Tuesday, September 3, 2013
As I have discussed in previous posts here and here, I am for the first time teaching two, two-credit, seven week courses, called Contracts I and Contracts II. Part of the point of the minimester system (and of our curricular reform generally at Valparaiso University Law School) is to provide students with more frequent assessments so that they know through the term how well they are understanding the material and do not have to go into a final exam with no sense of what the outcome is likely to be.
Frequent assessments also provide throughout the term also help law professors integrate assessments into the learning process. We go over the assessments in class, and alarmed students are encouraged to talk though their difficulties with the material. Early assessments also helps us to identify students who need to be considered for our Academic Success Program.
But that is where anonymous grading comes in. I am all in favor of anonymous grading, but not for the reasons I think students usually favor anonymous grading. I think students want to be graded anonymously because they fear that faculty members will punish troublesome students with bad grades. That may indeed occur, but I favor blind grading because I would find it very hard to give very low grades if I knew who was receiving them. And the last thing I want to do is give a D or an F to a student with whom I have had some sort of conflict (e.g., see picture). It would be much easier to give such a student a higher grade in the hopes that she and I will never again cross paths.
The challenge I now face is negotiate the need to preserve anonymity while maximizing the effectiveness of assessment as a teaching tool. The problem is not acute for now, since, as I mentioned in an earlier post, because I have 140 contracts students this semester, all of my graded assessments during the minimester will be multiple choice. Since there is no danger of my bias affecting the grade of any particular student when the quizzes are graded by scantron, I am having the students use their real names on the quizzes. That way, I can track how they are doing and call them in for talks if I think they are in real danger. When they come to talk to me on their own, they will not be giving away any information (such as their exam numbers) that might influence how I grade final exams. I don't know what I would do if I had to grade written work. If I could not sit down with students and discuss their written work, the benefits of the assessment as a teaching would be greatly reduced.
I welcome suggestions as to how to achieve the goals of early assessment while protecting students' anonymity.
|1||4018||Multimodal Bill of Lading: The Problem of Party Liability
Nadezda Alexandrovna Butakova,
Russian Presidential Academy of National Economy and Public Administration (RANEPA)
|2||86||'Sticky' Arbitration Clauses?: The Use of Arbitration Clauses after Concepcion and Amex
Christopher R. Drahozal, Peter B. Rutledge,
University of Georgia - School of Law, University of Kansas School of Law
|3||75||Improving Contract Quality: Modularity, Technology, and Innovation in Contract Design
George G. Triantis,
Stanford University - Law School
Howard M. Wasserman, Dan Markel, Michael McCann,
Florida State University College of Law, University of New Hampshire School of Law, Florida International University (FIU) - College of Law
Gus De Franco, Florin P. Vasvari, Regina Wittenberg Moerman, Dushyantkumar Vyas,
University of Toronto - Rotman School of Management, London Business School, University of Toronto - Rotman School of Management, University of Chicago - Booth School of Business
|6||67||Duties of Love and Self-Perfection: Moses Mendelssohn's Theory of Contract
McGill University - Faculty of Law
|7||65||The Law and Economics of Norms
Juliet P. Kostritsky,
Case Western Reserve University School of Law
|8||61||A Theory of Contract Formation
School of Law, University of South Australia
|9||57||Carve-Outs and Contractual Procedure
Erin A. O'Hara O'Connor, Christopher R. Drahozal,
Vanderbilt University - Law School, University of Kansas School of Law
|10||50||'Frustration' in the Court of Appeal
Victoria University of Wellington - Faculty of Law
Thursday, August 29, 2013
As I mentioned before here and here, we at the Valparaiso University Law School have divided our semesters into two, seven-week minimesters. This change does not affect every course, but it does affect every first-year course. The minimester system gives us greater flexibility in our curriculum, and we have experimented quite a bit this year. Civil Procedure is now taught in the first and the last minimesters, Torts and Criminal Law are taught in the second and third minimesters, Constitutional Law has been moved to the second year to make room a new, two-credit Damages and Equity course, as well as two new courses, Foundations and Praxis.
One advantage of the minimesters is that our students get a meaningful sense of where they stand relative to their peers after just seven weeks of law school. In addition, faculty members are encouraged to give students frequent assessments throughout the minimester. In my contracts course (you can check out my syllabus on the court LibGuide), students have their first assessment this week. It is just a short multiple choice exam, but it gives them a taste of the sort of multiple choice questions they will face on the bar exam.
My assessments this year will all be multiple choice,* which is far from optimal, but that is because I have 140 students in two sections this year, and I cannot grade that many essay exams or other forms of written exercises in a timely way for so many students (unless I were to give up blogging, and that's not happening!). But I am supplementing these graded assessments with non-graded assignments that we go over in class and which students are encouraged to discuss with me one-on-one during office hours. In order to encourage them to do so, I am having lunch in our school cafeteria three days a week. I am hoping that conversations about contracts, the law and life in general will ensue in the normal course of things.
The jury is still out of course and will remain out until I receive the anonymous student evaluations, but there is a marked up-tick in the number of students who are coming to ask me substantive questions during my office hours. We are only in the second week of the minisemester, so usually at this point all I get is the occasional social call by a student who wants to make a personal, one-on-one introduction (which is a great idea), but this year students are coming to show my their case briefs and to make sure they are getting the concepts.
This is how I always imagined teaching would be, but over the past few years, student traffic to my office had declined radically, until I started thinking of "office hours" as the hours of largely uninterrupted time when I get work done in my office or meet informally with colleagues. I think my students' increased diligence is also explained in part by the fact that we now have a Foundations course in which students focus on the basic skills they need to develop in order to survive in law school and succeed as attorneys. We are engaging in a bit of libertarian paternalism and nudging our students in the direction we want them to take. And that direction leads to my office door (or my table in the cafe).
*I add the following clarification -- my assessments during the minimester are multiple choice. There is still an essay component to the final exam.
Wednesday, August 21, 2013
This is the third in a series of posts in our online symposium on the Contracts Scholarship of Stewart Macaulay. More about the online symposium can be found here. More information about this week's guest bloggers can be found here.
Kate O'Neill's is Professor of Law at the University of Washington School of Law. Her principal interests are contracts, copyright, legal rhetoric, and law school teaching.
These essays present enlightening, provocative, and well-written analyses of relational contract theory, contract doctrine, legal practice, and social justice. The editors have sequenced and grouped them skillfully so that the reader can clearly see how the authors’ ideas intersect and diverge. As a result, the collection is more than its parts.
I want to draw readers’ attention to a problem the collection suggests but doesn’t address directly. What are we going to do about the contracts course in law school?
Several essays suggest, and Robert Scott’s expressly argues for, an emerging consensus that Macaulay’s original insights remain valid and are foundational for both law & economics and law & society theorists and that these warring camps may have more in common than either has yet recognized. If Scott and Macaulay are right, then I would wager that most contract courses not only fail to reflect the consensus but camouflage its most promising lessons.
The consensus seems to include two major points of agreement. First, unmessy doctrine can be handy (“Messy,” of course, was Macaulay’s description of much contract doctrine). Some “sophisticated” contracting parties should be able to make binding commitments on precisely the terms that they negotiate and, in case of dispute, they should be able to limit a judge’s interpretative discretion to alter their allocations of risk. In particular, they should be able to preclude the judge from resorting to “context” to alter the (presumably) plain meaning of the terms.
Second, consumers and employees should not necessarily be bound by all of the commitments purportedly imposed upon them by adhesion documents. Here, we can see fruit borne from Macaulay’s distinction between the real deal and the paper deal. Terms that are reasonable, typical, or expected are part of the deal; terms that are not are not. The expected nature of the relationship dictates the real contract terms; the paper contract terms do not necessarily govern the relationship. We are freed from the mutually exclusive and entirely fictional alternatives that either a contract was formed on the paper terms or it was not formed at all.
On the other hand, the collection makes clear that a fundamental policy issue remains contested especially in the consumer context – how much contract law should intervene in the market. The familiar alternatives are reflected: 1) let the market discipline bad actors even if there are a few casualties before the market works its magic because there is no agency more capable than the market in determining best (read, efficient?) practices; 2) let judges intervene to strike down bad terms – especially those that limit access to courts and class actions – because doing so will hasten market discipline of bad actors and will also relieve hardship in at least a few cases; or 3) regulate certain kinds of terms out of existence.
All the authors think that empirical data could help resolve the policy dispute. Edward Rubin, in particular, suggests that we think of contract law as a management tool. If we were to focus on whether the tool works well to achieve whatever objectives we set, then the legal system could essentially be taught to treat empirical evidence as intrinsic to the development of law. This is encouraging stuff. A systemic devotion to empiricism within the legal system might enable us, and the body politic, to clarify debates about what laws are fair and efficacious.
So far, so good, but here is the question that keeps troubling me. If we all are relationists and empiricists now, and we could use data to make contracting law and practice both fairer and more efficient (or whatever other goals we might conceivably agree upon), what and how we should teach law students?
Macaulay has taught us that contract law has relatively little explanatory power for many of the actual practices involved in the formation, performance, and modification of exchanges, or even the practices involved in resolving disputes. Serious attention to the nature of exchange relationships makes it hard to characterize contract law as unified, coherent and consistent or if it is unified theoretically, the unity operates at such a high level of abstraction that will matter little to judges or practitioners.
We praise these and other insights from empiricism both for what they tell us about law and society now and what they might teach us about alternatives. Yet most lawyers and judges plod on, oblivious or dismissive. Are we in part responsible? Look at our casebooks, listen to our classroom discussions! Traditional doctrinal analysis is alive, well, and I suspect dominant. Economic analysis “lite” has crept in, but attention to empirical methods, much less data on context or consequences, is scant. I suspect that even those of us who assign “law & society” contracts casebooks, like the ones edited by Macaulay and Deborah Post, still devote the bulk of class time to doctrinal analysis.
Perhaps this must be. Perhaps doctrinal analysis is our discipline’s unique identifier and must be taught first because it is foundational; perhaps we need to train litigators to understand the elements of a claim for breach; perhaps there is some utility in using the same basic case method in all 1L courses; or perhaps we are simply boxed in by student expectations, bar examiners, tradition, or confusion about what else to do?
Although there certainly are barriers to changing what and how we teach, I wonder if the core problem is that the work that needs to be done is profoundly interdisciplinary, challenging, and time-consuming. Many of us lack the skills to do it alone, and the scholarship, promotion standards, and instructional traditions at many law schools still make collaborations difficult.
Contracts teachers may alert law students to Macaulay’s insights, but I don’t think we give students sufficient tools to help clients and or work effectively on big systemic problems. Stewart might say that’s because we kinda like the mess the way it is.
[Posted, on Kate O'Neill's behalf, by JT]
Monday, August 19, 2013
When I started graduate school in 1986, people were saying that the early 90s were going to be a great time for newly minted history Ph.D.s. Universities had exploded in the 60s, and a lot of tenured faculty members were due to retire. There were going to be a lot of openings in a lot of fields. And of course, none of us graduate students were worried in any case because we were young and indestructable -- all brilliant and all certain to continue to be at the top of our fields.
But the people who were hired in the 60s didn't retire, and many of those who did retire were not replaced or were replaced in non-traditional fields. The year I got my Ph.D. (1993) ended up being pretty dismal for newly minted Ph.D.s, and I never found a tenure-track job in history. I never came close. I was on the market for five years and never even got an on-campus interview for a tenure track job at any of the hundreds of universities, colleges, technical colleges and private high schools to which I applied.
When I tried repeatedly and failed repeatedly to get a job teaching history, there were structural problems with gradaute programs in history. Lots of programs were admitting far too many students. They were doing so because gradaute students were a cheap labor supply for teaching (or T.A.ing) undergraduate courses and because faculty members wanted to have graduate students to work with. History departments wanted to develop their Ph.D. programs because that enhanced the reputation of the program and of the university. But there weren't enough jobs, and history programs were not really training people to get jobs, since graduate students were either taking obscure upper-level courses or were working on their far more obscure dissertations that they were hoping to publish as scholarly monographs that only libraries would buy and only other professional historians in their narrow sub-field would read. That remains the model for doctoral programs in history, and the model remains broken. I have no idea why the typical history doctoral student in this country spends at least five years working on a book that almost nobody will read when they could just as easily devote their time to writing 3-5 historical essays of publishable quality which, when published, will eventually be in a database where they will be full-text searchable and actually of use to other scholars and laypeople alike. Harumph!
Contrast that with the feverish if not frenzied innovation that is currently underway in the legal academy. Schools are experimenting in every imaginable way -- reducing faculty and administrative staff, decreasing class size, and most importantly, adjusting the curriculum to better prepare today's students so that they can pass the bar and also be ready to start practice in a legal environment where more seasoned lawyers have very little time to train new attorneys. Those who criticize law schools for being slow to react to the new market for attorneys need some context. The legal academy has been incredibly responsive, and the only questions are whether they have resopnded in the right ways and whether they have correctly identified as either long-term or merely cyclical the problems in the market for attorneys.
My Law School (Valparaiso) is no different, but it is unique. That is, we have been scrambling to figure out better ways to serve our students (just like everyone else), but we have come up with a new curriculum that is unlike any other that I have heard about. On the blog, I just want to talk about how we are transforming the contracts course, but there is a lot more to our new curriculum.
I have already blogged about our LibGuide, which is being curated by our librarian, Jesse Bowman (pictured). I will have a great deal more to say about the LibGuide as it continues to develop, but today I want to talk about our new seven-week minimesters.
Today is the first day of our first minimester. We will be teaching a two-credit Contracts I course for seven weeks. We will then have a break for exams, to be followed by another two-credit, seven-week course, Contracts II. One purpose of the minimester system is to enable us to assess our students and give them meaningful feedback as early as possible in the course of their legal education. So, rather than having a huge exam at the end of the semester, with very little sense of their chances of success on the exam, our students will have frequent assessment throughout the minimester and an exam at the end. The final exam will still be important, but it will only account for part of their grade in a two-credit course, and they should have some notice, based on assessment throughout the semester of where they likely will fall relative to their peers. Since no minimester course counts for more than two-credits, we will not have the phenomenon that sometimes occurs at schools where Property or Civ. Pro are five-credit, one-semester courses, and students neglect other courses in favor of hunting the semester's big game.
At the same time, my doctrinal colleagues and I are working closely with our skills faculty (and there is a great deal of overlap) to coordinate exercises and assessments in doctrinal courses with the subject-matter of our skills courses. Those too have been re-conceived and re-configured from the ground up based on our assessment of where our students are in terms of their preparation for law school and what they need to get them ready for practice.
I will be blogging throughout the semester about the LibGuide and the minimester system. I am really excited about this experiment and eager to see how it works for our students.
Thursday, August 15, 2013
According to Ken's post, he offered his services as a drafting instructor to two prestigious law schools (Ken has been teaching drating courses every Fall since 2005) and was told that those schools don't offer stand-alone contracts drafting courses. Rather, they teach contracts drafting in the context of courses on "Deals."
Ken has eloquent arguments in favor of stand-alone contracts courses, and the comments sections add further support for his position. He will get no argument here. I agree with Ken that drafting should be a stand-alone course, and I suspect that it is at most law schools. Still, I think there are reasons for teaching drafting as part of a substantive course that Ken does not consider, so I throw them out there:
One of the knocks on contemporary legal education (see, e.g. The Carnegie Report and Best Practices) is that the components of legal education (doctrine, practical skills, ethics) have been compartmentalized such that the students do not learn how to become lawyers in the proper contexts and have difficulties translating theoretical constructs into the actual practice of law. So, in an ideal world, one would learn contracts drafting in the context of a substantive course in which one also learned about the legal and business environments in which real contracts are drafting. Such a course would (again, in an ideal world) also include simulations in which students could learn other practical lawyering skills (client counseling, negotiation, etc.), as well as confront ethical challenges.
In a previous post, we called attention to Deborah Zalesne and David Nadvorney's Teaching to Every Student: Explicitly Integrating Skills and Theory into the Contracts Class, which can be used in a course that covers both doctrine and skills. So, I think the sort of integrated approach that certain, unnamed, prestigious law schools are attempting has its theoretical appeal. For my part, since I have only four credits and fourteen weeks to take studens from zero to Llewellyn, I am grateful that my law school has a separate contracts drafting course that students can take in the second year. That doesn't mean that practical exercises have no place in a first-year contracts course, but given everything else we try to accomplish in that course, we can only offer a taste of drafting in the first year.
Tuesday, June 4, 2013
Legal education is being transformed before our eyes. In part, this transformation has been so gradual that it has gone unappreciated. I routinely read critiques of legal education that seem to be based on the assumption that we all still teach like Professor Kingsfield. I know of very few people who still use that sort of strict Socratic method. Most doctrinal law teachers that I know teach through a mix of soft Socratic method, lecture, problems and discussion. But a great deal of the curriculum at most law schools is now dedicated to skills training, externships, co-curricular activities (moot court competitions, trial advocacy, journals, etc.) and of course clinics.
In the face of blistering criticism of legal education, law schools have been striving to demonstrate a commitment to reform, often by bolstering, highlighting or simply re-packaging existing programs. But to the extent that real change is occurring, it is often based on our intuitions about what ought to work for our students rather than on actual evidence of what works. As Holmes tells Watson, “It is a capital mistake to theorize before one has data. Insensibly one begins to twist facts to suit theories, instead of theories to suit facts.” But the partnership that produced Teaching to Every Student: Explicitly Integrating Skills and Theory into the Contracts Class bridges the gap between theory and facts. Deborah Zalesne is a contracts scholar at CUNY law and David Nadvorney is the director of academic support programs at CUNY. They have worked together for years to make certain that their pedagogical strategies actually work for their students
Introducing new approaches to the legal curriculum involves teaching old dogs new tricks, because law schools have to work with the faculties they’ve got. I consider myself a moderately old dog. I cannot easily abandon my doctrinal/theoretical approach to focus in my doctrinal courses on skills training and bar preparation. I need guidance to help me work on my approach. Nadvorney and Zalesne provide such guidance for contracts profs in Teaching to Every Student. The book is slim and affordable (under $30 on Amazon), and I think its approach is unique – or at least highly unusual – in that the authors insist on incorporating theoretical perspectives while also highlighting their very practical, skills-based approach to teaching first-year contracts.
Their approach to teaching contracts focuses on three areas of training: academic training, which includes everything from case briefing to exam preparation; legal reasoning, which includes the traditional skills set that enables students to learn how to issue spot and apply rules to unique factual situations; and theoretical perspectives, which encompasses learning theory, identifying and critiquing theoretical approaches, and integrating such approaches into advocacy.
The book can be a wonderful supplement to any casebook (or whatever other materials one chooses to use). It comes complete with in-depth sections on each of the three areas of training mentioned above, exercises, sample syllabi and some edited cases.
Even if one chooses not to adopt the book, I recommend it to law professors interested in looking for new stimuli that will enable them to shake up their approaches to teaching
Thursday, May 9, 2013
For many lawyers, To Kill a Mockingbird (TKAM) is at the top of their list of "favorite books/movies about a lawyer." TKAM is about more than lawyering, of course. It's about racism, family, class and much more. This week, TKAM also is about "fraudulent inducement," "consideration" (a lack thereof) and "fiduciary duty." All of those subjects are in the complaint filed by TKAM author, (Nelle) Harper Lee, against her purported literary agent.
In the suit, Lee alleges that Samuel L. Pinkus (and a few other defendants) fraudulently induced her to sign her TKAM rights over to one of Pinkus's companies in 2007 and again in 2011. According to Lee, Pinkus, the son-in-law of Lee's longtime agent, Eugene Winick, transferred many of Winick's clients to himself when Winick fell ill in 2006. Pinkus then allegedly misappropriated royalties and failed to promote Lee's copyright in the U.S. and abroad.
For Contracts professors, the Lee v. Pinkus suit provides some interesting hypos to discuss when teaching fraud, consideration, and assignments of rights. Regarding fraud, Lee alleges that Pinkus lied to her about what she was signing at a time when she was particularly vulnerable due to a recent stroke and declining eyesight. Consideration is in play because there allegedly was no consideration from Pinkus to Lee in exchange for Lee's transfer of rights to Pinkus. Assignment issues arose because the many companies who owed Lee royalties reportedly struggled to figure out which company or companies they should pay given Pinkus's many shell companies. Overall, it's a sad story for Ms. Lee but one that students may find particularly engaging.
[Heidi R. Anderson]
p.s. Although there are many quote-worthy passages in TKAM, a favorite of mine (useful when advising students about their writing) is: “Atticus told me to delete the adjectives and I'd have the facts.” Please feel free to share your favorites in the comments.
Friday, May 3, 2013
So, here's an interesting problem I'm facing. I taught sales for the first time this semester. I would say I devoted about 2/3 of class time to going over problems. In order to maximize active learning, I had the students hand in written answers to three of the problems each week, and that homework counted cumulatively for 40% of the grade).
My students were amazingly diligent, often looking up cases referenced in the questions and reading through the comments to Article 2 of the UCC. I don't know what all the students thought about the assessment system, but a few have told me that they appreciated the fact that they had no choice but to keep up with the material, even if answering the questions was time-consuming and often frustrating because of either ambiguities in the Code or tensions between the Code and the caselaw.
But here's the problem. I wasn't born yesterday. Now that there has been a group of students that has taken the course with me, their notes, including their answers to the homework problems, will circulate. I think it is unrealistic to expect students (especially 3Ls) to refrain from consulting such excellent authority when answering the questions. Unfortunately, the mystic chords of memory will swell when touched not by the better angels of our nature (as represented at left), but by a consultation with last year's students' answers, leading to idle minds with which devils (represented at right) are just as happy to play as with idle hands.
So how can I re-create this year's experience without coming up with my own original questions every time I teach the course?
Any suggestions -- from any perspective: law prof, student, interested practitioner -- would be most welcome.
Wednesday, May 1, 2013
We previously blogged about high-profile reward offers by Donald Trump, Bill Maher, a laptop-seeking music producer, and a Hong Kong businessman. Only one of those (the producer) led to an actual lawsuit. The latest reward offer in the news involves murder.
In February of this year, the City of Los Angeles and other entities collectively offered a $1 million reward for information regarding Chris Dorner. Dorner was the former policeman and Navy officer who (allegedly) killed four people, including two policemen. The manhunt for Dorner, labeled the "Cop Killer," reportedly was one of the largest in LA County's history.
One of the people claiming the reward, Rick Heltebrake, has filed a breach of contract suit in LA Superior Court (the complaint can be obtained here but only for a fee). Heltebrake is suing the City of Los Angeles, and supporting entities for $1 million and is suing three cities that offered separate $100,000 rewards related to Dorner. Heltebrake was a carjacking victim of Dorner's. After he escaped, Heltebrake called the police and told them where they could find Dorner. Because Dorner was found at the location Heltebrake identified, he is seeking the rewards.
The contract controversy is one of interpretation. The rewards reportedly were available for "information leading to the apprehension and capture of" Dorner, for the "identification and apprehension" of Dorner, for the "capture and conviction" of Dorner, and for "information leading to the arrest and conviction of" Dorner (I do not have the complaint so these excerpts are cobbled together from TMZ, Courthouse News Service, ABC and other sources). Police charged Dorner on February 11, 2013. Heltebrake called police on February 12. On February 25, after a shootout with police and structure fire, Dorner was found dead from an apparently self-inflicted gunshot wound.
Given the above facts, some of the intepretations questions are: (i) whether the authorities' shootout and recovery of Dorner's body qualifies as "apprehension" or "arrest," (ii) whether the "and" between "identification and arrest" or between "capture and conviction" means that both are required in order to collect, and many, many more. A complicating factor is that the $1 million reward was merely announced on TV; no written record was made. At least one reward offeror, the City of Riverside, has stated that the lack of a "conviction" means that it won't pay. Although this is a tragic story, I may mention it the next time I teach the Carbolic Smoke Ball case.
If anyone is able to find the complaint for free, please post a link in the comments.
[Heidi R. Anderson]
Thursday, April 25, 2013
It's the end of the semester which means that I'm finally covering third parties. One of my favorite (and pretty simple) cases in this unit is Rumbin v. Utical Mutual Insurance, Co. Mr. Rumbin, who had settled a personal injury case, was due regular payments under an annuity purchased by Utica and issued by Safeco. When he faced foreclosure and other financial hardships, Rumbin sought a declaratory judgment approving his assignment of rights to J.G. Wentworth. After a student recites the facts, I often pause the class to ask, "How many of you have heard of Mr. Wentworth before?" Usually, about half of my class has heard of him while the other half is thinking, "J.G. who?" For those who haven't heard of him, I offer this clip, which sums up Mr. Rumbin's situation rather nicely and features Mr. Wentworth himself at the end as the conductor:
If you watch and later find a way to get the "877-CASH-NOW" earworm out of your head, please let me know. I've been stuck with it for nearly 24 hours now.
[Heidi R. Anderson]
Monday, April 22, 2013
A lot of very smart contracts scholars, including to name just a few, Omri Ben-Shahar and Lisa Bernstein (here), Victor Goldberg (here), and Peter Siegelman and Steve Thel (e.g., here), have thought long and hard about the seeming conflict between UCC § 2-713 and the general principles of damages set out in UCC § 1-305 (formerly § 1-106). Most of them support the ruling in Tongish v. Thomas, to which I have just been introduced in teaching Sales for the first time this semester. I am uncomfortable with the decision for two reasons, which I will set out below.
But first, a brief summary of the case: Tongish agreed to sell his sunflower seeds to the Decatur Coop Association (the Coop) for a fixed price. The Coop had a deal with Bambino Bean & Seed, Inc. (Bambino) to sell the seeds to them for whatever price the Coop paid plus $0.55 per 100 pounds. The price of seeds went up and Tongish breached. The trial court awarded the Coop its lost profits, which came out to $455.51. The Court of Appeals vacted that award and remanded the case for a calculation of damages based on UCC § 2-713 (and the Kansas Supreme Court upheld that ruling). UCC § 2-713 allows a buyer to recover the difference between makret price at the time buyer learned of the breach and the contract price. Under this section, the Coop would recieve not $455 but something like over $5500, despite the fact that it would not have been able to charge Bambino anything more than what it paid Tongish for his seeds. In short, under the damages awarded by the appellate courts, the Coop gets about $5000 more than expectation damages.
I do not like the result, at least not based on the court's reasoning. Subsequent law review articles (cited above) provide more sophisticated defenses of § 2-713 based on economic theory. I cannot address those arguments here. Instead, I focus on two issues: fault and contract and the court's characterization of UCC § 2-713 as a "statutory liquidated damages provision."
First, the case is grist for the mill of Friend of the Blog, Steve Feldman, who has been trying unsuccessfully for years to persuade me that courts not only do consider moral fault in assessing damages but should do so. In Tongish, the Kansas Court of Appeals distinguished the case from a California case, Allied Canners Packers, Inc. v. Victor Packing Co. In Allied, the California court limited the buyer's remedy to actual loss. That case was different, says the Kansas court, because in Allied, the seller's crop had been destroyed and so it had no goods that it could deliver to buyer. Here, Tonigish breached simply becasue the price went up, and so "the nature of Tongish's breach was much different" from that in Allied, because the Kansas court found, "there was no valid reason" for Tongish's breach. Whether or not the court is right that there was no valid reason for the breach depends on one's views on the doctrine of efficient breach. More to the point, I find no language in the UCC that indicates that the measure of damages turns on the state of mind of the breaching party. That is, where in the UCC does it say that whether or not one can recover damages in excess of actual loss depends on whether the breach was innocent or willful?
The Kansas court then proceeds to an actual statutory analysis and notes the principle that a specific clause (in this case § 2-713, which the court reads to provide damages in excess of actual loss) trumps a general clause (§ 1-305, which limits damages to expectations). Allowing the specific clause to trump the general clause generally makes sense, but I would invoke another canon of contruction and read § 1-305 as articulating the general remedial scheme in light of which the remainder of the Code is to be read. Section 1-305 puts parties on notice that, unless they set out their own remedial schemes, though allocation of risk, liquidated damages and the like, they should expect that traditional expectation damages will be the most they can hope for in case of breach.
Read in that light, § 2-713 does nothing more than describe the usual mechanism for calculating expectation damages. It does not contemplate a contract such as the one at issue in Tongish in which the Coop, very far from demanding liquidated damages in the case of breach, has protected itself against loss by linking its purchase price from Tongish to its sale price to Bambino. In so doing, it invited the very sort of efficient breach in which Tongish engaged, and it is absurd for it to now to claim entitlement to (effectively) a disgorgement remedy when it failed to negotiate such a remedy at the time of contracting.
The Kansas court cites to Robert Scott's argument that limiting recovery to lost profits in such cases creates market instability by encouraging breach if the market fluctuates to the seller's advantage. Applying § 2-713 to permit recovery of damages in excess of actual loss, on the other hand, "encourages a more efficient market and discourages the breach of contracts," says the court. Once again, that determination turns on one's understanding of efficiency. In any case, to the extent that the circumstances in Tongish encouraged breach, they were entirely a product of the way the parties drew up their contracts. They in effect, allocated the risk of breach to the Coop, which had protected itself by finding a buyer who would accept any price so long as it was the same price as what the Coop had paid, plus a $0.55/100 lb. handling fee. To allow the Coop to recover cover costs on top of lost profits actually creates an incentive for sellers with contractual protections such as the Coop had, to encourage breaches, since the court allowed them recovery ten times in excess of their actual harm.
Thursday, April 4, 2013
I thought I might jump on the “classroom posts” bandwagon and blog a little about something I have been trying to do more of in my Contracts class – incorporate contract clauses in class discussions. What I typically do is introduce a contract provision when I’m wrapping up a particular topic. For example, when we finished up the section on substantial performance (and breach and conditions- it’s hard to talk about one without the other, IMHO), I asked my students about the meaning and effect of this provision:
“ TIME SHALL BE OF THE ESSENCE IN THE PERFORMANCE OF THE OBLIGATIONS UNDER THIS AGREEMENT. “
The phrasing sometimes throws off students – what’s this “of the essence” business? But they realize that the provision indicates that the timeliness of performance is important to the parties. In other words, if the services are to be performed according to a schedule, they intend to stick to the schedule. More to the point, without such a clause, a court will probably not find a small delay to be a material breach. With the clause, even a short delay may constitute a material breach - which brings me to substantial performance. A material breach has legal effects, one of which is that a party who has materially breached has not substantially performed -- and so can’t recover expectations damages under the doctrine of substantial performance. A material breach also excuses the other party’s performance.
The clause illustrates how the different doctrines work together, and given the emphasis on “skills” teaching, underscores that doctrine and skills are really intertwined. (I’m not sure how anyone can effectively teach skills without a good grasp of the underlying doctrine). Another reason to introduce contract clauses is to help my students overcome the automatic response that most normal people get when they see boilerplate – glazed eyes, numbing sensation, urge to do something more exciting. My hope is that once they learn the legal meaning behind the legalese, reading a contract will be a more engaging and rewarding experience.
Tuesday, April 2, 2013
A student recently sent me this story as an example of a liquidated damages clause gone awry, at least for the contractor. The contractor, Crystal Corp., was supposed to remodel a building to be the new location for a restaurant, Kuroshio, by September 30th. The work was not completed until late December. The contractor does not appear to be contesting whether there was a breach. However, he is contesting the damages.
The contract apparently contained a liquidated damages clause that specified a per-day penalty for any delays. It also required Crystal to notify Kuroshio, in writing, of any delays, and the reason(s) for those delays. Crystal did not supply the required notice. And, because of the length of the delay, the contractor now reportedly owes more money to Kuroshio than he is owed for completing the work. Further, because the contractor has not been paid by the restaurant, he reportedly has not paid his own employees. Thus, the contractor and/or his employees have taken to the street in front of the restaurant. According to AnnArbor.com, they protested in front of the restaurant every evening for over a week (there's no obvious update since late March). A protester's photo is available here.
I thought this case was a good one to mention in class because it's not every day that a contract dispute leads to public protest. More specifically, I hope to use this dispute to illustrate how liquidated damages clauses may not be enforceable (the cases in the text I use, Kvassay and O'Brian, are great but a present day example always seems to work better for cementing the material into students' minds).
I also hope to use this dispute as an example of another theme I stress in class. I tell my studentes that, as a deal lawyer, they'll often have to be the most negative person in the room. They have to ask many "what if" questions of their clients before suggesting they sign contracts. For example, "What if...you get inside and find out that the HVAC system is in terrible disrepair? Are you going to want to pay the per-day penalty in that situation? If not, then we need to revise the contract because, as written, you're going to be on the hook for the daily penalty no matter what." I'm not sure how much of this they'll remember but I'm hopeful that at least some of it will stick with them.
[Heidi R. Anderson, h/t to student Michael DeRosa]
Monday, April 1, 2013
Having recieved comments from numerous quarters, including from this blog's own Meredith Miller, the ABA Task Force on the Future of Legal Education, has announced that it is recommending that all areas of law now be understood as subsidiaries of contracts law. In addition to recommending that all law schools require their students to take six hours of contracts in the first year, the Task Force is recommending that second year students take required courses in Sales, Leases, Licensing and International Sales. Those courses, including related live-client courses, simulations, moot court and trial advocacy competitions, and practica, will constitute much of the second year curriculum.
According to the Task Force sources who asked not to be named because the Task Force's report has yet to be released officially, those elements of the reform proposal were uncontroversial. "Everyone recognizes that all lawyers need a firm grounding in contracts and contract-related areas. The only question disagreement on the Task Force was over whether six credits in the first year was enough. Some members wanted 24."
Somewhat more controversial is the Task Force's recommendation that other areas of law be subsumed within the law of contracts. According to our source, the Task Force is recommending that both Constitutional Law and Criminal Law be re-conceptualized as constituting either actual contracts or social contracts best understood with the traditional doctrinal tools of contracts law. The Task Force concedes that this innovation was in part driven by a desire to reduce students' text book costs. "All they have to buy is one, maybe two books by Randy Barnett, and they are covered," according to our source. In addition, the Task Force recommends that International law courses will now be divided into Private International Contracts and Public International Contracts (Treaties).
When asked if the Task Force anticipated difficulties persuading faculty members from other doctrinal areas to re-conceive those areas in terms of contracts law, our source told us that the Task Force considered the question and could not conceive of a doctrinal area that would not be better understood through contracts doctrine.
UPDATE: THE FULL TASK FORCE PRESS RELEASE CAN BE FOUND HERE.
Friday, March 8, 2013
Survey in Connection with Upcoming Symposium on Contracts Casebooks
The Washington Law Review is preparing to host a print symposium in December 2013 on the exciting new contracts book, Contracts in the Real World: Stories of Popular Contracts and Why They Matter, by Prof. Lawrence A. Cunningham of George Washington University (published by Cambridge University Press in 2012). This innovative text embraces a modern, narrative approach to contract law, exploring how cases ripped from the headlines of recent years often hinge on fundamental principles extracted from the classic cases that appear in contracts casebooks. Such an approach suggests new ways to imagine modern casebooks.
In addition to an article by Professor Cunningham, the WLR will also publish pieces in the December 2013 issue of the Washington Law Review by, among others:
Before the symposium, participants are interested in learning from contracts professors around the country. The purpose of this survey is to gather information about the material being taught in contracts classes, and the advantages and/or deficiencies of the approaches taken by current contracts textbooks.
The WLR would be grateful if you would complete our online survey by April 15.
The information (in both aggregate form and by individual response) will be distributed to the symposium’s participants, and may be reprinted in the Washington Law Review. Although the survey can be completed anonymously, the WLR invites you to leave your name for attribution if your responses are included in our symposium issue.
Thank you very much for your thoughts,
Monday, February 18, 2013
"Entrusting" includes any delivery and any acquiescence in retention of possession regardless of any condition expressed between the parties to the delivery or acquiescence and regardless of whether the procurement of the entrusting or the possessor's disposition of the goods have been such as to be larcenous under the criminal law.
Notwithstanding the clearly expansive nature of the doctrine, my students would not accept that, for example, a mechanic with whom you had left your car for repairs could sell same car and your only remedy against the mechanic (under the UCC) would be a suit for damages. When I informed them of the true state of the law, their outrage was unquenchable.
"You could still have the authorities pursue criminal charges for theft," I offered.
Not good enough.
Backing away from the lectern and eyeing the emergency exit, I pleaded, "There are likely state statutory protections that would enable you to recover the car. After all, the buyer is going to have a problem when he tries to register title to the car."
Still not satisfied.
Finally, left with no other choice, I threw Karl Llewellyn under the bus. "Look, I just teach this stuff," I said. "I didn't draft the UCC. Blame Karl! Blame Karl!! Blame Karl!!!!
I put up a white flag from the teaching station that I was hiding behind to avoid the projectiles headed my way, and then it came to me. "Wait," I said. "Let's talk about Kahr v. Markland." In that case, a man gave Goodwill a bag of clothes. Unbeknowst to him, the bag also included valuable sterling silver. The court held there had been no entrustment because Kahr intended to donate the clothes but not the silver. It's reasoning is as follows:
An entrustment requires four essential elements: (1) an actual entrustment of the goods by the delivery of possession of those goods to a merchant; (2) the party receiving the goods must be a merchant who deals in goods of that kind; (3) the merchant must sell the entrusted goods; and (4) the sale must be to a buyer in the ordinary course of business. ( Dan Pilson Auto Center, Inc. v. DeMarco (1987), 156 Ill. App. 3d 617, 621, 509 N.E.2d 159, 162.) The record establishes there was no delivery or voluntary transfer of the sterling silver because plaintiffs were unaware of its place in the bags of clothes.
But wait! Whence the court's notion that "there was no delivery or voluntary transfer"? Saying that there was no delivery in this case is more than a stretch. It's simply factually untrue. And saying that the transfer was not voluntary turns on what the term "voluntary," means. Nobody put a gun to Kahr's head. He just made a mistake. In any case, voluntariness is not an element of the test for entrustment as laid out by the Kahr court.
Of course, I merely thought all these things. I didn't say them for fear of my students' wrath.
But how about this hypothetical based on personal experience: I donate a bunch of books to Goodwill, including an old copy of Atlas Shrugged with a hideous paper cover on it. One week later, my wife asks me where her copy of Atlas Shrugged is. Since she is always after me to clear away old books that we are not going to read or re-read, I proudly announce that I delivered it to Goodwill.
Her jaw drops. "But that was a first edition bearing the inscription, "I know who John Galt is, It's you. Yours, with a passion hot enough to forge Rearden steel, Ayn." We rush to Goodwill, but we are too late. The book was snapped up faster than a locomotive powered by an engine that transforms atmospheric static electricity into kinetic electricity. Did I entrust it to Goodwill?
There is a bit of a discussion of the Kahr case on The Faculty Lounge blog.
Tuesday, February 12, 2013
I recently covered the implied duty of good faith and fair dealing in part through the fun case of Locke v. Warner Bros. In Locke, the LA County Superior Court found that Warner Brothers' alleged failure to even consider Ms. Locke's movie proposals could violate the implied duty of good faith and fair dealing in their contract. Although Warner Brothers was not obligated to produce Ms. Locke's projects, it was obligated to exercise its discretionary power regarding her proposals in good faith. If Warner Brothers had, as Ms. Locke alleged, never actually considered her proposals, it would have violated their contract.
After Ms. Locke survived summary judgment, the case later settled. Prior to that time, Ms. Locke also had suggested that Warner Brothers never seriously considered her proposals as a favor to her ex, Clint Eastwood. Locke and Eastwood had worked together on the movie, The Outlaw Josey Wales (poster pictured to the right), and cohabitated for several years therafter. When the two actors split, Eastwood allegedly convinced Warner Brothers to give Locke the "first look" deal as part of his settlement with her and perhaps had even reimbursed Warner Brothers for the money it paid to Locke under its deal with her.
Inspired by this tale of love and faith lost, student Catherine Witting crafted the following limerick and authorized me to share it with the world.
Locke sued the Dubya B,
Saying "Don't you patronize me!
Clint may pay the bill,
But discretion is still
Subject to good faith guarantee!"
For a more recent case that tracks the facts of Locke, see this post regarding director John Singleton from 2011.
Yesterday, I bellyached about a Ninth Circuit opinion with which I disagree. Today, I would like to complain about a Second Circuit decision with which I disagree, although not quite so passionately. The case is Bayway Refining Co. v. Oxygenated Marketing and Trading. The relevant facts are pretty simple. Oxygenated Marketing and Trading (OMT) send an order to Bayway Refining Co. (Bayway) for 60,000 barrels of a gasoline blendstock. Bayway sent a conflirmation that specified all of the relevant terms of the agreement and also included the following language:
Notwithstanding any other provision of this agreement, where not in conflict with the foregoing, the terms and conditions as set forth in Bayway Refining Company's General Terms and Conditions dated March 01, 1994 along with Bayway's Marine Provisions are hereby incorporated in full by reference in this contract.
Bayway's General Terms included a "Tax Clause" that required the purchaser to pay all taxes associated with the transaction. OMT never asked for and Bayway never sent a copy of its General Terms. Bayway then sent the blendstock and OMT accepted delivery. The taxes associated with the transaction came to nearly $500,000. Bayway paid the tax and then sued OMT to recover.
The Second Circuit correctly saw the outcome of the case as turning on the battle of the forms. Under UCC § 2- 207(1), Bayway's confirmation constitutes an acceptance of OMT's offer even though it contained additional terms. Under 2-207(2), because both parties are merchants, the additional terms become part of the contract unless one of three exceptions apply. The relevant exception in this case is materiality. The Second Circuit correctly noted that the Tax Clause was not per se material, in that there was no clear legal rule that had already determined such clauses to be material. So the Court proceeded to determine materiality based on a common law test, under which a clause is material if it causes surprise or (perhaps) hardship.
The court defined "surprise" as meaning that "under the circumstances, it cannot be presumed that a reasonable merchant would have consented to the additional term." The court found that no surprise occurred in this case because provisions like the Tax Clause were common (although not universal) in the industry. New York law is not clear on whether hardship is an element of its materiality analysis for the purposes of the battle of the forms. The Second Circuit did not reach the issue because it found that OMT could not show hardship in this case. OMT claimed hardship because "it is a small business dependent on precarious profit margins, and it would suffer a loss it cannot afford." The Second Circuit was unmoved because "any loss that the Tax Clause imposed on OMT is limited, routine and self-inflicted."
I have two problems with the Second Circuit's analysis. First, its discussion of surprise did not address the fact that clause at issue was part of an agreement incorporated by reference and never shared with OMT. While that fact might not change the outcome in the case, since the court found the evidence of industry practice convincing enough to put OMT on constructive notice, it strikes me as at least worthy of mention in the context of a discussion of surprise.
Second, I think the court could have treated the Tax Clause as relating to price. Industry practice suggested that sometimes contracts like the one at issue in the case included language like the Tax Clause, but in other cases the tax was just added to the price of the product. If OMT's original order included a price term, then Bayway's confirmation containing a price term plus the Tax Clause introduces not an additional term but a different term. I think the best reading of UCC § 2-207(2) suggests that different terms knock each other out. We then proceed to § 2-207(3) to enforce a contract consisting of the agreed-upon terms plus any additional terms the UCC can provide. The court should have been able to then determine the fair market price for the 60,000 barrels of a gasoline blendstock. Such an approach might have resulted in a Solomonic ruling or it might have made clear that one party or the other was trying to pull a fast one.
Monday, February 11, 2013
Last week, I taught an infuriating case called Diamond Fruit Growers v. Krack Corp. The case infuriates me not only because I think the Ninth Circuit bungled the battle of the forms so as to eliminate the UCC's § 2-207's important innovations and replaced them with with a rule unknown in either the code or the common law, but because James White, co-author with Robert Summers of the standard treatise on the Uniform Commercial Code, endorses the opinion. I can't understand why. Summers disagrees with his co-author but without the passion or incredulity that I think the context demands.
The parties to the contract at issue had been doing business together for ten years. Metal-Matic provided metal tubing for Krack's air conditioning business. The parties' practice was that Krack would send Metal-Matic an annual estimate of its needs, and Metal-Matic would send back its own acknowledgment form disclaiming warranties and consequential damages. Moreover, capitalizing on the langauge of § 2-207(1), Metal Matic's form included the following: "Metal-Matic, Inc.'s acceptance of purchaser's offer or its offer to purchaser is hereby expressly made conditional to purchaser's acceptance of the terms and provisions of the acknowledgment form."
The effect of that language under the UCC should be to make Metal-Matic's response into a counter-offer which would govern the parties' transactions once Krack, having notice of the terms, had accepted delivery. In this case, we know that Krack had notice of the terms, because it tried to get Metal-Matic to remove the disclaimer of warranties and limitations of damages, and Metal-Matic refused to do so. Having continued to accept delivery on that basis, Krack should be bound by Metal-Matic's terms.
Krack delivered some air conditioning units to Diamond Fruit Growers, but some of the Metal-Matic tubing failed, causing harm to Diamond Fruit Growers products. Diamond sued Krack and Krack turned around and filed a third-party complaint againts Metal-Matic. Metal-Matic's disclaimers and limitations on damages were now in play.
The court noted the important principle of neutrality underlying § 2-207. In contrast to the common law mirror image rule and last shot rule, the UCC is designed to avoid privileging either the offer or the counter-offer. Determining that it therefore could not give effect to Metal-Matic's unilaterally imposed terms, it looked to the UCC, as is proper under § 2-207(3), to supply the missing terms of the contract that had been formed by the parties' conduct. Since the UCC does not provide for limitations of damages and disfavors disclaimers of warranties, the court found that Metal-Matic's terms were out.
The court was focused on avoiding a return to the common law's last shot rule:
That result is avoided by requiring a specific and unequivocal expression of assent on the part of the offeror when the offeree conditions its acceptance on assent to additional or different terms. If the offeror does not give specific and unequivocal assent but the parties act as if they have a contract, the provisions of section 2-207(3) apply to fill in the terms of the contract.
The are numerous problems with this approach. Most obvsiouly, the UCC does not require a specific and unequivocal expression of assent by the offerer to additional terms. It certainly could have done so if the framers of the UCC so intended. More fundamentally, the result at which the court arrives is inconsistent with the principle of neutrality at the heart of the UCC"s approach to the battle of the forms. Indeed, the court's solution to the problem presented advantages the offeror far more than did the common law. Under the court's approach, the offeror is not only master of the offer; she is master of the transaction, and the offeree can do nothing through its writings to add terms to the contract.
The court suggests that allowing Metal-Matic to prevail in this situation would be arbitrary because it would turn only on which party sent the form last. But that is not so. Metal-Matic conditioned its acceptance on Krack's assent to its terms. Krack did not do likewise. Sticking to the language of the forms at issue in this transaction, Metal-Matic's terms would govern regardless of the order in which the parties exchanged forms. Here we have two sophisticated parties who knew what they were about. Metal-Matic insisted on its terms and Krack acquiesced because it needed the tubing.
The outcome of the case thus seems extremely unfair. Although I don't think it changes the UCC analysis, one might feel differently about the equities in the case if Krack were unaware of the terms and accepted the goods thinking that they were warranted, etc., but that was not the case here. Krack took the goods knowing the terms on which it accepted them. The court should not bail out commercial parties in these circustances, and courts do not bail out consumers who are bound by shrink-wrap terms to which they never expressly and unequivocally assent.
But James White, in § 2-13 of the White and Summers Treatise suggests otherwise, apparently on the ground that the UCC does not recognize acceptance by performance in this context. That's very odd, because the UCC is all about the liberalization of rules, including rules of offer and acceptance. As Summers points out, even the common law recognizes acceptance by performance and Summers sees no injustice given the parties' conversation about the disputed terms. White thinks the proper remedy for seller is to refuse to ship until buyer assents to its terms, but since a straight reading of the UCC would give a seller no reason to think such express assent necessary, I do not think Metal-Matic was on notice of that requirement.