of assent in favor of a focus on disaparities in bargaining power. Finally, she encourages courts to embrace a lower threshhold (reasonableness instead of "shocks the conscience") for substantive unconscionability.
Professor Danielle Hart of Southwestern Law School presented her paper on Contract Law and Inequality. She would eradicate the public/private law distinction in an effort to shift the frame from the current free market, neo-liberal frame to one that focuses on the propensity of law to promote inequality. In particular, Professor Hart views contract law as public law because of the extent of state involvement in every aspect of contracting.
Her paper focuses on bargaining power, a term that we use all the time but rarely pause to define. Professor Hart supplements the realist view that bargaining power is a form of property with Pierre Boudieu's notion that capital is any form of power that can be used to obtain an advantage.
Professor Hart identifies three cardinal principles of barganing power. 1) Bargaining power has never been and never will be distributed equally; 2) bBargaining power is always "inerested" in the Bourdieuvian sense; and 3) finally (and depressingly) unequal bargaining power begets unequal bargaining power. Unequal bargaining power affects bargains all the time, but contracts law addresses it (and then inadequately) only in cases when there is both an actionable misuse of inequality of bargaining power and undue advantage taking.
Professor Hart presents a fully realized, theoretically complex approach to some fundamental contractual concepts, to which it is hard to do justice in 1/3 of a blog post. We'll have to look forward to the publication of her paper.
Professor Hila Keren, Professor Hart's colleague at Southwestern Law School, presented what she described as an example of Professor Hart's thesis, Consenting Under Stress. Her presentation focused on a 10th Circuit case, Gascho, in which a nurse with 35 years of experience agreed to a separation agreement with her employer, abandoning her Title VII claims, while under conditions of extreme stress. The stress was mostly the product of her husband, who beat her, raped her and then demanded a divorce, and who was also her boss and had fired her after having an affair with his (and her) co-worker. The court articulated the doctrine of stress as a ground for excusing a party's duties under a contract. The doctrine, so understood, is very limited, and for that, according to Professor Keren, we have Judge Posner's Selmer decision to thank. The 10th Circuit affirmed the District Court's dismissal of the suit, finding that Ms. Gascho had not presented evidence from which a reasonable jury could conclude that the agreement was valid.
Professor Keren then undertakes an analysis of our legal understanding of stress. Courts treat stress as a subjective feeling, but Professor Keren, drawing on a scientific understanding of stress, questions the accuracy of that description. Stress is actually a predictable human response to certain external events. She proposes a solution that would take stress a lot more seriously as a physiological response to external factors that could indeed negate a claim that a party had knowingly and willingly consented to an agreement. The paper has many more illustartions of the harsh consequences of courts' misunderstanding of stress.
Finally, our co-blogger, Meredith Miller presented her paper on Party Sophistication and Pluralism in Contract, building on her 2010 article that appeared in the Missouri Law Review. This paper grows out of last year's conference celebrating the 30th anniversary of the publication of Charles Fried's Contract as Promise. At that conference, Roy Kreitner delivered a paper on the new pluralism in contract theory.
Isaiah Berlin defines value pluralism as a recognition of the fact that human goals are many, not all of them are commensurable, and they are in potential conflict with one another. So it is with contract law, say pluralists. They disagree with monists who seek to elevate one value above all others in order to unify contracts theory. Identifying parties as sophisticated or unsophisticated provides an ordering mechanism that helps us to determine which contracts principles to prioritize in different contexts. When courts and scholars are trying to navigate a pluralist system, they ask whether parties are sophisticated, and they elevate certain principles or others depending on their conclusion as to sophistication. Those interested in Meredith's take on how courts should go about determining sophistication need to look to her Missouri Law Review piece linked to above.
Mark Burge, Associate Professor of Law at Texas Wesleyan University School of Law, presented a paper, “Too Clever by Half: A Cautionary Tale in Socio-Legal Legitimacy Starring the Uniform Commercial Code,” which focuses on the failure of the revised UCC Section 1-301 (relating to choice of law) to win adoption, despite the fact that 40 states have adopted the rest of the revisions to Article 1 of the UCC. In Professor Burge's view, Section 1-301 failed because it violated a fundamental social idea of the American legal and political system in that it undermined the principle that laws ought to be generally applicable.
Revised Section 1-301 would have created different standards for choice of law for consumer and commercial transactions. The proposed Section would have permitted parties in non-consumer transactions to choose the laws of any state to govern their transactions. The proposal seemed a logical extension of the tendency in the common law. While the First Restatement provided rules for choice of law from which the parties could not deviate, the Second Restatement allowed parties to choose which law will govern their agreement, so long as the forum jurisdiction bears some relation to the transaction. The revised Section extended that logic by removing the restrictions and justified this move by noting that parties are already free to choose governing law if they opt for arbitration under the Federal Arbitration Act.
Professor Burge’s thesis is that state legislatures rejected the revised Section because of a visceral abreaction to the possibility that parties would agree to have their agreements governed by the laws of an utterly random jurisdiction. The visceral reaction arises, Professor Burge suggests, from the Section’s “un-American” diversion from the traditional rule that there must be some connection between the transaction and the jurisdiction whose laws will govern the transaction.
Jack Graves, Professor of Law at the Touro College Jacob D. Fuchsberg Law Center, presented his paper, forthcoming the American Review of International Arbitration, “Court Litigation over Arbitration Agreements: Is It Time for a New Default Rule?” Professor Graves’ thesis is bold and simple: we need a new international convention making arbitration the default legal rule for the resolution of international commercial disputes, that is business-to-business international transactions. Such a convention is necessary because arbitration is far more efficient and effective, but those advantages are negated by parties’ ability to litigate arbitrability, turning one relatively fast and inexpensive legal process into two, one of which is expensive and protracted. At the heart of Jack's presentation was a wonderful extended metaphor of court proceedings torpedoing arbitration in a maritime case.
David Horton, currently a Professor at Loyola Law School – Los Angeles. Starting next year, he will join the faculty at the University of California, Davis, School of Law, who has guest blogged for us in the past (more than once!), presented a paper on the vindication of rights doctrine. For years, courts favored litigation over arbitration and held that federal statutory claims could not be adjudicated adequately in arbitral bodies. In the 1980s, things shifted, as courts abolished this non-arbitrability doctrine in favor of the vindication of rights doctrine, placing the burden plaintiffs to provide concrete proof that arbitration thwarts federal statutory rights.
Recent Supreme Court decisions seem to be moving us in the direction of universal enforcement of arbitration provisions. But Professor Horton introduces the notion of inalienable rights that cannot be waived and are thus not subject to the policy favoring freedom of contract. If one’s ability to vindicate one’s federal statutory rights is inalienable – that is, if one cannot agree ex ante to contract terms that would make it impossible for you to vindicate your rights – then certain arbitration provisions might be unenforceable on those grounds.
Professor Horton runs through traditional justifications of inalienability in terms of preventing certain negative externalities or promoting certain positive externalities. However, Professor Horton concludes that the most promising justification for the inalienability doctrine is the non-commodification theory, according to which permitting certain things to be sold would change the very nature of the thing.
History Repeats Itself in Ohio: The Kirksey v. Kirksey Tragedy Replayed as the Williams v. Ormsby Farce
Our colleagues on the Contracts Listserv have brought to our attention the very interesting case of Williams v. Ormsby, decided last week in the Supreme Court of Ohio. There has been some suggestion that this is a repeat of the great Kirksey v. Kirksey case. But as William Casto or Val Ricks would have told Amber Williams “I knew Antillico. Antillico was a friend of mine. You, madam, are no Antillico.”
In May 2004, Frederick Ormsby moved in with his on-again off-again girlfriend, appellee, Amber Williams. Subsequently, Ormsby paid off the mortgage and in return, Williams quitclaimed the title to the property. Off again, the couple separated and agreed in March 2005 to sell the house and allocate the proceeds. On again, they attempted to reconcile, but in return for moving back in, Williams demanded an undivided half interest in the property. In June 2005, they signed a second document, ostensibly making them “equal partners” in the house.
By September 2007, the couple was off again, and now they assumed an equal undivided interest in a lawsuit. Williams sought either specific performance of the June 2005 agreement or damages arising from Ormsby’s alleged breach of that agreement. Ormsby alleged causes of action for quiet title and unjust enrichment/quantum meruit and sought declaratory judgment that both the March 2005 and June 2005 documents were invalid for lack of consideration. The trial court ruled in Ormsby’s favor; the Ninth District Court of Appeals reversed, concluding that “moving into a home with another and resuming a relationship can constitute consideration sufficient to support a contract.” The Supreme Court of Ohio accepted jurisdiction to decide whether or not that proposition is in fact good law.
The court of appeals found that the June 2005 agreement was supported by valid consideration because “romantic relationships typically involve some sacrifice by each partner.” The majority on the Ohio Supreme Court disagreed. Unlike Antillico Kirksey, Williams suffered no detriment from the June agreement; she received only a benefit and so the June 2005 offered evidence only of Ormsby’s gratuitous promise to give Williams an interest in the property based solely on the consideration of her love and affection. Such consideration is no consideration, harrumphed the majority.
The record is replete with shadings and innuendo that there was no love and affection between the parties. The record includes statements that suggest or allege that Williams and Ormsby were searching for a way to continue living well without engaging in full-time work, that Williams was seeking to both delude and elude creditors, that Williams’s name may have been fraudulently signed on the quitclaim deed or that the person who notorized her signature did so without being present when Williams signed, that domestic violence charges had been filed, and that each had promised not to accuse the other of domestic violence. That Williams wouldn’t move back into the house until Ormsby signed the agreement, which he wrote, was not offered as consideration and was not consideration. It was a simple fact of life—a fact that is outside the contract and is of no relevance.
Justice Pfeifer points out that identical language concerning consideration was used in both the March and June agreements. If the first is to be enforced, the second should be as well. Moreover, by voiding the March agreement, which entitled her to specific rights, Williams gave valid consideration for the June agreement, which entitled her to different rights. Under the June agreement, Ormsby gained more control over the timing of any sale of the house and in gaining these benefits, forfeited some equity in the house. Justice Pfeifer would have found both agreements enforceable, but since the case is so idiosyncratic as to be useless as a precedent, Justice Pfeifer would have dismissed the case, review having been granted improvidently.
[JT & Christina Phillips, with a hat tip to Catherine Garcia-Feehan, Esq., Career Law Clerk to Hon. David A. Katz at the Northern District of Ohio, through whose good offices this came to the attention of the Contracts Listserv]
Friday, March 2, 2012
Our colleauge here at the blog, Meredith Miller moderated the first of three panels united under the broad rubric of Contracts in Action.
Professor 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.
Professor 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.
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.
Keith Rowley has put together a panel consisting of Shawn Bayern, Omri Ben-Shahar, and Mark Gergen to honor Melvin Eisenberg, who is the fourth honoree for Lifetime Achievement at the Spring Contracts Conference.
Professor Bayern stressed Professor Eisenberg's fundamental refusal to reduce contracts law to any one unifying principle. Law must be justified by relevant social propositions: including morality, policy and experiential propositions. Not meaning to criticize theorists who view contracts as promise, or as plan, etc., Professor Beyern regards such views as undoubtedly useful but incomplete when considered from the perspective of Professor Eisenberg's appreciation of contracts as contracts. In addition, Professor Bayern highlighted Professor Eisenberg's contributions to and critiques of the field of law and economics. Professor Bayern notes that Professor Eisenberg's work is often not categorized under the rubric as law and economics because although Eisenberg utilizes economic theory, he reaches conclusions that are not usually associated with law and economics. But Professor Bayern challenges more traditional L&E types to attempt to refute any of Professor Eisenberg's arguments, which he (Professor Bayern) summarized as showing that, while economic models might make sense in the abstract world of rational actors, they do not help us understand the real world of contractual relations.
Omri Ben Shahar again stressed Mel Eisenberg's contributions in the realm of law and economics, recognizing Eisenberg as law and economics pioneer. Eisenberg's approach to L&E enables economic analysis to improve in resolution. Because Eisenberg focuses not on generating new theoretical models but on applying them in concrete situations, he can test and refine economic models and help them achieve greater clarity and specificity. Professor Ben Shahar elaborated on Professor Eisenberg's substantive contributions in refining our understandings of disgorgement, the bargain theory of consideration and procedural unconscionability doctrine.
Mark Gergen celebrated Mel Eisenberg as the best exemplar of his generation of the great pragmatic tradition in contracts scholarship. Professor Gergen illustrated this by comparing and contrasting Professor Eisenberg's work with that of last year's honoree, Stewart Macauley. After noting the extent of overlap between the two scholars, Professor Gergen identified the key distinction that Mel Eisenberg more clearly sees the limitations of contracts doctrine. Contracts may be about relationships, but it cannot repair such relationships when they are broken. There may be damages, but often the parties just must go their separate ways. Professor Gergen also contrasted Mel Eisenberg's work with that of another giant of Mel's generation of conracts scholars, Professor Robert Scott, especially in their estimation of the value of litigation and their faith in courts.
Ultimately, all agreed that Mel Eisenberg's scholarship defies easy categorization but is always characterized by lucidity, clarity and persuasiveness. The pleasure of reading Mel Eisenberg's scholarship is that you always learn by reading him and emerge either persuaded or knowing, because of the clarity of Eisenberg's writing and his transparency in identifying his assumptions, exactly why you disagree.
As expected, Professor Eisenberg was gracious in his remarks, noting that he is currently at work on a book on contracts, and indicating that there is still some "open texture" in his work that he can work on with the help of the comments he received on his work.