ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Tuesday, May 2, 2017

Some Fun with Offers!

Here's some fun with offers from Kirin Produce Co. v. Lun Fat Produce, Inc., Docket Number 1684 CV 03338-BLS2, a recent case out of Massachusetts. 

The dispute revolved around whether any of Kirin's actions constituted an offer that Lun Fat could accept form a binding contract. Over about a month's time, Kirin sent to Lun Fat a series of spreadsheets proposing terms under which it would be willing to buy Lun Fat's assets. However, each of these spreadsheets was labeled in several places that they were "subject . . . to change," including "Change by both Seller & Buyer." Under these circumstances, Kirin failed to manifest any present intention to be bound and so none of those spreadsheets constituted an offer. 

Lun Fat eventually responded to one of Kirin's spreadsheets with an email proposing a series of new terms, but the court found nothing in the email stated that this was a counteroffer and that Lun Fat was willing to sell if Kirin accepted those terms. At any rate, Kirin did not accept the terms but rather proposed new terms in response. The court construed that response as a rejection of any offer by Lun Fat and a counteroffer by Kirin. 

Later, Lun Fat called Kirin on the phone and orally offered to sell Lun Fat's assets on the terms that had been in Lun Fat's e-mail. Even if Kirin had accepted that oral offer, though, it was ineffective because this was a deal for land and thus subject to the statute of frauds. 

Therefore, there was never any contract between the parties. 

May 2, 2017 in Recent Cases, Teaching, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, May 1, 2017

Implied Waiver of an Arbitration Clause Is a High Burden

A recent case out of Texas, Legoland Discovery Centre (Dallas), LLC v. Superior Builders, LLC, No. 02-16-00425-CV (behind paywall), reaffirms how difficult it is to prove that a party waived its right to arbitration through substantially invoking the judicial process. 

In the case, Legoland notified Superior that it was terminating its contract due to alleged breaches on Superior's part. Superior then sued Legoland. Legoland responded, raising compulsory counterclaims. Superior than added as defendants the subcontractors that were identified by Legoland's counterclaims. A scheduling order was entered and the parties conducted some "basic" discovery, while Legoland systematically began settling with the subcontractors. A few days after it settled with the last subcontractor, twenty-two months after Superior had filed suit, Legoland moved to compel arbitration under the arbitration clause of its contract with Superior. Superior argued that Legoland had waived its right to arbitration because it had substantially invoked the judicial process, and the trial court agreed. 

The appellate court reversed, however, noting that the burden is high and implied waiver is seldom found. Legoland had participated in the ongoing court case, but only in a routine manner. The discovery conducted by the parties had not been extensive, and Legoland did not seek summary judgment. It was true that Legoland had brought counterclaims but they were compulsory. It was also true that Legoland waited almost two years after the filing of the complaint to seek arbitration but in the interim it had been settling with the subcontractors, who had not agreed to the arbitration clause that Superior was contractually bound by, and it sought arbitration almost as soon as the last subcontractor had settled out. Therefore, the appellate court ordered the parties to arbitration pursuant to their contract. 

May 1, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Sunday, April 30, 2017

"Losses" in an Expense-Shifting Clause Includes Diverted Staff Time

A recent case out of Maryland, Under Armour, Inc. v. Ziger/Snead, LLP, No. 802 September Term 2016, offers an interpretation of an expense-shifting clause in a contract. The clause in question read: 

"If Architect [Ziger/Snead] employs counsel or an agency to enforce this Agreement, Owner [appellant] agrees to pay the attorneys' fees, costs, expenses, and losses incurred by Architect prior to and through any trial, hearing, and/or subsequent proceeding, relating to such enforcement."

Following a legal dispute and a jury verdict in the architect's favor, the architect moved for attorneys' fees, costs, expenses, and losses, pursuant to the contractual clause above. Under Armour refused to pay the amount characterized as "losses," which seem to have been mainly diverted employee time. Under Armour's stance was that "losses" was too vague a term to cover "staff time." Rather, Under Armour claimed that "losses" was the equivalent of the attorneys' fees, costs, and expenses that had already been listed. 

The court, however, pointed out that "losses" was a term that had been negotiated by two sophisticated parties, and so must have some meaning. Other courts have held that diverted staff time can be included in losses. Therefore, where the contract did not mention staff time one way or the other, the court held it was permissible to conclude that the term "losses" meant to cover for diverted staff time. 

April 30, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, April 27, 2017

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (April 27, 2017)

Top-10-wArrowUp

 

SSRN Top Downloads For SSRN Logo2
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
26 Feb 2017 through 27 Apr 2017

Rank Downloads Paper Title
1 278 Notice and Takedown in the Domain Name System: ICANN's Ambivalent Drift into Online Content Regulation
Annemarie Bridy
University of Idaho College of Law
2 254 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 232 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
4 205 'No Money Down' Bankruptcy
Pamela Foohey, Robert M. Lawless, Katherine M. Porter and Deborah Thorne
Indiana University Maurer School of Law, University of Illinois College of Law, University of California - Irvine School of Law and Ohio University - Department of Sociology
5 199 Understanding the Consumer Review Fairness Act of 2016
Eric Goldman
Santa Clara University - School of Law
6 174 Massively Discretionary Trusts
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
7 164 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law
8 157 Contracts Ex Machina
Kevin D. Werbach and Nicolas Cornell
University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
9 154 Once Upon a Car: A Tale of Three Ambiguities
Mark Cooney
Western Michigan University Cooley Law School
10 136 A New Perspective on FRAND Royalties: Unwired Planet v. Huawei
Jorge L. Contreras
University of Utah - S.J. Quinney College of Law

 

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
26 Feb 2017 through 27 Apr 2017

Rank Downloads Paper Title
1 260 טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence)
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
2 254 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 232 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
4 182 The International Task Force on Mixed Mode Dispute Resolution: Exploring the Interplay between Mediation, Evaluation and Arbitration in Commercial Cases
Thomas Stipanowich and Veronique Fraser
Pepperdine University School of Law and Université de Sherbrooke - Group for the Prevention and Resolution of Disputes (G-PRD)
5 164 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law
6 158 Contracts Ex Machina
Kevin D. Werbach and Nicolas Cornell
University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
7 154 Once Upon a Car: A Tale of Three Ambiguities
Mark Cooney
Western Michigan University Cooley Law School
8 134 What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements
Taylor Payne and Richard A. Bales
Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
9 112 Boilerplate and Default Rules in Wills Law: An Empirical Analysis
David Horton and Reid K. Weisbord
University of California, Davis - School of Law and Rutgers Law School
10 109 Thinking in Terms of Contract Defences
Andrew D. Dyson, James Goudkamp and Frederick Wilmot-Smith
University of Oxford - Faculty of Law, University of Oxford - Faculty of Law and University of Oxford - Faculty of Law

April 27, 2017 in Recent Scholarship | Permalink

Tuesday, April 25, 2017

Contractual Rights to Prince's "Vault"

On April 14, the Wall Street Journal reported that Universal Music Group has won the licensing rights to late pop/rock star Prince's music in the "vault" he apparently kept on his property.  The price tag was $30 million.  Now, however, Warner Music Group, the singer's first record label, claims that it has conflicting rights in the material.  

That turn of events is hardly surprising, but what is is the fact that Universal "hadn't seen a copy of Prince's 2014 contract with Warner, so it asked [a relevant party] to clarify the details afters signing the deal and running into roadblocks as it tried to move forward." Unknown

Of course, legal disputes also arose as Prince did not leave a will, thus ceding his entire estate to his sister and five half-siblings.

Textbook lessons of what NOT to do in the contracts and wills and estates areas of the law.

April 25, 2017 in Celebrity Contracts, Commentary, Famous Cases, In the News, Music | Permalink | Comments (0)

Monday, April 24, 2017

New edition: Principles of Contractual Interpretation by Richard Calnan

From our friends at Oxford University Press:

"Written with the busy practitioner in mind, Richard Calnan’s Principles of Contractual Interpretation is a concise and insightful book that sets out the principles that guide the courts in interpreting contracts. Each principle is covered in its own dedicated chapter, supported by case law which illustrates how the principle works in practice and in its wider context. In addition to interpretation of contracts, the book also considers the implication of terms, rectification, and estoppel by convention. 


This new edition is fully updated to include new case law. It considers the implications of key decisions of the Supreme Court in Arnold v Britton and Marks & Spencer v BNP Paribas, and BNY Mellon v LBG Capital. As well as a discussion of the Makdessi v Cavendish Supreme Court case on penalties. This book provides an invaluable reference for lawyers drafting, interpreting and litigating on contracts."

April 24, 2017 | Permalink

Scholarship Spotlight: "What Did They Know and When Did They Know it? Pretesting and Assessing Learning Outcomes" (Jeffrey Harrison - Florida)

How far does the teaching of contract doctrine take students beyond their initial intuitive view of the applicable legal rules? Jeffrey Lynch Harrison of the University of Florida - Levin College of Law recently posted "What Did They Know and When Did They Know it? Pretesting and Assessing Learning Outcomes," an article that should be of interest to anyone teaching the first-year Contracts course. Here is the abstract:

Jeffrey Harrison (Florida(Abstract

Are legal rules intuitive or, at least, consistent with common sense? In this study, 260 law students at five law schools who had not taken contract law, were presented with eight questions based on specific contracts cases or common contracts issues. They were asked what they felt was the fair or right answer to each question and to formulate the rule they would apply. The purposes of the study were to 1) determine whether contract law is what the untrained person believes it is or should be and 2) experiment with a strategy of pretesting to determine what topics within any course deserve special attention during a semester.

Outside of its classroom implications, Harrison's article also provides some interesting fodder on the issue of the extent to which legal rules in general are--or must be--dependent on given zones of societal norms. "What Did They Know and When Did They Know it? Pretesting and Assessing Learning Outcomes" is available for SSRN download here.

 

April 24, 2017 in Recent Scholarship, Teaching | Permalink | Comments (0)

Sunday, April 23, 2017

Clever Price Interpretation Issue

Take a look at the below quote for “calendered” fabric by weight and consider what you think is the total price for the fabric (“tire cords”) including the calendering process by which rubber is compressed into the fabric sheets. There is no dispute that the “Polyester Tire Cord Only” line refers to fabric sheets purchased by Obermeyer from CSI and that the “Calendering, Compound & Poly Only” line refers to the calendering. Consider also that to get one pound of calendered fabric, Obermeyer would buy one half pound of fabric sheet at $1.87 and pay $2.23 to have that amount calendered into one pound of fabric. I76dd18d0184911e7a6d3010000000000

Should the total price be $4.10 or $5.97? Buyer says $4.10. Seller, of course, insists on $5.97; an almost 50% price increase above the buyer’s expectations. How would that be possible? Consider this:

“The increase is a consequence of the fact that calendering doubles the weight of the fabric. To obtain one pound of calendered fabric under the [above] pricing, Obermeyer would purchase one-half pound of fabric sheet (for $1.87) and pay $2.23 for that half pound to be calendered into one pound of calendered fabric. That came to $4.10 per pound of calendered fabric. Under CSI's interpretation of the January quote, however, Obermeyer would pay $5.97 for the same product. The essence of the parties' dispute is whether the $3.74/lb price of the fabric sheets is based on the weight of the untreated sheets (the untreated pricing) or the weight of the calendered product (the treated pricing).”

A motion for summary judgment was granted in favor of CSI. A Tenth Circuit Court of Appeals Court reversed and remanded for further proceedings to, among other things, allow the lower court to find out what the course of dealing between these parties had been. Said the court:

“CSI cautions that a decision against it would inject untenable uncertainty into commercial transactions by encouraging contracting parties to remain ignorant of the prices they pay. We disagree. There is a strong policy interest in encouraging trust between parties to commercial transactions. Commerce is not enhanced if buyers and sellers must always treat each other as adversaries, auditing every transaction as it occurs to be sure the other party is not cheating. If the jury finds that Obermeyer had been misled by an unscrupulous supplier on which it had relied in good faith, we do not think that the world of commerce will suffer from a verdict in favor of Obermeyer.

The case shows the importance of sufficiently elaborate contract drafting. Sometimes, less is more, but at other times, such as here, more detail would have been helpful. After the fact, it is much more difficult to ascertain whether fraud was at issue from the outset, at the end, or whether the buyer simply misunderstood the situation… the latter is a little hard to accept on the given facts, but on remand, hopefully the truth will come out.

The case is Obermeyer Hydro Accessories, Inc. v. CSI Calendering, Inc., 2017 WL 1174350, No. 16-1083 (March 30, 2017).

April 23, 2017 in True Contracts | Permalink | Comments (0)

Thursday, April 20, 2017

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (April 20, 2017)

Top-10 Cube Letters

SSRN Top Downloads For SSRN Logo2
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
19 Feb 2017 through 20 Apr 2017

Rank Downloads Paper Title
1 271 Notice and Takedown in the Domain Name System: ICANN's Ambivalent Drift into Online Content Regulation
Annemarie Bridy
University of Idaho College of Law
2 245 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 224 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
4 207 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
5 191 Understanding the Consumer Review Fairness Act of 2016
Eric Goldman
Santa Clara University - School of Law
6 188 'No Money Down' Bankruptcy
Pamela Foohey, Robert M. Lawless, Katherine M. Porter and Deborah Thorne
Indiana University Maurer School of Law, University of Illinois College of Law, University of California - Irvine School of Law and Ohio University - Department of Sociology
7 161 Massively Discretionary Trusts
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
8 160 Conceptualizing Cryptolaw
Carla L. Reyes
Stetson University College of Law
9 146 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law
10 141 Once Upon a Car: A Tale of Three Ambiguities
Mark Cooney
Western Michigan University Cooley 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
19 Feb 2017 through 20 Apr 2017

Rank Downloads Paper Title
1 259 טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence)
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
2 245 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 224 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
4 207 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
5 175 The International Task Force on Mixed Mode Dispute Resolution: Exploring the Interplay between Mediation, Evaluation and Arbitration in Commercial Cases
Thomas Stipanowich and Veronique Fraser
Pepperdine University School of Law and Université de Sherbrooke - Group for the Prevention and Resolution of Disputes (G-PRD)
6 146 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law
7 141 Once Upon a Car: A Tale of Three Ambiguities
Mark Cooney
Western Michigan University Cooley Law School
8 140 Contracts Ex Machina
Kevin D. Werbach and Nicolas Cornell
University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department
9 130 What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements
Taylor Payne and Richard A. Bales
Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
10 109 Boilerplate and Default Rules in Wills Law: An Empirical Analysis
David Horton and Reid K. Weisbord
University of California, Davis - School of Law and Rutgers Law School

April 20, 2017 in Recent Scholarship | Permalink | Comments (0)

Saturday, April 15, 2017

A False Advertising Case Isn't Covered by "Personal and Advertising Injury" Insurance

A recent case out of the Sixth Circuit, Vitamin Health, Inc. v. Hartford Casualty Insurance Co., No. 16-1724, settled a dispute between Vitamin Health and its insurance company over Vitamin Health's expenses defending against a false advertising suit. Bausch & Lomb alleged that Vitamin Health was making false statements about its own products in its advertisements. Vitmain Health sought coverage from Hartford as "personal and advertising injury," but Hartford denied defense. 

The court agreed with Hartford. The "personal and advertising injury" covered under Hartford's policy was defined in the policy as disparagement of other people's goods or services. At issue in the false advertising case was Vitamin Health's statements about its own products, which were not disparaging. There was no "disparagement." 

Vitamin Health's theory was that its statement about its products disparaged its competitors' products by implication. The Sixth Circuit didn't buy that theory, though. Vitamin Health's statements did not make claims about the superiority of its product compared to its competitors, so even if disparagement-by-implication were a valid doctrine. The case was simply about false advertising, not disparagement, and hence not covered by Hartford's insurance policy. 

April 15, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Friday, April 14, 2017

A Copyright Claim References Contracts, But Doesn't Bind Copyright Holder to Those Contracts

A recent case out of the Eastern District of Pennsylvania, Krist v. Pearson Education, Inc., Civil Action No. 16-6178, deals with whether a copyright holder's lawsuit can be governed by a contract between sublicensees with regard to forum selection. The answer: No. 

In the case, a photographer, Krist, licensed hundreds of his photograph to a stock photography agency, Corbis. Corbis then sublicensed the photographs to third parties. Corbis and Krist had agreements permitting this sublicensing; Corbis also entered into agreements with the sublicensees, including Pearson. 

Krist's allegations were that Pearson was using photographs outside of the terms of its contract with Corbis, resulting in copyright infringement. Pearson sought to transfer venue to the Southern District of New York, based on its forum selection clause in its agreements with Corbis. Although Krist was not a party to those contracts, Pearson argued that Krist's lawsuit was based on the contracts; Krist was a beneficiary of the contracts; and Corbis was acting as Krist's agent in entering into the contracts. 

But the court noted that Krist had not asserted any contract claims. His claims were entirely copyright-based. While the case would require "consideration" of the Corbis-Pearson contracts, that was not enough to bind Krist to the forum selection clause in a contract that Krist was not a party to. Krist had no continuing control over Corbis's activities, and so had not had the ability to comment on or affect or influence Corbis's acceptance of the forum selection clause. 

April 14, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, April 13, 2017

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (April 13, 2017)

Top-10-gold-logo

SSRN Top Downloads For SSRN Logo2
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
12 Feb 2017 through 13 Apr 2017

Rank Downloads Paper Title
1 262 Notice and Takedown in the Domain Name System: ICANN's Ambivalent Drift into Online Content Regulation
Annemarie Bridy
University of Idaho College of Law
2 232 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 221 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
4 194 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
5 185 'No Money Down' Bankruptcy
Pamela Foohey, Robert M. Lawless, Katherine M. Porter and Deborah Thorne
Indiana University Maurer School of Law, University of Illinois College of Law, University of California - Irvine School of Law and Ohio University - Department of Sociology
6 184 Understanding the Consumer Review Fairness Act of 2016
Eric Goldman
Santa Clara University - School of Law
7 178 The Deformation of Contract in the Information Society
Margaret Jane Radin
University of Michigan Law School
8 151 Massively Discretionary Trusts
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law
9 142 Conceptualizing Cryptolaw
Carla L. Reyes
Stetson University College of Law
10 131 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law

 


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
12 Feb 2017 through 13 Apr 2017

Rank Downloads Paper Title
1 256 טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence)
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
2 232 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 221 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
4 194 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
5 178 The Deformation of Contract in the Information Society
Margaret Jane Radin
University of Michigan Law School
6 167 The International Task Force on Mixed Mode Dispute Resolution: Exploring the Interplay between Mediation, Evaluation and Arbitration in Commercial Cases
Thomas Stipanowich and Veronique Fraser
Pepperdine University School of Law and Université de Sherbrooke - Group for the Prevention and Resolution of Disputes (G-PRD)
7 131 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law
8 127 Once Upon a Car: A Tale of Three Ambiguities
Mark Cooney
Western Michigan University Cooley Law School
9 121 What a Contract Has Joined Together Let No Court Cast Asunder: Abolishing Separability and Codifying the Scope of the Provisions of Arbitration Agreements
Taylor Payne and Richard A. Bales
Ohio Northern University, Pettit College of Law, Students and Ohio Northern University - Pettit College of Law
10 111 Contracts Ex Machina
Kevin D. Werbach and Nicolas Cornell
University of Pennsylvania, The Wharton School, Legal Studies & Business Ethics Department and University of Pennsylvania - The Wharton School, Legal Studies & Business Ethics Department

 

April 13, 2017 in Recent Scholarship | Permalink | Comments (0)

Wednesday, April 12, 2017

United Airlines and Unequal Bargaining Positions

It's by now common knowledge that United Airlines finally fessed up to its mistakes and promised not to use police to drag paying customers who held valid contracts and thus tickets with the airline off the planes anymore.  That seems like, uhm, a reasonable policy.

Now, as I have said before: when are we as a society going to wake up to and thus call for, yes, REGULATORY change in relation to the clearly dysfunctional contractual relationship between the few remaining American airlines and paying customers?  This recent debacle with the Asian doctor bloodied while being physically dragged away from a valid contractual situation (I know, I know, the airline had a right to oversell and so forth) shows the results of a clearly unequal bargaining position.

Let's call it what it is: unacceptable and abusively unequal commercial practice.  What, for example, if YOU want to change your ticket?  Good luck trying to do that unless you paid ten or so times what a regular ticket would be.  As I have also mentioned before: how about price gouging, or whatever we as attorneys may label the following: buying an airline ticket from point A to B in Europe with some low cost carriers will cost you very, very little.  Here, "low cost" carriers still charge you hundreds and hundreds of dollars.  I agree, the market place and capitalist system is better than the alternative, but it is far from perfect.  For what alternative do we have? Take the train? Drive?!  Right... in a country of this size, you just cannot reasonably do that.  

Or how about this: my elderly mother can fly to Los Angeles from Copenhagen and back on KLM/Delta Airlines for less than half of what I would have to pay on the VERY SAME AIRLINE, DATES, etc.   Yes, I've checked it.  Same route, you name it.  That's not "market forces," then, that's cheating customers because one can.

Airlines are great and provide a great and necessary service to many of us.  In fact, so necessary that they have, for all intents and purposes, become the "bus companies" or railroads of today.  Just as railroad companies and bus service providers were and are, to the best of my non-native knowledge, subject to quite some regulations, so would it not be unreasonable to look into the modern practices of airlines today.  Airlines around the world make a good living while facing quite a bit more regulation than American carriers do.  We are often being played for fools here.  We just put up with it too much.

April 12, 2017 in Commentary | Permalink

Tuesday, April 11, 2017

Flying the Friendly Skies after the Suffering Through the Violent Boarding Process?

Everyone is surely, by now, aware of the (most recent) United Airlines scandal.  Numerous questions abound: Was the airline racist in asking a non-white person to give up his seat or was the selection of which passenger to bump truly random? If the latter, was the airline racist in pursing this action after seeing that the selected passenger was not white whereas it might have given up taking such drastic action if it the passenger had been white? Equally importantly, what in the world is going on when law enforcement officers act as they did in this situation?! Is it fair to consider United Airlines responsible for actions that were, after all, not taken by its employees, but rather by the authorities?

While these questions are being addressed in many other locations, I find it interesting that several news sources correctly point out that United was legally entitled to bump a passenger, but that several sources seem to incorrectly state that under Department of Transportation rules, airlines may only pay passengers “up to a” $1,350 limit for delays of more than two hours. I have not had the time to fully research this rule, but as I read the rules, there is nothing saying that there is a limit to how much airlines may choose to pay, only what the DOT rules guarantee a pay-out (that one can, incidentally, insist on getting as payment, not a voucher) of $1,350, not more under the federal rules. The DOT guideline states as follows (from a website version only, admittedly):

“If the substitute transportation is scheduled to get you to your destination more than two hours later (four hours internationally), or if the airline does not make any substitute travel arrangements for you, the compensation doubles (400% of your one-way fare, $1350 maximum).”

If my understanding is correct, United could have chosen to voluntarily pay out a lot more than what they reportedly did ($800-1,000) and, as many correctly point out, most likely found some taker.  Surely, the rules do not prohibit this.  Instead, however, United chose to do what seems to increasingly be the order of the day: stand on their own rights and disregard the interests of their customers in the name of making a few extra dollars. Why am I not surprised?

April 11, 2017 in Commentary, Contract Profs, Current Affairs, Famous Cases, In the News, Travel | Permalink | Comments (0)

Thursday, April 6, 2017

Cyberattack liability

“Fees, fines or penalties” do not cover fraudulent charges incurred on commercial parties during a cyberattack. So ruled the Eight Circuit Court of Appeals in Schnuck Markets, Inc., v. First Data Merchant Serivces Corp., et al., (No. 15-3804, Jan. 13, 2017). 

Schnuck is a retail supermarket chain. First Data served as its credit card processor and Citicorp as its “acquiring bank.” Such a bank is one that pays the merchant and is reimbursed by the issuing bank. The acquiring bank sponsors the merchant into credit card association networks, in this case VISA and MasterCard. It also vouches for the merchant’s compliance with the associations’ rules. Unknown

Schnuck signed a contract with First Data and Citicorp for the credit card arrangement. Among other things, the agreement stated that liability under the relevant section of the contract “shall not apply to Schnucks’ liability for chargebacks, servicers’ fees, third party fees, and fees, fines or penalties … by the Association or any other card or debit card provide under this [agreement].”

In March 2013, a cyberattack against Schnucks compromised cardholder data. First Data and Citicorps subsequently withheld not only the fees and costs that MasterCard assessed against these corporations from payments to Schnucks, but also the fraudulent charges from the cyberattack itself. Schnuck filed suit, alleging breach of contract. At bottom, Schnucks agreed that it was liable for only actual fees and fines, but not the actual losses incurred by the issuing banks. Unknown-1

The court agreed. The payment of a “fee” is a payment for a service, not reimbursement for another party’s losses. Furthermore, since the contract does not mention anything about reimbursement for data compromise events, the banks were not in a legal position to get reimbursed for those. “Fines” and “punishment” describe, more narrowly, only sums imposed as a punishment and not data compromise losses.

Supermarket wins; banks lose. Good thing that the card holders were not involved here. The bigger loss is, of course, that shared by all of us; financiers, vendors, and card users when internet-based losses such as this happen. Another cost that undoubtedly will be built into the pricing scheme will result, but apparently, such is the nature of electronic transactions these days.

April 6, 2017 in Current Affairs, Web/Tech | Permalink | Comments (0)

Weekly Top Ten SSRN Contracts and Commercial Law Downloads (April 6, 2017)

Top10-Granite

SSRN Top Downloads For SSRN Logo2
Contracts & Commercial Law eJournal

RECENT TOP PAPERS for all papers first announced in the last 60 days
5 Feb 2017 through 6 Apr 2017

Rank Downloads Paper Title
1 250 Notice and Takedown in the Domain Name System: ICANN's Ambivalent Drift into Online Content Regulation
Annemarie Bridy
University of Idaho College of Law
2 226 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 217 Interpreting Contracts via Surveys and Experiments
Omri Ben-Shahar and Lior Strahilevitz
University of Chicago Law School and University of Chicago Law School
4 215 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
5 186 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
6 180 Understanding the Consumer Review Fairness Act of 2016
Eric Goldman
Santa Clara University - School of Law
7 176 What Brexit Means for the Interpretation and Drafting of Financial Contracts
Matthias Lehmann and Nihal Dsouza
University of Bonn and University of Bonn
8 175 'No Money Down' Bankruptcy
Pamela Foohey, Robert M. Lawless, Katherine M. Porter and Deborah Thorne
Indiana University Maurer School of Law, University of Illinois College of Law, University of California - Irvine School of Law and Ohio University - Department of Sociology
9 173 The Deformation of Contract in the Information Society
Margaret Jane Radin
University of Michigan Law School
10 141 Massively Discretionary Trusts
Lionel Smith
McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law

 

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
5 Feb 2017 through 6 Apr 2017

Rank Downloads Paper Title
1 255 טעות בכדאיות העסקה: שווי האובייקט, התפתחויות עתידיות, נטילת סיכון ורשלנות הטועה (Mistake as to the Worthwhileness of the Transaction: The Object's Value, Future Developments, Assumption of Risk, and Negligence)
Eyal Zamir
Hebrew University of Jerusalem - Faculty of Law
2 226 Choice of Law in the American Courts in 2016: Thirtieth Annual Survey
Symeon C. Symeonides
Willamette University - College of Law
3 217 Interpreting Contracts via Surveys and Experiments
Omri Ben-Shahar and Lior Strahilevitz
University of Chicago Law School and University of Chicago Law School
4 215 Copyright Survives: Rethinking the Copyright-Contracts Conflict
Guy A. Rub
Ohio State University (OSU) - Michael E. Moritz College of Law
5 186 Interpretation and Construction in Contract Law
Gregory Klass
Georgetown University Law Center
6 173 The Deformation of Contract in the Information Society
Margaret Jane Radin
University of Michigan Law School
7 157 The International Task Force on Mixed Mode Dispute Resolution: Exploring the Interplay between Mediation, Evaluation and Arbitration in Commercial Cases
Thomas Stipanowich and Veronique Fraser
Pepperdine University School of Law and Université de Sherbrooke - Group for the Prevention and Resolution of Disputes (G-PRD)
8 119 Self-Driving Contracts
Anthony J. Casey and Anthony Niblett
University of Chicago Law School and University of Toronto - Faculty of Law
9 104 Once Upon a Car: A Tale of Three Ambiguities
Mark Cooney
Western Michigan University Cooley Law School
10 103 Boilerplate and Default Rules in Wills Law: An Empirical Analysis
David Horton and Reid K. Weisbord
University of California, Davis - School of Law and Rutgers Law School

April 6, 2017 in Recent Scholarship | Permalink | Comments (0)

Wednesday, April 5, 2017

Nevada Court: There Was No Oral Contract, and It Needed to Be in Writing Anyway

A recent case out of the District of Nevada, Greenstein v. Wells Fargo Bank, Case No. 2:14-cv-01457-APG-CWH (behind paywall), reminds us of the importance of the statute of frauds as a useful doctrine that can clarify when parties have entered into a contract and when they haven't. Greenstein contended that he and Wells Fargo had entered into an oral contract regarding modifying his existing home loan. However, Wells Fargo disputed that. The court agreed with Wells Fargo that there was no contract, because Greenstein at best had alleged that, during multiple telephone calls, Wells Fargo had represented that it "might" agree later to a modification. Wells Fargo did tell Greenstein that he needed to reduce his principal to qualify for a modification, but that was not the same thing as saying that he definitely would qualify for a modification if he paid down the principal (which, in any case, he did not do). 

Greenstein apparently misinterpreted these conversations with Wells Fargo, none of which amounted to an offer or acceptance or even any material terms. This is precisely the sort of situation that the statute of frauds exists to try to alleviate: Because the contract involved land, it needed to be in writing. It never was, and surely any writing between the parties would have cleared up at least some of the misunderstanding between the parties. Oral contracts (alleged or existing) lend themselves easily to mistaken conclusions; making the land contract be in writing at least sometimes saves confusion and disagreement over these all-important terms. 

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

Monday, April 3, 2017

University Decisions on Disciplinary Procedures Receive Deference; Cannot Be Arbitrary, Capricious, or in Bad Faith

A recent case out of the District of Nevada, Janati v. University of Nevada, Las Vegas School of Dental Medicine, Case No. 2:15-cv-01367-APG-CWH (behind paywall), discusses the leeway universities have in enforcing the policies in their student manuals. The student was suspended from UNLV Dental School for plagiarism, and, in addition to raising constitutional due process and First Amendment issues, she contended that UNLV breached its Student Policy Manual and as such was in breach of contract. UNLV agreed that the Student Policy Manual constituted a binding contract between the school and the student but contended that its decisions on disciplinary procedures under the manual were entitled to "significant deference." 

The court agreed. The standard for determining if the university had violated its disciplinary procedure was "arbitrary, capricious, or bad faith," "without any discernable rational basis." The university's actions did not rise to that level in this case. The complaint concerning the student's Honor Code violations was required by the manual to "include specifics" of the conduct at issue, including any witnesses to the conduct. The complaint against the student here neglected to name two of the faculty members involved and left off the names of some of the witnesses, but the student admitted that she knew who everyone involved with the complaint was, even prior to its filing. There was also some confusion about whether the university failed to solicit information from one of the witnesses during the first Honor Council proceeding, but all of the parties agreed that, to the extent that witness was overlooked, he did provide information during the second proceeding the parties held. 

The court found that none of those rose to the high bar of violation of the disciplinary procedures and therefore the student could not sustain a breach of contract claim. 

April 3, 2017 in Current Affairs, In the News, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Saturday, April 1, 2017

"Discovery Rule" Doesn't Apply to Entertainment Company's Failure to Investigate a Known Breach

 

Here are the logos together, in happier times, from one of the movies at issue in this case, Henry Poole Is Here

A recent case out of California, Camelot Pictures LLC v. Lakeshore Entertainment Group, LLC, B269430, gives us a nice run-down on statute of limitations in contracts cases, in that state at least. The case involves breaches of "Equity Term Sheets" between two entertainment companies involved in making together the movies Pathology and Henry Poole Is Here. Unfortunately for Camelot in this case, it raised the issue of these breaches by Lakeshore too late. 

Camelot sued Lakeshore in November 2013 and eventually won an award in excess of $300,000. The problem, though, was, as Lakeshore argued on appeals, Camelot's claim was outside the four-year statute of limitations governing breaches of contract in California. And the appellate court agreed. 

The appellate court provided a summary of how the statute of limitations works for breaches of contract in California. Generally, the cause of action is considered to have accrued at the time of the breach, "regardless of whether any substantial damage is apparent or ascertainable." However, in "certain, limited circumstances," the accrual-on-breach rule can be replaced by the "discovery rule," which provides that breaches that are "committed in secret" and whose harm is not "reasonably discoverable" will be considered to have accrued on the date of the discovery of the breach, not the date the breach occurred. 

The trial court found that the discovery rule applied, and that Camelot had not discovered Lakeshore's breaches until the summer of 2011, within the statute of limitations period. That date was the date on which Camelot was advised by a consultant that Lakeshore's alternate accounting methodology was not beneficial to Camelot. However, Camelot had known that Lakeshore was using an alternate accounting methodology--in violation of the Equity Term Sheets--since December 2008. On that date, Camelot explicitly raised the fact that Lakeshore was not complying with the terms of the Equity Term Sheets. Camelot simply failed to pursue this lack of compliance for several years. Lakeshore's breach was therefore not "committed in secret" such that the discovery rule should apply. Indeed, Camelot admitted that it knew about the breach as soon as Lakeshore committed it; Lakeshore made no efforts to conceal it. Camelot did not know the impact of that breach until much later, but it could have discovered the impact much sooner, had it employed a consultant sooner than three years later to look into Lakeshore's conduct. Therefore, the trial court's judgment for Camelot was reversed. 

April 1, 2017 in Film, Recent Cases, True Contracts | Permalink | Comments (1)

Friday, March 31, 2017

Prison Telephone Service Provider Continues to Lose on Enforcing Arbitration Provision

I have already blogged about a related case out of the Western District of Arkansas, in which the court concluded that prison inmates did not consent to arbitrate when they funded their telephone accounts to enable them to make calls. This case out of the Third Circuit, James v. Global Tellink Corp., No. 16-1555, affirms a similar conclusion by the District of New Jersey. To refresh your memory, GTL provides telephone services to prison inmates. Inmates sign up for accounts and deposit funds into the account, either through GTL's website or through its automated telephone service. When interacting with GTL's automated telephone service, users are alerted that their transactions are governed by the terms of use found online but they are not required to indicate their assent to those terms. Inmates have brought a class action alleging that GTL's charges are unconscionable. GTL moved to compel arbitration based on its online terms of use, but the district court found that those who used GTL's automated telephone service never agreed to be bound by those terms of use. 

The Third Circuit agreed with the district court's conclusion. The subject of how to form a binding contract through interactive telephone services was a new and different one, as most of these cases involve websites these days. GTL argued that the inmates manifested the requisite assent by continuing to use the telephone services after being notified there were terms of use. But the inmates never had to perform any affirmative act to indicate their assent, and they were never told that their continued use alone would constitute such assent. None of the inmates in question who used the automated telephone services had ever taken the necessary extra step to access GTL's website to see the terms of use, so they were never presented with the terms of use or the arbitration provision in question. The inmates simply never received the terms, and were never told that use of the telephone system would bind them to the terms. 

March 31, 2017 in Current Affairs, Government Contracting, In the News, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)