Monday, December 12, 2011
A recent letter to the NYT's consumer advocate, the "Haggler," (aka David Segal, who some of us law profs may not love so much anymore since his recent swipe at legal scholarship...) raised some interesting contracts issues. A reader complained that in early September he bought two round trip tickets from San Francisco to Palau for $510 on Korean Air for a trip in February. In the interim, he booked hotels, bought an underwater camera and made plans. Sixty-four days later, he received an email from Korean Air stating that the posted fare was "erroneous" and that his tickets were cancelled. They offered a refund for "travel-related" expenses, including the tickets, and a $200 Korean Air voucher. The reader stated that with the voucher, his new fare would be $360/ticket higher than the fare he had originally booked.
So, what's the price of an average airline ticket to Palau from S.F. in early February? I checked and it's anywhere from $1600 to $2500 for coach. But before you say unilateral mistake -- for didn't the reader check other airlines and know that the quoted rate was so much lower? - I say, Hold on. I realize this is not the first time an airline, or any company, has posted an erroneous fare. The Haggler discussed another incident involving British Airways that arose in 2009 where the company posted fares from U.S. to India for $40. In that case, British Airways covered travel-related costs and gave out $300 vouchers. (One of the issues in an exam I wrote several years ago was inspired by this situation).
But the British Airways case was different from the Korean Air case in several ways. The British Airways fare was so low that I think the purchasers "knew or should have known" about the mistake. The Korean Air price was also low, but given the deals to be found on the Internet and that the tickets were booked so far in advance, it is not evident that the purchaser "should have known" that the fare was a mistake. It's a great deal, but not clearly a mistake. Furthermore, the wrong price was listed for only a few minutes on the British Airways site, whereas the erroneous fare was posted on the Korean Air website for several days ("at least four"). Would it be "unconscionable" to force Korean Air to honor the fare? Maybe. Under Donovan v. RRL Corp., the standard of"unconscionability" for unilateral mistake purposes is lower than required when it's a standalone defense.
There's another issue that was raised in the Haggler column as a potential problem for the purchasers, the "contract of carriage." I checked on the Korean Air website and found the document - all 44 pages of it. It's accessible as a link on the bottom of the Korean Air website, of course. I took a brief glance at the document (necessarily brief b/c of the length). There were some references to Korean Air's ability to cancel for broad and vaguely defined reasons, but I would not have interpreted these as permitting cancellation for posting an erroneous fee - these seemed more appropriately interpreted as allowing cancellation for equipment failure or scheduling or weather complications.
I may have missed it, but I didn't see a provision allowing Korean Air to cancel for posting an erroneous fare after it has confirmed the reservation. To interpret the existing cancellation clauses to mean Korean Air can cancel at will would create mutuality issues. Korean Air would not want to make this argument for while such an interpretation would disadvantage the purchasers in this particular case, it could also mean that the contracts it enters with its other customers are void (and customers could cancel at the last minute).
Another provision I didn't see and just might have missed (although I doubt it) was a choice of law provision with respect to contract claims.
Thursday, December 8, 2011
Tuesday, November 29, 2011
Yesterday, now widely known as "Cyber Monday," I received a marketing email from Patagonia. The message: "Don't Buy This Jacket." The email read in part:
Because Patagonia wants to be in business for a good long time - and leave a world inhabitable for our kids - we want to do the opposite of every other business today. We ask you to buy less and to reflect before you spend a dime on this jacket or anything else.
The advertisement reminded me to "think twice" and instructed not to "buy what [I] don't need." The jacket, "[m]ade of warm, breathable, compressible and stretchy high-loft fleece," is apparently one of Patagonia's bestsellers; retail price of $149.
Ha! Nice try, Patagonia. I will not be manipulated by your reverse psychology. Though, it did remind me of a contracts exam fact pattern I used a few years back that involved an email where the sender said something like "I'm selling my house but, trust me, you don't want to buy my house because it has been a real money pit." Seller also says all sorts of funny and brutally frank things about the house. One of the questions raised was whether this email constitued an offer to contract. I am also reminded of the parking lot of a Grateful Dead show in the early 90's and a gentleman wandering around saying "bad [acid] trips, who wants 'em? I got 'em!" But I digress, though only slightly (e.g., Ship of Fools, see below).
Elvis Costello is also participating in this season of reverse psychology. His message: "don't buy my new box set." In fact, Costello apparently wrote on his website: "Unfortunately, we at www.elviscostello.com find ourselves unable to recommend this lovely item to you as the price appears to be either a misprint or a satire." The price? $225. NBC reports:
Costello tried to get the record company to knock the price down, but was unsuccessful. So he is recommending buying the work of another legendary artist.
"If you should really want to buy something special for your loved one at this time of seasonal giving, we can whole-heartedly recommend, 'Ambassador of Jazz' -- a cute little imitation suitcase, covered in travel stickers and embossed with the name 'Satchmo' but more importantly containing TEN re-mastered albums by one of the most beautiful and loving revolutionaries who ever lived – Louis Armstrong," Costello wrote. "The box should be available for under one hundred and fifty American dollars and includes a number of other tricks and treats. Frankly, the music is vastly superior."
It may be earnest, but I read it as a brilliant marketing ploy. Who would have known that Elvis Costello was issuing a new box set? I mean, who buys physical CDs anymore? And it even comes with a vinyl record... but it is overpriced and you don't want it.
[Meredith R. Miller]
Monday, November 21, 2011
Monday, November 14, 2011
You've probably often wondered: Why can't I find a recording of any Academy Award winning actors giving dramatic readings of End-User License Agreements? Well, wonder no longer. Thanks to a tip from Oklahoma City's Celeste Pagano, we can now share CNET's production of Richard Dreyfuss's reading of Apple's EULA for its iTunes software.
Wednesday, November 9, 2011
A few posts back, I referred to Apple's business model as incorporating relational contracting on a mass consumer scale which made me wonder whether relational contract theory is due for a revival (not that it ever went away). I didn’t attend the conference at Wisconsin honoring Stewart Macaulay although I wish I had. Relational contracting should be the subject of renewed interest given the new business models that incorporate goods, services, and information. On the radio yesterday morning, I heard someone talk about Google's business as being more than a series of searches - it was about services and relationships with its customers. (Okay, maybe those weren't the exact words, but they're close enough). A few weeks ago, a NYT article discussed new technology companies that are assisting musicians in managing their relationships with their fans. In order to survive, many businesses (especially those in the creative industries) will have to reboot for the evolving marketplace. Not all businesses (and by “businesses," I mean musicians, writers and artists who want to get paid and are not backed by large corporate conglomerates) are equipped to do this. Well, make way for companies like Topspin, Bandcamp, FanBridge and ReverbNation, to assist them. These companies help musicians run a band's online business which means they sell music, manage fan clubs and calculate royalty payments. They have found a way to bundle physical and digital goods. How much you want to bet that those digital goods are protected by contracts?
Which brings me to relational contract law. The purpose of these companies is to enable the musician to survive (and even thrive) without being backed by a record company. Now, the musician can directly manage the relationship with the fan. In the past, a fan joined a fan club, bought a ticket to a concert from one vendor, a record from a retailer, a tee shirt from another retailer - you get the picture. With the exception of the rules on the back of the concert ticket and the fan club membership rules, the other transactions were not governed by contract. The fan can now buy everything she or he wants that's band-related from that band's website, subject to the terms and conditions of the website and the licenses that accompany the digital products. Shouldn't the terms of those contracts be considered in light of the existing relationship between the musician and the fan? Wouldn't a relational contracts approach be helpful in analyzing the terms and how they should be interpreted and enforced?
Apple is relevant in this discussion for another reason. If it weren't for iTunes, it's likely that
none of these businesses would exist. (Fun note - the NYT article mentions that the chief executive of Topskin has a tattoo of the logo for NeXT Computer, which was Steve Job's old company).
Tuesday, October 25, 2011
There have been several interesting articles about company policies in the news in the past couple of weeks. First there was this article which discusses how, as annoyed as customers might be by fees, they stay with their banks. They stay, not out of loyalty, but inertia. This article explains how certain magazine subscriptions are set to automatically renew upon notice. The problem is that the notice is not very noticeable. The next article explains how Google has captured the market for search because it is the default search engine for many users – and because resetting to another default is too complicated. Finally, there’s news here and here that wireless companies have agreed to notify customers when their data usage approaches or exceeds their monthly allotment – and they start to incur excess usage costs.
What all these articles illustrate is the importance of effective notice and default settings -- and how their design is the result of conscious business decisions. Companies get consumers to agree to bank fees, data overage fees and choice of search engine by setting the default to an option that favors the company. Ostensibly customers have a choice. They don’t have to agree to the default. They can affirmatively opt out, but they don’t. The contract (because there is bound to be one) is itself a default setting. The company substitutes notice for an affirmative indication of assent. It has made a choice not to require the customer’s actual assent. Bank fees are slightly different, but even there, the default enables the customer to use the card and assumes they agree to the fees; if they don’t agree, they have to “opt out” by changing their existing habit of using the card.
The design of a contract, including notices, and the choice of default settings really matters. Woody Hartzog has discussed contract design in the context of privacy policies . . Hartzog argues that a company’s privacy settings should constitute part of the agreement with the user. Ryan Calo has done interesting work about “visceral notice” that shows how notice can be rendered in a more effective manner. I’ve argued here and here that we should change the default setting on contractual assent in the online context to presume non-consent, thereby making actual assent a “cost” and making the contracting process part of the product or service offered by the company. [Of course, Arthur Leff made that argument way before I did in a famous essay, Contract as Thing, 19 AM. U. L. REV. 131 (1970).]
Calo’s work on visceral notice will be especially relevant in light of the wireless industry’s agreement to provide customers with text messages to alert them when they approach data usage limitations. Will these companies bombard consumers with so many marketing text messages (for example, to upgrade to another plan) that the usage warnings go ignored? Will users receive more SPAM by marketers, who take advantage of the attention that users will be paying to their texts – with the consequence that users no longer pay attention to their texts?
A broader question -- When there is so much that companies can do to affect the contracting process, especially online, shouldn’t we require them to do it? If a company can provide visceral or visual notice (rather than simply textual notice), why shouldn’t they be required to? If a company can easily enable the customer to indicate assent (by forcing a click, for example) to particular terms, why should we permit “blanket assent” online?
Monday, October 10, 2011
Steve Jobs made quite an impact on the world, rethinking the way people use technology and introducing beautifully designed, innovative products. Because this is a contracts blog, I want to discuss the interesting way his company, Apple, uses contracts in its business. Before iTunes, most music was sold to consumers on CDs. Apple is not the first or only company to license rather than sell digital music, but it is the most popular. Because of the enormous popularity of the iPod and iTunes, Apple made it acceptable to license rather than sell music - a concept that at one time seemed strange and somewhat outrageous. The way Apple uses contracts is closely tied to the nature of its innovative products and services (which meld the tangible and the digital), the way they are delivered to the customer, and Apple’s business model. Apple markets itself as more than a purveyor of technology products. Its customers don’t buy a product, they enter into a relationship. Apple reminds customers that they have a relationship, not a one time transaction, and they remind them via contracts. Apple has its customers click each time they purchase a song and each time they download an updated version of iTunes. It's mass consumer relational contracting. (Other companies may do this, too, but I can't think of one offhand that does it the way Apple does). Apple also closes the gap between offline and online contracting. When I bought my iPad not long ago, after I had paid for it, the salesperson (aka the “Genius”) had me click “I agree” to the terms of an agreement on my new iPad before he would hand it over. It made me wonder, will we see more rolling clickwraps? Will clickwraps replace paper contracts in the mass consumer setting? As products become more digital than tangible, will we see more licenses and fewer sales? (I think the answer is yes). As products incorporate more software than hardware, will they no longer be considered “goods”? What types of innovative contracting forms might we expect to confront in the future?
Thursday, September 22, 2011
[For the record, I am not trying to scoop Nancy on this clickwrap case -- welcome aboard, Nancy! It was an irresistible case that came my way via BNA.] Plaintiff Shaun Marso listed an engagement ring for sale; he found a buyer who agreed to pay $12,000 for the ring, plus shipping costs. Marso went to a Greensboro, North Carolina UPS store and shipped the ring to the buyer, using C.O.D. service. UPS delivered the ring and took a cashier's check from the buyer. It turned out that the buyer's cashier check was fraudulent.
Marso sued UPS on the grounds that it "agreed to collect on delivery the sum of $12,145.00," "guaranteed that collection as a matter of contract," "did not collect the sum of $12,145.00," and thus "materially breached its contractual obligation." UPS moved for summary judgment, pointing to its terms of service, which provide:
[a]ll checks or other negotiable instruments (including cashier's checks, official bank checks, money orders and other similar instruments) tendered in payment of C.O.D.s will be accepted by UPS based solely upon the shipper assuming all risk relating thereto including, but not limited to, risk of non-payment, insufficient funds, and forgery, and UPS shall not be liable upon any such instrument....
UPS' witness averred that terms are presented in a clickwrap agreement on a computer that the customer must use before the shipping label may be printed to send the package. Once a customer prints out the shipping label, he or she brings the package to a counter for a UPS employee to scan the bar code on the shipping label.
In an affidavit, Marso averred that he never agreed to the clickwrap and never used a computer to print out his shipping label:
plaintiff "categorically den[ies]" that he used a computer "in any way, shape, or form" when he visited the UPS Customer Center in Goldsboro. Instead, plaintiff asserts that defendant's employee entered the information into the computer, and that "[n]o one advised [plaintiff], orally or in writing, about any UPS Tariff, waybill, or service guide," or advised him that he could request a copy of the same. Plaintiff asserts that defendant's employee at the UPS Customer Center "assured [him] that UPS would collect cash from the purchaser," that "the collection was guaranteed," and that plaintiff "would be getting a check from UPS, not from the purchaser." In other words, plaintiff suggests by his argument that he did not assent to the terms of service identified in the UPS Tariff, which would limit defendant's liability for the fraudulent cashier's check collected by defendant upon delivery of plaintiff's package to Mr. Thompson, and instead asserts that he formed an oral contract with defendant's employee which obligated defendant to be liable to plaintiff for $12,145.00 without limitation. Thus, there appears to be a genuine issue as to whether plaintiff assented to be bound by the limiting terms of the UPS Tariff, and whether defendant presented plaintiff with actual or constructive notice of the terms set forth by the UPS Tariff.
Therefore, the North Carolina Court of Appeals held that summary judgment was inappropriate. The parties presented conflicting evidence "regarding the attendant circumstances of the formation and terms of the agreed-upon contract, including whether plaintiff had either actual or constructive notice that he would be bound by the terms."
Marso v. UPS, Inc. (Sept. 20, 2011 N.C. Ct. Appeals)
[Meredith R. Miller]
Wednesday, July 13, 2011
It is rare that a day passes without some headline or other about the affairs of the major players in the fields of information technology (IT), Internet Business (IB) or Social Networking (SN). The cast of players - a revolving door of usual suspects – includes Microsoft, Apple, Google, Facebook etc. The relative harmony that once derived from their clearly differentiated activities – e.g. personal computing, online searching or social networking – is now a thing of the past. Brittle harmony has given way to - shades of the 1990s - blow by blow accounts of smear tactics, strategic protests, general blogfare, and of course, court actions . Why? Because the players are slugging it out in the mush pit which the converging IT/IB/SN arena has become – all for a (bigger) piece of the pie.
The average observer might be daunted by the copious data and convoluted interrelationships typically involved. Close contemplation of contractual details, particularly those undergirding the relentless strategizing, negotiating, and (guarded) cooperation of such parties, is clearly something the average observer does not relish. Yet the nitty gritty of who is doing what to whom, and where, to get to the bottom of what is really going on in a dispute may not be that hard to find. Help is found in unexpected places – even in very contracts that are dauntingly associated with such transactions. Or more precisely, even from the angst created by such contracts.
There is a struggle, you see, between an industry giant, Microsoft, who is determined not to be past its prime, and an equally determined giant slayer, Google, a relative upstart that is notoriously hungry for power. Microsoft is determined to reinvent itself. It is trying to build on its dominant market position to expand beyond the dated server based computing approach. The aim is to become the leader of the emerging ‘cloud based enterprise solution revolution’. All very well. The thing is, however, that Google is eagerly developing competing products in the same field. And Google is striving, mightily, to market those products. So, here is the rub – Google has been having a hard time persuading potential customers, a significant percentage of whom are loyal customers of Microsoft’s email and other office offerings, to make the switch.
This is why Google cried foul, and loudly, when the U.S. govt., through the agency of the Department of the Interior (DoI), issued a request for quotations – an invitation for offers as we know – but allegedly indicated that it would not entertain offers from Google. The DoI subsequently awarded the contract to Microsoft.
Google objected to not being invited to the party by filing a bid protest in the U.S. Court of Federal Claims. In the filing, Google asserted infringements of the Competition in Contracting Act’s policy requirements which mandated that “technology vendor neutrality as far feasibly possible” must be maintained. Google has asked the court to enjoin the DoI from awarding the contract to Microsoft until competitive bidding has taken place.
This dispute between the parties has been anything but straightforward. The DoI has asserted that Google was ineligible for consideration because Google’s products were not certified under the Federal Information Security Management Act (FISMA) at the time. But here’s the thing - it now seems that Google had this certification – or at least for a related product, while Microsoft at the time of the award of the contract, allegedly did not. Microsoft reportedly received the certification after the award, but this disparity is a fierce point of contention.
Google clearly understands that it has a huge task to unseat the Microsoft behemoth. Its hopes of entering into what must be an accelerating volume of contracts required for market viability, if not market dominance, depends on a spreading domino effect. An increasing number of smaller users will need to take their cue (to contractually adopt Google products) from the bigger fish who adopt Google’s applications.
The bigger war for market dominance is not limited to Microsoft and Google, of course. When this slender threat of a bid protest is traced, it leads to a whole other can of worms: cut throat rivalry not only for cloud computing, but voice over IP, mobile tasking, and mobile payment also (to name a few). But that can of worms is for another day……
Thursday, May 12, 2011
Contracts Prof and friend of the blog, George Washington University Law School Professor Steven Schooner (pictured) has a new article up on SSRN that is making headlines in the nearly mainstream media. Over at the Huffington Post, David Isenberg reports on Professor Schooner's new scholarship, co-authored with GWU Law student Collin D. Swan, called "Dead Contractors: The Un-Examined Effect of Surrogates on the Public's Casualty Sensitivity." Here is the abstract from SSRN:
Once the nation commits to engage in heavy, sustained military action abroad, particularly including the deployment of ground forces, political support is scrupulously observed and dissected. One of the most graphic factors influencing that support is the number of military soldiers who have made the ultimate sacrifice on the nation’s behalf. In the modern era, most studies suggest that the public considers the potential and actual casualties in U.S. wars to be an important factor, and an inverse relationship exists between the number of military deaths and public support. Economists have dubbed this the "casualty sensitivity" effect.
This article asserts that this stark and monolithic metric requires re-examination in light of a little-known phenomenon: on the modern battlefield, contractor personnel are dying at rates similar to - and at times in excess of - soldiers. The increased risk to contractors’ health and well-being logically follows the expanded role of contractors in modern governance and defense. For the most part, this "substitution" has taken place outside of the cognizance of the public and, potentially, Congress. This article explains the phenomenon, identifies some of the challenges and complexities associated with quantifying and qualifying the real price of combat in a modern outsourced military, and encourages greater transparency so that the public can more meaningfully participate in "the great American experiment."
The article is forthcoming the Journal of National Security Law & Policy. As Isenberg notes, the article and its subject matter deserve our attention.
Monday, March 14, 2011
A relationship, in pseudo contractual terms, is the interaction of two persons who, because of mutually agreeable expectations, have chosen to spend time together and are willing to perform in certain ways. "I am willing to commit to this relationship", a prospective girlfriend might say, "because I want to have a companion for social events – a liberator from the dating jungle - and I’m attracted to you and want to get to know you better". Marriage, the ultimate relational commitment, is thus described as a marriage contract, while actions for breach of promise to marry - aka heart balm actions - are not unheard of. (Who on earth, you may wonder, even thinks of suing for breach of promise to marry these days? Evidently the few that live in a jurisdiction where the cause of action still exists, and are both extraordinarily peeved and brave enough to pursue a claim.)
Once upon a time, the idea of an eBaying paramour would have been unthinkable. Monogamous marital relationships were the default sixty years ago. Faithfulness was expected ‘till death do us part’, children out of wedlock were a disgrace, and adultery was a heinous wrong. To put it mildly, times have changed. Marriage is not the objective of a relationship for many nowadays . In fact, some statistics would have us believe that marriage is depressingly out of reach for some. So what might two people be committing to – or to rephrase for the commitment phobic - what might their expectations be when people decide to ‘become an item’? Monogamy as in a faithful, exclusive, romantic relationship with only one person at a time? An enjoyable companionship in which compatibility rather than passion is key? Expectations of trust and respect driving good faith efforts to abstain from all others, or an ‘open relationship’? Symbiotic cohabitation, or merely a friendship ‘with benefits'? The last two do not infer expectations of fidelity or exclusivity, so what was the girlfriend expecting? This incident clearly illustrates the hellish wrath of a woman scorned. Since the catalyst for her titillating revenge was discovering her boyfriend had been seen with other women, it is safe to infer that she expected fidelity from the guy.
So, she is furious. We don’t know if he expressly or implicitly promised to be faithful, but she clearly expected that he would be. Likely she would assert, if asked, that he induced her to believe that he would be faithful – that is, if she was not explicitly promised faithfulness (i.e. as an express term of their relational agreement) by the guy. However they arose, her expectations of faithfulness were disappointed. Should her ex be allowed to get away with his relational crime – or should he be estopped from denying his obligation to be true (if any) and be accordingly punished? Presumably she doesn’t want the guy back. Her actions indicate that she wants to make him pay for the betrayal and she wants it to hurt. How she goes about this is the crux of the story. The boyfriend preferred her to dress conservatively during their relationship so what does she do? She posts scantily clad pictures of herself draped with the items in question on eBay. Revenge and liberation in one fell swoop – so take that, ex boyfriend!
But wait a minute – who’s hurting whom? To a more conservative eye, she cut her nose off to spite her face by baring – on a global auction site no less – her assets in a demeaning display. Undignified perhaps, but understandable all the same? Relationships are more often emotional affairs than business arrangements so it is to be expected that the behavior of the parties will be illogical at times. A person braver than I might even suggest a correlation between the frequency of illogical responses and the sex (of the actor) involved - but I won’t venture into that particular minefield. The response of the scornee in this scenario is what should be our focus. She eBayed the scorner's clothes. She set up a website. She advertised the items for auction on eBay. She linked the risqué auctions to her new website. This drummed up traffic to her website. Immodest yes, but maybe not so illogical after all.
Were the items in question hers to sell? She claims to have bought most of the items. But even if she did, surely it was with the intention of giving them to him as a gift. If so, the clothes became his property at that point. She did not have title to the items and had no right to dispose of them if that was the case. She didn’t, that is, unless the relationship was based on the understanding – a sub provision of an implicit termination clause? – that in case of unfaithfulness or other just cause, all gifts given to an offending donee will revert to the affronted doner. Her disposal of the property would be justified alternatively, if it had been abandoned by its owner. As she reportedly locked him out by changing the locks and has been impervious – thus far - to his alleged pleas to return, the latter is unlikely on the facts. If in her rage, she has treated someone else’s property as her own, the legal ingredients for conversion –and perhaps theft – have been satisfied.
Will the scorner-donee-ex-boyfriend have the gumption to strike back – say by suing his scorned ex-girlfriend for the return of his property? Might he seek damages for whatever injuries he has sustained from this now very public exacting of revenge? In that case (if you will forgive the puns) , the shoe would be on the other foot – a suit for an intentional tort or negligence, rather than a case for breach of promise to marry (jilting). Assuming that he chooses not to press criminal charges, that is. But it seems the boyfriend has attempted at least one retaliatory blow – the auctions were taken down by eBay staff, allegedly at the instigation of her ex, for being too sexy. Undeterred, the enterprising Miss re-posted the listings in the ''art'' category. Although the ‘art’ advertised for sale is the collection of photographs showing her modelling different items (of her ex’s clothing), the ingenious gal still manages thus to accomplish her aim of profiting from, and getting rid of, her ex’s clothes. As an incentive to buy each photograph, she offers to ‘throw in’ (or should that be ‘throw out’?) the actual item photographed as a ‘gift’. Contractually, prospective buyers more interested in the ‘gift’ item than the photograph may be reassured in at least two ways. Either the promise of a ‘gift’, though made before the sale, induced the sale, and for that reason may be deemed a term of the contract (i.e. ‘gift’ is a misnomer as the item is jointly supported by the consideration provided by the price paid for ‘the photograph’). Alternatively, the promise of the gift, though unsupported by consideration - and to that extent not contractually mandated – may still be enforced by means of an estoppel. Bottom line, the girlfriend followed up her saucy baseline serve with a volley (that was ultimately met by eBay restricting the most risque pictures to the adult section).
But she may have moved on. It seems girlfriend has other fish to fry. Initially motivated by anger, she is now enjoying the attention of being a guest on TV networks here and overseas. More, she has a new business venture to think about. "I'm realising that maybe there's something there to explore with a website where I can invite women to also share their breakup stories and maybe also give them the opportunity to sell products and things like that as well," she has reportedly said. With careful execution, perhaps the conversion of her website into a portal for jilted lover-sellers will not create an exponentially greater liability minefield.
Of such a budding entrepreneurial empire however, one can only caution: buyers beware – the scorners may strike back! The Machiavellian tangles of sweet revenge reach far.
Eniola O. Akindemowo.
Tuesday, March 8, 2011
Tuesday, February 22, 2011
As the mother of two preteen children this story hit a little too close to home. In short, kids insist on playing with Beyblades in the bathtub, said tub is chipped and soap holder is broken by the rough play, frustrated Mom seizes toys, and presumably, after reducing the kids to tears by threatening to get rid of the toys, takes a snapshot of the tearful kids holding the offending toys in a ziplock bag; frustrated Mom makes good on her threat by actually auctioning toys of traumatized kids on eBay.
Now here's the thing: there was keen bidding for the toys (estimated retail price $69) - the bids skyrocketed to $999,999! So, what's wrong with this picture? I'll tell you what's wrong - like a virtual Hydra, an online community known for rapidly rallying behind the causes of its members became indignant at the 'heartless' Mom. Members waded in, sparing no expense, to bid the auction to ridiculous heights.
The last auction bid was for $999,999. As we know, an auction sets up a contractual sale - in ordinary circumstances notice of the sale is an invitation to make offers, bids are offers, and the bang of the auctioneer's gavel (or in these circumstances, expiry of the fixed time predetermined for auction of the particular item) signifies acceptance of the highest bid. Are you serious??? Surely not $999,999 for a Ziploc bag of silly used toys (plus the guilt of being an accomplice to the trauma of two kids). Is there a law against this? There may be.
The first rule is READ THE CONTRACT. eBay's terms provide:
As an auction-style listing proceeds, we’ll automatically increase your bid on your behalf, up to your maximum bid, to maintain your position as the high bidder or to meet the item’s reserve price. The bid increment is the minimum amount by which your bid will be raised.
So, there may be automatic bidding. Okay. But you may pay less than your bid if you win:
When you win an auction you always actually pay only a small amount more than the next highest bid-even if your bid was thousands of dollars more. If your bid wins, you must buy. Your bid on an auction is a legally binding contract. If when time runs out your bid is the highest, you have purchased the item and must pay the seller for it.
So what happened here? Was the last bid $999,999, or was it in reality say (I'm picking a number out of thin air here) $73.01? Clearly this would be less cause for excitement/incredulity (take your pick). And that brings me to my next point: what was said frustrated Mom supposed to make of the bids? Was she expected to take it all seriously? Was she one of those rare creatures that actually read the fine print, and knew that $999,999 meant squat?
These are not merely rhetorical questions. If she had reason to believe the bids were in jest, would that negate the intention of the vengeful Hydra to enter into a legally binding agreement? Do eBay's terms permit this - can any random group decide to use eBay as a means of punishing (whom in its opinion is) a bad mom by frustrating her lesson-in-financial-responsibility punishment? Maybe not - eBay's terms state further:
Bidding is meant to be fun, but remember that each bid you place enters you into a binding contract. The only bids that are non-binding are those placed in the Real Estate category and for vehicles on eBay Motors. All bids are active until the listing ends. If you win an item, you’re obligated to purchase it.
But was this auction binding? Let's think this through:
if you bid in malice believing that your bid is patently ridiculous and obviously not to be taken seriously = no intention [read: not binding],
but the terms say a bid is binding, period, and you are presumed to read the terms = intention [read: binding],
but the size of the bid may not be what it seems [read: binding. Caveat: for a lesser price unknown to all except eBay during bidding],
but bids may be withdrawn in some circumstances = possibly not binding [read: not binding],
So, what's a mom to do: exasperated, ask eBay to cancel the auction? Can this be done without a reserve price? Can eBay do whatever its adhesion contracts say it can? Apparently, yes, and in this case, that is what happened. eBay cancelled the auction (presumably at the request of the humiliated Mom) and that was that.
Well I say there ought to be a law. Not necessarily against on-again-off-again auctions (if there can be such a thing - you either bid or you don't, you either accept the bid or you don't?), but against the unsympathetic hounding of frustrated mommies. You see, I know all too well how hard it is to balance lessons in obedience, responsibility and (dollars &) 'sence' with warm hugginess, patience and forgiveness. As the mother of two children, I know that sometimes, you need to just let it lie. But there are those moments when you've simply had it - when you've heard 'let 'er rip"a hundred million times, and that irritating rattle and roll in the beyblade arena (yes, one of my kids looooooves beyblades too) is ringing in your ears, for example.
Imagine another scenario: You've had a long day teaching, you are starving because all you had to eat all day was that granola bar snatched between classes. You're finally home juggling cooking dinner, supervising homework and checking voicemail messages. The fact that someone has contributed to the daunting mess in the family room by leaving beyblade paraphernalia scattered all over the place is ticking like a timebomb, at the back of your brain, setting up a 'Mommy moment'. Must you not only patiently endure your hunger, your exhaustion and your frustration, but fight the temptation of eBaying the offending toys too?
I've tried the maligned discipline tactic before, you see. Someone who will remain nameless once shattered my car windscreen during a tantrum. Exactly $173.16 of the $1000+ it cost to replace the windscreen emptied the culprit's piggy bank. Admittedly I didn't take a picture of the culprit, post it on eBay, round up all the beyblades I could find, and attempt to raise the $826.84 balance by auctioning them on eBay. I'm not even sure the lesson had the desired effect because from time to time, I'm reproachfully reminded by a certain someone (who's saving up for the latest computer-game-thingy), that s/he would have $173.16 more by now if I hadn't raided his/her piggybank. But what's a mom to do?
Its a sometimes thankless job, being a Mom, but really, what has this world come to when a random Hydra can rear up to (caution: link contains coarse language) frustrate your non-spanking discipline attempts , and you earn yourself a place in the Mommies Hall Of Shame for even trying the discipline attempt? With a chipped bathtub and broken soap dish on top, to add insult to injury?
So now I have a hilarious intended-in-jest-or-serious-contractual-offer teaching hypo for my contracts students. And, the urge to check that I have not been outed in the Mommy's Hall of Shame as a bad mom everytime I cringe at hearing 'let er rip!"
[Eniola O Akindemowo]
Thursday, February 17, 2011
What is “a good bargain”? Is it all in the price? The price may or may not reflect the value of the subject of the bargain. It may be underpriced (to the glee of the buyer), or overpriced (to the satisfaction of the seller). An underlying belief about what the basic value of the subject is must also exist. Without that underlying belief, judgments about how underpriced or overpriced - and thus, how good or bad - the proposed contractual bargain (price) is, cannot be made. So, what is the true value of the Huffington Post? Some see the HuffPo as a barely five year old celebrity upstart that defied expectations to become a remarkably popular blog. Was it a steal or a bust at 315 million?
Celebrity, even notoriety, seems admired and highly valued these days. And, if admiration is not quite the word, the fact of celebrity - even where the person concerned is famous for simply being famous – certainly draws our attention. It is because of this that the 'art' of being a celebrity is a hardnosed business pursuit rather than a frivolous lark. There is no shortage of promoters willing to pay someone - anyone - who can attract, however fleetingly, the public’s attention. In this era of the ever shrinking attention span therefore, the proverbial fifteen minutes of fame is a lifetime in dog celebrity years. How to explain otherwise the high dollar book deals, and the endorsements that are the badge of even the most tenuous celebutante?
So, how to quantify the objects of our admiration? We may not even be dealing with objects but with abstract values if you will – celebrity, popularity, notoriety to name a few. Might a sampling of celebrity book deal dollar values yield a value index of sorts? Perhaps - if accurate figures were not so fiercely guarded and exaggerated accounts were not so eagerly circulated. Perhaps a listing of celebrity books on the New York Times Bestseller List might provide a surrogate of sorts? One can only hope it was no mean feat for the reflections of a celebutante to make the New York Times Best Seller list at the same time that the memoirs of a former U.S. president did.
Contract law permits a wide exercise of choice here. As one person’s trash may be another’s treasure, it is the buyer’s (or seller’s) choice to make a deal that might seem a bad idea to someone else. Choice is the operative word – if the party was misled, unduly influenced or improperly threatened for example, the deal will of course be voidable.
Twenty years ago, America On Line (AOL) was a profitable media giant. A decade later, a less vibrant AOL consented to become a part of the Time Warner group. Seen as a bad idea at the time by some and now viewed as possibly the worst merger deal in history, there was no suggestion when it all ended badly, that it was anything other than an ill-advised gamble. Now a very publicly ailing member of a reputably dying breed of media and print enterprises, AOL has by this merger bought itself a chance to turn around it’s all but inevitable demise.
Presuming that this can only be a good deal for AOL which had to do something, anything, or die, what about the Huffington Post? Did the HuffPo get ‘good value’ for the trade? The jury is out on whether the deal will be a vindicated or regretted. Contractually speaking, however, a contractual party is entitled to exactly what he or she bargained for – nothing more, nothing less. Full performance of a party’s side of the bargain discharges that party’s duty to perform, while the unexcused non performance of even part of a due duty is a breach per the Restatement of Contracts (2nd) §235.
The bargain, ideally, was shaped by the parties preferences. A party may thus receive as the exchange, if she chooses, a little something now whose value at the time of contracting is greater to her than its face value. She may promise to pay, if she wishes, double, threefold or more of that face value in exchange, sometime in the future. She may choose, conversely, to pay big money for a subject of seemingly slight value in the hope that the potential she sees will soon be realized. If that potential is unrealized, she will wear the risk. Unfair tactics and public policy aside, the law is content to permit her to assign whatever value she chooses to the subject of her desire be it increased popularity, an entry pass into a stronger corporate group, or a chance to play with the big boys.
Should we conclude therefore that value is in the eye of the beholder, and that the measure of a subject’s value is how much people are willing to pay for it? This is a logical deduction, but only one side of the value-is-determined-subjectively v objectively jurisprudential debate. It must be harder in any event, to quantify the value of celebrity musings without reference to sponsored endorsements, celebrity impact rankings and such. It evidently is just as difficult, if not more so, higher up the food chain. Take our example of a very popular upstart website/blog. Analyses of monitored acquisition deals indicate that online media sites are typically acquired for 1½ times the amount of their generated revenues. Launched barely five years ago, the Huffington Post was acquired for 315 million - reportedly five times its generated revenue. It is hard to know whether this figure is a hardnosed assessment of the HuffPo’s worth, or a reflection of the fact that the negotiations were between an ailing giant and an ambitious upstart fledgling.
If all goes well, the ultimate verdict may one day be that the HuffPo was a steal at 315 M. It is possible that Adrianna Huffington may come to rue the bargain that looked oh so good at the time. If AOL’s profitability hemorrhage is not stemmed by this deal, on the other hand, its 315 M payout will be just one more milestone in its march to oblivion. There is no contractual rule against a deal that was, with hindsight, ruefully underpriced or fatally expensive. Contract law will be content where the regretted deal, truly bargained for and not compromised by vitiating factors, was based upon a freely quantified exchange.
The parties considered the bargain. They assessed its value. Once you have done that, “you pays your money and you takes your choice.”
[Eniola O Akindemowo]
The blogosphere has erupted with chatter regarding the recent acquisition of the Huffington Post by America Online (Sidebar: was anyone else surprised to learn that AOL still exists?) for a reported $315 million. While estimates of how much Arianna Huffington (shown at left prior to having herself gilded) personally profited from the sale greatly vary, it is safe to say that she made somewhere in the ballpark of $20 million to $30 million. In light of this, commentators have come out of the woodwork to both praise and question the Huffington Post model. From the journalists, the message is basically this: Arianna, you've got hate mail!
The Huffington Post employs paid journalists to create original content and editors to sift through the massive content aggregated from AP, Reuters, and major newspapers and magazines, all to draw in readers to their website. Nothing controversial so far. Beyond that, the Huffington Post also features the work of unpaid bloggers who can post their content on the Huffington Post site to benefit from the increased traffic. Up until now, most were content with this arrangement. However, the idea that a relatively small number of people made millions of dollars, at least in part due to the work of “little-guy” bloggers who won’t see a dime, does have many up in arms.
Some decry the transaction as unjust enrichment of the elite at the expense of citizen journalists. For example, David Carr at the New York Times compares the plight of unpaid bloggers at Huffington Post to serfs under feudalism.
Not to be outdone, Tim Rutten of the Los Angeles Times likened Huffington Post’s business model to “a galley rowed by slaves and commanded by pirates” with “overhead that would shame an antebellum plantation.” But there is more to this line of argument than farfetched historical analogies. While Huffington Post now draws most of its traffic from “big name” content, it only got to this point by the work of unpaid bloggers who contributed their time, efforts, and ideas. Without them, HuffPo may have been DOA.
Others praise and defend the Huffington Post model. TJ Walker at Forbes points out that no promise of payment was ever extended to these bloggers. In other words, they knew what they were getting into. And if they feel they are being exploited, Walker argues that you can always “own your own means of production” by starting your own blog on your own terms. Hillary Rosen of HuffPo notes that Huffington Post gives bloggers a platform to let their ideas be known to a larger audience than they might otherwise get themselves.
Will this joint-venture succeed? Will the “blogger serfs” ever receive compensation for their intellectual labors? Who knows? What no one can deny is that the Huffington Post model has changed the way journalism works, and the AOL/HuffPo deal validates that proposition.
Asked for comment about how this development reflects on their own business model, the managers of the Law Professors Blog Network stated, "We pay our bloggers exactly what they are worth. And if they don't like being galley slaves rowing for watered grog, they can row without the watered grog."
Okay team, pass the grog and row!
[JT and Jon Kohlscheen]
Tuesday, February 15, 2011
As reported by CNET News here, consumers have recently filed a class-action lawsuit in the Northern District of California against AT&T for breach of contract, unjust enrichment, and unfair business practices stemming from the “systemically overbilling” of its iPhone and iPad customers for data transactions. For most consumers, independently verifying the data used on their smartphones can be anywhere from extremely difficult to downright impossible. That’s why Plaintiff Patrick Hendricks hired an independent consulting firm to conduct a 2-month study of AT&T’s billing practices of data usage.
The findings should give AT&T customers pause. According to the class action complaint filed on January 27, 2011 in Hendricks v. AT&T Mobility, LLC, AT&T regularly overcharges consumers between 7% and 14%, but in some cases by over 300% for data transfers. Beyond inflated charges, the complaint also alleges charges for what it calls “phantom data traffic”, or data charges when there is no actual data usage by the customer. The consulting firm purchased an iPhone, disabled all web-based data functions, and let the phone sit idle for 10 days. During that period, AT&T billed the account for 2,922 KB of usage, or roughly 35 transactions. In response to the class-action lawsuit, AT&T issued a brief statement, saying, “We intend to defend ourselves vigorously. Transparent and accurate billing is a top priority for AT&T.”
The complaint compares AT&T’s billing practices to “a rigged gas pump that charges for a full gallon when it pumps only nine-tenths of a gallon into your car’s tank.” Count II of the complaint alleges that AT&T breached its contract with members of the class consisting of all U.S.-based iPhone or iPad users with a usage-based AT&T plan. AT&T allegedly breached its agreement by rigging its billing system to overstate data usage. Plaintiffs seek restitution and cessation of the practice.
Fans of the movie Office Space can clearly see the similarities between AT&T's plan, as alleged, and the penny tray at your local 7-11:
Peter Gibbons: [Explaining the plan] Alright so when the sub routine compounds the interest is uses all these extra decimal places that just get rounded off. So we simplified the whole thing, we rounded them all down, drop the remainder into an account we opened.
Joanna: [Confused] So you're stealing?
Peter Gibbons: Ah no, you don't understand. It's very complicated. It's uh it's aggregate, so I'm talking about fractions of a penny here. And over time they add up to a lot.
Joanna: Oh okay. So you're gonna be making a lot of money, right?
Peter Gibbons: Yeah.
Joanna: Right. It's not yours?
Peter Gibbons: Well it becomes ours.
Joanna: How is that not stealing?
Peter Gibbons: [pauses] I don't think I'm explaining this very well.
Peter Gibbons: Um... the 7-11. You take a penny from the tray, right?
Joanna: From the cripple children?
Peter Gibbons: No that's the jar. I'm talking about the tray. You know the pennies that are for everybody?
Joanna: Oh for everybody. Okay.
Peter Gibbons: Well those are whole pennies, right? I'm just talking about fractions of a penny here. But we do it from a much bigger tray and we do it a couple a million times.
Hopefully, the legal defense team at AT&T can come up with a more convincing argument than Peter Gibbons.
[JT & Jon Kohlscheen]
Tuesday, January 4, 2011
Last week, Judge Martin Agran of the Cook County Circuit Court issued a ruling in Travelport, LP v. American Airlines, Inc. Case No. 10 CH 48028. Unfortunately, I have been unable to find the opinion on the web, so I am relying on other reports that I have found on the web. As reported in The Mercury here, American threatened to pull its flights from Orbitz's site on December 1st as a result of a dispute over American's attempts to provide information about its flights directly to Orbitz and thus to cut out middlemen known as global distribution systems which track the airlines and provide the information to travel sites such as Orbitz. While Travelport, which owns 48% of Orbitz was initially granted an injunction forcing American to continue posting its flights on the travel site, Judge Agran now has ruled that no injunction is necessary, as American can simply pay damages if it is found to have breached its contract with Orbitz.
Apparently, under the current system, airlines such as American have to pay a fee to Orbitz when its customers book a flight with the airlines and also to the global distribution systems, which make flight information available. As anyone who has paid to check a bag, or to have legroom or to have a snack or a drink on an American Airlines flight known, American prefers to charge money rather than spend it. So it is now proposing to provide its own flight information and have Orbitz pay for access to that information. Travel industry experts claim that cutting out the middlemen will make it harder for consumers to comparison shop and will create confusion.
I checked on December 30th, and Orbitz does not seem to be offering flights on American Airlines right now. The short-term effect of Judge Agran's decision will thus make matters a bit more difficult for consumers. The website Travelpulse.com reports that the Business Travel Coalition is unhappy with the ruling for that reason. eTurboNews provides a quotation from BTC Chairman Kevin Mitchell here:
The stakes in this conflict are clear: either an improved airline industry and distribution marketplace centered around the consumer, or one that subordinates consumer interests to the self-serving motivations of individual airlines endeavoring to impose their wills on consumers and the other participants in the travel industry. Single-supplier direct connect proposals, like the one advanced by American Airlines, can cause massive fragmentation of airfares and ancillary fees depriving consumers of the ability to compare the total cost of air travel options across all airlines.
The same article provides survey results indicating business travel managers' hostility to American's new strategy. It appears that American is trying to learn from its more efficient rival, Southwest, which already has its own information distribution system.
For reasons unexplored in the articles I found, American's flights are listed on Expedia. In order to book with Southwest, you have to go to their website, And that may be the future for American as well.
Update: The New York Times, frustrated at having been scooped once again by this blog, has now published a full report with more information. Among other things, the report notes that American has taken down its flights from Expedia.com as well now. It looks as though Delta might follow American's lead. The Times report is also the clearest I have thus far found about what is motivating this move, beyond the general observation that the big airlines are looking for ways to cut costs and increase revenues.
Wednesday, July 7, 2010
Douglas G. Baird, The Holmesian Bad Man's First Critic, 44 Tulsa L. Rev. 739 (2009).
Matthew K. Bell, Forget What You Intended: Surprisingly Strict Liability and COGSA Versus Carmack, 37 Transp. L.J. 57 (2010).
Molly Brooks, The "Seller-Friendly" Approach to MAC Clause Analysis Should be Replaced by a "Reality-Friendly" Approach, 87 U. Det. Mercy L. Rev. 83 (2010).
Edwin Butterfoss & H. Allen Blair, Where is Emily Litella When You Need Her?: The Unsuccessful Effort to Craft a General Theory of Obligation of Promise for Benefit Received, 28 Quinnipiac L. Rev. 385 (2010).
David Cabrelli & Rebecca Zahn, Challenging Unfair Terms: Some Recent Developments,  Jurid. Rev. 115.
Ross Dillon, A Bale of Wool,  N.Z.L.J. 145.
Lisa A. Fortin, Note, Why There Should Be a Duty to Mitigate Liquidated Damages Clauses, 38 Hofstra L. Rev. 285 (2009).*
James Gordley, The Origins of Sale: Some Lessons from the Romans, 84 Tul. L. Rev. 1437 (2010).
Sam S. Han, Predicting the Enforceability of Browse-wrap Agreements in Ohio, 36 Ohio N.U. L. Rev. 31 (2010).
Robert A. Hillman & Maureen A. O'Rourke, Principles of the Law of Software Contracts: Some Highlights, 84 Tul. L. Rev. 1519 (2010).**
Kristin L. Hines, Note, Examining Contractual Models for Transferring Environmental Liability: How They Work and Where They are Headed, 11 Vt. J. Envtl. L. 395 (2009).
Martin A. Hogg, Promise: The Neglected Obligation in European Private Law, 59 Int'l & Comp. L.Q. 461 (2010).
Joshua Karton, Contract Law in International Commercial Arbitration: The Case of Suspension of Performance, 58 Int'l & Comp. L.Q. 863 (2009).
Nancy S. Kim, Expanding the Scope of the Principles of the Law of Software Contracts to Include Digital Content, 84 Tul. L. Rev. 1595 (2010).**
Juli Loden, Comment, The Earth is Not Flat, and "A Quasi Contract is Not a Contract at All" -- Tennessee Restitution and Unjust Enrichment Law, 11 Transactions: Tenn. J. Bus. L. 167 (2010).
Susana López-Bayón & Manuel González-Díaz, Indefinite Contract Duration: Evidence from Electronics Subcontracting, 30 Int'l Rev. L. & Econ. 145 (2010).
Andrew C. W. Lund, Opting Out of Good Faith, 37 Fla. St. L. Rev. 393 (2010).
Larry A. DiMatteo & Samuel Flaks, Beyond Rules, 47 Hous. L. Rev. 297 (2010).
Juliet M. Moringiello & William L. Reynolds, What's Software Got to Do with It? The ALIPrinciples of the Law of Software Contracts, 84 Tul. L. Rev. 1541 (2010).**
Otto Sandrock, The Choice Between Forum Selection, Mediation and Arbitration clauses: European Perspectives, 20 Am. Rev. Int'l Arb. 7 (2009).
Hannibal Travis, The Principles of the Law of Software Contracts: At Odds with Copyright, Consumer, and Employment Law?, 84 Tul L. Rev. 1557 (2010).**
Hal R. Varian, Computer Mediated Transactions, 100 Am. Econ. Rev. 1 (2010).
Daniel A. Verrett, Comment, Delay Damages Sufficient for a Maritime Lien?: The Economic Loss Doctrine Brings Certainty to the High Seas, 47 Hous. L. Rev. 463 (2010).
Kate Zdrojeski, Note, International Ice Hockey: Player Poaching and Contract Dispute, 42 Case W. J. Int'l L. 775 (2010).
* - Despite a somewhat awkward title -- the point is to mitigate damages, not mitigate clauses -- this Note is worth a read, arguing that, inter alia, preventing economic waste, a penalty on the breaching party, and windfall profits for the nonbreaching party, as well as promoting consistent remedial principles, should oblige a court (or arbitrator) to not mechanistically assess the damages to which the parties agreed in their contract.
** - These four essays comprise a mini-symposium on the ALI's Principles of the Law of Software Contracts, arising out of a program I organized and moderated at January's AALS Annual Meeting in New Orleans. (Yes, that's January 2010.) Bob Hillman, Maureen O'Rourke, and Juliet Moringiello spoke at the program, as did Amy Boss and Florencia Marotta-Wurgler. Nancy Kim and Hannibal Travis responded to a supplemental call for papers to accompany those the program speakers were contributing to the print symposium.
For those who complain about the sometimes sluggish processes of student-edited law journals (for example here, including the comments), the program was on January 9, final drafts were due February 15, and the print issue arrived in my campus mailbox on June 2. Unfortunately, this pace proved too brisk for several authors lined up to contribute to the print symposium (including yours truly). I hope to collect those authors' contributions, revised-as-appropriate versions of these four essays and other essays and articles first appearing elsewhere, and some original shorter response and reply pieces, in a book coming soon -- at least by astronomical or paleontological standards -- from an as-yet-undisclosed legal academic publisher.
[Keith A. Rowley]