ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Saturday, March 4, 2017

Inmates Didn't Consent to Be Bound to a Contract Every Time They Used the Telephone

Myanna has already blogged about the problem of inmate telephone rates being set unreasonably high. Myanna's blog post was about a dispute in California but a recent decision out of the Western District of Arkansas, In re Global Tel*Link Corporation ICS Litigation, Case No. 5:14-CV-5275 (behind paywall), deals with the same issue. (There are several of these litigations, as well as other government debates about regulation of these rates.) In the Arkansas decision, the court refuses to compel arbitration. 

Global Tel*Link's allegation was that the inmates consented to the terms of use when they funded their accounts to enable them to make phone calls, and the terms of use contained an arbitration clause. Every time the inmates put money on their accounts with Global Tel*Link, they heard a message similar to the following: 

Please note that your account, and any transactions you complete with GTL or any of its affiliates, are governed by the terms of use and the privacy statement posted at www.connectnetwork.com . The terms of use and the privacy statement were most recently revised on March 30, 2015.

The court determined, however, that a reasonable person would not have understood this message as referring to a contract and as constituting consent to be bound by that contract, since it never used any contract buzzwords like "contract," "consent," "agree," "assent," "offer," "accept," etc. The court said that, as far as the inmate listening to the message was concerned, the terms of use and privacy statements could have been just generally applicable legal rights imposed by regulators. The court characterized Global Tel*Link's behavior as basically hiding the contract ball: Global Tel*Link could have straightforwardly said the inmates were entering into a contract but instead "invite[d] [them] to visit a website where [they] might accidentally stumble across this fact." (I went to connectnetwork.com. The terms of use are located at the bottom of the page and required me to scroll to find them, and I just blogged about a case where the persistent location of the terms of use hyperlink at the bottom of the page didn't constitute enough notice.)

Because the inmates never signed anything, never clicked or punched any button signifying acceptance of contract terms, never had an opportunity to review the terms of use prior to using Global Tel*Link's services, and would not reasonably have understood the message to be referring to contractual terms, the inmates did not assent to the contract and thus are not bound by the contract's arbitration provision. 

March 4, 2017 in Current Affairs, Government Contracting, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, March 3, 2017

If You Disagree with Your Insurance Company's Claim Decision, Do It Promptly

A recent case out of the Southern District of Florida, Rodriguez v. Liberty Mutual Fire Insurance Company, Case Number 16-21926-CIV-MORENO (behind paywall), clarifies the statute of limitations on insurance claims. Rodriguez filed an insurance claim in 2005, to cover damage resulting from Hurricane Katrina. That same year, Liberty Mutual sent Rodriguez a check with a letter indicating that the claim had been completely reviewed. Rodriguez took the check and cashed it. Then, ten years later, in 2015, Rodriguez requested an appraisal of the claim, which Liberty Mutual denied. Rodriguez then brought suit, alleging that the statute of limitations should be measured from Liberty Mutual's denial of the appraisal request in 2015, rather than from the payment of the claim in 2005. 

The court disagreed with Rodriguez. Florida has a five-year statute of limitations on breach of property insurance contract claims. The statute of limitation runs from the breach of the policy. The complaint here alleged that Liberty Mutual breached the contract by failing to make full and adequate payment for the damage done in 2005. Liberty Mutual had informed Rodriguez in 2005 that it considered its review to be complete and Rodriguez made no indication to Liberty Mutual that it was dissatisfied with Liberty Mutual's decision until 2015. Rodriguez also gave no reason to try to justify the ten-year delay in notifying Liberty Mutual of a dispute. Therefore, the statute of limitations began accruing in 2005, not in 2015 when the appraisal request was denied. Otherwise, an insured could simply sit on rights an indefinite period of time, ask for an appraisal many years later, and never be barred by the statute of limitations, which the court thought could not be the right result. 

In addition, the court found that, even if the statute of limitations did not bar the action, Rodriguez breached the insurance policy by failing to provide "prompt notice" as required under the policy. In Florida, this failure to provide prompt notice can justify a denial of coverage. The court found that waiting ten years constituted late notice, and, in Florida, also raised a presumption that Liberty Mutual was prejudiced by the delay, which Rodriguez did not even attempt to overcome. Even without the presumption, the court held that Liberty Mutual had shown prejudice because evidence showed that the house had been damaged again in 2013, which would have made it difficult for Liberty Mutual to investigate the previous 2005 damage at issue in this case. 

March 3, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Michael Malloy (Pacific McGeorge) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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Michael P. Malloy, Ph.D. (University of the Pacific McGeorge School of Law)

Contracts in a Digital Age: My Teenaged Tech Advisors Rescue Dad

Abstract

Michael Malloy (Pacific McGeorge)Contracting in a digital age isn’t just a change in time or place, it is in many respects potentially a change in orientation. Confronting that change initially involved improvising an assimilation of e-contracting into our unstated assumptions about the way contracts are created and the way they are performed, but some adjustment in the framework has been necessary as e-contracting has flourished. It has now been 25 years since the Third Circuit decided Step-Saver Data Systems, Inc. v. Wyse Technology, subjecting box top terms to those assumptions, and 20 years since the Seventh Circuit decided ProCD, Inc. v. Zeidenberg, distinguishing Step-Saver and embracing shrink wrap terms, leading the way to the easy application of click wrap terms. As we have moved from telex to facsimile, to e-mail, to texting, to direct communication between computers, and so on to as yet unknown methods – new technology almost always creates new challenges for contract law. My paper calls for the recognition of new analysis and adaptable principles for electronic contracting on its own terms, but without abandoning the objectives underlying contract law.

 

March 3, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink

Eyal Zamir (Hebrew University of Jerusalem) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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Pricing Methods, Marketing Techniques, and the Law of Consumer Contracts

Eyal Zamir (Hebrew University of Jerusalem, Faculty of Law)

(Based on a forthcoming book, Behavioral Law and Economics (co-authored with Doron Teichman, OUP)) 

Introduction

  Eyal Zamir (Hebrew University)           In our daily life, we all manipulate, and are being manipulated by, others. As Eladar Shafir has put it, being manipulated is an integral part of the human condition. Marketeers do it for a living.

            Firms employ various marketing and pricing methods, which arguably exploit consumers’ heuristics and biases, to enhance their sales and profits. Some of these techniques are clearly illegitimate and even illegal. Others raise difficult questions regarding their legitimacy and the appropriate legal response to them. In my presentation I will describe a few pricing and marketing techniques that are not obviously illegitimate, and raise the question of whether they should be regulated. I intentionally use the language of “raise the question,” because I will not offer definitive answers.

            The methodological perspective I use is commonly described as behavioral law and economics. A primary contribution of behavioral law and economics lies in the identification of behavioral market failures. In addition to traditional market failures, such as monopolies and information problems, markets may fail to promote social utility due to deviations from the assumption that all players in the market are rational maximizers of their utility.

            However, I will not limit myself to the behavioral-economic perspective, as behavioral insights are equally relevant to non-economic perspectives that highlight other values in lieu of, or in addition to, maximizing aggregate human welfare. These include respect for autonomy, fairness, and distributive justice.

            However, due to time limitations, I will neither be able to consider all of these perspectives, nor to delve into the choice between different regulatory measures: disclosure duties, compulsory interventions, and mere nudges. Some people identify the behavioral perspective with the use of nudges, but this is a mistake. Behavioral findings may justify more intrusive regulation. I believe that mandatory regulation is often warranted, and that paternalism—despite its bad PR—is often justified. But I will not go into these issues today.

            Relatedly, the pricing and marketing techniques I will discuss are used not only in consumer transactions, but in commercial ones, as well. Hence, my discussion is not limited to the consumer sphere, although the normative considerations in commercial transactions may be different.

March 3, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink

Thursday, March 2, 2017

Weekly Top Ten SSRN Contracts Downloads (March 2, 2017)

Top-10-3D

SSRN Top Downloads For SSRN Logo2
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
1 Jan 2017 through 2 Mar 2017

Rank Downloads Paper Title
1 785 Risk and Anxiety: A Theory of Data Breach Harms
Daniel J. Solove and Danielle Keats Citron
George Washington University Law School and University of Maryland Francis King Carey School of Law
2 312 Empirical Findings on International Arbitration: An Overview
Christopher R. Drahozal
University of Kansas School of Law
3 238 Rise of the Digital Regulator
Rory Van Loo
Boston University School of Law
4 157 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
5 156 Interpreting Contracts via Surveys and Experiments
Omri Ben-Shahar and Lior Strahilevitz
University of Chicago Law School and University of Chicago Law School
6 146 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
7 134 What Brexit Means for the Interpretation and Drafting of Financial Contracts
Matthias Lehmann and Nihal Dsouza
University of Bonn and University of Bonn
8 134 Notice and Takedown in the Domain Name System: ICANN's Ambivalent Drift into Online Content Regulation
Annemarie Bridy
University of Idaho College of Law
9 131 Comparative Contract Law and Development: The Missing Link?
Mariana Pargendler
Fundação Getulio Vargas Law School at São Paulo
10 124 Contracting Over Privacy: Introduction
Omri Ben-Shahar and Lior Strahilevitz
University of Chicago Law School and University of Chicago Law School

 

SSRN Top Downloads For SSRN Logo2
Law & Society: Private Law - Contracts eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days 
1 Jan 2017 through 2 Mar 2017

Rank Downloads Paper Title
1 238 Rise of the Digital Regulator
Rory Van Loo
Boston University School of Law
2 157 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 156 Interpreting Contracts via Surveys and Experiments
Omri Ben-Shahar and Lior Strahilevitz
University of Chicago Law School and University of Chicago Law School
4 146 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
5 131 Comparative Contract Law and Development: The Missing Link?
Mariana Pargendler
Fundação Getulio Vargas Law School at São Paulo
6 124 Contracting Over Privacy: Introduction
Omri Ben-Shahar and Lior Strahilevitz
University of Chicago Law School and University of Chicago Law School
7 122 The Deformation of Contract in the Information Society
Margaret Jane Radin
University of Michigan Law School
8 108 Failures in Law Making: The Case of Arbitration Law in India
Badrinath Srinivasan
Independent
9 107 History and Theory of Good Faith Performance in the United States
Steven J. Burton
University of Iowa - College of Law
10 92 The Limits of Interpretation in the Law of Contract
Andrew Robertson
Melbourne Law School

March 2, 2017 in Recent Scholarship | Permalink | Comments (0)

Michael Dorff (Southwestern Law School) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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Michael Dorff (Southwestern)

Assessing the Assessment: B Lab's Effort to Measure Companies' Benevolence, Seattle University Law Review, Vol. 40, No. 1, 2017

Michael B. Dorff, Southwestern University School of Law

For benefit corporations to persuade their various audiences that they are as beneficial for society as they claim, they need reliable assessments of their social performance. Even if assessments were not required by most states’ benefit corporation statutes, it is difficult to imagine the benefit corporation form could gain credibility without them. Creating measurement tools for these assessments poses the twin challenges of balancing simplicity against validity and weighing vision against inclusiveness. This article examines how B Lab’s popular assessment tool engages these challenges.

 

SSRN link:  https://ssrn.com/abstract=2911302

March 2, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)

Carol Sanger (Columbia) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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Contracting for Abortion

KCON 12: Intimate Contracts, Consent, and Commodification Panel

Carol Sanger, Barbara Aronstein Black Professor of Law, Columbia University

Sanger_Carol (Columbia)Contracts between intimates or about intimate subjects are now a regular feature of regular contract law. I have recently written about post- adoption visitation agreements, where birthmothers agree to place a child with an adoptive couple in exchange for visitation rights; Bargaining for Motherhood, 41 Hofstra L. Rev. 309 (2012). This paper concerns not the acquisition of a child, but the promise not to have one by agreeing contractually to abort a pregnancy in exchange for consideration.   The topic arose as part of my inquiry into what men take into account when decisions about the disposition of an embryo or fetus is up to them, in such matters as contested embryo cases.  Another source of these decisions is found in surrogacy contracts when the commissioning man (or couple) bargains for the surrogates promise to terminate the pregnancy upon prenatal testing that reveals an anomaly specified in the contract as triggering the abortion provision.  While such contracts have not been specifically enforced, they remain a common feature of surrogacy contracts, perhaps serving an in terrorem function. 

Yet in an interesting 1987 case, L.G. v. H.A.G., the Missouri Court of Appeals upheld a contract between a father and his adult unmarried daughter where he promised to reinstate her in his will if she terminated her pregnancy.  She did, but he didn’t.  The Court found there was nothing against public policy or illegal per se in the daughter’s promise. Indeed, “family harmony and reconciliation were also involved and both … naturally encouraged as a matter of public policy.”  The case puts women’s abortion decisions in an economic framework, and suggests that fathers too have interests in reproductive decisions for which they too are willing to bargain.  

This paper draws from the chapter “Fathers and Fetuses: What Would Men Do” in my new book About Abortion: Terminating Pregnancy in 21st Century America (Harvard U.P.,  March, 2017).

March 2, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)

Wednesday, March 1, 2017

Gastón de los Reyes (George Washington University: Business) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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Not from guile, but from entitlement: Lawful opportunism haunts the cracks in contracts

Gastón de los Reyes and Kirsten Martin (George Washington University School of Business)

Abstract (KCON Presentation by Gastón de los Reyes)

Gaston-De-los-Reyes (GWU School of Business)Opportunistic acts are not all cut from the same cloth. While the blatant opportunism that results from “self-interest seeking with guile” is widely acknowledged, the lawful opportunism that Williamson paints as the bane of hybrid governance remains obscure and little understood. We examine the construct of lawful opportunism and empirically explore its connection to the known and studied contracting behaviors of blatant opportunism and cooperation. Using a series of contracting vignette surveys, we demonstrate that lawful opportunism is a theoretically distinct intended behavior across a variety of contracting scenarios. A contractor’s sense of entitlement, we find, is the primary driver of intended lawful opportunism. In contrast, and perhaps surprisingly, the more a contractor views the exchange in economic terms, the less likely they are to act with blatant opportunism. The study has implications for the study of contracting and hybrid governance across disciplines and for prescription to contracting parties.

March 1, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)

Chris Odinet (Southern University) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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BITCREDIT: MARKETPLACE LENDING AND CONSUMER PROTECTION 

Christopher K. Odinet

 Abstract

Chris Odinet_photoThe digital economy is changing everything, including how we borrow money. In the wake of the 2008 crisis, banks pulled back in their lending and, as a result, many consumers and small businesses found themselves unable to access credit. In the space left vacant by these traditional financial institutions have come a wave of online firms called marketplace lenders. These platforms are fast making antiques out of many mainstream lending practices, such as face-to-face interviews with loan officers and long paper applications. Instead, through underwriting by automation—utilizing big data (including social media data)—loan processing that once took weeks can now be done overnight. The result of these technological advances has been quicker access to capital, more economic efficiencies, and even greater prospects for access to credit for theunbanked and underbanked. “Click here” is the new “sign on the dotted line.”

 But there is a lot still to learn about the online lending marketplace. How do these marketplace lenders work and what kinds of products do they offer? Moreover, what role will they play in the future of American debt and credit markets? This Article explores these questions and assesses current government responses to the nascent industry. It also surveys the currentregulatory landscape for marketplacelenders and analyzes a multi-year dataset of complaints submitted to the CFPB relative to consumer loans offered by these firms.The Article concludes by offering some broad policy considerations for how investors, small businesses, and consumers could be protected in this new world of BitCredit.

March 1, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (1)

Tuesday, February 28, 2017

Colin Marks (St. Mary's) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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Online and As Is

Colin P. Marks (St. Mary's University School of Law)

Abstract

Colin Marks (St. Mary's)Online retail is a multi-billion-dollar industry in the United States. Consumers enjoy the ease with which they can browse, click, and order goods from the comfort of their own homes. Though it may come as no surprise to most lawyers, retailers are taking advantage of online transactions by attaching additional terms and conditions that one would not normally find in-store. Some of these conditions are logical limitations on the use of the retailers’ websites, but others go much further, limiting consumers’ rights in a way that would surprise many shoppers. In particular, many online retailers are using these terms to limit implied warranties, selling the goods “as is,” and limiting remedies, as well as adding a host of other limitations. This article does not discuss the effects of online terms and conditions, but rather starts with exploring a very basic question: How prevalent are certain terms and conditions? While these terms and conditions may seem to be ever-present in online transactions, there have been few attempts thus far to empirically record the frequency of their use in retail transactions involving goods. This article remedies the situation by exploring the mode by which consumers assent, the prevalence of warranty and liability limitation clauses, and the prevalence of other common clauses used by the largest retailers in the United States.

SSRN Download Available Here

February 28, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)

Charles Calleros (Arizona State) - KCON Scholarship Spotlight

The conference is over but the scholarship lives on. This is one of a series of posts highlighting several KCON XII presenters who graciously provided me with abstracts or summaries of their presentations.

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U.S. Unconscionability and Article 1171 of the New French Civil Code: Achieving Balance in Statutory Regulation and Judicial Intervention

(forthcoming in Georgia Journal of International and Comparative Law)

Professor Charles R. Calleros,

Sandra Day O’Connor College of Law, Arizona State University

  Charles Calleros (Arizona State)Abstract

            Perhaps the most notable development in commercial law in 2016 is the revision of contract law in the French Civil Code, the first comprehensive revision since the adoption of the 1804 Napoleonic Code. Perhaps the most notable innovation in that revision is article 1171, which empowers a judge to strike down an ancillary provision of an adhesion contract if it would otherwise create a significant imbalance between the parties.  

            Compared to the U.S. unconscionability doctrine, article 1171 adds to existing French legislation in a cautious manner and should not spark serious concerns about interference with freedom of contract. Instead, the more interesting questions are (1) whether the French judiciary will sufficiently embrace and exercise the authority afforded it under article 1171 to achieve its limited goals, and (2) whether lawmakers in the United States can overcome the American resistance to legislative and executive intervention sufficiently to emulate French and European control of abusive terms through a combination of legislative, administrative, and judicial regulation.

February 28, 2017 in Conferences, Contract Profs, Recent Scholarship | Permalink | Comments (0)

Sunday, February 26, 2017

Terms and Conditions Hyperlink at Bottom of Page Not Conspicuous Enough to Be Binding on Users

We have blogged about arbitration clauses in contracts lots of times before, including in the Internet context, and including in the diet pill context. Now a recent case out of Florida, Vitacost.com, Inc. v. McCants, No. 4D16-3384, adds to the pile, in the Internet diet pill context. In this case, McCants sued Vitacost, from which he purchased dietary supplements that he alleged seriously damaged his liver. In response, Vitacost sought to compel arbitration based on the arbitration clause in the terms and conditions on its website. In Florida, the enforceability of Vitacost's "browsewrap" terms and conditions was a matter of first impression. 

Vitacost claimed that the hyperlink to its terms and conditions was located at the bottom of every page of its website and that that was sufficient to put McCants on notice of them. However, the court noted that the constant positioning of the hyperlink at the bottom of the page required every user to have to scroll to the bottom of the page to notice the terms and conditions. Even upon buying something and "checking out," the hyperlink remained positioned toward the bottom of the page. McCants alleged that he had not seen the terms and conditions, and the court found that the hyperlink's location was not conspicuous enough to put McCants on notice. 

February 26, 2017 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (2)

Iowa Bill Proposal: To Get Faculty Position, Must Have Correct Political Affiliation

Just when you think the political debacle in this country cannot get anymore grotesque, here's a recent proposal by Iowa State Senator March Chelgren: to counter the liberal slant at Iowa's three public universities, the job candidates' political affiliations would have had to be considered.   Why?  To ensure "balanced speech" and avoid the "liberal slant" in public universities these days. 

Under SF 288, the universities would use voter registration information when considering job applicants, and could not make any hire that would cause declared Democrats or Republicans on the faculty to outnumber the other party by more than 10%.

Demonstrating the very deep and logical (not!) argument, check this line of thinking: Chelgren said professors who want to be hired could simply change their party affiliation to be considered for the position.  "We have an awful lot of taxpayer dollars that go to support these fine universities," he said. "(Students) should be able to go to their professors, ask opinions, and they should know publicly whether that professor is a Republican or Democrat or no-party affiliation, and therefore they can expect their answers to be given in as honest a way possible. But they should have the ability to ask questions of professors of different political ideologies."

Duh!

February 26, 2017 in Commentary, Contract Profs, Current Affairs, Government Contracting, In the News, Labor Contracts, Legislation | Permalink

Saturday, February 25, 2017

Contract Law Meets Reality

KCON12-Reality Panel

From left: Rachel Arnow-Richman, Keith Rowley (Moderator), Eric Zacks, Thomas Joo, and Allen Kamp.

This after-lunch panel deals with a variety of contract law issues in specific settings--hence "reality." Summaries follow, with the usual caveats about the possibility of scribal error.

Rachel Arnow-Richman (Denver): "Noncompetition, Good Faith, and the Bilateral Employment Contract." As a body of law, noncompetition agreements follow a well-established framework for analysis, but courts are in fact dealing with particular fact patterns by analysis that occasionally explicitly--but often implicitly--utilizes a duty of good faith. Other times, the courts will use good faith language while not using the concept in its better known forms, as in the Restatement and the UCC. New Hampshire, for example, will not enforce an employment contract modification to add a noncompete agreement in an employment at will situation, not because it lacks consideration, but the modification is not in good faith. In other situations two otherwise enforceable terms will be seen as bad faith when enforced together even though the separate provisions could be enforceable. Explicit use of an implied duty of good faith in covenant not to compete cases would be a preferable approach for policing this public policy issue, both for employees and as a matter of coherence in contract doctrine.

Allen Kamp (John Marshall): "Wellness Programs and Consent." The U.S. spends twice as much as other industrial countries on healthcare but do not get appreciably better results. Statistics show that Americans are frequently more out of shape than their international counterparts.  The Affordable Care Act of 2009 introduced the concept of employer "Wellness Programs" to incentivize better healthy behavior, but these can be intrusive and reveal personal health information.  One of Fitbit's features, incidentally, is a tie-in to an employer wellness program. The ACA requires that a wellness program be "voluntary," raising the concern of employers coercing employees into these programs by financial incentives, some of which could be quite large. The ACA itself does not define "voluntary," thus raising the concepts of contract-law consent, duress, good faith, unconscionability, and other doctrines.  These doctrines however, are as vague as the term that they are seeking to supplement. The employer wants the benefit of reducing its health insurance premiums, so there are very real incentives for employers to pressure their employees. Going forward, if the ACA is repealed, the Americans with Disabilities Act will be the controlling law.

Thomas Joo (UC-Davis): "The Law in the High Castle: Breach of Contract and Alternative History." Professor Joo noted that his paper is actually contract law meeting unreality rather than reality. In seeking expectation damages, contract law seeks to construct an alternative version of history where the contract was performed, and that is the place where plaintiff's damages are based. The discipline of history deals in counterfactuals, though these technically don't qualify as history. Quantum physics does allow for alternate realities as a concept--one that actually can exist. Viewed in this light, benefit of the bargain from an alternative future is a more normatively defensible concept. In effect, the litigating parties are fighting over the properties of the quantum wave function. The court enforcing contract law makes an alternative world come into existence.

Eric Zacks (Wayne State): "The Statute of Limitations and Acceleration Clauses in Mortgage Foreclosure  Cases." This paper considers the effect of certain provisions in home mortgages. Acceleration and foreclosure can be wielded as a threat again and again because the means by which the statute of limitation operates from individual payments.  Acceleration provisions are routine, as they both protect the lenders' interests and serve to motivate the borrower to pay in an in terrorem sense. How should res judicata apply here? Subsequent claims could be barred based on the same earlier breaches of the contract. If a lender accelerates and loses the case, it arguably loses the right to sue on an acceleration again because the obligation is a single indivisible obligation for preclusion purposes. This approach encourages lenders to be judicious in enforcing acceleration clauses. Some courts and jurisdiction have chipped away at the "two dismissals" rule, finding that a voluntary dismissal works a constructive "de-acceleration" of the loan, despite the fact that deceleration clauses actually are not in the loan documents. The issue becomes one of framing and equity--deadbeat borrowers versus oppressive lenders, but lenders have frequently gotten the upperhand in story telling. Regular contract law and doctrine--if applied--would actually benefit the borrowers in these sloppy mortgage litigation cases. But the lenders are not treated like "regular" plaintiffs and extending equity to those lenders but not the borrowers.

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February 25, 2017 in Conferences | Permalink

This Is a Case About Trade Secrets But in Other News: Google Has a Project Called "Project Loon" Involving Balloons in Earth's Stratosphere

Balloon fully inflated.jpg
By CambridgeBayWeather - Own work, GFDL, Link

Here's a case that's out of this world, lolololol, I'm ashamed of myself. 

But a recent case out of the Northern District of California, Space Data Corp. v. X, Case No. 16-cv-03260-BLF, deals with weather balloons and a failed negotiation between Space Data and Google regarding becoming partners. Like many corporations who have valuable trade secrets that need to stay protected during negotiations but also need to be revealed so they can be evaluated and discussed, the parties entered into an NDA. This lawsuit resulted from Google's subsequent development of "Project Loon," which involves using high-altitude balloons to provide wireless services, and which Space Data alleges uses information Google gained from Space Data during the failed negotiations. 

Space Data's challenge, of course, is that it knows very little about Google's Project Loon, and so all of its allegations regarding trade secret misappropriation and breach of the NDA are vague and conclusory. Space Data was unable to point to any confidential information Google used that violated the NDA, and therefore those counts were dismissed. Space Data tried to argue that it didn't know yet what information Google was using but that it had provided enough information for the court to infer that Google must be using some misappropriated confidential information. The court, however, found there was not enough in the complaint for these causes to survive into discovery. 

A guiding tale for anyone writing up a trade secret complaint right now. 

Space Data's patent infringement claims against Google still exist. The complaint is available here

February 25, 2017 in Commentary, Recent Cases, Web/Tech | Permalink | Comments (0)

Empirical Approaches in Contract Scholarship

Saturday morning at KCON also included a session on empirical scholarship, summarized below. As always, errors in the notetaking are those of the taker--whom happened to be the moderator--and not the presenters.

 

  KCON12-Empirical Panel

From left: Gaston De Los Reyes, Colin Marks, Chris Odinet, and Mark Burge (Moderator)

Gaston De Los Reyes (George Washington University - School of Business): "Not From Guile But From Entitlement: Lawful Opportunism Haunts the Cracks in Contracts. Professor De Los Reyes dealt with opportunism based on a transaction cost perspective in contract law. Opportunism includes strategic manipulation of information or disclosure of intentions. Hybrid governance in deals has a timebomb built into it of "literal enforcement"--this is the longstanding contract law problem of Paradine v. Jane, where the parties didn't bargain for the situation that actually happened, but that is a fully honest dealing by the parties (naivete rather than opportunism). Lawful opportunism would pursue these cracks with literal enforcement even when the outcome would be punitive. This isn't lying or cheating in a deal, which would be blatant and unlawful. Can or should we adapt contract law to deal with the problem of lawful opportunism. Behavioral studies in contracting identified some variables (e.g., sense of entitlement) that could impact when parties defect from the spirit of the contract to enforce the letter. A strong sense of entitlement rather than a relational sense will contribute to the tendency to push literal enforcement. A study with about 1,300 participants tested the potential variables to see the tendency to be cooperative rather than opportunistic. Participants were not inclined to be blatantly opportunistic, lawful opportunism was more likely, and cooperative behavior was most likely. People with strong sense of entitlement were more likely to use lawful opportunism, as were people with a strong sense of economic exchange, but the latter were less likely to be blatantly opportunistic.

Colin Marks (St. Mary's University): "On-Line and As Is." Professor Marks studied online transactions where it is well established that parties dis not read the terms and conditions. For example, Wal-Mart terms online effectively create an "as-is" transaction through disclaimers where such disclaimers are not necessarily present in an in-store transaction. Are customers aware of these terms?  Are they enforced and enforceable? Data came largely from the top 100 retailers in the National Retail Federation who have both online and in-store sales. Eleven different terms in contracts that could impact consumers were compared. One difference is between browsewrap and clickwrap, with the former being much more passive in nature. Terms and conditions are fairly hidden in some websites. Clickwrap at least involves an active consent. Pizza Hut, for example, works hard at obtaining consent, but the actual deal is fairly user friendly. A newer innovation is "sign-in wrap" where continuing on a site (like Amazon creation of an account) is where the binding terms occur. Another variant is "scrollwrap" which requires scrolling to the end of the terms before clicking "I Accept."  Surprisingly, 72.5% of the retailers still use browsewrap.  Clickwrap and scrollwrap are seldom used by large retailers. The retailers seem to be more concerned with reducing transaction friction rather than creating enforceability. Some disclaimers are only arguable in their enforceability. 85% of terms use some form of "as is" clause to disclaim the implied warranty of merchantability. 35% of retailers have arbitration clauses. None of the 110 retailers use conspicuous disclaimers in a brick-and-mortar store where they had the opportunity to do so. Most retailers (outside of food-sellers) have return policies despite the fact of an otherwise "as is" deal. Overall, browsewrap, as-is clauses, and return policies are prevalent.

Chris Odinet (Southern University Law Center): "Bitcredit: Marketplace Lenders and Consumer Protection." Professor Odinet studied marketplace lending, which bypasses traditional financial institutions and puts borrowers and lenders together directly (e.g., Kabbage, Avant, Prosper, Lending Club). Information from an application is put into an algorithm that evaluates the potential borrower, including (allegedly) the borrower's social media activity. Many of these lenders use the direct funding model with investors, but the bank-partnership model is becoming more prevalent, where the bank is the loan-maker, but the platform lender purchases the loan with funds put up by investors. How does this differ from traditional borrowing? Technology reduces the transactional cost of traditional lending through automation. Mainstream banks like these companies because someone else handles the FinTech, while the affiliate banks take on their traditional role albeit in a less-costly transaction. Marketplace lending arose following the 2008 financial crisis when many types of credit lending dried up as traditional banks became more cautious and shut down their non-core lending activities. The types of lending are diverse ranging from consumer to small business to refinancing. State banking regulators in some states have approached these firms, as have the CFPB and FTC, but the regulation is far less developed than what is occurring with traditional banks. Professor Odinet conducted an empirical study of these marketplace lenders based on data from the CFPB complaint portal to determine the nature of consumer problems with this type of lending. Study focused on 228 complaints over a five year period all based on consumer loans.  CFPB complaints tend to be disproportionately filed by higher income consumers and some racial minorities. California is disproportionately represented in the CFPB database, as is Florida. The narratives submitted by consumers are a rich source of information as well as to what is motivating filing consumers. Many complained about their credit score being pulled before they actually applied for the loan. Borrowers seem to be having some substantial misunderstandings with these websites. Marketplace lending does not have a concerned prudential regulator at this point.

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February 25, 2017 in Conferences | Permalink | Comments (0)

Looking Toward Asia's Contract Law

KCON12-Mindy Chen-WishartFrom left: Mindy Chen-Wishart and Tan Zhong Xing.

Mindy Chen-Wishart (Oxford University): In a plenary session, Professor Chen-Wishart described the massive multi-volume project, Studies in the Contract Laws of Asia, of which she is co-editor, to create an English-language resource on modern contract law in Asian jurisdictions. As countries seek to harmonize contract law internationally, Asian law is often left out of the discussion due to its inaccessibility. Major Asian jurisdictions, however, due to the colonial era, have legal systems that share a great deal with European contract law, both continental civil law and English common law. China is a particularly interesting hybrid system that was codified in 1999 with an eye toward international harmonization. The most recent codification of Asian law is in Cambodia, which draws heavily from Japanese legal experts. Indonesia is the most diverse and complex jurisdiction, drawing from tribal law, Islamic law, and Dutch law--which is still in Dutch and has never been translated into local language, despite the fact that most judges don't speak judge. Such a massive comparative law project has raised many interesting (and conflicting) theoretical issues about the nature of legal-system transplantation. Asia is an amazing laboratory for learning the process of legal transplant, and the transplanted law morphs when transplanted into new soil.

A particular challenge arises from editing authors whose native language is not English, and translation issues were particularly problematic when using legal technical terms. Differing cultural norms caused problems in the editing process, working with authors who were used to high deference in their local cultures. On the substance, comparing jurisdictions has required  ferreting out real differences and similarities from actual differences. Both civil and common law seek to put the non-breaching party is the same position as performance, but civil law places a great focus on cure and performance. Exceptions and concepts like good faith mitigate some of the surface differences. Authors would reach similar results on the same hypotheticals, despite the fact that the reasoning to get to that result differed. Objective approaches have been subjectified (and vice-versa) across jurisdictions. Human communication is actually "inter-subjective" and putting together this project exemplified this truth.

Legal transplant has led to divergences as well as convergences: In Singapore cases purporting to apply the exact same English law on undue influence reached different results, with the Singapore courts far less likely to find uindue influence due to Confucianist culture. In the East, a rigid hierarchy of titles, gender, and other positions creates legal soil in which the same doctrine will play out. "Person" and "roles" play different roles, with Western cultures focused on the person while Eastern cultures focused on roles--where respect, obligation, and duties are owed based on roles. Power is understood as more derivative--roles are inherently correct and not to be challenged. Individualism and collectivism play different parts--Asian cultures and law focus on identity as part of community and family, not as individuality. Eastern culture tends to control by shame where Western culture tends to control by guilt. Finding undue influence in a family setting would be counter-cultural. omparison with and among Asian legal jurisdictions shows that law on the books is not the same as law in action. Application of the law will differ based on the soil where a legal system is transplanted.

Volume 1 has just been published by Oxford University Press, entitled Remedies for Breach of Contract covering the law of contract remedies in China, India, Japan, Korea, Taiwan, Singapore, Malaysia, Hong Kong, and Thailand.

Tan Zhong Xing (Moderator, National University of Singapore)

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February 25, 2017 in Conferences | Permalink

Friday, February 24, 2017

KCON Lifetime Achievement Honoree for 2017: Deborah Post

Tonight's Casablanca Nights Moroccan dinner will be highlighted by the presentation of the KCON Lifetime Achievement Award to Deborah Post, but first is a panel tribute and presentation. Meredith Miller read Professor Post's moving personal narrative on Williams v. Walker-Thomas Furniture Co. Professor Post's coauthors Deborah Zalesne and Nancy Ota presented a humorous tribute and partial roast in an appropriately ContractProf form: The Restatement of Deborah Post, complete with chapters, sections, and defined terms.

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Seated in red at left: Deborah Post. At the front panel from left: Meredith Miller (standing), Deborah Zalesne, and Nancy Ota

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Through the years.

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Sample from "The Restatement of Deborah Post."

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February 24, 2017 in Contract Profs | Permalink

Behavioral & Experimental Perspectives on the Contracting Process

Last doctrinal panel session of the afternoon involved a variety of empirical studies on the actual contracting process. Fascinating stuff. As always, beware of the roughness of the notes, as they could contain errors.

Buyer Beware

Eyal Zamir (Hebrew University of Jerusalem) "Marketing Techniques, Pricing Methods, and the Law of Consumer Contracts."  Numerous studies show that price framing impacts consumer choices in significant disproportion to the actual money involved. Describing a price differentiation as a "discount" rather than a "surcharge" substantially impacts customer perception, as do pricing methods such as charging $1.99 rather than $2.00 because of disproportionate reliance on the left digit. Another effective strategy is the use of a "regular price" term coupled with a discount price. A high regular price suggests higher quality and perception of a bargain on an item sold at a discount. In the U.S. the FTC can use 16 CFR 233.1(b) to police a deceptive regular price, but the prohibition is convoluted and multifactor, leading to little FTC enforcement of the provision. Interesting, studies show consumers don't believe the "regular price" but know that they are influenced by it. These kind of pricing practices present a quandary for consumer protection, as do some uses of rebates and gifts. Humorous moment: How many economists does it take to change a lightbulb? Answer: None, because the market will take care of it.

Russell Korobkin (UCLA) "Bargaining with the CEO: The Case for 'Negotiate First, Choose Second.'" A longstanding debate exists over CEO compensation.  How much are they worth relative to what they are paid? Advocates suggest too much or too little based on their perspective from where the CEO value is derived. Better question to act, according to Korobkin, is whether CEOs are overpaid versus what firms could be paying them. The problem is the process: choose first, negotiate second. Better approach would be to reverse this, and negotiate the salary with a few select finalists. At this point, the firm has more bargaining power, but both sides in the negotiation get more information on which to make a rational choice. The firm avoids commitment and consistency bias in inflating CEO compensation.  Korobkin and co-author Michael Dorff did a study using 206 law students placed in roles of a hiring "Director" and three "Candidates." Both sides were given incentive to maximize their relative cost position. Candidates are told to assume that the other two are "well qualified," as are they. Directors are told that outside consultant rated all the finalists as equal. Tested three conditions: (1) choose first, negotiate second (C1N2), (2) negotiate first will all three candidates individually before hiring a candidate (N1C2), (3) candidates pre-submit their minimum salary requirements (N1C2 also). Control group (1) averaged $8.62 MM, (2) averaged $6.56MM, and (3) averaged $7.58 MM. So why don't firms adopt N1C2? Possible answers are (a) director self-interest--but that isn't universal enough, (b) higher transaction costs--but these costs are not proportionately higher, or (c) firms rate candidates as having widely different value--but how would most candidates know this. Better hypothesis: Firms are concerned about losing candidates by adopting a N1C2 process and it may be perceived as unfair.  But study didn't support this hypothesis either.

Dave Hoffman (Penn) and Tess Wilkinson-Ryan (Penn): "The Psychology of Consumer Contracts." Why do layperson intuitions about contracts matter as a substantive? Some answers: Rules have to comport on some level to ensure legitimacy of the rules; parties use intuitions as their basis for taking precautions against overreach; and simple majoritarian doctrine. The authors worked on a study of the role of formalities in the perceptions of formation: When do parties think a contract is formed when given a hypothetical with several arguable points of formation? Signing the paperwork was actually the vast majority understanding (62%). The layperson understanding is that a document titled a "contract" is most significant. When told that a "contract period" didn't begin for three days, subjects said they felt more free to shop around. What about contracts as having a "moral meaning" in a world of standard forms that simply can't actually be read? When provided various scenarios for ways an obnoxious term could be provided to a consumer, consumers don't distinguish between a set contract and a rolling contract in connection with their respect for the enforceability of the term. When the offending policy was online rather than in the document, parties were less sanguine about the policy and its enforceability. Study also inquired as to what parties think the law actually is. Judge's declaration only mattered when it was an invalidation of the contract. Another study showed that Millennials are three times more likely to think that an oral contract is not legitimate as compared to a "written" internet contract. Laypersons shown the cross-collateralization provision from Williams v. Walker-Thomas Furniture were far less empathetic to the plaintiff if they were. But once told that a doctrine of unconscionability exists, Millennials are more likely to think it applies that the doctrine would apply in real life.

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From left: Dave Hoffman, Tess Wilkinson-Ryan, Eyal Zamir, and Russell Korobkin (not pictured Deborah Post (Moderator))

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February 24, 2017 in Conferences | Permalink | Comments (0)

Contracts in the Corporate Setting

Friday afternoon at KCON XII included an excellent panel on corporate contract law issues, including the new Benefit Corporation business entity form and exploring the problem of data privacy.  The notes are rough and may contain scribal errors, but they hopefully provide you the flavor of the proceedings.

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From left: Michael Dorff, Pamela Edwards, and Mark Gergen (not pictured--Summer Kim (Moderator))

Michael Dorff (Southwestern): "Benefit Corporations--Assessing the Assessment: B Lab's Effort to Measure Companies' Benevolence."  Only about 3,000 Benefit Corporations ("B Corps") exist in 31 states as a relatively new form of business entity. B Corps are required to consider community interests and social benefits rather than principally profits.  What does this different structure add?  Officers include Benefit Directors and Benefit Officers and allow a special kind of derivative suit. Ultimately the force toward social benefits seems to be toothless. The B Corp only works if you believe in it.  What makes this system work is the B Lab Certification Process. Thus, the certification contract matters more than the state statute. B Lab has the BIA, "the B Impact Assessment." Assessment tools need simplicity, reliability, validity, transparency, credibility, and efficiency. It must measure what people care about or no one will pay attention to the assessment. Professor's Dorff's paper assesses the viability and value of the B Lab assessment. Companies must want to engage in this process and it has to be doable. The BIA is heavily customized for company size, industry sector, etc. and to date 72 versions of the BIA exist. Companies must score 80 out of 200 to be certified. The BIA is ultimately simple, but comparing across categories is difficult.  Questionnaire is long and complicated, which makes it hard for companies. Fault is that BIA measures virtue (good intentions) rather than actual impact. Negative behavior does not deduct from the score. Points are not readily translatable--how does helping the homeless compare against preventing pollution. BIA is a good first cut at the problem, but more needs to be done.

Pamela Edwards (CUNY): "Have Public Benefit Corporations Benefitted the Public?" B Corps are valuable as an attempt to account for constituencies other than shareholders and their profit. This has been a problem since 1919 in corporate law. Moving away from that premise is valuable in changing what the premise is of a corporation. Notably, regular corporations seek to promote their actions as beneficial. Are B Corps actually helping anyone? Too early to tell--but it may be too optimistic to expect corporations to be agents of change due to the B Corp entity form.  Agrees with Professor Dorff that comparisons of different companies are difficult to make. The greater ability to challenge a corporation's decisions beyond the standard business judgment rule is a significant feature.  Notably, that was one of the purposes of B Lab's founders who had seen his corporate vision and culture destroyed after selling his business. Business entities are able to move in and out of being in the formal B Corp form. While that flexibility can be useful, it lessens the ultimate impact of the business form.

Mark Gergen (UC-Berkeley): "Privacy, Privity, and Collective Private Ordering." U.S. privacy law is in limited silos--FTC, HIPPA, etc., unlike the more comprehensive approach in Europe and elsewhere. Can breach of contract litigation fill the gap? Probably not--courts have been very hostile to privacy claims, frequently by misstating or ignoring established contract law, such as claims for disgorgement and restitution. Just because compensatory damages are not available does not mean that breach of contract claims are note available, yet that is where the privacy decisions are heading. Google and Facebook actually aren't the problems here, not because of damages but because of market forces.  The real problem is THIRD PARTIES--data brokers, against whom you can't bring a breach of contract action because you have no privity of contract. Europe and HIPPA (as a U.S. example) require that a contract exist containing consent.  That won't work with gateway data harvesters. The real way to solve this problem is to recognize a property right in personal privacy--but that's unlikely in the current political climate. Another possible solution: data firms must give a warranty that your data won't be acquired.  If a 3rd party acquires the data, then it is liable for tortious interference with contract.  The Yelp (review for hire vs. restaurant) case illustrates the viability of a tortious interference claim. Only way to get out of liability would be for the gateway firms to get a standard license. Here, private ordering doesn't require the creation of a property right. Ultimately, the tortious interference route may be our best hope for protecting personal data privacy.

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February 24, 2017 in Conferences | Permalink | Comments (0)