Friday, July 28, 2017
Our friend and esteemed colleague, Professor Charles Calleros, has kindly sent the following as a guest contribution to the ContractsProf Blog. Enjoy!
Recently Val Ricks has collected a number of essays from colleagues on best and worst cases for the development or application of contract law. In addition to participating in that project, Charles Calleros invites faculty to upload and post links to essays about their favorite cases as teaching tools (regardless whether the cases advance the law in an important way). He starts the ball rolling with this Introduction to his essay on "Why Pyeatte v. Pyeatte Might be the Best Teaching Tool in the Contracts Casebook":
Pyeatte v. Pyeatte, a 1983 decision of the Arizona Court of Appeals, did not break new ground in the field of contracts. Nonetheless, I assert that it is one of the best pedagogic tools in the Contracts casebook, for several reasons:
- * The facts are sure to grab the attention of first-semester law students: A law grad reneges on a promise to support his ex-wife through graduate school after she supported him through law school during their marriage;
* This 1980’s opinion is written in modern plain English, allowing students to focus on substance, while also learning a few necessary legal terms of art.
* After their immersion in a cold and rather unforgiving bath of consideration and mutual assent, students can finally warm up to a tool for addressing injustice: quasi-contract;
* The opinion’s presentation of background information on quasi-contract provides an opportunity to discuss the difference between an express contract, an implied-in-fact contract, and an implied-in-law contract;
* Although the wife’s act of supporting her husband through law school seems to beg for reciprocation or restitution, students must confront judicial reticence to render an accounting for benefits conferred between partners in a marriage, exposing students to overlap between contract law and domestic relations law;
* The appellate ruling of indefiniteness of the husband’s promise – presented in a later chapter in my casebook, but looming vaguely in the background of the discussion of quasi-contract – invites critique and perhaps even speculation that the appellate panel felt comfortable denying enforcement of the promise precisely because it knew it could grant restitution under quasi-contract; and
* The court’s admonition that expectation interest forms a ceiling for the calculation of restitution reveals a fascinating conundrum that brings us back to the court’s ruling on indefiniteness. . . .
You can find the whole essay here.
Monday, July 17, 2017
A recent case out of Texas, Carnegie Homes & Construction, LLC v. Sahin, No. 01-16-00733-CV, brings up no fewer than three golden discussion topics of contracts law courses: conditions precedent, specific performance, and unclean hands.
The dispute is actually a pretty run-of-the-mill disagreement over a real estate purchase. It just happens to contain a lot of arguments.
First, Carnegie Homes, the buyer, attempted to argue that a number of conditions precedent had never been fulfilled, and therefore none of its obligations to buy the property had been triggered. The contract in question did read it "shall only be effective upon performance of the conditions set forth in Section E of this agreement." But despite calling the contents of Section E "conditions," the court read them and found them to be covenants, not conditions, dictating when and how much Carnegie Homes would pay and how much their respective obligations would be. Rather than conditions, Section E contained mutual promises, and indeed, Section E was called "Terms" instead of conditions. Therefore, the reference to conditions was a mistaken one.
Second, specific performance was deemed to be the proper remedy, because the contract was for the sale of a unique property. Carnegie Homes tried to argue that specific performance was not usually made available to the seller of a piece of property, only to the buyer of that property. However, the court said that specific performance was not so limited and that sellers have the right to seek and be rewarded specific performance just as much as buyers.
Finally, Carnegie Homes tried to argue that unclean hands prevented the seller, Sahin, from receiving relief. The conduct Carnegie Homes complained of concerned Sahin's service of a supplemental petition that alleged Carnegie Homes committed fraud. Sahin served the petition but never filed it. Carnegie Homes, however, was required to disclose it in a loan application, which allegedly caused it to be refused financing, leading to Carnegie Homes's difficulty in fulfilling its obligation to buy the property. The court, however, found that the disclosure to one lender did not block Carnegie Homes from performing the rest of its obligations, and did not act as unclean hands on Sahin's part. The contract did not require Sahin to help Carnegie Homes obtain financing, nor did it condition Carnegie Homes's obligation to pay on the receipt of financing. Therefore, Carnegie Homes was not excused from its obligations and Sahin was entitled to relief.
Monday, July 10, 2017
Over at the hallowed mothership of the Law Professor Blogs Network, TaxProf Blog, Jeff Lipshaw (Suffolk) has written a thought-provoking post entitled "Robot Lawyers, 'Skills Training' and Legal Education." Here are two of the key closing paragraphs:
As a long, long, long time practitioner and generalist, I continue to be amused (or something like that) by the buckets of legal education (the rooms of the Mystery House). For example, it took returning to academia to find out that "commercial law" (i.e. the UCC) is a different area than "corporate law." Within business law, there are corporate camps and "uncorporate" camps, with the latter seemingly most interested in demonstrating why the area in which they happen to write and teach is normatively superior to the other (my friend and co-author, the late Larry Ribstein, being a prime example of the latter).
In the long, long term, I think the crunchable middle will be both doctrine, as traditionally taught, and what today pass for "skills." Both, to a large extent, have the potential of being robotic. The long game is in doing and teaching what robots really can't do, or in managing the robots. I'll put aside both trial and appellate litigation and focus on everything else lawyers do. In the interim, I'd do away with a lot of classes that are merely more yammering away at segments of doctrine by way of litigated cases, reverse the classroom, and make classes ones in which you merely bring doctrine to the party along with all the other theories. (In my own area, I'd do away with the traditional business law courses, and combine with the business school to teach "Law & Finance of Business Entities" with J.D. and M.B.A. students intermingled.)
The whole post is well worth a read and is available in its natural habitat here.
From time to time on ContractsProf Blog, we like to highlight innovative or interesting teaching materials that will be of interest to our readers. Jay A. Mitchell is the Director of the Organizations and Transactions Clinic at Stanford Law School and is the author of Picturing Corporate Practice (West Academic). In the current push for pedagogy and materials to create law graduates who are more "practice ready," Professor Mitchell's text stands out with its approachable and innovative design choices for engaging students. I asked the Picturing Corporate Practice author if he would tell us more about his book in a guest blog post.
Without further ado, let me turn this post over to Professor Mitchell:
Picturing Corporate Practice is a blend of text and visuals intended to introduce students to corporate and transactional work.
The book includes a brief overview of corporate practice and chapters focused on advice development, transaction planning and management, contracts and other legal documents, board meetings, litigation (from a corporate perspective), SEC filings, corporate pro bono, and client service.
The fun part here is that I collaborated with a graphic designer on the thing. We used a landscape format, paid close attention to layout and typography, built in lots of white space, included 50+ diagrams, timelines, and other graphics, and used a conversational writing style throughout. I’m a big believer in the value of design and typography for legal work-products, course materials, and other information products -- the book reflects that belief.
And I tried to draw on my experience not only from the Stanford Law School clinic but also as a former senior lawyer at a big company (and thus client) and law firm partner, and on the input of the five former students who read the entire manuscript.
Several notes about goals and themes:
- Orientation. Most importantly: I wanted simply to orient folks to the work. Corporate is unfamiliar to most students. I tried to provide some broader ways of thinking about the practice and what we do as corporate lawyers -- build things, design processes, produce products that people use, manage projects, engage in a craft. I think those frameworks can help students start to get their head around the job.
- Documents. The book gives considerable attention to contracts and other legal documents, the core products of the trade. It discusses reading, a fundamental lawyer activity that in my view doesn't receive the attention it deserves. It identifies document characteristics -- business focus, variety, functionality, visibility, longevity, etc. -- and how law is “underneath” and reflected in our documents. There’s coverage of practical tasks like document planning, working with forms, and proofreading. The idea was not only to demystify but also cultivate an appreciation for the many dimensions and implications of legal documents, and for what it takes to do them well.
- Getting Started on a Problem. The book provides tangible suggestions for getting started on a project or document. Students and new lawyers often don’t know how to get going on assessing a business situation, or dealing with a big contract -- I see that in the clinic all the time. So the book includes ideas about how to get traction, how to start getting a grip on a problem, and emphasizes the relevance of common sense and commercial sensibility.
- Visual Thinking. I wanted to make the case for one of those practical suggestions: drawing pictures to facilitate thinking and collaboration. Drawing is an unusually effective tool for thinking, and something that we don’t talk about much in law school. The book includes a brief general discussion, grounded in research from psychology, cognitive science, engineering, and other disciplines, and then lots of ideas and examples across the practice.
- How Things Work. The book includes how-things-work information and vocabulary. Like, what’s a closing? How do covenants and conditions work together? What do board resolutions do? How does an IPO work? What’s a T&R schedule? When the partner says “we need to make conforming changes,” what does she mean? What’s an officers’ certificate? These are questions folks may be reluctant to ask, and stuff that people in firms rarely explain.
- Habits of Mind. The book emphasizes the central importance of ways of working and professional disciplines: organization, attention to detail, project management, diligence, stamina, responsiveness, service orientation…. all things especially important early in one’s career, and generally not big topics of emphasis in school.
- Fun. I try to be direct but encouraging, and to suggest the intellectual and professional enjoyment in the job -- which can be easy to lose sight of in the grind of law school and especially law firm life.
We use this book as a text in my clinic, and it could be used in other transactional skills courses as well; the chapters on deal work and board meetings are relevant to, say, an M&A course. I think the book could be used in 1L lawyering skills and legal writing classes and in contracts and contract drafting courses, with the two chapters about documents being of particular relevance. I’d also love to see visual methods be introduced in lawyering skills or comparable 1L courses -- it’s really useful in this line of work.
Outside of skills and contracts-oriented classes, I can imagine that corporations instructors might find useful the chapter about board meetings. Evidence instructors who want to add a touch of corporate to the curriculum could use the chapter about litigation, which centers on record building and attorney-client privilege in the transactional setting. Public interest and pro bono instructors might find the pro bono chapter useful in briefing students about nonprofit organizations. And the increasing number of lawyers and others interested in legal design might find both the visual methods discussion and the book design itself of interest.
So, the book is a little different, both for the transactional skills space and for the legal education genre generally. I hope folks find it helpful.
More information on Picturing Corporate Practice is available here. Thanks to Jay Mitchell for providing this guest post.
Do you have any innovative contracts, commercial, or transactional teaching materials that would be of interest to our readers that we could highlight on ContractsProf Blog? If so, drop me (Mark Burge) an email with the information, and you might be our next featured guest post.
Tuesday, May 2, 2017
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.
Monday, April 24, 2017
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:
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.
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.
Thursday, March 30, 2017
Teaching Spotlight: "Reflections on Teaching the First Day of Contracts Class" (Norman Otto Stockmeyer - Western Michigan)
We at ContractsProf Blog love to highlight recent scholarship by our readers, but we are fans of teaching, as well. If you are the author of a recent work of contracts or commercial law scholarship or of teaching-related materials that you have posted on SSRN, send me (Mark Edwin Burge) a copy of your abstract or summary along with an SSRN link, and we may spotlight your work here. Today's spotlight is on an essay by Otto Stockmeyer.
Reflections on Teaching the First Day of Contracts Class
Norman Otto Stockmeyer (Western Michigan University Cooley Law School)
A veteran of the law school classroom offers his thoughts on why Contracts is the most significant course in the first-year curriculum, why the study of contract law should begin with the subject of remedies, and why the “hairy hand” case of The Paper Chase fame makes an ideal starting point. The author also shares his first-day advice on how to succeed in law school. Along the way he explains why he prefers a problems-based casebook, opposes use of commercial briefs and outlines, and makes robust use of a course website.
SSRN link: https://ssrn.com/abstract=2927249
Sunday, February 12, 2017
A recent case out of the Eastern District of Kentucky, Taylor v. University of the Cumberlands, Civil No: 6:16-cv-109-GFVT (behind paywall), has lots of causes of action, including an interesting dispute over whether an agreement between the university and its former President and Chancellor was supported by consideration.
While the decision itself, granting in part and denying in part the university's motion to dismiss, is behind a paywall, the dispute has been reported and described in the press. Dr. Taylor served as the President of the university for 35 years. He alleged that the school had agreed to pay him and his wife almost $400,000 annually after his retirement until they were both dead. The school disputed the validity of that agreement. The Taylors then brought several claims against the university, including breach of contract.
On the motion to dismiss, the main contract argument involved consideration. The university argued that the contract was given in recognition of the Taylors' successful fundraising efforts and service to the school, which had already occurred. This, the university contended, meant it was past consideration and rendered the agreement unenforceable.
The court acknowledged that the agreement discussed the Taylors' past behavior. However, the court also identified five current promises the Taylors made under the agreement: to continue to serve as president until he decided to retire; to accept the role of Chancellor until he decided to retire; to serve as an Ambassador of the university; to serve the university in any capacity requested; and to continue to fundraise for the university. Therefore, there was consideration.
The university then argued that the agreement had no definite end date, which would mean it was terminable at will. However, the court noted that that rule applies to contracts that would otherwise run forever. In such a circumstance, the right to terminate at will can be considered appropriate. In this case, the contract would terminate once both of the Taylors were dead. No one knew when that date would be, but presumably the Taylors will not live forever and therefore the contract will not run forever. Therefore, the contract was not terminable at will, and the Taylors lived to fight another day on their breach of contract claim (although the court noted that there were significant disputes surrounding the execution of the agreement and its proper interpretation).
Friday, January 13, 2017
Frequently when I teach Contracts I find myself telling the students to just put in the contract exactly what they want it to say, because so often I feel like cases revolve around parties saying, "I know what it said, but I thought that meant something else entirely." Although, often, of course, these might be ex post facto proclamations when a situation turns out to not be exactly what the party thought it was going to be.
A recent case out of Maryland, Norman v. Morgan State University, No. 1926 September Term 2015 (behind paywall), is another illustration of a party claiming that a contract means what a court finds it does not mean. In that case, Norman had sued Morgan State after he was denied tenure there. The parties entered into a settlement agreement under which Norman was permitted to apply for "any non-tenure track position at [Morgan State] for which he was qualified." The current lawsuit is the result of Norman's allegation that Morgan State prevented him from applying for an external research grant that that would have funded a future position at the school for him.
The court, however, found that the contract clearly stated that Norman could apply for "any non-tenure track position." It said nothing about external grants and external grants are not non-tenure track positions. Therefore the settlement agreement did not require Morgan State to permit Norman to seek the external grant. Norman tried to argue that he would not have agreed to the settlement agreement had he known it allowed Morgan State to block applications for external grants, but the court dismissed that argument based on the plain and unambiguous language of the contract.
Saturday, January 7, 2017
Photo Source: hgtv.com
The main reason I have cable these days, honestly, is because of my HGTV addiction. I like that the shows are so predictable and formulaic, which makes them low-stress. It's a habit I started years ago as a stressed-out lawyer in a law firm, when I needed to come home and watch something that didn't require thought, and it's kept me company as I transitioned into academia. And I'm apparently not alone in using it as comfort television.
I use HGTV a lot in my Contracts class as the foundation of hypotheticals (so much that I'm contributing a chapter to a book detailing how I use it) and so I'm always interested when there is a real-life HGTV contract problem...such as is happening right now with "Flip or Flop."
You might not be anxiously following HGTV shows, so let me tell you that the world was recently rocked (well, a small corner of the world) by the revelation that Christina and Tarek, the married couple with two young children at the center of the house-flipping show "Flip or Flop," were separated and/or getting divorced. And now come reports that HGTV has threatened them with a breach of contract action if their ongoing marital problems affect the filming of the show.
This is an example of the interesting issues that arise when your personal life becomes the equivalent of your contractually obligated professional life. Christina and Tarek no longer want to be married to each other, apparently, which is a stressful enough situation, without adding in the fact that their marriage is also the source of their livelihood. HGTV has a point that the show is less successful when you know that their personal life is a mess. The network was running a commercial pretty steadily through the holiday season where Christina and Tarek talked about their family Christmas, and every time I saw it I thought it was so weird and that they should pull the commercial. But that was clearly the advertising campaign HGTV had long planned for the show and it was probably costly for HGTV to change it at that point.
I am curious to see what the resolution of this is. I'm unclear how much longer Christina and Tarek were under contract for. They probably hoped to keep their separation quiet for as long as they could (they had, after all, kept it quiet for several months). But now that it's out in the open, we'll have to see how the parties recalibrate not just their personal but also their contractual relationships with each other. There is always a lot of talk about how "real" the shows on HGTV is. This situation is testing where our boundaries on "real" vs. "fake" actually lie.
Thursday, December 29, 2016
Multiple sources report that Syracuse University is suing its long-term law firm over the firm's failure to put a "time is of the essence" clause into one of the university's contracts. I can't seem to track down the docket online so I haven't been able to look at the actual court documents but if you're teaching "time is of the essence" clauses next semester and looking for a recent controversy, here's one!
Friday, December 23, 2016
Just a quick entry in advance of a weekend that is a holiday for many, but this post on Inside Higher Ed caught my eye, discussing an in-progress case against NYU. An appellate court allowed two professors' complaint to survive a motion to dismiss based on sufficient allegations that the faculty handbook was a formal binding contract. One to keep an eye on in the new year.
However you plan to spend this upcoming weekend, I hope it's full of peace and joy.
Thursday, December 15, 2016
A recent case out of Arkansas, Baxter v. Wing, No. CV-16-21 (behind paywall), has a nice discussion of the difference between moral obligation and legal obligation. In the case, a man named one of his four stepchildren, Susannah, as the sole beneficiary of his life insurance policy and asked her to share it with her three siblings.
Nobody disputed that it was the deceased man's wish that Susannah share the money with her siblings. The problem, though, was that her obligation to comply with his wishes was merely moral, not legal, and the court could do nothing to force her to comply with it. The deceased man gave Susannah instructions, but he did not make her any promise, nor did Susannah make any promise in exchange. There was no deal along the lines of, "I promise to make you the sole beneficiary if you promise in exchange to share the proceeds with your siblings." The deceased man gave Susannah instructions, which did not rise to the level of an enforceable contract.
Cases like this are valuable when you're teaching consideration but they always make me sad, because consideration cases so frequently seem to be about families feuding on a level so rancorous that they turn to the court system. Tough cases to get through.
Wednesday, November 30, 2016
I am always saying to my students that if they care about something, they should put it in their contract, and they should be specific about what it is they want. I think sometimes people might think there's something to gain strategically by being vague, but introducing ambiguity into a contract can work out very poorly (and also takes control out of the hands of the parties). A recent case out of Florida, Boardwalk at Daytona Development, LLC v. Paspalakis, Case No. 5D15-1944, is a case where the court, faced with an ambiguous description of the land at issue in a contract, just threw up its hands in frustration.
The dispute between these two parties has been long and contentious. According to this article, it's dragged on for over a decade. It was originally rooted in an eminent domain proceeding in which Boardwalk at Daytona ("BDD")'s predecessor obtained property belonging to Paspalakis and the other appellees. The appellees contested BDD's acquisition of their land and eventually that lawsuit was settled. The settlement agreement provided the appellees with an option to purchase and operate 7500 square feet of retail space on the Daytona Boardwalk. The agreement contained no legal description or street address for the property at issue. The agreement said that the land would: (1) be adjacent to another particular business; (2) have a minimum of 50 boardwalk frontage feet; and (3) have sufficient land to build a 7500-square-foot, one-story building. Unfortunately for the appellees, there were at least three parcels of land that met this description, and they ranged drastically in size from around 7700 square feet to over 17,000 square feet.
The problem with the description of the land in the settlement agreement was exposed when the appellees tried to operate their option. BDD offered a piece of property that met all three criteria set forth in the settlement agreement. However, the property required unusual structural design features that troubled the appellees and also came with a negative easement for light, air, and unobstructed view that benefitted the BDD property next door. The appellees therefore objected to this plot of land and asked for another one.
BDD sought a declaratory judgment that the plot of land it proposed was sufficient under the settlement agreement and that it did not have to provide another plot of land. The appellees, in response, sought specific performance that BDD provide a plot of land fitting the description in the settlement agreement, without the restrictions of the land BDD had offered. In the face of the counterclaim, BDD shifted stance and argued that the settlement agreement was too ambiguous to be enforced.
The trial court sided with the appellees and ordered BDD to convey the largest possible plot of land to the appellees. BDD appealed, and this court agreed with BDD. The court noted that a description of the land in question is usually considered an essential part of any land purchase agreement, and that without any such description there are serious doubts whether the parties reached a meeting of the minds. The description of the land in the settlement agreement here was ambiguous. The trial court correctly examined parol evidence to try to resolve the ambiguity, but it didn't help. The contract terms at issue here simply could have been fulfilled by any of three very different parcels of land. To this court, there was no contractual way to choose between them and no parol evidence that shed light on which parcel of land the parties had in mind. Indeed, the court was skeptical the parties ever really agreed on which parcel of land would be conveyed, and so the parties never reached a meeting of the minds that could be enforced. Therefore, the court reversed the order of specific performance and entered judgment for BDD instead.
A bitter pill here for the appellees, who doubtless thought that they were getting something of value in the settlement agreement they struck and end up with nothing to show for it. But it does seem like there was considerable confusion about which land was affected by the situation here. I guess it's a lesson to all of us: try to be as specific as possible. I tell my students drafting contracts is frequently like playing a game of what-if with yourself. What if BDD offers this parcel of land instead of that parcel of land? If the answer to that question is that you would prefer one parcel of land over the other, best to be specific in the contract.
Monday, November 28, 2016
If you are looking for a case with a nice analysis of procedural and substantive unconscionability, a recent case out of Ohio, Christ Holdings, LLC v. Schleappi, Case No. 15 NO 0427, has one.
The case involved a right of first refusal that the defendants claimed was unconscionable. The trial court agreed with the defendants, but this court reversed the finding. The court started by looking at procedural unconscionability and noting that it requires consideration of "age, education, intelligence, business acumen and experience," etc. The court then presented in some amount of detail the education and employment history of both parties, concluding that their educational level is roughly equivalent but that the plaintiff did have more business acumen and experience than the defendant.
However, importantly for this decision, the court noted that the parties actually had a history of conducting real estate transactions between them without the aid of any attorneys, negotiating several times over the course of several years. To the court, this was an indication that both parties were knowledgeable in the particular type of real estate transaction at issue here, even if the plaintiff had more general business acumen.
The trial court had also been very concerned about the fact that the defendant had been operating under time constraints. But this court noted that the time constraints were not the plaintiff's fault: he gave no indication that he wouldn't have given her time to read the contract over if she had requested it (which she did not).
After finding no procedural unconscionability, the court then turned to substantive unconscionability. The trial court had found substantive unconscionability for a number of reasons, most notably, though, because this right of first refusal involved the licensing of mineral rights. The trial court asserted that rights of first refusal should be limited to real estate purchases, not to the leasing or licensing of real estate as was at issue here. The trial court seemed to think that rights of first refusal to license were unconscionable in and of themselves, without further inquiry into their terms. This court, however, said that there was no reason to so narrowly restrict the ability of the parties' to use rights of first refusal in their agreements. It found the right of first refusal to be enforceable and remanded for further proceedings.
Wednesday, November 23, 2016
A recent case out of West Virginia, Stiles Family Limited Partnership v. Riggs and Stiles, Inc., No. 16-0220, does a nice job analyzing the fact that an anticipatory breach must be unequivocal. The fairly straightforward facts could be a useful way of helping to illustrate this topic the next time you teach it.
The parties (all members of the same family) entered into a lease under which Riggs and Stiles agreed to farm the property at issue. The lease has been in effect since 2006 without dispute until 2013, when Riggs and Stiles allowed a production company to file an application for a permit to hold a music festival on the farm property. When Stiles Family Limited Partnership learned of the application, they objected; the following month, when they failed to convince the Partnership to allow them to hold the music festival, Riggs and Stiles withdrew the application, and no music festival was ever held on the property. However, the Partnership tried to terminate the lease, arguing that Riggs and Stiles had anticipatorily repudiated the lease when it permitted the filing of the application. The Partnership claimed that this permission by Riggs and Stiles demonstrated an unequivocal intent on their part to use the land for something other than farming, in violation of the terms of the lease, and it made sense to treat the lease as breached as the moment of application rather than having to wait for the music festival to actually take place.
The court disagreed, however. It was undisputed that Riggs and Stiles had at all times farmed on the land, never stopping and continuing to farm on the land even after the filing of the application. The application alone was not a breach of the promise to use the land only for farming, as it was undisputed that it was all Riggs and Stiles ever did. And continuing to farm the land was not consistent with an unequivocal repudiation of the lease, because it was actually what Riggs and Stiles was required to do under the lease. Performing consistent with the lease couldn't be considered an unequivocal repudiation of the lease. Moreover, when the Partnership informed Riggs and Stiles that it didn't agree to the music festival being held on the land, Riggs and Stiles withdrew the application for the permit. Rather than being an unequivocal intent to breach the contract, that displayed equivocation on the part of Riggs and Stiles: they sought to take actions to not breach the contract.
Wednesday, November 9, 2016
Here's a Nice Case to Use to Review Contract Formation, Conditions Precedent, and Promissory Estoppel
As we reach the end of the semester, I keep trying to remind my students of what we learned at the beginning of the semester, which was only a few weeks ago but feels like several lifetimes ago. As we turn our attention to our last topic of third-party rights, I don't want the students to forget the basics of contract formation. I want them to realize that contracts law builds on itself and is self-referential and so they can't just forget about the stuff that came first.
Anyway, I say all of that to lead into this nice recent case out of the Eastern District of Pennsylvania, Killian v. Ricchetti, Civil Action No. 16-2874, that deals with issues of contract formation, and then turns to promissory estoppel. Exactly as I keep trying to remind my students to do! So I couldn't resist writing this case up for the blog. It serves as a nice review of a lot of what we've learned and I think I may actually use it in class.
The alleged contract was a series of e-mails exchanged between two friends. The first e-mail set out a bunch of terms and ended with "there are more little details...it's a start." The response to the e-mail added a few additional terms. This, the court found, did not form a contract, because the response was not an acceptance but rather a counteroffer, due to the fact that it added terms. There was never any reply to that particular e-mail, so the counteroffer was never accepted.
After these initial e-mails, there were further e-mails between the two regarding the real estate transactions at the heart of the alleged agreement. Those e-mails were enough to form a contract as follows: The first e-mail read, "[W]hen the Pine [Street property] is clear title we form an LLC with an equal partnership of 50% . . . ." with some further details given. The reply to the e-mail was "OF COURSE," which constituted an acceptance. However, there was a condition precedent to this contract: that the parties receive clear title on the Pine Street property in question. Due to no fault of the parties themselves, they never received this clear title, so the condition precedent never occurred, so no duties to perform under the contract ever arose.
The court then turns to the promissory estoppel question, though. The court found here there were genuine issues of material fact whether there was a promise made and whether the other party acted in reliance on that promise. Similar issues of material fact existed for the unjust enrichment and qunatium meruit claims. Therefore, although the court granted summary judgment on the breach of contract claims, it denied summary judgment on the remaining claims.
Wednesday, October 26, 2016
We've been talking about contract interpretation in my Contracts class lately and I'm always struck by how many cases involve a lower court ruling of ambiguity and then an appellate court reversal of that ruling, because it always strikes me as such a funny thing. The very definition of ambiguity would seem to be "multiple people disagreeing on the meaning of the word," but the appellate court decisions in those cases necessarily have to dismiss the reasonableness of the lower court's understanding of the meaning in order to assert that the meaning is SO OBVIOUS. This always makes these cases feel a little more...condescending? Than the typical reversal. Like, "We don't know what you were so confused about, lower court, this is OBVIOUS."
A recent case out of California, Borgwat v. Shasta Union Elementary School District, No. C078692, is another example of this. The plaintiff, upon retiring from the defendant, was entitled to a monthly post-retirement contribution toward her "medical insurance coverage." For a couple of years, the defendant paid the contribution toward the plaintiff's dental and vision coverage. But then the defendant concluded that dental and vision insurance was not included in "medical insurance coverage" and ceased paying the contribution. This lawsuit resulted.
The lower court found the phrase "medical insurance coverage" to be ambiguous and allowed extrinsic evidence to illuminate its definition, including the fact that the defendant had initially paid the plaintiff the contribution for a few years. Therefore, the lower court endorsed the plaintiff's interpretation that "medical insurance coverage" included dental and vision insurance.
The appellate court here reversed, though, saying that "medical insurance coverage" was not an ambiguous term. The relevant section of the contract was Section 5.7 but the appellate court looked to Section 5.2, which dealt with benefits during the course of employment. In that section, the defendant had agreed to pay sums "toward the cost of medical, dental and vision benefit coverage." The fact that dental and vision were considered independent from medical insurance in Section 5.2 rendered the use of "medical insurance" in Section 5.7 unambiguous: It can't include dental and vision insurance, because the parties in Section 5.2 revealed that they didn't understand medical to include dental and vision insurance when they felt it necessary to list all three. For this reason, the appellate court refused to allow any extrinsic evidence, because the defendant's mistake in paying for the dental and vision insurance could not change the unambiguous terms of the contract.
So there you have it. OBVIOUSLY. :-)
Tuesday, October 18, 2016
I'm happy to report that my new book, The Fundamentals of Contract Law and Clauses, is now available. The book is intended to give students a working knowledge of contract law, meaning that they learn the meaning of contract clauses and how they are shaped and affected by doctrine. It's a textbook but it's not a casebook - it's intended to be used as a supplement in a first year contracts course or a primary text in a business school or undergraduate contracts law course. (There's a Teacher's Manual which is available to instructors adopting the book which contains discussion points and exercises).
It always seemed a bit strange to me to teach contracts law solely by using cases - this emphasizes how to win disputes rather than how to avoid them. This makes sense for litigators, but transactional attorneys (which I was for a decade) have a different role. As Mark Burge has pointed out on this blog, contracts is a good gateway to transactional skills but it's not easy to figure out how to do that seamlessly. Hopefully, this book will be an easy way to incorporate some "transactional skills" into a first year contracts course.