ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, August 18, 2012

AMR Corporation motion to end pilots' contract denied

Last week, a federal judge denied AMR Corporation's request to abandon collective bargaining agreements with its pilots' union.  AMR Corp. is the parent company of American Airlines.  AMR is undergoing bankruptcy and the motion was part of its reorganization efforts.  You can read more here

[Nancy Kim]

August 18, 2012 in In the News, Labor Contracts | Permalink | Comments (0) | TrackBack (0)

Friday, August 17, 2012

New Year, New Casebook!

Chomsky-carol KunzNext week, after a two-year hiatus, I will embark on my sixth semester teaching contracts.  This time, for the first time, I will be using Christina Kunz (left) and Carol Chomsky's (right) casebook, Contracts: A Contemporary Approach.  I am looking forward to returning to teaching contracts and especially to trying out a new approach.  

In addition to the new casebook, I am also incorporating clickers into my course for the first time.  That is, I will be polling my students and giving them little un-graded mini-quizzes.  They will give me answers by pressing buttons on their clickers, and I will see the results immediately.  Because the clickers enable the students to participate anonymously, they need not be nervous about getting the wrong answers and I hope that this technology will help me quickly take the temperature of my students and see if the material is sinking in.  

I have colleagues who find one casebook and stick with it, but I am a firm believer in the switcheroo.  I've learned a great deal from teaching out of each of the casebooks I have used prior to this one.  I expect that I will learn a great deal from an intense immersion into Chomsky's and Kunz's approaches to teaching contracts.  And I am eager to see how and the extent to which m students make use of their casebook's interactive features.

But mostly, the new casebook will give me the opportunity to cover some cases that I haven't used before, and new cases mean new limericks!

Stay tuned (bwhahahaha!)


August 17, 2012 in Teaching | Permalink | Comments (0) | TrackBack (0)

Thursday, August 16, 2012

An Early Win for Hewlett-Packard in Its Battle with Oracle

For three decades Oracle and Hewlett-Packard (“HP”)  worked together, with HP selling its hardware and Oracle selling its software, to their shared customers and the two corporations cooperating to make certain that Oracle's software was compatible with HP's servers which run on a system called "Itanium."  Tensions arose when Oracle acquired Sun Microsystems (“Sun”), a direct HP competitor, in 2010.  And things did not get better when Oracle hired HP's former CEO, Marc Hurd, and HP sued to enjoin Hurd from sharing trade secrets with his new employers.  Meanwhile, HP sought assurances from Oracle that it would continue to offer its software on HP’s platforms.  Along with assurances from Oracle’s most senior software execs that it was committed to business as usual, the parties signed a “reaffirmation agreement” (the Agreement), which stated in Paragraph 1:

Oracle and HP reaffirm their commitment to their longstanding relationship and their mutual desire to continue to support their mutual customers.  Oracle will continue to offer its product suite on HP platforms, and HP will continue to support Oracle products…on its hardware in a manner consistent with that partnership as it existed prior to Oracle’s hiring of Hurd.

The parties continued business as usual until Oracle abandoned this “work together” approach.  In a press release issued in March, 2011, it announced, without notice to HP, that new versions of Oracle’s software would no longer be compatible with HP’s server platform.  HP then filed suit, soon followed by Oracle’s very colorful cross-complaint

After a 12-day trial, on August 1st, the Santa Clara Couty Superior Court bestowed this win on HP, fiinding in HP's favor on its claims for both breach of contract and promissory estoppel.  The court found that the parties are bound by the Agreement, and that Oracle has a continuing obligtation to offer its product suite on HP's Itanium-based server platforms until HP discontinues the sale of its Itanium-based servers.   

The Superior Court began its inquiry by breaking down the plain language of Paragraph 1 and determined that (1) the first sentence was fully consistent with a continued obligation to make certain that Oracle software is compatible with HP servers, and (2) the second sentence used the language “Oracle will continue…” which can “only be reasonably interpreted as requiring Oracle to continue offering its product on HP’s Itanium platforms.”

The court rejected Oracle's argument that the Agreement  “merely a ‘public hug’ that imposed no obligations on either party,” and that Oracle “retained absolute discretion with regard to” making its software compatible with HP's systems.  In rejecting the "public hug" theory, the court noted that throughout the parties’ history, 99% of their dealings were accomplished without contracts.  Therefore, based on the parties’ prior course of dealing and the plain language of Paragraph 1, because HP was simply asking Oracle to maintain the business relationship as it had been prior to Oracle’s hiring of Hurd, it was fair and reasonable to require Oracle to continue its obligation to make its software compatible with HP systems.  Since the court interpreted the Agreement as a promise by Oracle to continue to work with HP, it found that Oracle's unilateral announcement that it would no longer make its software compatiable with HP systems constituted a breach of contract.

The court also ruled for HP on its promissory estoppel claim, based upon unambiguous promises made by two Oracle executives.  In reliance upon these assurances, HP provided Oracle with nearly $5 million of Itanium servers for porting and continued to invest in research and development in order to optimizing compatibility with Oracle’s software.  Further, HP also entered into the Itanium Collaboration Agreement (“ICA”) with Intel, a $264 million investment.  As the parties’ had been long-time business partners, it was foreseeable that HP would have no reason to doubt Oracle’s word and would make investments based on its support.   HP relied upon the parties’ long-term, upstanding business relationship to its detriment.  As a result, the court found that all elements of a promissory estoppel claim were satisfied. 

In sum, the plain language of the agreement, Oracle’s continued assurances of commitment, both to HP and to the public, and the parties’ long history of informal dealing sans contracts led the court to find for HP on both the breach of contract and promissory estoppel claims.  The court ordered Oracle to continue its porting obligations without charge “until such time as HP discontinues the sale of its Itanium-based servers.”

As reported here by, Oracle released the following statement:

“Last March, Oracle made an engineering decision to stop future software development on the Itanium chip.  We made the decision as we became convinced that Itanium was approaching its end of life and we explained our rationale to customers here.  Nothing in the Court’s preliminary opinion changes that fact.  We know that Oracle did not give up its fundamental right to make platform engineering decisions in the 27-words HP cites from the settlement of an unrelated employment agreement.  HP’s argument turns the concept of Silicon Valley ‘partnerships’ upside down.  We plan to appeal the Court’s ruling while fully litigating our cross claims that HP misled both its partners and customers.” 

So, the battle has been lost but the war continues.

[Chrstina Phillips and JT]


August 16, 2012 in Recent Cases, Web/Tech | Permalink | Comments (0) | TrackBack (0)

Tuesday, August 14, 2012

Don't Get Screwed Over

Docracy is an open source legal document site.  The site has launched a video campaign called "Don't Get Screwed Over" - it very effectively conveys the importance of freelancers having written contracts:

A free open source contract site is a great idea. I am not convinced, however, that it obviates the need for an attorney.  That said, it is true that, regardless of whether an attorney is involved, freelancers should always get their deals in writing and carefully express expecations and payment schedule.  The site's founder Matt Hall appears to share in my sentiment and believes that his site is a starting point for freelancers to figure out what they need and to find an attorney.  Hall told .net magazine:

[T]he video was designed to "make sure freelancers are aware how important it is to have a contract for work they do, and that there are resources like Docracy that can take the fear and mystery out of the process". He said it's increasingly common that freelancers don't get paid for work they've done, starkly highlighted by projects like the World's Longest Invoice.

Hall recommended "upfront and clear communication with your client about what's expected, when it's expected and when you'll be paid", and then getting this all down in writing and signed. "Clear communication can go a long way to avoiding problems in the future," he added. And while Docracy can be a starting point, Hall said such sites are not a replacement for proper legal advice: "A good lawyer who understands your business will save you money over the long term, so get educated and then find a good lawyer you like working with. We have a bunch of great, tech-savvy lawyers on the site who have already shown their willingness to help freelancers, so they might be a good start."

[Meredith R. Miller]

August 14, 2012 in Film Clips, Miscellaneous, Web/Tech | Permalink | Comments (1) | TrackBack (0)

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 

June 14, 2012 to August 13, 2012

RankDownloadsPaper Title
1 221 Party Choice and the Common European Sales Law, or: How to Prevent the CESL from Becoming a Lemon on the Law Market 
Jan M. Smits
Maastricht University Faculty of Law - Maastricht European Private Law Institute (M-EPLI)
2 202 Regulatory Techniques in Consumer Protection: A Critique of European Consumer Contract Law 
Oren Bar-GillOmri Ben-Shahar
New York University (NYU) - School of Law, University of Chicago Law School
3 194 The Optional Instrument of European Contract Law: Opting-in through Standard Terms – A Reply to Simon Whittaker 
Jürgen Basedow
Max Planck Institute for Comparative and International Private Law
4 161 You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture 
Zvi H. Triger
College of Management Academic Studies (COMAS) School of Law
5 147 What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool 
Horst Eidenmueller
University of Munich
6 128 Featuring People in Ads 
Eric GoldmanRebecca Tushnet
Santa Clara University - School of Law, Georgetown University - Law Center
7 126 The Dynamics of Contract Evolution 
Stephen J. ChoiG. Mitu GulatiEric A. Posner
New York University (NYU) - School of Law, Duke University - School of Law, University of Chicago - Law School
8 104 Hollywood Deals: Soft Contracts for Hard Markets 
Jonathan Barnett
USC Gould School of Law 
9 101 Affirmatively Inefficient Jurisprudence?: Confusing Contractors’ Rights to Raise Affirmative Defenses with Sovereign Immunity 
Steven L. SchoonerPamela Kovacs
George Washington University - Law School, George Washington University - Law School
10 95 Law and the Stable Self 
Rebecca E. Hollander-Blumoff
Washington University in Saint Louis - School of Law

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

June 14, 2012 to August 13, 2012

RankDownloadsPaper Title
1 194 The Optional Instrument of European Contract Law: Opting-in through Standard Terms – A Reply to Simon Whittaker 
Jürgen Basedow
Max Planck Institute for Comparative and International Private Law
2 161 You Definitely Should Have: A Contractual Look at Israeli Wedding Gift Culture 
Zvi H. Triger
College of Management Academic Studies (COMAS) School of Law
3 147 What Can Be Wrong with an Option? An Optional Common European Sales Law as a Regulatory Tool 
Horst Eidenmueller
University of Munich
4 104 Hollywood Deals: Soft Contracts for Hard Markets 
Jonathan Barnett
USC Gould School of Law
5 95 Law and the Stable Self 
Rebecca E. Hollander-Blumoff
Washington University in Saint Louis - School of Law
6 74 Autonomy, Pluralism, and Contract Theory 
Hanoch Dagan
Tel Aviv University - Buchmann Faculty of Law
7 68 Reflections on the Two-Handed Lawyer: Thinking versus Action in Business Lawyering 
Jeffrey M. Lipshaw
Suffolk University - Law School
8 62 Mistake Under the Common European Sales Law 
Ariel Porat
Tel Aviv University
9 62 The Importance of Fault in Contract Law 
Robert A. Hillman
Cornell Law School
10 52 The Renegotiating Clause in Petroleum International Joint Venture Agreements 
Talal Abdulla Al-Emadi
University of Qatar


August 14, 2012 in Recent Scholarship | Permalink | TrackBack (0)

Monday, August 13, 2012

Georgia State Court Reinstates Suit by Student Claiming Unlawful Expulsion

In Barnes v. Board of Regents, the Superior Court of Fulton County, Georgia found that Valdosta State University's student handbook serves as a binding contract that guaranteed students certain procedural rights before they could be expelled from the university and that the state had waived its sovereign immunity defenses to suit for violations of the student handbook by entering into such a contract with its students.  

Valdosta SealIn 2008, former Valdosta State University (“VSU”) student Thomas Barnes (“Barnes”) sued the Board of Regents of the University System of Georgia (the “Board”) and VSU's President, Ronald M. Zaccari (Zaccari) for breach of contract.  Barnes' complaint describes the underlying facts as follows:

Barnes was summarily expelled from VSU without notice or hearing in May 2007.  Since March 2007, Barnes had been voicing his objections (on environmental and financial grounds) to a proposed new campus parking garage.  Beginning in April 2007, Barnes and Zaccari had a series of meetings at which, according to Barnes, Zaccari castigated the student for having embarrased Zaccari.  According to the complaint, since the meetings did not deter Barnes from protesting the new parking garage, Zaccari began digging into Barnes’s academic and psychiatric records looking for grounds for expulsion. Zaccari decided to “administratively withdraw” Barnes without notice or a hearing on the ground that “Barnes presented a clear and present danger to the campus.”  

Query: is expelling a potentially dangerous student a good way of keeping your campus safe?  Wouldn't such an expulsion be more likely to unhinge a student whose mental balance was already on edge (not that there's any evidence that Barnes did in fact pose a threat)?   It's not as if college campuses are equipped with cutting-edge electronics, including those retinal scanners that Phillip K. Dick imagined in Minority Report, and could prevent any expelled student from ever returning to campus.

But we digress.

Barnes originally filed suit in federal court, and the Eleventh Circuit had ruled that the Board is immune to Barnes’s suit based on 11th Amendment sovereign immunity, although Barnes' suit agianst Zaccari was permitted to proceed.   Barnes re-filed his suit against the Board in state court, and the Fulton County Superior Court rejected the defense of sovereign immunity because, under Georgia law, such immunity is waived in actions alleging the breach of a written contract.  

[Christina Phillips & JT]


August 13, 2012 in In the News, Recent Cases | Permalink | Comments (0) | TrackBack (0)

Gnarly Formation and Damages Case out of the Fifth Circuit

The facts of Westlake Petrochemicals v. United Polychem are complicated.  Here's a nutshell of the facts:

  • In July 2008, A broker matched a bid for 5 million pounds of ethylene per month in 2009 by United Polychem (UPC) with an offer to sell by Westlake Pharmaceuticals (Westlake);
  • Westlake's offer to sell was subject to approval of UPC's credit;
  • Credit approval proved problematic, and UPC's President was required to provide a personal guaranty
  • In September 2008, Westlake also demanded that UPC secure its credit with a $2 million letter of credit; and 
  • In October 2008, UPC claimed that because Westlake had never formally accepted UPC's credit, the deal had never closed.

At trial, the District Court found UPC liable for $6.3 million in damages plus $634,000 in attorneys' fees.  The District Court also held UPC's President jointly and severally liable based on the guaranty.

On appeal, UPC contended that there was no consideration for the agreement.  Westlake's obligations were contingent on its approvel of UPC's credit, which it never gave.  The Fifth Circuit ruled as follows:

  • Westlake did not have a unilateral right to reject UPC's credit, but would have been subject to a breach of contract claim had it done so, as the deal is considered made with the expiration of a short window after the broker brings the parties together;
  • Because credit is not considered an "eseential element for the purposes of the Statute of Frauds, the Statute was satisfied here by the broker's written confirmations to both parties by instant message (!) and e-mail, even thought those writings omitted the credit term;
  • The broker had authority to bind the parties; and 
  • Westlake's approval of UPC's credit was not a condition precedent to the formation of the contract.

 On the damages issue, the District Court ruled that the jury shoudl be instructed that, pusuant to UCC s. 2-708(a) Westlake was entitled to the difference between the contract and market price at the time and place of tender.  The parties gave various estimates of what damages would be appropriate, but since the price of ethylene dropped after the contract was formed, the amount was considerable.  However, in this case the Fifth Cicuit found that s. 2-708(b) applies instaed of 2-708(a) and that Westlake is only entitled to its lost profits.  The Fifth Circuit so concluded because Westlake never purchased the ethylene it was to sell to UPC, and awarding it full expectation damages in such circumstances would constitute a windfall.  The Fifth Circuit remanded the case to the Distirct Court for a new calculation of damages.  

As to UPC's President's liability, the Fifth Circuit found the Guaranty ambiguous.  It had been cancelled before the first payment on ethylene shipments would have been due.  It was not entirely clear whether the Guaranty was to apply to all shipments under the contract or only to those on which payment was due prior to calculation. In such circumstances, the Fifth Circuit held that the guaranty must be construed in favor of UPC's President and that he could not be held jointly and severally liable with UPC.


August 13, 2012 in Recent Cases | Permalink | Comments (0) | TrackBack (0)