Wednesday, January 30, 2013
[Edited: Apologies to my co-blogger, Nancy Kim, for posting this before reading our own blog to see that she already covered it. I'll keep this up for the links to the cases but please read Nancy's post for a more in-depth analysis of the materiality issue.]
For professors who teach nondisclosure as a "reason not to enforce a contract," (that's what the book I use calls "defenses"), Stambovsky v. Ackley often is a favorite case due its entertaining facts. In the case, the buyers of a Nyack, NY house (pictured) seek to have the contract rescinded due to the home being haunted by poltergeists. The haunted condition was known by the sellers but was not disclosed to the buyers.
I am particularly fond of the case in part because the opinion is filled with puns such as, "[I]n his pursuit of a legal remedy for fraudulent misrepresentation against the seller, plaintiff hasn't a ghost of a chance, [however,] I am nevertheless moved by the spirit of equity to allow the buyer to seek rescission of the contract of sale and recovery of his down payment.". Puns aside, the case is instructive because it helps students understand the difference between nondisclosure versus misrepresentation and gets some students to question their faith in caveat emptor. The fact that I teach the case right around Halloween is a nice bonus.
The only potential problem with the case is that it's somewhat dated (yes, something from the 1990s can feel dated to current first-year students). Thankfully, a student of mine from last semester just sent me a link to this newer version of Stambovsky out of Pennsylvania (what do ghosts love about the mid-atlantic states?). In this new dispute, the buyer, a recent widow, is seeking to rescind the contract for sale of a home based on the nondisclosure of a murder-suicide in the home in the same year she agreed to purchase it. The trial court granted summary judgment to the sellers and the appellate court affirmed, finding that, "psychological damage to a property cannot be considered a material defect in the property which must be revealed by the seller to the buyer." The buyer now has appealed the case to the Supreme Court of Pennsylvania. No one knows how that court will exorcise its discretion (ba-dum-bum).
[Heidi R. Anderson]
Tuesday, January 22, 2013
We here at ContractsProf Blog can't seem to get enough of the "Chicken Case," also known as Frigaliment. Many of us use this case when teaching the "ambiguous term" exception to the parol evidence rule. In the case, the seller argued that the written contract term of "chicken" meant any type and age of chicken of the specified size while the buyer argued that "chicken" meant only "roasters and fryers" of the specified size, which are younger and appreciably better than older "fowl."
Students who are only familiar with Chick-Fil-A and the packaged chicken parts in the grocery store tend not to appreciate the practical difference between the two sides' meanings. Confused students? ContractsProf bloggers to the rescue!
For a picture that says it all, see Prof. Snyder's post from 2010. For a video-based explanation of the issues in the case from none other than Hitler, see my post from last year. Prof. Miller also has offered another video-based teaching aid to use. Today, I bring you this clip, the source of which I cannot remember.
Apologies to whomever showed this clip to me first (a former student? a previous post on this blog that is not coming up in my search?).
I like this clip because you only need to take a few seconds of class time and it sticks with the students more than a 2-D picture thanks to Ms. Child's natural charm.
[Heidi R. Anderson]
Monday, January 21, 2013
In theory, if you are looking for a case to illustrate the UCC's potential liberality in letting in trade usage evidence to modify a written contract, nothing could be better than Nanakuli Paving v. Shell Oil. One cannot avoid feeling gobsmacked by the Ninth Circuit's insouciance as it uses parol evidence to alter a clear, unambiguous price term. And it's fun to say "Nanakuli."
But Nanakuli is long. In order for students to understand it, they have to appreciate the idiosyncrasies of the asphaltic paving industry in Hawaii and they have to know quite a bit of detail about the the relationship between Nanakuli and Shell. If you have six credits to play with, luxuriate in Nanakuli's details, but if you are on a time budget, do I have a case for you!
Whaley and McJohn's Problems and Materials on the Sale and Lease of Goods includes Columbia Nitrogen Corp. v. Royster Co., 451 F.2d 3 (4th Cir. 1971), which is just as outré as Nanakuli but much, much shorter. The case is about a phosphate sale, most likely for the manufacture of fertilizer. Despite the image at left, there's nothing sexy about the case, other than the fact that its logical contortions (like those in Nanakuli) are reminiscent of the Kama Sutra. Still, it's a good way to hammer home the point that, under the UCC, one cannot expect the parol evidence rule to provide much protection against the introduction of course of dealing, course of performance and trade usage evidence.
Thursday, December 20, 2012
They say that doing the same thing over and over and expecting different results is the hallmark of insanity. But it's also the hallmark of scholarship. I have just posted on SSRN the shortest version yet of my argument for why we should not conflate the state secrets privilege with the Totten doctrine. The good people over at the American University National Security Law Brief have agreed to publish it, so it should be up with them early next year.
Totten establishes a justiciability rule: people who enter into voluntary secret agreemetns with the government cannot sue to enforce those agreements because doing so would violate the implied terms that the agreements are to be kept secret. Thus, Totten, estate administrator for a man who alleged that he had entered into a spy contract with President Lincoln (here pictured before he became either a vampire hunter or Daniel Day Lewis) but had not been paid, could not recover on the contract. That basic principle was subsequently expanded in Tenet v. Doe to bar not just suits on contracts but all suits to enforce secret agreements with the government.
So, I have my issues with Totten, which I think has become overbroad, as I explained here. But the point of the current article is simple and straightforward: The state secrets privilege is an evidentiary privilege. It is neither a contracts doctrine nor a justiciability doctrine. The conflation of Totten with the SSP has resulted in the unwarranted pre-discovery dismissal of colorable claims alleging tort and constittuional violations by the government and its contractors.
But for those who want to see the draft, you can download it on SSRN here. This is the abstract:
The state secrets privilege (SSP) has become a major hindrance to litigation that seeks to challenge abuses of executive power in the context of the War on Terror. The Supreme Court first embraced and gave shape to the SSP as an evidentiary privilege in a 1953 case, United States v. Reynolds. Increasingly, the government relies on the SSP to seek pre-discovery dismissal of suits alleging torts and constitutional violations by the government. Lower federal courts have permitted such pre-discovery dismissal because they have confused the SSP with a non-justiciability doctrine derived from an 1875 case, Totten v. United States. The Totten doctrine only applies to claims brought by people who have entered into voluntary relationships with the government, but it is now being invoked when the government seeks dismissal of tort claims through the SSP. While the government should invoke the SSP whenever necessary to prevent disclosure of information that might jeopardize national security, such invocations of the SSP should never result in pre-discovery dismissal.
Monday, October 29, 2012
At right is a drawing of the Ballantine brewery in Newark as it appeared in the late 19th century. Founded in 1840, the brewery grew to be one of the largest in the United States by the end of the 19th century. Recognizing that nobody without a gut full of beer could enjoy the American passtime, Ballantine cleverly partnered with the New York Yankees. Through its partnership of that storied team, Ballantine grew to become the third most popular beer in the United States.
Sadly, in the 1960s the brand declined. As Judge Friendly recounts in his opinion for the Second Circuit in Bloor v. Falstaff Brewing Corp., in 1969, the brewery suffered the indignity of acquisition by a real estate conglomerate with no experience in brewing. After bleeding money for a few years, the conglomerate sold Ballantine to Falstaff Brewing Corporation in return for some cash and a promise to use "its best efforts to promote and maintain a high volume of sales" of Ballantine beer. If it ceased to sell the beer entirely, the contract provided for liquidated damages.
Falstaff chose not to promote Ballantine beer. It's marketing strategy was summarized by Falsataff's controlling shareholder as follows: We sell beer, F.D.B. the brewery. You come and get it. That didn't work very well for Ballantine, and its volume of sales plummeted. The trustee of what remained of Ballantine sued alleging breach of the best efforst clause and seeking liquidated damages. Judge Friendly's conclusion is summarized below:
Bloor v. Falstaff Brewing Corp. Limerick
Falstaff had to adhere
To its deal to sell Ballantine beer.
Volume’s not killer
When there’s Bud, Coors and Miller.
Still, its efforts must be sincere.
Monday, October 22, 2012
Lawrence A. Cunningham is the Henry St. George Tucker III Research Professor of Law at the George Washington University Law School. He is also the author of Contracts in the Real World.
Before wrapping up the symposium about Contracts in the Real World, I wanted to offer two posts on main themes of the contributions–which were wonderful.
The first concerns the role of politics in contract law adjudication. It emerged as a theme from several posts, explicitly by Dave and Miriam, implicitly byJake’s discussion of Baby M and by Nancy’s of ProCD, and more obliquely in Tom’s (and Miriam’s) reference to my notion of the “sensible center” in contract law.
Perhaps the safer way to put the point would be to say that the common law of contracts is among the least political of subjects in law. The book does recognize the potential for political factors, of course, including variation among states. And while it celebrates the impressive power of the common law of contracts to deal neutrally with change, it also notes limits.
This is most explicit in the case of Baby M and its contrast with California’s Baby Calvert. I agree with Jake, and his agreement with Dave, that these two cases illustrate the driving role that judicial worldviews, and perhaps local state outlooks, can play in the approach to a case and the outcome.
The pairing of the two cases helps to show such features, in a context where opposition seems particularly acute. This is the context of “public policy,” an area where the common law of contracts is often inferior to administrative or legislative solutions precisely because at stake are exquisitely political decisions. That’s why p. 56 notes that judges on both (or all) sides of the debate about surrogacy contracts “usually concede that better solutions are likely to come from legislation. As magisterial as the common law of contracts is, many of society’s vexing puzzles should be resolved by the legislative branch of government.”
The differences between California and New Jersey on surrogacy contracts reminds me of the differences, to which Dave adverts, between California and New York on the parol evidence rule. In California, Chief Justice Roger Traynor helped to forge a weak parol evidence rule, stressing context and reflecting skepticism of the unity of language, compared to New York, where judges since Andrews and Cardozo (noted at pp 7-8) have shown greater interest in finality and the security of exchange transactions.
Those differences, in the doctrine and underlying attitudes, are real. But as this example shows and Dave notes, this is not so easy to classify in political or ideological terms. It may be due more to New York’s history as a commercial center and may reflect something about how California is just a more relaxed place in general.
I think the example of ProCD, about which Miriam, Nancy and Jake commented, is an instance of the potential but vague role of politics or judicial worldview in contract adjudication. In the book, I summarize the case as a possible precedent for the main case, which concerned consumers “assenting” to inconspicuous terms in an on-line license—the Netscape spyware case. The ProCD precedent, I note, pointed in opposite directions for the Netscape case, forcing the judge to choose whether to follow in its path or not. The judge chose not to. The related facts seem to support that outcome. So far so good.
But given the charged setting of electronic commerce, I suspected that readers would have a sneaking suspicion that something else is going on. So I identify the judges—something done rarely in the book, as follows: at page 28 “[ProCD was written by] Frank Easterbrook, the federal judge in Chicago appointed by President Ronald Reagan” . . . and at page 27 “Netscape was written by Judge Sonia Sotomayor for a federal appellate court in New York, several years before her promotion by President [Barack] Obama to the U.S. Supreme Court.”
The real problem with ProCD may be more akin to the real problem with Baby M: even the common law of contracts nods. The issues are so novel and vexing that legislatures should act. Even the UCC—part of a long tradition in sales law recognizikng the limits of the common law—may not be readily adaptable to the world of electronic commerce, as Miriam’s post about ProCD hints.
But to return to the broader thrust of the sensible center and the generally apolitical quality of contract law, consider two points Jennifer made in her post. The first concerns the political fury that erupted amid the AIG bonus contracts. While politicians were calling for scalps and the company’s PR team intoned about the sanctity of contracts, Jennifer notes the op-ed I wrote summarizing the comparatively cool tools and results recognized by the common law of contracts.
Jennifer also calls attention to the list of conclusions at the end of Contracts in the Real World. Look at those statements of earthy contract law (some listed here) and it will be difficult to deny the truth or to detect a political or ideological edge within the spectrum of American political discourse. Let contract law do its knitting, and my own answer to Dave’s excellent question is that contract law really is pragmatic.
[Posted by JT]
Professor Lawrence Cunningham knows the law and his audience. With Contracts in the Real World: Stories of Popular Contracts and Why They Matter, he brings contract doctrine to life. Cunningham concisely, yet colorfully, covers how courts resolve a variety of deals gone wrong. This book is ideal to help students develop an understanding of how the law is used to sort between those bargains that will be enforced and those that will not, as well as what remedies are available when things do not go as the parties to the agreement initially planned.
Contracts in the Real World has considerable range. It starts with a wrecked wedding party, an event few experience though many may fear. A dispute between a couple and a banquet hall venue results from a regional power outage during the reception. This fact pattern echoes the type of phone call a recent law graduate might receive from an exasperated family member punctuated with the dreaded question — you’re a lawyer, can we get our money back? The book provides a sensible explanation of how the wedding dilemma would resolve, and weaves together this type of personal situation with more public, celebrities’ disputes and classic contract decisions. These classic decisions are better appreciated in this fashion, when they are used to explain the outcomes of more modern disputes. For example, Sherwood v. Walker (the fertile cow – mutual mistake case) dating back to 1887 resonates when it is used to analyze a divorce settlement dispute concerning millions of dollars invested with Bernard Madoff’s Ponzi scheme.
What makes the book particularly compelling, is that mixed in with relatable fact patterns and entertaining battles are significant matters of policy.Contracts in the Real World accomplishes this, for example, when it covers some very unpopular contracts. These include the infamous agreements under which American International Group (AIG) paid out $165 million in cash bonuses to roughly 400 employees. According to the New York Times, among those who received more than $1 million a piece were 73 employees of the AIGFP business unit. This was the same business unit that helped enable the housing bubble and related Financial Crisis of 2008 by providing credit protection (selling credit default swaps) on high-risk mortgage-linked securities. The AIG bonuses were announced in 2009, just months after the US government paid $85 billion for a nearly 80% ownership stake in AIG. This was a part of the $182 billion government commitment to rescue the giant insurance firm when it approached insolvency due, in large part, to its inability to make payments to counterparties on its credit default swaps.
The public outrage over the AIG bonuses is included in Chapter 3 which covers the concepts of “excuses and termination.” These bonus contracts were entered into in early 2008, well before the bailout. The agreements which promised bonus payments in 2009 and 2010 were designed to encourage employees to stay with AIGFP. In response to an irate public, in 2009, AIG which was by then a ward of the state, insisted that the contracts with these employees were ironclad. Yet, the company did not publicly reveal the actual language of the agreements nor were legal theories that would have excused performance discussed. Those opposed to paying the bonuses, including certain members of Congress suggested imposing up to a 100% tax on them. In this manner even the opposition seemed to treat as true the faulty premise that contract law requires all agreements to be performed without any exceptions. Cunningham attempted to correct this misperception. In a contemporary op-ed in the NYT and in Contracts in the Real World he suggested that contract doctrine might have been a moderating measure, an alternative to either unexamined payments on the one hand or demands for government confiscation, on the other. It also would have been a teachable moment. Though that moment passed, through this book, the lesson is not lost.
Finally, beyond these thoughtful presentations of popular and unpopular contracts, this book includes in the final chapter twenty statements the reader is invited to determine are true or false, to test comprehension of contract law. This useful list serves as a proxy for the book’s (and a course’s) intended learning outcomes. Given the comprehensive scope and easy style of Cunningham’s book, this is a natural choice to assign as a supplement to a casebook. Or, one might be tempted to use it as the primary textbook, and supplement it with the UCC, a number of the referenced cases and other favorites, highlighting where jurisdictions vary. Students may learn faster when they are so guided and engaged. Should this leave extra time in the semester, it might be used for contract negotiation and drafting, skills that nearly all attorneys need but few learn in law school.
[Posted by JT]
Dave Hoffman is the James E. Beasley Professor of Law at Temple University's Beasley School of Law.
I’ll begin by joining the others who’ve written in already to praise Larry’s excellent Contracts in the Real World. It is highly accessible, entertaining, and offers a ream of examples to make concrete some abstract and hard doctrinal problems. Larry has the gift of making complex problems seem simple – much more valuable and rare than the common academic approach of transforming hard questions into other hard questions! This would be an ideal present to a pre-law student, or even to an anxious 1L who wants a book that will connect the cases they are reading, like Lucy, Baby M, or Peevyhouse, to problems that their peers are chatting about on Facebook.
Larry’s typical approach is to introduce a salient modern contract dispute, and then show how the problem it raises was anticipated or resolved in a famous contract case or cases. Larry often states that contract “law” steers a path between extremes, finding a pragmatic solution. This approach has the virtue of illustrating the immediate utility of precedent for guiding the resolution of current disputes, and comforts those who might believe that courts are alwayspolitical actors in (caricatured) Bush v. Gore or Roberts/Health Care Cases sense. It has the vice of de-emphasizing state-by-state differences in how contract law works, as well as the dynamic effects of judicial decisions on future contracts. But I think that for its intended audience, these vices can be easily swallowed.
I wanted to offer one question to provoke discussion: is it actually true that politics is as removed from contract law as Larry’s narrative appears to suggest, and how would we know? The contracts law professor listserve is full of laments about judges turn away from Traynor & his perceived progressive contract doctrines – and I certainly know of colleagues who teach that there are “liberal” and “conservative” versions of the parol evidence rule, for instance. But what does this actually mean, and how does it connect with the scholarship on judicial politics generally? As it turns out, this question has been understudied, probably because political scientists have yet to find a way carefully operationalize what a “liberal” or a “conservative” outcome in a contracts case would be, and thus to usefully regress case outcomes against a judge’s political priors. Many authors (Sunstein et al. 2004; Christy Boyd and I, 2010) have found ideological effects outside of the typical con law regime (particularly in “business law” areas). But I’m aware of a few empirical papers analyzing the political valence of how contract doctrine comes to be. (Snyder et al. n.d.) Some have suggested that contract law is a particularly hard area to study because selection effects loom so large. I would also note that most contract law “work” occurs at the state court level, where ideological measures are either explicit or very obscure.
If we found good measures, my own hypothesis would be that a particular judge’s worldview matters a great deal to how he or she resolves contract disputes – with priors about how much a person should be responsible for their own choices, and their perspective on market discipline, shaping how they understand the facts and thus apply the law. Contract cases are powerfully controlled by judges – probably more so than in other areas of private law. Contract doctrine would reflect these individual choices, and we’d thus be left not withone ”pragmatic” contract law, but rather many competing strands. I’d thus close by urging readers of Larry’s book to think a bit about the cases not picked out and illuminated in the narrative – where the judges are less wise and more human.[Posted by JT]
Donald C. Langevoort is the Thomas Aquinas Reynolds Professor at Georgetown Law.
Like all the reviewers so far, I am a big fan of Larry’s book. My interest in his approach comes partly from his way of bringing the subject alive, but more (and the book varies in the extent to which it does this deliberately) because it moves readers toward situating themselves in the time and place at which the bargain was struck and events play themselves out. Erik Gerding makes this point, too, and I want to elaborate on it. A case like Wood v. Lucy Lady Duff Gordon asks why the deal was expressed as it was, and thus what was the deal, really? There is a good bit of writing in law and economics that tries to theorize about deal-making, and Victor Goldberg, among others, have done some very rich work on Lucy, among other cases. I desperately want to engage my contracts students with these ideas, but find it hard to do without devoting more time than my 4 credits in a semster allows. “Contracts in the Real World” gives the students a base for many of these intuitions (especially the chapter on interpretation and parol evidence), and I hope that it will at least stimulate their interest in thinking more about contract doctine in this way. What I hope for most is that Larry or some reader will follow up on this volume with another dealing more explicitly with the “what were they trying to do?” and “was this a good way to do it?” questions. I’m familiar with a couple of efforts in this direction, but so far they don’t work for me. The person who pulls off that book in a rich, sophisticated but engaging way will earn my undying gratitude. For now, however, I’m happy enough that Larry has given contracts students and teachers not only a great introduction to the human workings of contract law, but also some valuable impressions of the work-a-day world out of which some very interesting deals were conceived.
[Posted by JT]
Erik Gerding is an Associate Professor at the University of Colorado Law School
Let me start out with a criticism of Larry’s book: it is too much fun. I had a hard time breaking off just a chunk of Contracts in the Real World to write about and found myself spending several hours reading one interesting vignette after another on famous and infamous contracts.
The book will make a wonderful companion text to a traditional contracts casebook. Its value is not just in its engaging account of contract stories or in giving context to chestnut cases, but in providing a very intuitive framework for understanding contract law. The traditional contracts course, perhaps by virtue of having the doctrine of consideration at its heart, can be one of the most confusing in the One-L year. Students are often left to divine the inner structure (or lack thereof) of contract law on their own, likely while cramming for finals. Sometimes the epiphany comes. For many students it does not.
Larry has a real genius for laying out the doctrinal building blocks in a very thoughtful and accessible structure. He groups cases around a rough life cycle of contracts, with chapters devoted to “Getting In: Contract Formation,” to “Facing Limits: Unenforceable Bargains,” to “Paying Up: Remedies.” The layout of the book combined with its lucid writing demystifies contracts.
The layout may at first appear to make this book an ill fit as a companion text to many case books, because many of the cases appear in Contracts in the Real World under a different doctrinal heading than in a particular case book. For example, in the case book I currently use Batsakis v. Demotsis appears in the chapter on “consideration.” Larry places this classic next to cases on unconscionability. I also teach Lucy, Lady Duff Gordon in consideration, while Larry situates it in “Performing: Duties, Modification, Good Faith.”
These differences actually demonstrate a strength of the book. Some disconnect between the organization of a primary case book and a companion text forces students to move beyond a facile understanding of contract law in terms of rigid doctrines. Seeing cases in different contexts and fitting into different doctrinal boxes can help students see that lawyering involves more than memorizing black letter rules and putting issues into the right doctrinal box. Indeed, sometimes different doctrinal boxes can apply to the same problem and lead to the same result (witness rules on past consideration and duress). At other times, the choice of the doctrinal box makes a huge difference (see those same two doctrines). Accomplished students can move from memorizing blackletter law to seeing the possibility of creative lawyering. Larry’s organization – both intuitive and surprising – will help students at both stages.
One final strength of the book is Larry’s choice to include not only court cases but many contemporary contract disputes that never reached the courtroom (such as the dispute between NBC and Conan O’Brien). This brings into the classroom a wider panorama of how lawyers encounter and shape contractual problems in practice. After all, few contracts and few lawyers find their way into a courtroom. Most disputes are resolved in the shadow of law.
I also have a wish list for Larry’s next project (from personal experience, I can tell you how invigorating it is for an author who has just finished a book to be asked “what’s next?’). One of the limitations of the traditional contracts curriculum is how rarely students read and interpret – let alone negotiate or draft – actual contracts. It would be incredibly helpful as a professor to have some of the source contracts behind these stories. Although some of these contracts are already contained in a judicial opinion (Carbolic Smoke Ball) and many will not be public (Conan’s deal with NBC), others might be available with some digging. Having real and full contracts would allow professors to meet many of the items on Professor Collins’ wish list, such as transactional perspectives and drafting exercises. Although some lawyers litigate over failed contractual relationships, many more help parties plan prospectively – including by drafting and negotiating deals. For most attorneys, contracts are not an autopsy subject, to be dissected in a court opinion, but a living thing.
Professor Cunningham’s book provides a joyful reminder of the life in contracts.
[Posted by JT]
Monday, October 1, 2012
Once again, I have to express my gratitude to Christina Kunz and Carol Chomsky. Because of their casebook, I have finally had the opportunity to teach Wood v. Boynton, which is just a really fun case to teach. The students can relate to it, divide up relatively evenly on each side of the case, and can easily see the trouble with the old common law rule that tried to draw Aristotelian distinctions between mistakes as to essential qualities and mistakes that only go to the value of the consideration.
Mrs. Wood, being in need of cash, returned to Mr. Boynton's jewelry store to see if he was still intersted in purchasing for $1 a rough stone found by her husband. Boynton renewed his offer, and the two made the exchange. The rough stone, which Mr. Wood had guessed was a topaz, turned out to be a diamond. According to Wikipedia, Mr. Boynton sold it to Tiffany's for $850. Some time later, J.P. Morgan bought the diamond, now known as the Eagle Diamond, and gave it to the American Museum of Natural History in New York. It was later stolen and perhaps cut into smaller stones. The Eagle Diamond is no more, but here is a picture of it (from five angles) in its glory:
But to get back to our story. Upon learning that she had sold a diamond, Mrs. Wood sought rescission based on fraud or mutual mistake. There seems to have been no fraud, as Mr. Boynton, though a jeweler, had never seen an uncut diamond before. The court also rejected mistake, as there was no mistake that the thing was a stone. The only mistake, said the court, was as to its value, and such mistakes are not a ground for rescission.
Wood v. Boynton Limerick
Wood found and then sold a rough stone.
Its value was then quite unknown.
Later, she’d holler
Having sold for a dollar
Ere the doctrine “mistake” was full-grown.
I think that, under the test articulated in the Restatement (Second) of Contracts, rescission would have been available.
Monday, September 17, 2012
Speaking of Lucy v. Zehmer, I had never taught the case until this year. I don't know why so many casebooks no longer include it. My students responded very well to it, and we had a very interesting discussion both of the joke/dare issue and of the drunkenness issue. How drunk does one have to be to be adjudicated incompetent to enter into a contract? Zehmer claimed he was "high as a Georgia pine." That might have been enough, but the court didn't buy it.
Lucy v. Zehmer Limerick
come to Virginnie
Some come to draft contracts and sign.
As did Zehmer, and so
He was bound even though
He was high as an old Georgia pine.
Monday, September 3, 2012
The case is pretty plain vanilla. Vassilkovaska bought a car from Woodfield Nissan, Inc. (Woodfield). A dispute ensued over allegedly misleding terms in the finance agreement, and Vassilkovska sued in state court. However, Vassilkovska had also signed a separate arbitration agreement. The terms of the arbitration agreement provided that Vassilkovska had to arbitrate any "dispute" she had with Woodfield and provided for certain exceptions. The court found that the exceptions covered every sitution in which Woodfield would sue Vassilkovska and none in which Vassilkovska would sue Woodfield. As a result, the court found that there was no consideration for Vassilkovska's agreement to arbitrate. She promised to arbitrate; Woodfield promised nothing.
In the process of selling a car,
Woodfield took things too far.
Of compelled arbitration,
The parties must be on a par.
The last line should not of course be taken to indicate that there must be "adequate" consideration; only that both sides must give consideration that induces a reciprocal promise.
A student asked why Woodfield would have opted for a separate arbitration agreement over an arbitration clause in a purchase or finance agreement. I admit that I am stumped. Can anybody think of a reason why there could be an advantage to a separate arbitration agreement?
Monday, August 27, 2012
I've actually been in Limerick rehab for the past three years. But with a new casebook, I have some fresh material. I think I'm still a bit rusty because the facts of this case are highly Limerickworthy, and yet I'm uncertain that this is a keeper.
American Ash made available to paving companies a material known as AggRite -- all the paving companies had to do was cart it away. Pennsy Supply did so for use in paving driveways and parking lots in a high school in Northern York County, Pennsylvania. In fact, it carted away 11,000 tons of the stuff.
The AggRite didn't work so well, and the pavement cracked during its first winter. Pennsy perfomed all the repairs, which involved carting away and disposing of the AggRite, which it turns out is hazardous waste. I love the idea of dumping 11,000 tons of hazardous waste in a public high school parking lot. It's the kind of metaphor that could be at the heart of a Don DeLillo novel.
The Superior Court of Pennsylvania found that there was consideration and thus that Pennsy had a viable warranty claim (at least for the purposes of surviving a motion to dismiss/demurrer). American Ash received a benefit when Pennsy agreed to haul away 11,000 tons of hazardous waste for free.
Pennsy Supply, Innc. v. American Ash Recycling Corp. of Pennsylvania
The court found a bargain was closed
When American Ash Corp. disposed
Of its AggRite through Pennsy
In the ideal dispens’ry:
A lot to a school juxtaposed.
Friday, July 20, 2012
In his first appearance on ContractsProf blog, Ashton Kutcher was noted for his replacement of Charlie Sheen, famous for violating an alleged morals clause in his contract with the producers of the CBS television series, Two-and-a-Half Men. In this appearance, his company possibly provides a good example of a party seeking reliance damages.
Kutcher's company, Katalyst Media, reportedly had a contract with the California DMV (yes, that DMV) to provide access and content for a reality show about "the variously humorous, emotional, dramatic, moving, humanizing and entertaining situations that arise [at the DMV] on a daily basis." According to the complaint, the DMV later attempted to cancel the arrangement. In addition to other claims, Kutcher claims that the attempted contract cancellation came after his company had spent money in reliance. Specifically, the complaintstates:
"In direct reliance upon DMV's promises and commitments...Plaintiffs entered into an agreement with cable television station TruTV....Also in reliance on DMV's promises and commitments...Plaintiffs spent literally hundreds of thousands of dollars in pre-production for the Series, including with respect to casting, hiring of personnel, preparing budgets, negotiating contracts, and other pre-production activities."
The case is particularly interesting because the facts somewhat parallel those in the case I use to teach reliance, Hollywood Fantasy Corp. v. Gabor. In Gabor, the organizer of fantasy acting camps sued Zsa Zsa Gabor for backing out of one of the camps and allegedly causing all sorts of damages (including, perhaps, the bankrupting of the entire company). The plaintiff, Leonard Saffir, also alleged that he lost anticipated profits from a "bloopers" show he was planning to sell to a television network based on outtakes from the fantasy camps. Although Saffir's damages were too uncertain to recover under a traditional expectation-based lost profits theory, he was able to recoup his expenses (such as brochures, advertisting, etc.) incurred in reliance on Ms. Gabor's promise to appear.
I suppose the modern day equivalent to a bloopers show would be some current reality TV shows, including Kutcher's own prior series, Punk'd. So, from now on, whenever I run across an Ashton Kutcher re-run, I'll automatically think of Leonard Saffir--and reliance.
[Heidi R. Anderson]
Thursday, July 19, 2012
I've just returned from a semester in New Zealand, teaching an advanced contracts course at the beautiful Victoria University of Wellington. One of the best things about teaching at the law school was having David McLauchlan as a colleague. As many contracts profs know, David is an impressive and prolific contracts scholar and a highly respected expert on contract law. Some of his writings can be found here. During my visit, I had the privilege of hearing David present a paper with the intriguing title, “The Contract That Neither Party Intends.” In his paper, he tackles the issues of interpretation and responded to a recent New Zealand case which endorsed our very own Holmes' strict views regarding the objective approach to contract formation and interpretation. Professor McLauchlan offers several compelling reasons why that view should be rejected in favor of (also our very own) Corbin’s less stringent version of objectivity. The paper is a spirited discussion of interpretation issues ("promisee objectivity" v. "detached objectivity" aka "fly on the wall" theory) and discusses cases that are classics in American casebooks (such as the Peerless case) as well as New Zealand and Australian cases that may be unfamiliar to U.S. contracts profs. It goes to show that while contract law may be local, contract law issues are universal.
Tuesday, May 22, 2012
Sir Cosmo Duff-Gordon (pictured), Titanic survivor and husband to Lucy, Lady Duff-Gordon of Wood v. Lady Duff-Gordon fame, was pictured in today's New York Times here. The picture shows Sir Cosmo, along with two British fencing teammates, holding pistols at the 1908 Olympic Games. Inattentive readers might conclude that Sir Cosmo competed in the dueling competition, but as his Wikipedia entry notes, his specialty (Silver Medal, 1906 Olympics) was the épée.
The individual dueling competition was featured only at the 1906 games and as the Times waggishly notes, "none of the duelists was actually shot," which must have been terribly disappointing for the audience. No wonder you couldn't even find the games on cable in 1906. The Times explains that the competitors "shot at a dummy dressed in a frock coat."
Thursday, April 12, 2012
At the Spring Contracts Conference last month, I presented the contracts law portion of my article, Intolerable Abuses: Rendition for Torture and the State Secrets Privilege. That article is now in print, 63 Alabama Law Review 429 (2012), but as the electronic version has not yet appeared on the Law Review website, you can get the draft version (which is substantively the same as the print version) on SSRN.
The portion that I presented at the conference, "The Trouble with Totten" is about an 1875 case brought by the estate of William Lloyd a Civil War spy. As I summarized the case previously:
In Totten, the administrator for the estate of William A. Lloyd brought a claim against the government, seeking to recover for the breach of an espionage contract. He alleged that Lloyd had entered into an agreement with President Abraham Lincoln in which Lloyd infiltrated enemy territory during the Civil War in order to provide the U.S. Government with vital information relating to the military forces and fortifications of the Confederacy. For these services, Lloyd was to be paid $200/month plus expenses. Honest Abe allegedly paid Lloyd only expenses.
Justice Field, writing in 1875, found that the subject matter of the contract was a secret and that both parties must have known at the time of their agreement that their lips would be “for ever sealed respecting the relation of either to the matter.” In order to protect the public interest in having an effective arm of the government that could engage in secret services, the Court ruled that there could be no claim for breach of a secret contract because the existence of the contract was itself a secret that could not be disclosed.
I have subsequently learned more details about Mr. Lloyd's exploits on behalf of President Lincoln (he was Lincoln's personal spy) and about why President Lincoln stiffed him (Lincoln was dead by the time Lloyd returned from his assignment). The source of the information is Douglas E. Markle's book, Spies and Spymasters of the Civil War. The information provided in the book is also available online here. Unfortunately, Mr. Markle's book contains a bibliography but no citation apparatus, so I cannot identify or further explore his sources. A letter to his publisher went unanswered and I have no other contact information for him.
As I would like to pursue the matter further -- I think the case would be a great subject for a Law Story -- I would appreciate any suggestions our readers might offer about how I might get further information about the life of William A. Lloyd, personal spy to Preisdent Lincoln.
Wednesday, April 4, 2012
A few months back, we ran a series of contracts songs YouTube videos created by Professor Richard Craswell. But the market is not saturated. Noting that Professor Craswell has no song about the good ship Peerless, Professor Mark DeAngelis, of the University of Connecticut School of Business (pictured), rushed to fill the gap.
This is a "Law Lessong" - a law lesson in a song - that I wrote to help students consider the issues of mistake in contract formation. This song chronicles the story of the case of Raffles v Wichelhaus: establishing the rule of mutual mistake in contract law.
The Bonnie Ships Peerles
By Mark DeAngelis
Sing Ho! For the mighty Peerless as through the waves she steers
A bonnie name for a bonnie ship that surely has no peer.
Can there be another like her cargo-bound for Britain's shore
On her treacherous journey into contract lore?
In America the cotton states were subject to blockade
For the fate of worldwide commerce other plans had to be made
In the colony of India English merchants solace found
Though treacherous be the journey the Cape round
And the halls of British commerce saw negotiations bold
A hundred and a quarter bales of Surat cotton to be sold
And bound to "arrive ex Peerless" from the port of far Bombay
A cargo of great value to convey
Sing Ho! For the mighty Peerless as she plows the briney main
A gallant bark no match for her we'll likely see again
Her name being inked upon the page had given the call for
Her treacherous journey into contract lore?
In October's balmy weather it was she first set sail
Her hold was brimmed with goods the merchants contracted for sale
And owing to the faithfulness and skill of her fine crew
Along the docks of Liverpool she drew.
The merchant halls received the word she'd arrived from far Bombay
And the buyer with expectancy made haste unto the quay
As the Peerless spilled her cargo down upon the dock below
No cotton would be found to buyer's woe
Sing Ho! For the mighty Peerless as she rolls upon the seas
With sails aloft and Britain bound she harnesses the breeze
But naught one bale of cotton could be found from aft to fore
On her treacherous journey into contract lore.
But lo and hark the Peerless sits embarking for to sail
Holding precious cotton bound up in a hundred and a quarter bales
A fine Bombay December morn saw her mainsail full unfurled
As she sought to journey halfway 'round the world
The Peerless tossed and pitched so hard as 'round the Cape she flew
When another ship was spied and hailed by her intrepid crew
So, now as peers they plowed the swells bound for opposing shores
Peerless once, now peerless nevermore.
And once again in Liverpool the word passed with all speed
The Peerless had arrived and all with business should take heed
And the Seller stood upon the dock full satisfied and bold
As bail on bail poured from the Peerless' hold.
But alas the buyer ne'er appeared, seller's tender was in vain
For the Buyer'd long since covered other cotton for his skeins
The Seller's suit was filed and for contract breach he claimed
And the case went on to earn them legal fame
Sing Ho! For the mighty Peerless now her voyage it is done
Her seafaring o'er but in the law her legacy's begun.
Though the merchants both invoked her name it left the seller sore
O'er her treacherous journey into contract lore.
Peerless? Nay the gallant ship was equaled by one more
For two ships by name "Peerless" sailed the brine to Britain's shore
On the merchants' fateful term to "arrive exl Peerless" they'd agreed
But no contract formed that either one must heed.
The words were fraught with meaning neither party could foresee
That each had meant a different ship to sail the rolling seas
Like two ships passing in the night, each one to the other blind
Though words agreed, no meeting of their minds.
Sing Ho! For the mighty Peerlesses as through the waves they steer
A bonnie name for bonnie ships that surely have no peers.
Can there be another like them cargo-bound for Britain's shores
On their treacherous journey into contract lore?
It's a treacherous journey into contract lore!
Professor DeAngelis's other Law Lessongs can be accessed here.
Monday, March 5, 2012
History Repeats Itself in Ohio: The Kirksey v. Kirksey Tragedy Replayed as the Williams v. Ormsby Farce
Our colleagues on the Contracts Listserv have brought to our attention the very interesting case of Williams v. Ormsby, decided last week in the Supreme Court of Ohio. There has been some suggestion that this is a repeat of the great Kirksey v. Kirksey case. But as William Casto or Val Ricks would have told Amber Williams “I knew Antillico. Antillico was a friend of mine. You, madam, are no Antillico.”
In May 2004, Frederick Ormsby moved in with his on-again off-again girlfriend, appellee, Amber Williams. Subsequently, Ormsby paid off the mortgage and in return, Williams quitclaimed the title to the property. Off again, the couple separated and agreed in March 2005 to sell the house and allocate the proceeds. On again, they attempted to reconcile, but in return for moving back in, Williams demanded an undivided half interest in the property. In June 2005, they signed a second document, ostensibly making them “equal partners” in the house.
By September 2007, the couple was off again, and now they assumed an equal undivided interest in a lawsuit. Williams sought either specific performance of the June 2005 agreement or damages arising from Ormsby’s alleged breach of that agreement. Ormsby alleged causes of action for quiet title and unjust enrichment/quantum meruit and sought declaratory judgment that both the March 2005 and June 2005 documents were invalid for lack of consideration. The trial court ruled in Ormsby’s favor; the Ninth District Court of Appeals reversed, concluding that “moving into a home with another and resuming a relationship can constitute consideration sufficient to support a contract.” The Supreme Court of Ohio accepted jurisdiction to decide whether or not that proposition is in fact good law.
The court of appeals found that the June 2005 agreement was supported by valid consideration because “romantic relationships typically involve some sacrifice by each partner.” The majority on the Ohio Supreme Court disagreed. Unlike Antillico Kirksey, Williams suffered no detriment from the June agreement; she received only a benefit and so the June 2005 offered evidence only of Ormsby’s gratuitous promise to give Williams an interest in the property based solely on the consideration of her love and affection. Such consideration is no consideration, harrumphed the majority.
The record is replete with shadings and innuendo that there was no love and affection between the parties. The record includes statements that suggest or allege that Williams and Ormsby were searching for a way to continue living well without engaging in full-time work, that Williams was seeking to both delude and elude creditors, that Williams’s name may have been fraudulently signed on the quitclaim deed or that the person who notorized her signature did so without being present when Williams signed, that domestic violence charges had been filed, and that each had promised not to accuse the other of domestic violence. That Williams wouldn’t move back into the house until Ormsby signed the agreement, which he wrote, was not offered as consideration and was not consideration. It was a simple fact of life—a fact that is outside the contract and is of no relevance.
Justice Pfeifer points out that identical language concerning consideration was used in both the March and June agreements. If the first is to be enforced, the second should be as well. Moreover, by voiding the March agreement, which entitled her to specific rights, Williams gave valid consideration for the June agreement, which entitled her to different rights. Under the June agreement, Ormsby gained more control over the timing of any sale of the house and in gaining these benefits, forfeited some equity in the house. Justice Pfeifer would have found both agreements enforceable, but since the case is so idiosyncratic as to be useless as a precedent, Justice Pfeifer would have dismissed the case, review having been granted improvidently.
[JT & Christina Phillips, with a hat tip to Catherine Garcia-Feehan, Esq., Career Law Clerk to Hon. David A. Katz at the Northern District of Ohio, through whose good offices this came to the attention of the Contracts Listserv]