Monday, September 16, 2013
All the details can be found here. Here's the main information:
Join us Winter 2014 in the Sunshine State for
The 9th Annual Conference on Contracts
February 21-22, 2014
The 2014 conclave will be hosted by
St. Thomas University School of Law
and will be chaired by Professor Jennifer S. Martin (pictured).
The Ninth International Conference on Contracts will bring together scholars who teach and work in the areas of contract law and practice for two days of panels and scholarly presentations. The Conference is unique in the breadth of its coverage of contract-related issues and its mix of senior and junior scholars.
One of its chief goals is to foster and encourage dialogue and relationships among scholars at all levels, and to bring together those whose work comes from different perspectives.
For more information about the Conference contact lead conference organizer:
Professor Jennifer S. Martin at (305) 474-2420, or via email at [email protected][JT]
Friday, September 13, 2013
Last week, Facebook announced that it planned to enact changes to its privacy policies. Its announcement elicited the by now, all too-familiar flurry of protests from users and privacy advocacy groups. Six privacy groups wrote to the Federal Trade Commission (FTC) that the proposed changes violated the 2011 settlement that Facebook reached with the FTC over its Sponsored Stories advertising program.
The letter states that the proposed changes “will allow Facebook to routinely use the images and names of Facebook users for commercial advertising without consent.” While the current policy permits users to “use your privacy settings to limit how your name and profile picture may be associated with commercial, sponsored, or related content ,” the proposed policy brazenly states:
“(y)ou give us permission to use your name, profile, picture, content and information in connection with commercial, sponsored or related content…This means, for example, that you permit a business or other entity to pay us to display your name and/or profile picture with your content or information, without any compensation to you.”
As the letter points out, the images of Facebook’s users “could even be used by Facebook to endorse products that the user does not like or even use.”
Facebook’s proposed policy changes also contain this provision:
“If you are under the age of eighteen (18), or under any other applicable age of majority, you represent that at least one of your parents or legal guardians has also agreed to the terms of this section (and the use of your name, profile picture, content, and information) on your behalf.”
This week, the Federal Trade Commission announced that it would investigate whether Facebook's announced policy would violate a 2011 agreement that the company had reached with the agency. Facebook's position is that the proposed changes were prompted by its settlement in a case involving its Sponsored Stories advertising program.
Facebook’s proposed changes seemed eerily familiar and then I realized why –I’d already written about this issue back in December. Back in December, Instagram, a company acquired by Facebook, proposed changes to its terms of service that stated:
“you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you taken, in connection with paid or sponsored content or promotions, without any compensation to you. If you are under the age of eighteen (18), or under any other applicable age of majority, you represent that at least one of your parents or legal guardians has also agreed to this provision (and the use of your name, likeness, username, and/or photos (along with any associated metadata)) on your behalf.”
Do the terms sound familiar?
And now this, again. It's like the 1993 movie, Groundhog Day, starring Bill Murray and Andie MacDowell. In that film, Murray's character, a T.V. weatherman, is made to report on Groundhog Day activities. Murray's character, who doesn't like the assignment, finds that he keeps waking up to relive Feb. 2nd over and over again.
Facebook just doesn’t understand that no, means no. It pleads forgiveness, wants us back, and then the same behavior starts up all over again. We want to believe you. We really do.
We feel your pain, Huma Abedin.
There are long term consequences to what Facebook is doing. Each time it pushes, it pushes hard, and in
response to pushback from consumers, it appears to retreat – but not as far
back as it pushed. Then it does it again
and each time, Facebook manages to loosen our privacy norms just a bit more. It wins through increments, through
persistence. It didn’t get to a billion
users overnight and it isn’t going to strip us of all our privacy without a
good fight from us.
But big changes are made in increments. Policy changes that nobody reads because they are hidden in wrap contracts, slowly but surely, change our expectations of privacy. The erosion of consent, justifiable perhaps at one time to limit business risks, led us to where we are now –an online contract clause that purports to extract consent from someone who never even received notice of its existence. To make matters worse, the clause is directed at children who don’t even have legal capacity to contract.
Really, this time you’ve gone too far, Facebook. This time, let’s make it the last time, Facebook. Promise?
Of course you do.
Over the summer, hte UK's National Audit Office presented to the BBC Trust Finance Committee this Report on executive severance payments made to fromer BBC executives. The BBC has reduced its management staff signficantly since 2009. In so doing, it expects savings totalling £92 million. However, the BBC also has made severance payments to the 150 ousted executives totalling £25 million.
According to the Report, the BBC plans changes going forward. From now on severance pay will not exceed 12-months salary or £150,000, whichever is less.
The drama of Parliamentary hearings into the payments is well described here in the UK's The Guardian. The BBC's Director General at the time of the payments was Mark Thompson, who recently moved on to The New York Times, where he is Chief Executive. Thompson defended the payments before Parliament, although they exceeded by £1.4 million (£2 million in The Independent's account) the BBC's contractual obligations to its former executives. The largest single payment was just over £1 million, and it went to Thompson's deputy, Mark Byford. According to the BBC, the investigation into severance payments was triggered by a £450,000 payment to one BBC executive who resigned in connection with a scandal after just 54 days on the job.
From an American perspective, it is a bit hard to see what the fuss is all about. Sure, capping severance for executives at publicly-owned entities is certainly a reasonable policy, but even without the cap, exceeding contractual obligations by something less than 10% while achieving significant savings overall seems pretty tame on the overall scales of both wasteful public-sector spending and executive severance packages. As Brad Pitt's character puts it in Inglorious Bastards, that should just get you a chewing out. But perhaps we have been desensitized by the size of severance packets, even at public corporations, on this side of the pond.
1. It is perhaps telling that the Report begins with three blank pages (after the cover page) followed by two mostly blank pages. Apparently they don't audit their own use of paper.
2. UK usage seems to have completely abandoned the hyphenated compound adjective. Thus, after all the blank pages, the Report begins, "The BBC Trust receives value for money investigations into specific areas of BBC activity." I had to read this sentence three times before I could make any sense of it. That's because "value for money" is a compound adjective rather than two nouns separated by a preposition. To my eyes, the sentence would have been far more readable if it had been written: "The BBC Trust receives value-for-money investigations into specific areas of BBC activity. " Am I the only one? My inquiry also relates to changes going on in Law Review offices in the US, as I have tussled with student editors who have grown hostile to hyphens in recent years. I like the little fellas.
Thursday, September 12, 2013
In July, Centre College announced that the A. Eugene Brockman Charitable Trust had pledged the largest gift in the history of small, liberal arts colleges. The fund would be used to create 160 scholarships for students majoring in the natural sciences, computational sciences or dismal sciences (aka economics). Eugene Brockman died in 1986, but his son, Robert T. Brockman attended Centre College and is now a principal in Reynolds & Reynolds, a car dealership support company.
Earlier this week, Centre College announced that the gift had been withdrawn. The gift was contingent, as it turns out, on "a significant capital market event." The event was a $3.4 billion loan deal involving Reynolds & Reynolds. The proceeds from the deal would go to Reynolds & Reynolds shareholders, including the Brockman Trust. But the rating agencies did not like the deal and downgraded Reynolds & Reynolds. As a result, no deal, no proceeds, no revenues to the Brockman Trust and then none to the College.
For our purposes, there are two money quotes in the Times coverage from Centre College's President John Roush. First, “In retrospect, we might have put a big asterisk on this thing . . . ." And second “We had a lot of people who have poured mountains of time into this . . . ."
No doubt, Centre College would like to maintain its good relations with the Brockman Trust. It has received money from the Trust in the past; it would like to continue to do so in the future. But if there were a clean break, is the pledge enforceable?
The answer may turn on where that astserisk should be. Was there an asterisk attached to the gift or an asterisk attached to the announcement of the gift? If Brockman made clear that its gift was contingent on the significant capital market event, then its pledge is not binding. There was no promise. But if the condition was not clear, there may still be a representation that one would reasonably expect to induce reliance and that apparently induced actual reliance when the Centre College people "poured mountains of time" into the gift. Even the announcement of the gift, its purposes and its source, might be consideration, rendering the gift pledge enforceable (if there was indeed a promise), because the Trust got something of value (publicity) in exchange for its pledge.
One also wonders about other donors. If the Brockman Charitable Trust pledge was used to attract other donors, those donors might now be experiencing donor's remorse. If the other donors now renege on their pledges, might the College have a cause of action against the Trust?
The NYT reported that Victor Willis, who you may know as the policeman/naval officer from the Village People, will finally get control of copyright to certain songs that he wrote back in the day. Those songs include hits like "YMCA," "In the Navy" and "Go West." Yes, he also wrote "Macho Man," but unfortunately, he wrote tht one before the relevant law went into effect. That law was a provision in the 1978 Copyright Act that gave creators "termination rights" that permitted them to take back control of the copyright to their works after 35 years - even if they had originally signed away those rights. We've all heard the horror stories of our favorite musicians in their lean and/or naive years signing away rights in one-sided contracts that favor the labels. His is the first well-known case of an artist invoking those termination rights, which opens up a lot of possibilities for him. Mr. Willis is quoted in the NYT article as saying, "I've had lots of offers, from records and publishing companies" although he isn't sure what he'll do next. He does have these parting words of wisdom, "When you're young, you just want to get out there and aren't really paying attention to what's on paper. I never even read one contract they put in front of me, and that's a big mistake." It takes a real "macho man" to admit his mistakes.
Wednesday, September 11, 2013
This post will conclude our sympoium on the contracts scholarship of Stewart Macaulay. Professor Macaulay has asked us to thank all those who participated in the discussion of his work both on the blog and in the book, Revisiting the Contracts Scholarship of Stewart Macaulay: On the Empirical and the Lyrical (Jean Braucher, John Kidwell, and William C. Whitford, eds., Hart Publishing 2013).
We add our own thanks to Jean Braucher, who put the symposium together for us, and to all of our participants, whom we name below with links to their posts:
And here are links to the introduction to the symposium and the biographies of our contributors:
In many law schools, faculty offices are in a separate part of the law building from class room space and other common spaces that students habitually occupy. In my law school. classrooms are on the first floor; faculty offices are on the second floor. Students -- especially 1Ls -- have a hard time breaking through the ceiling and asking faculty members for help outside of class time. I think part of the problem is that, for some students, the second floor is a strange and alien place. We try to be welcoming, but when students see strange adults rushing about purposefully upstairs, students may feel like they are in the way.
I am doing two things differently this year that have tremendously increased the quantity and quality of my out-of-class interactions with my students. We are now in the fourth week of our seven-week mimimester, about which I have written previously, here, here and here. This week, I am giving the second of three in-class quizzes that will account cumulatively for 20% of my students' grades. After the results of the first quiz, students are taking this very seriously, and many of them are coming to see me to make certain that they grasp the material. So part of the increase in out-of-class interactions with my students is a product of the frequent assessments.
I attribute the other part of the increase to my new habit of eating in our law school cafeteria (pictured) three days a week. I told students that I will be there around noon on Tuesdays, Thursdays and Fridays. I am available to them to talk about contracts, if that is what they want to do, but I am also there just to hang out and get to know them. I used to meet with my first-year students for lunch in small groups. That way, I was assured at least one out-of-class encounter with each student, and I also got to introduce the students to some of the local eateries that they might not discover on their own. But most students did not follow up on the interaction, and some of the lunches were awkward, because not every student is as thrilled by the prospect of lunch with a professor as I would have been. Sometimes it was hard to get a conversation going or a few students dominated the conversation while others sat silently and stared at their food.
But I think my being in their space works a lot better. Students come to me on their terms. Everyone understands that it is a setting in which people come and go. Students pull up a chair, join in a conversation, and take off whenever they need or want to. Sometimes I still eat alone, and that's fine. I have an iPad. The rhythm follows the rhythm of the minimester. When an assessment is imminent, I am surrounded by students. In its wake, I say hi to my students, and they barely look up from their legal research assignment, or whatever other book they have their noses in. Unlike me, they cannot relax between contracts quizzes.
Ann E. Cudd, A Contractarian Approach to Corporate Bailouts, 11 Geo. J.L. & Pub. Pol'y 283(2013)
Tuesday, September 10, 2013
According to Rolling Stone, Ohio resident Noam Lazebnik has sued Apple for breach of contract, claiming that "he and other Breaking Bad fans have been cheated by only receiving the first eight episodes of the show's final 16 episodes with their iTunes 'Season Pass.'" Rolling Stone explains:
The AMC drama's fifth season has aired in a split format of two eight-episode mini-runs. Lazebnik says he and other customers were promised "every episode in that season," which should include the final eight episodes (since those are technically still part of Season Five). According to the lawsuit, Apple owes fans either $14.99 (for the standard version) or $22.99 (for the high-def version).
Lazebnik is basing the suit on "breach of contract and violation of California's consumer protection laws."
"When a consumer buys a ticket to a football game, he does not have to leave at halftime," reads the claim. "When a consumer buys an opera ticket, he does not get kicked out at intermission." Apple representatives contacted by GigaOM did not immediately respond to a request for comment.
[Meredith R. Miller]
- Business Law Prof Blog, by C. Steven Bradford (Nebraska), Eric C. Chaffee (Toledo), Joshua P. Fershee (West Virginia), Marcia L. Narine (St. Thomas), Stefan J. Padfield (Akron) & Anne Tucker (Georgia State)
- Education Law Prof Blog, by Derek Black (South Carolina) LaJuana Davis (Cumberland) & Areto Imoukhuede (Nova)
- Elder Law Prof Blog, by Kim Dayton (William Mitchell), Rebecca C. Morgan (Stetson) & Katherine C. Pearson (Penn State)
- Marijuana Law, Policy & Reform, by Douglas A. Berman (Ohio State)
We welcome our colleagues to the wonderful world of blogging and wish them all great success.
Monday, September 9, 2013
Today is the official release date for my book – WRAP CONTRACTS: FOUNDATIONS AND RAMIFICATIONS. I’m excited about it and pleased that the publisher, OUP, has offered a promotional discount to readers of this blog. I plan to blog later this week about the topic of the book – wrap contracts and the alarming things they do. In the meantime, I’ve posted the Introduction here.
Brooklyn Law School is sponsoring a conference entitled What Law Governs International Commercian Contracts? Divergent Doctrines and the New Hague Principles. More information can be found here.
Here are the basics:
Brooklyn Law School
250 Joralemon Street
Brooklyn, New York
About the Symposium
With the continued dramatic growth of international commerce, a critical question has become even more important: What law governs the contracts behind the commerce? Key issues include:
- In much of the world, courts accept the choice of the parties to a contract as to what law will govern it – but this principle is not accepted everywhere. Even in nations where it is accepted, differences abound.
- Should the ability of parties to select the law governing their contract be approached differently in the increasingly prevalent world of international commercial arbitration?
- In many arbitral systems, parties may select not only the law of a sovereign state, but also “rules of law” emanating from non-state sources, such as “principles” promulgated by international organizations. Should courts show the same deference to the parties’ choice of non-state law?
The Hague Principles on Choice of Law in International Contracts, prepared by the Hague Conference on Private International Law and now nearing completion, are expected to be quite influential, both in establishing the principle of party autonomy to select the law governing commercial contracts and in developing the principle and its limits.
This symposium addresses the important issues described above – from the perspectives of both current law and the “best practices” represented by the draft Hague Principles.
Friday, September 6, 2013
I start my first year contracts course with consideration. For the first time, I’m also teaching a contracts drafting course. Based upon the contracts drafting texts that I reviewed, the general consensus seems to be that recitals of consideration are basically pointless. While I think that’s somewhat true in that they don’t contain performance obligations, it’s misleading, too. Courts not only consider recitals in construing clauses and the parties’ intent, a recital of consideration may create a rebuttable presumption or may estop a party from claiming lack of consideration. In other words, in some cases, it can save a party from a claim that consideration was insufficient.
A recent case involving a patent assignment, Network Protection Sciences v. Fortinet, 2013 WL 4479336 (N.D. Cal 2013), seemed to go even further when the court, applying Texas law, held that a recital was conclusive. The recital in question stated that the patent was assigned “for good and valuable consideration, the receipt of which is hereby acknowledged.” The party contesting the assignment argued that it was invalid because it was “beyond dispute” that no consideration was paid for it. The court, applying Texas law, rejected that argument finding the recital conclusive and that “(e)ven if no actual consideration were paid…NPS’s agreement to be bound by the choice-of-law provision would be deemed adequate consideration.” In other words, according to the court, the recital is conclusive with respect to the issue of whether there was consideration for the assignment but even if it weren’t, agreeing to the choice of law provision was sufficient consideration. Is this the law in Texas, is it unique to Texas, or did the judge make new law? Any contracts profs care to weigh in?
In any event, it seems that consideration wasn't the way to go anyway because (although the parties didn't raise the issue) the assignment seems to fall under Restatement section 332 regarding gratuitous assignments that are irrevocable if signed and delivered to the assignor. This makes sense to me because a written assignment can affect third parties who rely upon it.
The case is also noteworthy because it opens with a quote from a recent NYT oped, coauthored by Santa Clara law prof Colleen Chien, which discusses the problem of “patent trolls” (companies that buy up patents with the intent to sue for infringement, rather than to practice the patented invention). The court’s decision denying the defendant's motion to dismiss the patent infringement action was a bit disappointing given the way it began its opinion and the less-than-admirable behavior of the plaintiffs and their trollish behavior in pursuing the action. Where are the activist judges when you need them?
Thursday, September 5, 2013
University of Utah Law Prof Debora Threedy (left) has introduced us to a new resource for first year Contracts classes. The Center for Innovation in Legal Education at the University of Utah has produced 37 online videos dealing with topics from the Restatement of Contracts 2d.
The goal of this project is to reduce the amount of in-class time spent on conveying doctrine so that more time can be devoted to active learning activities, such as group exercises or skills development. The Utah crew aimed to have short videos ready for viewing one week ahead of the class session during which that material was covered. The students could watch the videos, which were usually less than ten minutes long, and then come to class with a working knowledge of the concepts covered in the next class session. The ultimate goal is to reduce the amount of in-class time spent on conveying doctrine so that more time can be devoted to active learning activities, such as group exercises or skills development.
Professor Threedy's colleague, Aaron Dewald (right), has blogged about the University of Utah's experience with the videos, which you can read here. Here is his bullet-point summary of student survey responses to the project:
Of the 101 students that took the class, 69 of them responded to the survey. They were split virtually even with 34 females and 35 males replying. Here are some very interesting results that came out of the survey:
Regarding video questions
- Roughly 97% of respondents agreed or strongly agreed that the modules made the Restatement content easy to understand.
- 10% of respondents agreed or strongly agreed that the length (8:30 on average) was too long. 40% were neutral. This answered our hypothesis that most students would be ok with a length lower than 10 minutes. A few students noted in their qualitative feedback that some of them were too long.
- Students were mostly neutral (37%) or agreed (36.2%) when we asked if there was desire to have a way to clarify questions after watching the module. We asked this in anticipation of a message board or discussion forum or something. This conflicts a little bit with a more direct question later.
Module use in class
- Students typically watched the modules before class time (49%). Unfortunately, due to unforeseen scheduling (one professor was ahead of the other), the modules were sometimes released very closely to class, if not after.
- The previous point was supported by the fact that nearly 85% of the students reported wanting more time with the modules prior to class.
- Students also reported using the modules as a review after class (70%)
- Not surprisingly, 42% of the students agreed or strongly agreed that they would rather watch the videos than read about the restatements. 29% were neutral.
- 50% of the students agreed or strongly agreed that the videos allowed them to pay better attention in class. 31% were neutral. We were very satisfied with this response, because it speaks to the idea that moving the non-interactive content outside of the classroom can facilitate a better learning experience in the classroom.
- Nearly 60% of the students wish they had a way to assess their knowledge after watching the videos. This question was asked in anticipation of administering the videos with a formative assessment to allow students some idea of their comprehension.
- Interestingly, over half of the students reported that they wouldn’t have used an online discussion board to talk about the content in the videos.
- Several questions asked the students if they used the videos as asubstitute for outlines or note taking in class, overwhelmingly the students replied. “No.”
- Finally, students would choose a class that implemented videos over one that does not (85%)
There were a few common threads through all of these:
- Contrary to what multimedia theory says, the students wanted me to read the text of the restatements. They hated the silent time I gave them to read to themselves. Confused? There’s a multimedia principle called the Redundancy principle. Basically, it says that if you have a bunch of text on a screen, and you read it to the viewer, they spend more cognitive energy reconciling what you’re reading out loud to what’s printed on screen. The unfortunate side effect is they aren’t reading to comprehend, they’re reading to reconcile.This was probably the most surprising to me… and I’m willing to admit that I was wrong. Just proof that what is proved in a “lab” may not be the best thing in real life. If you’re interested in reading more about it, you can pick up the book on Amazon. I think anyone who uses technology to create learning environments, especially multimedia ones like videos, animations, or the like, should understand the principles in this book.
- As stated in the survey, many wanted them far ahead of time. This was strongly emphasized in the feedback. Having already made the videos and a better understanding of their use, etc… this shouldn’t be an issue for future iterations, but this is something to keep in mind if we want to do new courses in the future. We definitely need more lead time.
- A funny one: Students were tired of “widgets”. A few feedback statements and some verbal feedback (given to me in Torts class) told me they wanted real examples and not theoretical “widgets” as part of the examples. There must be something too theoretical about a widget… something lacking in their prior knowledge. Next time, we’ll use something like iPhones or paintbrushes. Maybe we can make some money with product placement! Just kidding…
- The students really, really liked the videos, and found them extremely helpful. They noticed towards the end of the semester when we were a little rushed to get them all out… but I thought we still stayed on a pretty good release schedule considering the amount of time that went into them.
- Captioning or script availability – this is a feature on YouTube and might just need to be mentioned in class.
This is the eighth in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
Doctrines of Last Resort
Last week I had occasion to re-read “The Path of the Law” by Oliver Wendell Holmes Jr., and I was reminded of my many discussions about contract law with Stewart Macaulay (pictured, below left). During my time teaching at Wisconsin, the Contracts professors held weekly lunches to discuss the materials we were covering in class. These discussions would often turn to the fundamental question that Stewart began to wrestle with in his famous study “Non-Contractual Relations in Business” and that has fascinated him ever since, namely, “What good is contract law?”
In “The Path of the Law,” Holmes offered a well-known and provocative perspective on this question: the purpose of law is to constrain “the bad man.” Whether Holmes actually believed that one who “want[s] to know the law and nothing else … must look at it as a bad man” is the subject of some dispute, but the bad man has become an important starting point for thinking about law for generations of law students and remains a powerful image for legal scholars.
In “Non-Contractual Relations in Business” – and in our lunchtime discussions – Stewart didn’t seem to have much faith in law to constrain the bad man. Mark Suchman deftly summarized the core insight of Stewart’s most famous work: “Legal doctrine and legal recourse often matter very little . . . since most transactions are governed, in practice, by informal community norms, enforced by informal social sanctions.” On more than one occasion, therefore, I pressed Stewart on whether his emphasis on the impotence of contract law undermined our teaching of the course to first-year law students.
But the point for Stewart was never that contract law is irrelevant, only that it is sometimes overemphasized by legal scholars, particularly legal scholars who rely on highly reductionist theories of human behavior. Indeed, in his more recent article, “The Real and the Paper Deal,” Stewart observes, “doctrine can matter.” In my contribution to the book, I focus on a collection of legal doctrines, which I call the “doctrines of last resort,” and I argue that these doctrines matter because they facilitate contract formation.
The doctrines of good faith and fair dealing, fiduciary duty, and unjust enrichment are doctrines of last resort because they are activated only when all other potentially applicable commands from constitutions, statutes, regulations, ordinances, common law decisions and contracts have been exhausted. In these circumstances – where positive law and private ordering are otherwise incomplete – contracting parties rely heavily on informal social sanctions to protect against opportunism, but the doctrines of last resort reinforce these social sanctions. Rather than regulating all of the deviations and adjustments that are common in contractual relationships, doctrines of last resort constrain extreme deviations from social norms, reinforcing agreements precisely in those contexts where informal social sanctions are weakest.
In my essay, I introduce the notion of “boundary enforcement,” arguing that the doctrines of last resort are united by a similar objective: the establishment of boundaries on self-interested behavior to mitigate opportunism. This concept is developed further in my working paper (with Jordan Lee) entitled Discretion, which focuses on the role of the duty of loyalty. Two insights about boundary enforcement are crucial to that paper and not limited to fiduciary law. First, “boundary enforcement” suggests that courts should respect the reasonable exercise of private decision making within the boundaries established by the doctrines of last resort. In contract law, for example, courts should generally respect the deals struck by the parties, even if the courts would have struck a different deal. Second, when boundaries are not established by the contracting parties, courts often turn to industry customs and social norms to establish the limits of self-interested behavior, and this is a sensible way to meet the reasonable expectations of the parties. By establishing the boundaries of opportunism in this way, the doctrines of last resort not only constrain the bad man, but embolden private parties to form contractual relationships, thus servicing another important value in law: the promotion of entrepreneurial action.
[Posted, on Gordon Smith's behalf, by JT]
Wednesday, September 4, 2013
We are saddened by the death of Ronald Coase, whose work opened up a range of new prospectives on contractual (and other kinds of) relationships. That sadness is tempered by our knowledge that his life was well-lived and that he remained active and productive even as he surpassed the century mark. Remeberances abound and we have little to add, so we simply link below to what others have said:
This is the seventh in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
Peter Linzer is a Professor of Law at the University of Houston Law Center.
Contracts of Adhesion: An Oxymoron?
Contracts of adhesion are a big topic this year, what with Peggy Radin’s Boilerplate, Oren Bar-Gill’s Seduction By Contract and the ALI’s new Restatement Third of Consumer Contracts. I’ve been focusing on the notion of adhesion, so my view of the fine book that Jean Braucher, Bill Whitford and the late John Kidwell have put together in honor of Stewart Macaulay (pictured below left) is tilted in that direction. Macaulay’s 1963 American Sociologicaly Review article referred to non-contractual relations in business, and many of the essays in the Festschrift (Stewart probably finds the term pretentious, but it surely is a celebration of him and his work) are about business contracts. But only three years later, Macaulay wrote Private Legislation and the Duty to Read – Business Run by IBM Machine, the Law of Contract and Credit Cards, 19 Vand. L. Rev. 1051 (1966), which is excerpted in the book.
The reference to IBM machines must sound quaint to younger readers, but like early Kurt Vonnegut stories (“Epicac”) and novels (Player Piano) that saw the problems of technology and people in an era of vacuum tubes, it still rings true. Most of the Vanderbilt article deals with businesses, but in a footnote Macaualay cited Lawrence Friedman’s discussion of how discrete areas such as labor law and occupational licensing have been spun off from general contract jurisprudence, and made reference to his own discussion of automobile franchising. (It’s note 5 on page 22 in the book, and note 18 in the Vanderbilt article.) In a fairly short discussion of consumers, Macaulay considered both case-by-case policing and legislationve regulation of standard terms, as in fire insurance contracts, and didn’t go much beyond that. But in an article not included in the book, but with the happy short title of Bambi Meets Godzilla, 26 Houston L. Rev. 575 (1989), he looked at consumer and deceptive trade practices laws and showed how they should be an integral part of the Contracts course, even though they had frequently been distorted into windfalls for well-informed consumers (often lawyers), rather than as weapons of defense for the little guy.
Others in the book have built on Macaulay (and Ian Macneil) to suggest that consumer transactions should be treated as a separate form of contract law. Bob Scott, whom Bob Gordon seems to describe, with respect, as a neo-formalist relationalist, has put forth a strong argument in that a hands-off policy makes no sense with consumer transactions, even if it does when sophisticated businesses are dealing with each other, while Ethan Leib has argued strongly that relationalists should “fragment consumer form contracts into its own sphere for treatment with the reasonable expectations approach,” but that this will require even more fragmented empirical research “to be useful to courts and regulators.” Ethan Leib, What is the Relational Theory of Consumer Form Contract? Chapter 9, at 284). Chuck Knapp, who has written frequently on adhesion problems, shows in his Is There a ‘Duty to Read’? (Chapter 11), how courts have or should have distinguished consumer transactions, and argues that what he calls a “presumption of knowing assent” should not preclude scrutiny of contracts of adhesion.
I think, however, that the real issue is whether we should treat adhesion contracts as part of contract law at all. I started teaching forty years ago, and from the beginning I had my doubts about the lines among the basic topics of private law: tort, contract and property, or even about how private private law was, and Peggy’s book in particular has led me to doubt that we should call any legal document a contract when it involves no real agreement, no negotiation or bargaining, little understanding of terms by the non-dominant party and no opportunity to change terms, except by walking away. In a previous blog, about Boilerplate, I pointed to the removal of products liability from the law of negligence. There, I pointed out that before the great 1914 Cardozo opinion in MacPherson v. Buick Motor Co., liability for a defective product was based on contract, while the expansion of liability away from the proof of negligence came from the use of implied warranties, which are sort of contractual, until Roger Traynor spoke of strict liability in a res ipsa loquitur case and, half a generation later, the Restatement of Torts Second § 402A took us off to the races.
This is hardly the place to review the immense body of writing about adhesion contracts, but I would like to point out that much of the apology for the dominant party imposing terms seems really to treat the issue as a matter of property law – “It’s my widget (or software) and I can set any terms for your license [a property term] to use it.” In effect, a no trespassing sign. That’s all right, I suppose, but it isn’t contract, and it should be judged by whether an owner of a thing owes a public duty to treat those who wish to use it with some degree of fairness, ultimately a matter of public law, like antitrust.
None of this answers the question of how to deal with what Knapp calls “individual contracts,” not just consumer deals, but franchise, employment and at least some professional service contracts (lawyers, brokers, etc.). We know, as both Stewart Macaulay and Jean Braucher have shown us, that individualized review through litigation, even with a presumption in favor of the little guy, is economically unfeasible in most circumstance, especially with the Supreme Court’s rigid imposition of the Federal Arbitration Act to favor pre-dispute arbitration clauses in contracts of adhesion. Bob Scott points to the European Union’s regulation of consumer contracts through a Council Directive imposing strong rules favoring the consumer, but the EU member states seem more amenable to a regulatory regime than we have been in recent years, though our former colleague and friend, Senator Elizabeth Warren’s Consumer Financial Protection Bureau has begun to make headway.
I think, and have written before, that legislation or administrative regulation forbidding specific terms in various individual adhesion transactions (examples could include choice of a distant forum, mandatory arbitration, limits on consequential damages, waiver of jury trials) is probably the best way. It is an appropriate area for state legislature, and more important, Congressional intervention, particularly because this issue has almost nothing to do with freedom of contract.
In fact, it has almost nothing to do with contract.
[Posted, on Peter Linzer's behalf, by JT]
Tuesday, September 3, 2013
We continue our online symposium inspired by Revisiting the Contracts Scholarship of Stewart Macaulay: On the Empirical and the Lyrical (Jean Braucher, John Kidwell, and William C. Whitford, eds., Hart Publishing 2013) with two more posts this week.
Peter Linzer is a Professor of Law at the University of Houston Law Center, where he has taught since 1984. Before going into teaching, Professor Linzer practiced law both as a Wall Street lawyer and as an Assistant Corporation Counsel for the City of New York. Professor Linzer is a member of the American Law Institute. Professor Linzer has served as the Chair of the Contracts Section of the Association of American Law Schools and is a Board Certified civil appellate specialist. He served for nearly a decade on the Pattern Jury Charge Committee of the State Bar of Texas. His principal academic subjects include Contracts; Constitutional Law; Equal Protection; First Amendment; International Contracting; Transactional Clinic; Contract Negotiation and Drafting; Introduction to American Law (for foreign LL. M. candidates); and Torts. Working with experienced practitioners, he pioneered a transactional course in international contracting that sees students negotiate and draft documents in simulated international deals.
Gordon Smith is Associate Dean and Glen L. Farr Professor of Law at BYU's Reuben Clark Law School. Professor Smith's research focuses on corporate and securities law, with particular emphases on Delaware corporate law and entrepreneurial finance. His work has appeared in many top law reviews, and he has co-authored a popular casebook, Business Organizations: Cases, Problems & Case Studies, with Professor Cynthia Williams of the University of Illinois Law School.
Prior to joining the BYU law faculty, Professor Smith taught law at the University of Wisconsin, where he served as Associate Director of the Initiative for Studies in Technology Entrepreneurship (InSiTE). He also taught at Lewis & Clark Law School and has been a visiting professor of law at Vanderbilt University, Arizona State University and Washington University. He has taught courses at universities in Australia, China, England, Finland, France, Germany, and Hong Kong.
Before entering academe, Professor Smith clerked for Judge W. Eugene Davis in the United States Court of Appeals for the Fifth Circuit and was an associate in the Delaware office of the international law firm Skadden, Arps, Slate, Meagher & Flom.
Some of Professor Smith's publications can be found here.
As I have discussed in previous posts here and here, I am for the first time teaching two, two-credit, seven week courses, called Contracts I and Contracts II. Part of the point of the minimester system (and of our curricular reform generally at Valparaiso University Law School) is to provide students with more frequent assessments so that they know through the term how well they are understanding the material and do not have to go into a final exam with no sense of what the outcome is likely to be.
Frequent assessments also provide throughout the term also help law professors integrate assessments into the learning process. We go over the assessments in class, and alarmed students are encouraged to talk though their difficulties with the material. Early assessments also helps us to identify students who need to be considered for our Academic Success Program.
But that is where anonymous grading comes in. I am all in favor of anonymous grading, but not for the reasons I think students usually favor anonymous grading. I think students want to be graded anonymously because they fear that faculty members will punish troublesome students with bad grades. That may indeed occur, but I favor blind grading because I would find it very hard to give very low grades if I knew who was receiving them. And the last thing I want to do is give a D or an F to a student with whom I have had some sort of conflict (e.g., see picture). It would be much easier to give such a student a higher grade in the hopes that she and I will never again cross paths.
The challenge I now face is negotiate the need to preserve anonymity while maximizing the effectiveness of assessment as a teaching tool. The problem is not acute for now, since, as I mentioned in an earlier post, because I have 140 contracts students this semester, all of my graded assessments during the minimester will be multiple choice. Since there is no danger of my bias affecting the grade of any particular student when the quizzes are graded by scantron, I am having the students use their real names on the quizzes. That way, I can track how they are doing and call them in for talks if I think they are in real danger. When they come to talk to me on their own, they will not be giving away any information (such as their exam numbers) that might influence how I grade final exams. I don't know what I would do if I had to grade written work. If I could not sit down with students and discuss their written work, the benefits of the assessment as a teaching would be greatly reduced.
I welcome suggestions as to how to achieve the goals of early assessment while protecting students' anonymity.