ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Monday, September 11, 2017

Employment Contracts in France under Macron

As reported by the Los Angeles Times and others, the no. two economy in the Eurozone - France - may see its notoriously worker-friendly labor laws overhauled in favor of fewer restrictions soon.

One key measure proposed by the government trims the role of unions, notably in small- and medium-size companies — which the prime minister said make up nine out of 10 companies in France.  Under the reforms, companies with fewer than 50 employees would be able to negotiate work rules with an elected colleague — not unionized — and companies with fewer than 20 employees can negotiate directly with their workers.

Labor Minister Muriel Penicaud said the reforms aim to not just change France's work rules but "to change the behavior of social dialogue in our country."

Whether this will be a favorable turn of events for France on the national and international business stage remains to be seen.  For workers, however, "negotiating directly" with employers sounds an awful lot like the very unequal bargaining powers so frequently seen in the USA.  Here, such contractual bargaining and conditions have not resulted in improved incomes for the middle and lower classes, although other factors of course also weigh in.  Nonetheless, it is a basic tenet of contract law - and thus employment law - that one can only strike the bargain that one has leverage to strike.  Trade unions and labor regulations can contribute significantly and importantly to an otherwise very skewed bargaining situation, especially in times and locations of unemployment and for older workers.

But of course, France should do something to improve its equally notorious unemployment rate, currently at 10%.  The work environment in Europe is still so much more relaxed than in the USA that it is doubtful whether any employer would seriously expect workers to amass the very high amount of hours worked by Americans or the very few weeks of vacation.  Hence, a social dialogue may be what it takes in France.

 

September 11, 2017 in Commentary | Permalink

Tuesday, September 5, 2017

Crumbling foundations are happening all over Connecticut, and the insurance policy fights are underway

I'd been seeing a lot of insurance cases come across my alert dealing with crumbling house foundations in the District of Connecticut. This one, Roberts v. Liberty Mutual Fire Insurance Co., No. 3:13-cv-00435 (SRU) (behind paywall), tells us why. Apparently it's part of an epidemic across Connecticut that so far has affected at least four hundred homes and may ultimately affect as many as 34,000 (!). The mix used in the concrete to pour these foundations contained a naturally existing mineral called pyrrhotite that degrades rapidly, causing the issues the homeowners are seeing. You can read more about this horrible situation here

The Robertses are one of the homeowners caught up in the deteriorating foundation issue. They brought a claim under their homeowners' insurance policy, which was denied because the policy excluded coverage based on faulty construction, which Liberty Mutual explained was the problem at issue with the foundation. However, the policy did cover loss due to defective construction if it resulted in "collapse." The issue in this case revolved around the definition of the word "collapse." The Robertses claimed the cracks in the foundations will eventually cause the walls to give way and collapse and so they should be covered. 

The insurance policy did not define the term "collapse," and previous Connecticut precedent had found the term in homeowners insurance contracts to be ambiguous. Because insurance contracts are construed against the insurance company, these courts had concluded that "collapse" could be something beyond just "a catastrophic breakdown" to include the "substantial impairment of the structural integrity of a building." But what does "substantial impairment" mean? Does it mean the building has to be in "imminent danger" of falling to the ground? Precedent suggested no. Connecticut courts had allowed recovery under "collapse" where the house never caved in and indeed the homeowners continued to live in it. So this court concluded that "substantial impairment" means that the building would cave in without repair to the damage. The judge found that there were factual disputes in this case involving whether the Robertses' home was in this state and thus summary judgment was inappropriate. 

This series of cases is painful to read and made me walk around my house worrying about what's not covered by my howeowners insurance that could destroy it...

September 5, 2017 in Commentary, Current Affairs, True Contracts | Permalink | Comments (0)

Friday, August 25, 2017

Beware starting work on a property before you own the property

When I poke through recent contracts cases trying to find ones to blog about, I tend to decide pretty quickly whether I want to spend time reading an opinion or not. This recent case out of Virginia, American Demolition and Design v. Pinkston, CL16000199-00 (behind paywall), caught my eye because the very first paragraph sounds like a hypo: 

This case arises out of a contractual negotiation for sale of real property . . . from . . . Pinkston to . . . Sweet. The negotiations never resulted in a final contract for sale of the property and no conveyance of the real property ever resulted. After the parties entered into contractual negotiations, but before the parties terminated contractual dealings, with oral permission from Pinkston, Sweet began preliminary construction on the property for the purpose of improving parts of the farmhouse located on the property. Although Pinkston discovered that Sweet’s work on the property had exceeded the scope of their discussions, Pinkston never stopped Sweet from performing further work on the property. Finally, when Sweet and Pinkston learned that a lien against the property hindered Pinkston from conveying title, Sweet stopped all work on the property. The property was subsequently rendered to be worth only a fraction of what it was previously worth before Sweet began working on the property.

So, naturally, I stopped to read the rest. Sweet brought the suit quantum meruit, for recovery of the value of his work performed on the property.  

The court acknowledged that there was no written contract about Sweet's work on the property, but the parties did make oral agreements on the subject that the court used in evaluating the quasi-contract claim. The work that Sweet performed on the property apparently brought the value of the property down, raising the question of whether it conferred a benefit on Pinkston as is required for recovery. However, the court noted that Pinkston knew Sweet was doing the work and did nothing to prevent him from doing it. In fact, they negotiated that Sweet would do the work. Therefore, the court found the work was a benefit that Sweet conferred on Pinkston with Pinkston's knowledge, despite the effect of the work on the value of the property at issue. 

But mere rendering of the services is not enough to merit recovery. The circumstances also must indicate that it would be inequitable for Pinkston to retain the benefit of Sweet's work without compensating him for it. There was no evidence that the parties ever thought Pinkston would pay Sweet for his labor. It was very clear that Sweet, expecting to buy the property, was in fact performing the work for himself, not Pinkston. Not only did Sweet not expect Pinkston to pay him, he expected to have to pay Pinkston when he bought the house. Therefore, the circumstances did not indicate that Pinkston needed to pay Sweet for his work. 

The case stands as a word of warning: be careful expending time and effort on a piece of real estate before negotiations for it have concluded. 

August 25, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (2)

Thursday, August 24, 2017

Is Amazon Selling Products or Services?

As first reported on Above the Law, the Federal Circuit Court of Appeals has just ruled that Amazon is nothing but a simple purveyor of “online services” and does not make “sales” of goods. Although the issue in the case was one of intellectual property infringement and thus not the UCC, the differentiation between “goods” and “services” is also highly relevant to the choice of law analyses that our students will have to do on the bar and practitioners in real life. Unknown

How did the Court come to its somewhat bizarre decision? Amazon, as you know, sells millions, if not billions, of dollars worth of tangible, physical products ranging from toilet paper to jewelry, books to toys, and much, much more. They clearly enter into online sales contracts with buyers and exchange the products for money. “Amazon” is the name branded in a major way in these transactions whereas the names of the actual sellers – where these differ from Amazon itself – are listed in much smaller font sizes. Often, it is Amazon itself that packages and ships the products to the buyers, whereas at other times, third party buyers are responsible for the shipping. Amazon “consummates” the sale when the buyer clicks the link that says “buy” on the Amazon website. Amazon then processes the payments and receives quite significant amounts of money for this automated process.

Clearly a “sale,” right? Nope. I guess “a sale is not a sale when a court says so.” As regards the IP dispute, the crucial issue was whether or not Amazon could control the acts of the third-party vendors. You would think that even that would clearly be the case given the enormous control Amazon has over what is marketed on its website and how this is done. Amazon, however, argued that it sells so many items that it cannot possibly police all of them. Thus, it won on its argument that it was not liable under IP law for a knock-off item that had been sold on the Amazon website as the real product (cute animal-shaped pillowcases). Unknown

Had this been an issue of contracts law and had the court still found that the transaction was not a sale of goods under UCC Art. 2, would it have erred? Arguably so. Under the “predominant factor test” used in many, if not most, jurisdictions, courts look at a variety of factors such as the language of the contract, the final product (or service) bought and sold, cost allocation, and the general circumstances of the case. When you buy an item on Amazon, it is true that you obtain the service of being able to shop from your computer and not a physical location, but at the end of the day, it is still the product that you want and buy, not the service. Apart from the relatively small service fee (which gets deducted from the price paid to the seller), the largest percentage of the sales price is for the product. Modernly, online buyers have become so used to that “service” being provided that it is arguably not even that much of a service anymore; it is just a method enabling buyers to buy… the product. Clearly, it seems to me, a “sale” under Art. 2.

Again, this was not a UCC issue, but it does still show that courts apparently still produce rather odd holdings in relation to e-commerce, even in 2017.

The case is Milo & Gabby LLC v. Amazon.com, Inc., (Fed. Cir. 2017)

August 24, 2017 in Commentary, Current Affairs, E-commerce, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, August 18, 2017

Brian O'Conan Hypo

Having disappeared for a couple of weeks into frantic preparation for the new semester, I thought I would re-emerge by sharing a hypo that I do with my students on the first day of class, based on Conan O'Brien's contract dispute with NBC from a few years ago. The hypo goes something like this: 

Brian O’Conan is a comedic host who has helmed a show on CBN, Later at Night, for sixteen years. Later at Night airs at 12:30, and Brian has always wanted to “move up” in the world of late night hosts to host a show at the earlier time of 11:30. Five years ago, in order to keep Brian at the network, CBN promised to give Brian hosting duties for its legendary 11:30 show, Somewhat Late at Night, as soon as Len Jayo’s current contract was up. Somewhat Late at Night is a flagship show that has aired in its time slot on CBN for 43 years; prior to that, it started at 11:15 for 14 years. For its entire 57-year existence, Somewhat Late at Night has begun directly after the late local news.

Brian and CBN enter into a contract with the following terms:

  • Brian is guaranteed that he will be the host of Somewhat Late at Night.
  • Both Brian and CBN promise to act in good faith in executing the contract.
  • Both parties will mitigate any damages caused by a breach of contract, but CBN agrees that it will pay Brian $40 million if it breaches the contract.
  • Brian is prohibited from being a late-night host on any other network in the event of a breach of the contract.

As promised by the contract, Brian becomes host of Somewhat Late at Night. After a strong start, Brian’s ratings trail off. Six months into Brian’s stint as host, CBN makes a public announcement that Somewhat Late at Night will be moved to start at midnight. It will use the 11:30 time slot for a new late-night show with old Somewhat Late at Night host Len Jayo.

Brian, learning all of this for the first time from the public announcement, tells CBN it has breached the contract, demands payment of $40 million, and also opens discussions with a competing network, Wolf, to host a new late night show at 11:30.

***

I like this hypo because, even though it was several years ago now, most students recognize the real-life situation this problem was based on and so feel somewhat engaged with it. In addition, even though I have taught them literally nothing about contract law at this point, I think they gain a lot of confidence from being able to examine the problem and come up with ideas for how the analysis should begin. I usually split them up and assign them a side to represent and have them make arguments on their client's behalf, and then allow them time for rebuttal. Along with discussing the contract's terms around the show itself, the students get into discussions about good faith, mitigation of damages, and just basic fairness. When we're done with the discussion, I then ask them how they felt about the side they had been assigned to, and if any of them had wished they'd had the other side. I think it is a good basic introduction to the task of being lawyers that I find relaxes them a little on the first day: If they can already talk about this problem on the first day, imagine how much better they'll be once they know some law!

If you're starting school years like I am, good luck!

August 18, 2017 in Celebrity Contracts, Commentary, Current Affairs, In the News, Law Schools, Teaching, Television, True Contracts | Permalink | Comments (2)

Tuesday, August 1, 2017

Fact-Checking the Snopes Lawsuit

You, like me, might often resort to Snopes to weed through what's true and what's not in the avalanche of information we're exposed to every day. (My most recent Snopes search: can a gift shop upcharge federal postage stamps? The answer is yes!) Recently Snopes turned to its constituents on the Internet to help provide funding to keep the website alive, precipitated by a lawsuit stemming from several contracts between the parties at issue. The whole thing is a matter of messy corporate structure that really seems like it's going to depend on the court's reading of the stock purchase agreement between the parties. Vox has a rundown of the whole situation here (that I'm quoted in). 

August 1, 2017 in Commentary, Current Affairs, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, July 28, 2017

Why Pyeatte v. Pyeatte May Be the Best Teaching Tool in Contracts Law

Our friend and esteemed colleague, Professor Charles Calleros, has kindly sent the following as a guest contribution to the ContractsProf Blog.  Enjoy!

Recently Val Ricks has collected a number of essays from colleagues on best and worst cases for the development or application of contract law.  In addition to participating in that project, Charles Calleros invites faculty to upload and post links to essays about their favorite cases as teaching tools (regardless whether the cases advance the law in an important way). He starts the ball rolling with this Introduction to his essay on "Why Pyeatte v. Pyeatte Might be the Best Teaching Tool in the Contracts Casebook":

Pyeatte v. Pyeatte, a 1983 decision of the Arizona Court of Appeals, did not break new ground in the field of contracts. Nonetheless, I assert that it is one of the best pedagogic tools in the Contracts casebook, for several reasons:

  •  *          The facts are sure to grab the attention of first-semester law students: A law grad reneges on a promise to support his ex-wife through graduate school after she supported him through law school during their marriage;

*          This 1980’s opinion is written in modern plain English, allowing students to focus on substance, while also learning a few necessary legal terms of art.

*          After their immersion in a cold and rather unforgiving bath of consideration and mutual assent, students can finally warm up to a tool for addressing injustice: quasi-contract;

*          The opinion’s presentation of background information on quasi-contract provides an opportunity to discuss the difference between an express contract, an implied-in-fact contract, and an implied-in-law contract; 

*          Although the wife’s act of supporting her husband through law school seems to beg for reciprocation or restitution, students must confront judicial reticence to render an accounting for benefits conferred between partners in a marriage, exposing students to overlap between contract law and domestic relations law;

*          The appellate ruling of indefiniteness of the husband’s promise – presented in a later chapter in my casebook, but looming vaguely in the background of the discussion of quasi-contract – invites critique and perhaps even speculation that the appellate panel felt comfortable denying enforcement of the promise precisely because it knew it could grant restitution under quasi-contract; and

*          The court’s admonition that expectation interest forms a ceiling for the calculation of restitution reveals a fascinating conundrum that brings us back to the court’s ruling on indefiniteness. . . .

You can find the whole essay here.

July 28, 2017 in Commentary, Contract Profs, Famous Cases, Law Schools, Miscellaneous, Recent Scholarship, Teaching, True Contracts | Permalink | Comments (2)

Thursday, July 27, 2017

Make Sure You Use Photos According to the License Agreement

Recently, Procter & Gamble has been sued for copyright infringement based on its use of photographs on packaging. It's not that P&G didn't have a license; it's that P&G allegedly violated the scope of the license. The allegations claim that P&G, trying to keep costs down, negotiated for fairly narrow rights. It makes a ton of sense to do that if that's all you want the photos for. After all, why pay for rights that you're probably not going to utilize? However, the caveat with that is to be sure that you won't want to use the photos beyond what you're negotiating. That's allegedly what P&G did, and why it finds itself the subject of a lawsuit. 

July 27, 2017 in Commentary, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, July 12, 2017

What Does "Renovate" Mean to You? (A Perfect Question for Those, Like Me, Addicted to HGTV)

I'm blogging this case because I had a whole conversation with non-lawyer friends about what the term "renovate" means, and I think maybe they changed my mind about what "renovate" means. I don't know. Upon first reading this case, I spent a lot of time reflecting on all the episode of "House Hunters Renovations" I've watched and what actually happens in them. 

Anyway, if you want to go away and watch a marathon of "House Hunters Renovation" at this point, it's okay. I understand. This blog post will still be here for you to contemplate afterward. 

The case in question (there is an actual case) is a recent case out of Pennsylvania, Blackburn v. King Investment Group, No. 2409 EDA 2016, and, as you may have guessed, the debate in the case was over the meaning of the word "renovate" in the contract. One party maintained that the term was ambiguous, because it could have required them to demolish the bathrooms at issue or merely to do what was necessary to bring them up to modern standards (which was less than full demolition). The other party argued that it was not an ambiguous term and clearly required demolition. 

The court agreed that it was a clear and unambiguous term that required demolition and replacement, and this was what got me to thinking: Do I think that renovation requires demolition? At first my kneejerk reaction was like, "I don't know, I don't think it does." But after conversations with people, I decided maybe it does mean demolition? That doing something less than demolition wouldn't be called renovation but just updating? If you say you're going to renovate your kitchen, does that always imply that you're demolishing the entire kitchen? If you do less than that, is saying you renovated your kitchen misleading? 

My struggling with the word leads me to believe maybe it's not clear and unambiguous but I often feel that way with these types of cases. What I find extra-striking about this case is that, while the court proclaimed the term "clear and unambiguous," it did so by relying entirely on parol evidence, and this parol evidence, in my view, just determined what the parties understood "renovation" to mean. I think finding what renovation meant in the context of this contract to these parties makes a lot more sense than declaring it to be a clear and unambiguous term generally. 

July 12, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, July 10, 2017

Who Typed What Where, and Does That Matter?

When I teach my students rules of construction and we talk about contra proforentem, I feel like the standard examples I use with them are insurance contracts, where it's easy to identify who the drafter is. A recent case out of Indiana, Song v. Iatarola, Court of Appeals Case No. 64A03-1609-PL-2094 (thank to D.C. Toedt for the new non-paywall link!), involved an actual discussion of who was the "drafter" in a situation where both parties had input in the contract. The Iatarolas seemed to try to argue that Song should be considered the drafter and have the contract construed against him because he was the one who typed it into Microsoft Word. The court pointed out, though, that the rule of construction is about independent drafting, not a situation where both parties contributed to the contractual terms. Who physically types the contract up means nothing if both parties have helped to decide on the terms being typed up. I have never thought to discuss that with my students, but I think I might bring it up, just to be clear on what the rule is talking about. 

July 10, 2017 in Commentary, Law Schools, Recent Cases, True Contracts | Permalink | Comments (2)

Friday, July 7, 2017

If You Want to Hold Your Real Estate Development to Its Master Plan, Make Sure It's in Your Contract

A recent case out of Idaho, Swafford v. Huntsman Springs, Inc., Docket No. 44240, serves as a word of warning for those purchasing plots in real estate developments. As someone who recently purchased a plot of land in an in-progress real estate development, I read this case with interest.

The Swaffords bought a plot of land early on in the development's life, based on a master plan that they had viewed. Later, as the development continued underway, Huntsman Springs altered its plans, so that they way it turned out was not as it had been in the master plan the Swaffords had viewed. The Swaffords then sued for breach of contract. 

The problem was that the "master plan" had never been part of the Swaffords' contract with Hunstman Springs. The contract did not incorporate the master plan and in fact the contract stated in several places that Huntsman Springs was bound by no other representations outside of the four corners of the contract and, in an integration clause, that the contract was the entire agreement. The contract was much less specific in Huntsman Springs's obligations to the Swaffords, but Huntsman Springs did comply with all of them. Therefore, there was no breach of contract. 

Important lesson learned: If you want your developer bound by a master plan, make sure it's in your contract. (Of course, that's possibly easier said than done, depending on power differentials. But, if you allow for reasonable modifications of that master plan in some way, maybe you could accomplish it.)

July 7, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Sunday, July 2, 2017

The McMansion Hell Dispute Was Really About Contracts

Zillow's cease-and-desist letter to popular Tumblr blog McMansion Hell --and its subsequent backing down from its position after the blogger secured representation from the Electronic Frontier Foundation --has been well-documented, including by such outlets as BBC News. However, a lot of outlets reported it as being a copyright dispute. While there was definitely a copyright angle to the disagreement--Zillow even alleged as such in its letter--the issue was really one of contract. After all, as many commentators pointed out, Zillow didn't even own the copyright in any of the photos. The true dispute, as Zillow conceded and EFF explained in its letter response, was over Zillow's terms of use. 

Zillow alleged that its terms of use prevented "reproducing, modifying, distributing, or otherwise creating derivative works from any portion of the Zillow site." Zillow seemed to be alleging that the blogger's parodies and commentaries of the photos on the site--otherwise easily protected by copyright's fair use doctrine--were prohibited by the terms of use. EFF fought back on this, though. EFF claimed that the blogger had never effectively assented to be bound by the website's terms of use, and that even if she had, the agreement's clause permitting modification without notice rendered the terms of use illusory and unenforceable. EFF also noted that contract doctrines have in the past restricted terms that restrict speech, at least in part due to public policy concerns. Finally, EFF raised the recently enacted Consumer Review Fairness Act of 2016, which voids contract provisions that attempt to prevent people from posting reviews, performance assessments, or other analyses of goods and services. The blogger's parodies of the real estate photographs on Zillow, according to EFF, are analyses of Zillow's services, and therefore Zillow cannot restrict them through its terms of use. 

Zillow backed off pretty quickly, claiming that it never intended to cause McMansion Hell to shut down, and McMansion Hell is back up, without having deleted any of the demanded photos. It seems like a victory for McMansion Hell and, more importantly, for individual speech. All of us spend a lot of time on websites with terms of use that we never bother to read. The quick reaction of many in the legal community to help McMansion Hell fight back, and the subsequent news coverage it received, is a nice reminder that not all contracts are automatically binding, especially not when criticism is involved. Hopefully other less high-profile recipients of dubious cease-and-desist letters can take heart from this story. 

July 2, 2017 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech, Weblogs | Permalink | Comments (0)

Monday, June 26, 2017

"As Is" Clauses Don't Grant You Immunity If You Commit Fraud -- and Parol Evidence Can Help Prove It

A recent case out of South Dakota, Oxton v. Rudland, #28070 (behind paywall), is another case involving alleged fraud during the sale and purchase of a house, this one with an explicit parol evidence debate. 

As in the previous case I blogged about on this topic, the contract for the house contained an "as is" clause. The Oxtons agreed that the contract with this "as is" clause was unambiguous and fully integrated. However, they argued that the parol evidence rule never applies when a party is alleging fraud. Because they were alleging fraud, they wanted to be able to bring in parol evidence regarding that fraud. 

The court agreed that the parol evidence rule does not apply in cases of fraud, which cannot be avoided by disclaimers in the contract. Therefore, the court looked at the Oxtons' evidence of fraud, which consisted of the fact that the Rudlands who sold them the house had just bought it a few months before and in the course of buying it had been told about "major settling" of the house (the problem at issue). The Rudlands, however, did not disclose that "major settling" when they sold to the Oxtons months later. The Rudlands countered that the disclosure statement that did not contain any language about "major settling" was largely irrelevant, and that the Oxtons were well aware they were purchasing the home "as is" and had the opportunity to obtain an inspection before finalizing the contract. 

The court found that it could not resolve these questions of fact but that there was enough evidence to possibly support the Oxtons' fraud claim, such that summary dismissal of that claim was inappropriate. The court allowed the parol evidence to support the claim, and also explicitly pointed out that "as is" clauses do not provide "general immunity from liability for fraud." Therefore, the Rudlands could not rely on the "as is" clause alone as blanket protection for all of their behavior and statement, and the litigation over the alleged fraudulent inducement should continue. 

It's interesting to contrast this with the Texas case I just blogged. There, the court held that getting an inspection was enough to prove that you were not relying on the sellers' statements. The Oxtons did obtain an inspection in this case but little attention is given to that fact. I wonder if it will gain more prominence as the debate over the alleged fraud goes forward, as at the moment the case was pretty focused on the parol evidence rule and the operation of the "as is" clause, not on the effect of the inspection. 

June 26, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, June 19, 2017

David Mamet's Last-Minute License Term

 

Puyallup High School Auditorium.jpg
Public Domain, Link

This story is a few weeks old, but I think it's an interesting one still deserving of discussion. Apparently, one of the terms of licensing one of David Mamet's plays to perform is that the theater not host any "talk backs" within two hours of the show. It's interesting to me first because talk backs are fairly common within the theater industry, and I'm not sure most theater companies would assume there were restrictions around them. This makes me wonder if other playwrights have similar policies and how much theater companies check into those specific terms. 

Another thing that struck me about this, though, was that apparently this talk-back-prohibiting term was not in the original terms of the license. The theater company detailed in the article received a new contract with the new licensing term just four hours before the show opened. Do we think that was a valid modification of the original license terms? There is no discussion of this in the article, but do you think that the theater company, threatened with fines of $25,000, felt compelled to agree to the new term after having sold tickets and invested time in rehearsing the play? Was the new term in that license enforceable? 

Finally, apparently Mamet's agent will ensure that the clause is included in license terms from this point on. Generally, parties can enter into any contractual terms they wish (within certain bounds of reason). Presumably if Mamet's no-talk-back provision is disliked by theater companies, Mamet's plays could fall out of fashion and the market could handle the situation. However, if other playwrights start demanding similar terms, then there might not be as much pushback from the theater companies. So far it seems that Mamet's clause just prohibits discussion within two hours of completion of the play, so that could allow an enterprising theater company to just hold a talk back two and a half hours later. It could be interesting to see what effect, if any, this situation has on theater talk backs going forward. Anyway, it was an interesting little contract story, so I thought I'd pass it along. 

(h/t to Rebecca for bringing the article to my attention!)

June 19, 2017 in Commentary, Current Affairs, In the News, True Contracts | Permalink | Comments (1)

Monday, June 12, 2017

Adding to Quatar’s Woes: Loss of FIFA Soccer Contract?

On Monday June 5, 2017, Saudi Arabia, Egypt, Bahrain, Yemen, Libya, the United Arab Emirates and the Maldives all severed diplomatic ties with Qatar. While only a small period of time has passed, the small Arab nation has been left with some pressing issues. Almost immediately the people of Qatar rushed to supermarkets to stock up on food. Many fear that with their only land border shut (that between Qatar and Saudi Arabia), food supplies will run short and prices will skyrocket. The Philippines have already begun restricting migrant workers from going to Qatar for fear that migrant workers will be more marginalized if food shortages become an issue in a country that does not produce any of its own food. Migrant workers have been a source of conflict in Qatar for years and this current crisis could worsen or better the landscape. Unknown

On December 2, 2010, Qatar became the first Middle Eastern country to win a World Cup bid. That World Cup is set for 2022. In preparation, massive construction projects have begun in Doha and the surrounding area, including building new stadiums, renovating old ones, building new ports and rail systems, and renovating current city areas to make Qatar appear a modern metropolis in the heart of a desert. While all of that sounds good, it has come at a steep humanitarian cost. Many migrant workers have died and many modern governments have reprimanded Qatar for its inhumane treatment of people. Unknown

However, the current climate of Qatar is one of isolation from its neighbors—Emirates and Etihad airlines have ceased all travel to Qatar. Migrant workers are already starting to lose jobs. While FIFA, the governing body of soccer worldwide, has stated that the World Cup will continue as planned, if construction materials and workers cannot enter the country, the small country cannot hope to continue hosting the World Cup. No country has ever lost a FIFA World Cup contract after being awarded the bid, but the consequences could be astronomical. Qatar is looking to spend almost $200 billion for the World Cup, and while not all or even most of that money will be recovered by hosting the event, there is an expectation of gain for local businesses and hopefully an increase in tourism following the event. Without the World Cup, Qatar would be out the money and potentially enter a massive contract suit with FIFA. Currently, we can only wait and see how the situation works itself out, but it will be at the forefront of many people’s minds until the current diplomatic situation is resolved.

June 12, 2017 in Commentary, Current Affairs, Sports | Permalink | Comments (2)

Wednesday, June 7, 2017

Looking for Some Unambiguous Insurance Policy Language? Here's Some

Insurance contracts often provoke disputes over language interpretation. A recent case out of West Virginia, Erie Insurance Property & Casualty Co. v. Chaber, No. 16-0490, overturns on appeal the lower court's finding of ambiguity, declaring that the language at issue was in fact unambiguous.

The Chabers had an insurance policy that excluded "earth movement," which was defined as including "landslide . . . whether . . . caused by an act of nature or . . . otherwise caused." Soil and rock slid down a hill behind the Chabers' property and damaged it. The insurance company refused to pay out, pointing to the exclusion of landslides. The Chabers alleged that the landslide was caused by improper excavation, not natural causes, and thus shouldn't have been excluded under the policy. The lower court found that the insurance policy was ambiguous, and that the Chabers might have expected that landslides caused by actions of humans were covered. The appellate court, however, disagreed. 

The appellate court found that previous cases had found ambiguity in insurance policies that excluded events arising "from natural or external forces." In contrast, the Chabers' insurance policy language was the much more general "act of nature or . . . otherwise caused," losing the word "external" that had been considered ambiguous. The language in the Chabers' policy was relatively new but the few courts that had considered it had found it to be unambiguous. Therefore, the appellate court found the policy was unambiguous and covered landslides, whether human-triggered or naturally occurring. 

I always find it interesting when courts disagree regarding ambiguity, because the very fact of courts disagreeing seems to indicate ambiguity! However, this policy does seem to be unambiguous in its breadth of exclusions. Possibly the lower court just felt bad for the Chabers. 

June 7, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, May 31, 2017

Alleging Medical Necessity Under a Health Insurance Contract

We are by now probably all familiar with the modern phenomenon of GoFundMes to cover medical care. Those funds likely aren't just to cover situations where the parties didn't have health insurance, but also situations where the parties did have health insurance and the health insurance refused to pay. Sometimes because of the terms of the particular health insurance policy, but also sometimes without adequate justification. A recent case out of the Southern District of Florida, Grewal v. Aetna Life Insurance Co., Case No. 17-cv-80318-MIDDLEBROOKS (behind paywall), seems like the latter situation, based on the allegations of the complaint. 

Grewal, who had Aetna health insurance, also had a six-year-old son, A., who became seriously and unexpectedly ill. He was eventually diagnosed with a rare and very dangerous condition that required long-term care and inpatient rehabilitation. A.'s doctors determined that he should be transferred to a different hospital that could properly treat A. The hospital where A. had been was unable to handle the specialized care A.'s condition required. (In fact, there were allegations the hospital had allowed A. to lay in his own vomit for long periods of time, which seems...alarming???)

Aetna refused to clear A.'s flight transfer, finding that it was not medically necessary, but A.'s condition grew increasingly serious, so A.'s father decided to go through with the flight. He then filed a claim with Aetna to pay for the flight, which Aetna refused within days, without examining A. or the hospitals in question. This refusal left A.'s father with a bill over $300,000. 

Aetna's motion to dismiss required the court to determine if the complaint had sufficient allegations that A.'s flight between hospitals was indeed "medically necessary." And the court determined that it did. The complaint alleged that, at the time that A. was transferred, ground transportation was unsafe because of the seriousness of A.'s condition. Therefore, if A. had to be transported, it had to be by flight. And the complaint further alleged that A.'s current hospital was so inadequate to treat A. that it was a life-threatening situation for A. Finally, the complaint alleged that A.'s doctors, those medical professionals most familiar with A.'s condition, recommended the flight transfer. Those allegations were all sufficient to establish that the transfer was "medically necessary" and thus covered by the health insurance policy. Therefore, taking the facts in the complaint as true, a breach of contract was alleged. 

We'll see how this case plays out, but I can't help but feel intense sympathy for A.'s father, having to make this decision. Imagine your six-year-old son being suddenly, unexpectedly, very seriously sick, and your son's doctors saying he needed to be transferred to have any chance at recovery. How rational do you think you would be dealing with your insurance company in your situation? Would you really consider it time to have a debate over contractual language? 

May 31, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 29, 2017

Your Mother-in-Law Pays Off Your Student Loans, Then You Divorce Her Son. Now What?

Here's another case for the "it's always better to get it in writing" file. Although here the failure to get the contract in writing doesn't doom recovery, it does just add an extra layer of analysis that might otherwise have been avoidable. 

The case, out of Alabama, is Julie Gerstenecker v. Janice Gerstenecker, 1160144, and you can probably guess immediately from the shared last name that doubtless the reason the contract wasn't in writing was because of the familial relationship between the parties. In fact, Julie was Janice's daughter-in-law. Janice, concerned about the interest rate on Julie's student loan, claimed to offer to pay off the loans in their entirety, in exchange for Julie paying her back interest-free at a rate of $700 a month (later to raise to $1,000 a month). Julie sent Janice an e-mail with the student loan information (including specific instructions as to how Janice could pay them off) and Janice thereafter paid the student loans off. Julie then paid Janice, as allegedly agreed, for four consecutive months. However, after that Julie and Janice's son divorced and Julie stopped making any further payments. Janice sued for breach of contract. 

Julie denied there had been any contract, although I think her credibility was undermined by her testimony in response to why, if there had been no contract, she had written the checks to Janice: Julie claimed not to be able to remember why she had written the checks at issue to Janice. At any rate, she tried to raise a statute of frauds defense, asserting that the contract could not have been completed in a year and that therefore it should have been in writing (which it was not). However, she raised the defense so late in the case that the court basically deemed she had waived it. 

The court then went on to address Julie's argument that there was not enough evidence of mutual assent. Julie agreed that she did e-mail Janice her student loan information and that she did give Janice the checks at issue, but argued that evidence was ambiguous and did not indicate that she had accepted Janice's offer. The court disagreed. Julie provided Janice with all of the information Janice needed to pay off the student loans, and then Julie began her performance in response by beginning to pay Janice (no other explanation for the checks, after all, had ever been offered). That was enough evidence that a contract had existed. 

The only thing left to debate was the measure of damages. The trial court had awarded Janice the entire repayment amount. However, the appellate court concluded that was incorrect because there was no evidence that the contract contained an acceleration clause. Therefore, Janice could only receive a judgment for the amount of money Julie already owed in missed payments. 

May 29, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, May 22, 2017

Terms and Conditions on Your DNA: How Complicated Can It Get?

This is a long one, that I didn't expect to be long, but I decided the point is how long this is, and the questions it raises about all of those terms and conditions on websites. 

A friend of mine asked me recently about the terms and conditions of the Ancestry.com DNA service. The service, if you're not familiar with it, takes your DNA and breaks it down into ethnic backgrounds for you, based on analysis of genetic markers. Here's a video that talks about it some: 

So if you're using the DNA service, you're handing your DNA over to Ancestry.com, and maybe we should think: what does that mean? After all, who does our DNA belong to, and what can it be used to? The Supreme Court looked at this in the context of patents a few years ago, finding that DNA cannot be patented. So we know that no one can own a patent on your DNA. But that's not really what's at issue in the DNA service site. No one is trying to patent the DNA, but Ancestry.com is still using the DNA in certain ways.

Looking into the terms and conditions initially seemed to me like it would be straightforward. Several hours later...

I started with the actual terms and conditions (makes sense, right?). It has a license provision:  

"By submitting DNA to AncestryDNA, you grant AncestryDNA and the Ancestry Group Companies a perpetual, royalty-free, world-wide, transferable license to use your DNA, and any DNA you submit for any person from whom you obtained legal authorization as described in this Agreement, and to use, host, sublicense and distribute the resulting analysis to the extent and in the form or context we deem appropriate on or through any media or medium and with any technology or devices now known or hereafter developed or discovered."

That "we deem appropriate" language seems very broad to me. Appropriate for what? There isn't a lot of limitation there, and a lot of trust seems to be placed that your definition of "appropriate" will be the same as Ancestry's (and how likely is that, really?). I looked at some social media terms to compare (Facebook, TumblrTwitter), and none of their license grants had "we deem appropriate" language (and, in fact, Tumblr's license in particular was fairly narrow in its grant). Keep in mind, Ancestry has your DNA, not a random tweet about making a cup of tea in the morning. Also a point to think about: the social media is free, and I think we kind of expect that there's a trade-off for that. Ancestry costs money AND also takes a broad license grant in exchange. 

The terms and conditions also go on:

"You hereby release AncestryDNA from any and all claims, liens, demands, actions or suits in connection with the DNA sample, the test or results thereof, including, without limitation, errors, omissions, claims for defamation, invasion of privacy, right of publicity, emotional distress or economic loss. This license continues even if you stop using the Website or the Service."

So they can do whatever they deem appropriate, and you release them from any lawsuits in connection with it. 

Now, adding a complicating layer to all of this, though, is that the terms and conditions are supposed to be read in conjunction with the privacy statement, on a completely different webpage, that does appear to limit what they're doing with the DNA, I think, and also appears to give you the opportunity to cancel the service, although how that affects the license, which says that it survives termination of the service, is unclear to me. And in addition to that, there is another completely different webpage, called the Consent Agreement. I don't know when this comes up in the DNA process, because I didn't want to input my credit card, and before that point I only saw the terms and conditions and privacy statement referenced. But the Consent Agreement has to do with participation in scientific research, which seems cool, except that when you read further down into it, it says stuff like this: 

"If Data are obtained through these methods, it is possible that information about you or a genetic relative could be revealed, such as that you or a relative are carriers of a particular disease. That information could be used by insurers to deny you insurance coverage, by law enforcement agencies to identify you or your relatives, and in some places, the data could be used by employers to deny employment.

In the United States, a federal law called the Genetic Information Non-Discrimination Act (GINA) generally makes it illegal for health insurance companies, group health plans, and most employers to seek your genetic information without your consent, and to discriminate against you based on your genetic information. GINA does not protect you from discrimination with regard to life insurance, disability insurance, long-term care insurance, or military service. There may be state laws and laws outside the United States that prohibit discrimination against you based on genetic data."

Tl;dr: What I just want to say is that's the point. I spent all morning trying to piece together all the different clauses of all these different documents, and I'm still confused, and I'm an actual lawyer (theoretically). And then I wrote a blog entry about it that was also too long! How confused do you think consumers are? And how many of them do you think actually spent the amount of time I did to try to get through all of that? 

May 22, 2017 in Commentary, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, May 5, 2017

An "Egregious" Breach, But No Damages...

I haven't done a damages case in a while so here's one for you out of California, Wiring Connection, Inc. v. Amate, B264113

The parties entered into a lease totaling 65 months at $6,252 per month. After signing the lease, though, Amate leased the property to someone else and Wiring then had to lease a different property, under a three-year lease for $7,500 a month. Wiring sued for breach of contract and won. The court then had to determine damages. The lower court stated that the proper measure of damages would be the fair market value of Amate's property, less the amount Wiring had agreed to pay for it in the breached lease. Amate called an expert witness who testified that $6,252 had been the fair market value of Amate's property. The lower court was skeptical of this expert testimony, but Wiring did not call any expert witnesses of its own. Rather, Wiring argued that the proper measure of damages was the difference between what it would have paid in rent over 65 months at Amate's property and what it would pay in rent over the same time period at the property it had had to rent instead once Amate breached the lease.

The lower court said that, based on the evidence in front of it, it could not calculate any difference between the fair market value of Amate's property and the amount Wiring was going to pay under the lease, and found that it therefore could not award any damages to Wiring. The lower court said it was unhappy with the result, since Amate's breach had been "egregious," but it felt its hands were tied on the matter.

The appellate court agreed with the lower court. The lower court's statement of the measure of damages was the correct one, and Wiring failed to prove that there had been any difference between the fair market value and what was in the lease. Therefore, Wiring got nothing.  

I find this case a little curious because I find it difficult to believe that Wiring wasn't damaged in some way. Wiring is now paying substantially more for rent than it would have if the agreement had never been breached, after all. But it also seems like Wiring could have met its burden based on how much the new tenant was paying for Amate's property? I assume the new tenant was paying more (otherwise it would seem odd for Amate to breach, unless there was a personal relationship involved), and that that new tenant's monthly rate could be used to establish damages for Wiring. Probably not as high as the damages Wiring was seeking but at least something. But there is no discussion in the case of what the new tenant was paying, that I could see, so it either was less than Wiring was going to pay and so unhelpful to Wiring or Wiring simply ignored it in favor of putting all of their eggs in the basket of being compensated for the difference between their more expensive second lease. 

Either way, this is a painful damages case from Wiring's perspective. A welcome one, of course, from Amate's perspective! 

May 5, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)