ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, December 7, 2016

Air Force None?

Recently, Donald Trump famously tweeted that “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”  Trump has not said why he believes the planes will cost "more than $4 billion." Boeing says it currently has an Air Force One contract worth $170 million.

Air-force-one-3

This raises several contractual issues that could be used as an interesting issue-spotting practice for our students. At first blush, it seems like an impossible attempt at a breach of contract that would, conversely, at least give very reasonable grounds for insecurity if not constitute an anticipatory repudiation outright.

Needless to say, Trump’s remark that “[w]e want Boeing to make a lot of money, but not that much money” finds no support in contract law. One contractual party has no control over how much money the other party should make. One would have thought that Trump – as a staunch “market forces” supporter – would have understood and embraced that idea, but that either was not the case or he is flip-flopping in that respect as well.

Digging deeper into the story, however, it turns out that “not even [Boeing] can estimate the cost of the program at this time, since the Pentagon has not even decided all the bells and whistles it wants on the new Air Force One." Further, “without knowing all the security features, it is hard to estimate the cost … and the Air Force isn't even sure whether it wants two or three of the planes.” Does a contract even exist at this point, then, when the essential terms have apparently not been mutually agreed upon, or is there simply an unenforceable agreement to agree? A valid argument cold be made for the latter, I think.

Mr. Trump has been accused of overestimating the cost of the planes. Does he, however, have a point? “So far[,] the Air Force has budgeted $2.9 billion through 2021 for two new Air Force Ones.” It is not inconceivable that the price tag may, in these circumstances, run higher than that. That circularity goes back to the essential terms – the price in this case – arguably not having been decided on yet.

There might, of course, be other issues in this that I have not seen in my admittedly hasty review of the story, but it is interesting how the media jumps at a legally related story without thoroughly or even superficially attempting to get the law right.

December 7, 2016 in Celebrity Contracts, Commentary, Contract Profs, Current Affairs, Government Contracting, In the News, Travel, True Contracts | Permalink | Comments (0)

Saturday, September 10, 2016

Strongarming Car Renters to Buy Insurance

In an 8/27 article, the New York Times (paid access only) reports how Payless Car Rental, owned by Avis Budget, basically forces at least some of its customers to buy personal liability insurance whether or not they want it. Here’s how the story reports it done – well worth repeating on this website to show the blatant disregard for contract law displayed by Payless Car Rental: Images

A client states repeatedly to the car rental company that he or she does not want insurance. When returning the car after the rental period is over, guess what shows up on the receipt: of course, the declined insurance – in one case $222. When the renter complains, the car rental agency representative snatches the contract that had been initialed by the renter, who apparently thought he or she indicate that they did not want the insurance. Instead, although orally and repeatedly stating that, the initials indicated that he or she did want the insurance (fine print probably not read by renter at airport counter).

ImagesAfter not getting the reimbursement requested, he or she disputed the charge with credit card provider American Express. The amount was refunded, the renter thought… until Payless sent a letter titled “Debit notice” which indicated that the amount would now be sent to collection by a company located on, I kid you not, “32960 Collection Center Drive, Chicago, Ill.” The problem with that is that no such address exists! Try in Google Maps. At least I and the New York Times reporter could not bring it up.

Payless also told the renter that if he or she did not react, his/her “rental privileges” would be suspended(!). Not sure why they would think that their renter would ever want to rent from that company again…

A Payless PR representative did not, when contacted about this incident, offer any explanation or apologies. She simply stated that the issue had been resolved and that “we will reinforce with our associates … the importance of ensuring that our customers clearly understand which services and options they are selecting.” It seems like they should also train their associates to accept the contractual choices then made by the customers.

September 10, 2016 in In the News, Miscellaneous, Travel, True Contracts | Permalink | Comments (0)

Monday, August 29, 2016

“Trophy hunting” contracts – unenforceable for reasons of public policy

Allow me to highlight my most recent article on the questionable ecosystem viability and contractual common law validity of so-called “trophy hunting” contracts. With these contracts, wealthy individuals in or from, often, the Global North contract for assistance in hunting rare animals for “sport.” Often, these hunts takes place in the Global South where targeted species include giraffes, rhinos, lions, and other vulnerable if not outright threatened or endangered species.  Images
A famous example of this is Minnesota dentist Walter Palmer killing “Cecil the Lion” in 2015 causing widespread outcry in this country and around the world. Trophy hunting also takes place in the USA and Canada, where targeted animals include polar bears, grizzly bears, and big horn sheep.

Trophy hunting should be seen on the background of an unprecedented rate of species extinction caused by several factors. Some affected species are already gone; others are about to follow. Western black rhinoceroses, for example, are already considered to have become extinct in 2011.   The rest of the African rhinoceros population may follow suit within the next twenty years if not sufficiently protected. In the meantime, more than 1.2 million “trophies” of over 1,200 different kinds of animals were imported into the United States just between 2004 and 2015. In addition to the extinction problem, the practice may also have ecosystem impacts because, among many other factors, the trophies often stem from or consist of alpha animals.

UnknownOf course, no one is arguing that rare species should be driven to extinction, in fact, quite the opposite: both trophy hunters and those opposing the practice agree that such species should be conserved for the future. However, the question lies in how to do so. Some argue that trophy hunting creates not only highly needed revenue for some nations, but also brings more attention to the species conservation issue.

I argue that at least until there is much greater certainty than what is currently the case that the practice truly does help the species in the long run (and we don’t have much time for “the long run”!), legal steps must be taken against the trophy hunting. Even when positive law such as hunting laws and/or the Endangered Species Act (“ESA”) do not address the issue (yet), common law courts may declare contracts that have proved to be “deleterious effect upon society as a whole,” “unsavory,” “undesirable,” “nefarious,” or “at war with the interests of society” unenforceable for reasons of public policy. Images-2

In the case of Cecil, African lions had been proposed for listing under the ESA when the animal was killed, but the listing did not take effect until a few months later. The case, others like it, and several studies demonstrate that a sufficient and sufficiently broad segment of the population have come to find the killing of very rare animals so reprehensible that common law courts can declare them unenforceable should litigation on the issue arise. This has been the case with many other contracts over time. The same has come to be the case with trophy hunting. As long as doubt exists as to the actual desirability of the practice from society’s point of view – not that of a select wealthy individuals – the precautionary principle of law calls for nations to err on the side of caution. The United States prescribes to this principle as well.

The article also analyzes how different values such as intrinsic and existence values should be taken into account in attempts to monetize the “value” of the practice. Instead of the here-and-now cash that may contribute to local economies (much revenue is also lost to corruption in some nations), other practices such as photo safaris are found by several studies to contribute more, especially in the long term. (Note that Walter Palmer paid a measly USD 50,000 for his contract with the landowner and local hunting guide).

Finally, the article draws in arguments under the public trust doctrine and the state ownership of wildlife doctrine. Ethically, these animals belong to all of us (or none of us). Images-1

Trying to save rare animals by shooting them simply flies in the face of common sense. It also very arguably violates notions of national and international law.

August 29, 2016 in Commentary, Current Affairs, Famous Cases, In the News, Legislation, Recent Scholarship, Science, Travel, True Contracts | Permalink | Comments (0)

Friday, August 26, 2016

Ryan Lochte and Morals Clauses

I have witnessed with interest the evolving story of what exactly happened in Rio involving Ryan Lochte the morning of August 14. Initially Lochte claimed he had been robbed at gunpoint. I later heard through the gossip mill that that story was untrue and that Lochte had in fact beat up some security guards. That turned out, it seems, just to be rumor-mongering, but the story has continued to evolve from there, with both Lochte and the Rio police making statements that later seem untrue, or only partially true, or exaggerated. Slate has a good run-down of the changing versions of Lochte's story, although it's from a week ago. Now Lochte has been charged with filing a false police report, since it does seem clear at this point that no robbery happened. Even that, however, is confusing to parse if you read a lot of articles about it: It seems like the crime is more accurately making a false communication to police, as some articles have eventually stated, since there are conflicting reports about whether a police report was ever filed. 

In the wake of this whole mess, Lochte has lost several of his sponsorship deals (although he's also picked one up). It's unclear, because the contracts don't seem to be public, whether this is a choice of just not renewing the contract (apparently that's the case with Ralph Lauren) or if a violation of a morals clause is being invoked to allow cancellation of the contract (which might be what's going on with Speedo). All of this provokes an interesting morals-clause conversation to me, and we had a bit of discussion about it on the Contracts Professors listserv. It seems clear that Lochte engaged in some sort of inappropriate behavior, and it seems also clear that whatever that behavior was, even the most minor version of the story is arguably a violation of any morals clause out there.

What is most clear is that, no matter what really happened, this has definitely served to tarnish his reputation, and that's is what's striking to me. This story has taken on an enormous life of its own, with many differing versions of it floating around the Internet. This situation has been caused, of course, by Lochte's many differing stories, together with some apparent conflicting statements by the Rio police, coupled with reporting that may have been less than precise itself in describing what was going on. One online story details all the conflicting information and asks the individual reader what they believe about the story.

While this particular maelstrom seems to have some basis in fact, it's not difficult to imagine something like this getting out of control without such justifying behavior at the root of it. Morals clauses tend to be about perception, but does that mean you can manipulate the perception of someone, through no real fault of their own? Take, for instance, the "Ted Cruz is the Zodiac Killer" meme that was popular on the Internet earlier this year. Ted Cruz wasn't born until after some of the Zodiac killings had happened, so he obviously could not have been the Zodiac Killer, and in fact some people interviewed about the meme noted that was the point: what they were saying was impossible. Nevertheless, it was reported that polls indicated 38% of those surveyed thought he might, in fact, be the Zodiac Killer, despite the impossibility. If a substantial number of people start thinking you did something you absolutely did not do, is that enough for a morals clause to be violated, because of the perception that you did it? 

August 26, 2016 in Celebrity Contracts, Commentary, Current Affairs, Games, In the News, Sports, Travel, True Contracts, Web/Tech, Weblogs | Permalink | Comments (0)

Sunday, August 21, 2016

Does “Similar Quality” Reflect a $17,100 Reduction in Car Resale Value?

Plaintiff William Baldwin’s almost new Toyota Tundra pickup truck was badly damaged when, while parked, the cars of two other men slammed into it. This decreased the car’s future resale value by more than $17,100. Mr. Baldwin filed suit against his insurance company, AAA, among others. He wanted either the pre-accident value of the car or a sum which would allow him to repair the pickup truck to its original pre-accident condition. He contended that the truck did not match such condition with respect to safety, reliability, mechanics, cosmetics, and performance. Unknown

The interpretation of an insurance contract is, in California, a matter of law. This insurance policy provided that AAA “may pay the loss in money or repair.” Further, under the Limits of Liability, that AAA’s coverage responsibility for car damage would “not exceed the lesser of those two options,” namely paying “the actual cash value of the damaged property or the amount necessary to repair the property … with similar kind and quality.” (My emphasis).

The court found that the insurance policy “ambiguously gave the insurer the right to elect to repair the insured’s vehicle to a “similar condition if repair costs would be less than the actual cash value of the vehicle.”

In other words, the court supported AAA’s reading that a car with a realistic loss in value of $17,000 was in a “similar condition” to its almost-new value. You can see why this lawsuit came about. On the other hand, the car was repaired and was fully functional. Should insurance companies then additionally have to pay out a sum that would correspond to an arguably hypothetical resale value (the owner may never sell the car at the relevant moment in time)? Arguably, that would drive up insurance prices too much. Note too that this case is from California where cars are almost members of one’s family…

The case is Baldwin v. AAA Northern California, et al., 1 Cal.App.5th 545 (Cal. Ct. App. 2016).

August 21, 2016 in Recent Cases, Travel, True Contracts | Permalink | Comments (0)

Thursday, August 4, 2016

Service Fees Are Annoying...But Not Bad Faith

A recent case out of the District of Connecticut, Singer v. Priceline Group, Inc., No. 15-cv-1090 (VAB), tackles an issue familiar to all who travel: service fees. The plaintiff, on behalf of a class, sued Priceline over the fact that service fees were added on to the price that he bid to pay for a hotel room. We've all been beset by service fees tacked onto the prices quoted for various travel-related items, from hotel rooms to flights, and to be honest I feel like I, to some extent, have just grown used to and resigned to them. The court seems to feel the same way about them here. The service fees weren't a breach of contract, since Priceline's Terms of Use explicitly stated that service fees might be charged above the quoted price, nor were they a breach of the covenant of good faith and fair dealing because, again, Priceline was upfront about the fact that Singer might owe more money in service fees from the hotel. Priceline never made any representation that it wouldn't provide Singer with quotes that might require further service fees and so did not act in bad faith when it did so in a way that the court found was open and reasonable.

I might wish that more places would just tell me the end price without the extra fees, but, for now, I think the widespread acceptance of these fees in the course of transactions indicates they're here to stay for the time being.

August 4, 2016 in Commentary, E-commerce, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (3)

Wednesday, July 27, 2016

Forum Selection Clauses in Moving Contracts

 Moving Mess

As anyone who's ever moved knows full well, it's a fraught process. Finding good movers can be challenging, and untangling the relationships between the parties involved in your move even more challenging: which company is storing, which company is packing, which company is renting the truck being used, which company owns the truck being used, which company employs the movers, etc. I've had moves go poorly enough that I've left a couple of scathing "beware!" reviews in places, but I've never gone to court, and so I never really thought through fully the challenges in litigating issues that might arise during a move.

A recent case out of Ohio, Nieman v. Moving Insurance, LLC, Appeal No. C-150666, made me finally consider them. Not a lot of details are given about what happened during the Niemans' move to prompt them to sue, but what we do learn is that they are suing about a move from Chicago to Cincinnati. The Niemans have sued multiple companies, probably because of how many companies get involved in a major interstate move like this. For instance, it seems to me that they're suing a moving company, a trucking company, and an insurance company (again, details aren't really given in the case). The Niemans signed contracts, of course, with each of these entities. Each of the contracts had a forum selection clause. One contract required that suit be brought in New Jersey. The other contracts required that suit be brought in Florida. The court here found that the Niemans were bound by the forum selection clauses. Therefore, rather than bringing suit in their current state and the place where the move concluded, the Niemans have to bring two suits, one in New Jersey, one in Florida.

I've blogged a lot about arbitration clauses, but I haven't blogged much about forum selection clauses. The court is dismissive here of the Niemans' arguments, which it characterizes as a matter of inconvenience rather than injustice. But surely there's a point where something becomes so inconvenient that it's no longer worthwhile, from a cost efficiency perspective, to pursue it, and in that case isn't some kind of injustice being wrought? I'm not saying necessarily that the Niemans deserve some kind of recovery from the moving companies. However, I could see how, if it was me, faced with a ruling that I had to bring two separate cases, procuring lawyers, etc., in states that aren't even in my time zone, I might decide it wasn't worth the effort and just drop it.  And I don't think this is laziness on my part; I think this is practicality regarding the best use of my time and money at that point. Which, of course, means this definitely depends on the amount of damages I believed that I was owed, and therefore underlines that enforcing a forum selection clause in these circumstances means that there is some amount of liability that, as a practical matter, will almost never be assessed, even if it should be, because the costs of procuring that assessment are too high.

This is, naturally, an ongoing problem in the court system in general. Maybe because I am in the process of coordinating yet another move, this one really stood out to me today!

July 27, 2016 in Commentary, Recent Cases, Travel, True Contracts | Permalink | Comments (0)

Saturday, July 9, 2016

Arbitration Clauses: Gogo Internet Edition

The rise of Wi-Fi on airplanes means that you never have to be without the internet if you don't want to be...which also means that you never have to be without terms of use! A recent case out of the Eastern District of New York, Salameno v. Gogo Inc., 16-CV-0487 (behind paywall), reinforces that those terms of use are binding on you, and, as could probably be predicted, leads to the enforcement of an arbitration provision contained in them.

In this case, the plaintiffs had purchased Gogo's in-flight Internet access multiple times. They claimed that the Internet access didn't work as advertised, with allegations that it was incredibly slow, crashed frequently, or sometimes didn't work at all. (Anecdotally, I have heard people around me on flights complain about this, although I don't know if Gogo was at issue there or if in-flight Wi-Fi is simply fraught with complications.) Despite these alleged ongoing issues, the plaintiffs kept buying Gogo's Wi-Fi, perhaps in eternal hope that it would someday work properly? At any rate, this all culminated in plaintiffs' lawsuit here.

A judge recently found that the plaintiffs are bound by the arbitration clause in Gogo's Terms of Use. All of the plaintiffs used Gogo's Internet access multiple times, and each time they had to indicate that they agreed to the Terms of Use. This wasn't just a one-time thing, which maybe would have made the court more sympathetic, but multiple times of clicking "Agree" without looking at the Terms of Use. And, the court said, those who seek Internet access in the air are experienced Internet users who should be expected to know how to read the Terms of Use contained in the hyperlink.

How to click on a hyperlink, yes, most Internet users know how to do; whether or not the average Internet user necessarily understands all of the legalese found at that hyperlink is another question entirely, of course, but not one addressed in this case. Possibly because the court assumes that all laypersons understand the difference between litigation and arbitration, although in my experience I am not entirely sure that's true. At any rate, the court here held this arbitration clause to be binding.

July 9, 2016 in Commentary, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (2)

Thursday, June 9, 2016

Unilateral Contracts: “… Never Pay for Gas Again!”

Relying on the win-a-car-for-a-hole-in-one case where a Pennsylvania court found that a car dealership was obligated to honor its offer for a unilateral contract posted at the ninth tee when a golfer finally aced a hole-in-one despite the dealership’s subjective intent to end the promotional offer two days earlier, a Third Circuit Court of Appeals court found a unilateral contract to exist under the following circumstances.

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A brochure distributed to the customers of Giant Eagle – a chain of retail supermarkets, gas stations, etc. – promised its customers that they could “Earn free gas – it’s easy!” and “You may never pay for gas again!” as long as they spent $50 on supermarket purchases. (See the true images posted here in this blog). The brochure, however, also included fine print provided, among other things, that “discounted fuel cannot exceed 30 gallons and discounts must be used in full on one vehicle in one transaction,” “the promotion is valid for a limited time and may end at any time without prior notice,” and “fuelperks! discounts expire 3 months after the last day of the month in which they’re earned.” However, the court found that none of the published program parameters suggested that Giant Eagle reserved the right to retract rewards that customers had already accrued. In fact, in the entire history of the Giant Eagle fuel program, no such retroactive termination ever occurred.

Said the court, “[l]ike the golfer who teed off with a promise of reward in mind, a customer anticipated the promised fuel discounts when deciding to shop at Giant Eagle in the first place—and thus deciding not to shop at a different store. Because she was then aware that she could apply the discounts as advertised if she spent fifty dollars on supermarket purchases using her Advantage Card, she was indeed a party to a unilateral contract with Giant Eagle. Liability therefore attached upon her performance, i.e., at checkout.”

A fair win for consumers, it seems.

June 9, 2016 in Current Affairs, Miscellaneous, Recent Cases, Travel, True Contracts | Permalink | Comments (3)

Monday, May 2, 2016

You Might Think City Buses Don't Have a System, But They Totally Do! (it just might be copyright infringing)

  MTA bus Nashville TN 2013-12-27 002

Entities and people come together, do business, have disagreements, go their separate ways. It happens all the time. But nowadays, since so many things have embedded software, these break-ups of business relationships have copyright implications. If you don't have a license to continue using the embedded software, when you break up with another business, that means you have to stop using whatever contains the software, too. Theoretically. 

A recent case out of the Middle District of Tennessee, ACS Transport Solutions, Inc. v. Nashville Metropolitan Transit Authority, 3:13-CV-01137, dealt with this issue. The Nashville Metropolitan Transit Authority ("MTA") had contracted with ACS to develop a system for MTA to manage its buses. The system ACS created contained copyrighted software that ACS expressly licensed to MTA. A few years after the development of the system, MTA discontinued its relationship with ACS, but it continued to use the system that contained the embedded software. ACS contacted MTA and told it that it was using the software without a license and infringing ACS's copyright. Nevertheless, MTA continued to use the system with the embedded software, and so ACS eventually brought this lawsuit. 

MTA argued that, when it terminated its relationship with ACS, it did not terminate the license to use the software, and so it was still properly licensed. However, MTA's relationship with ACS was governed by a contract, within which was the software license. Terminating the relationship set forth by that contract, the court found, necessarily terminated the software license also found in that contract. 

MTA additionally argued that it had paid for the system and that therefore it should be entitled to use the software within the system indefinitely. ACS did agree that MTA had paid for the system and would not have owed ACS any further payments...if ACS and MTA had fulfilled the rest of their contractual obligations. Instead, ACS argued, MTA breached its obligations. Therefore, ACS rescinded MTA's license to use the software. 

There was some slim hope for MTA. MTA argued that it had an implied license to use the software for a "reasonable" period of time while it transitioned to the new software of the company it hired to replace ACS. The court seemed skeptical that the length of time MTA had used ACS's software after terminating ACS (it ended up using the software for more than two years after terminating ACS) was reasonable; the court implied that, even if MTA had had an implied license to use the software while it transitioned, MTA's use had exceeded that implied license's scope. However, the court found this to be a material fact in dispute and so inappropriate to resolve at the summary judgment stage. 

Under the terms of its contract with ACS, MTA received only a non-exclusive, revocable license for the software. If MTA had wanted more protection, MTA should have negotiated better license terms. ACS, of course, might never have been amenable to granting better license terms. But let this case be a lesson: Many things are going to come with embedded software these days, and that software is copyrighted. You're going to need to dot your copyright i's and cross your copyright t's regarding this software; don't lose sight of that by focusing instead on the larger product you're buying. MTA may have thought of itself as buying a system, but it really needed to think of itself as buying the software within the system. 

May 2, 2016 in Commentary, Government Contracting, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, April 1, 2016

Airlines and Terminal Change Information

Are airlines contractually bound to inform their passengers of a possible terminal change between the time of printout of one’s boarding tickets and the flight departure under the duty of good faith? No, found a district court judge for the District of Columbia. The case is Naqvi v. Saudi Arabian Airlines, 14-cv-01314.

What’s more, airlines are also not under any contractual good faith duty to give passengers water in the terminal or to ensure that terminal restrooms are sanitary.

The case was brought by a passenger who went to the terminal listed on his boarding passes that he had printed out the night before his early-morning flight. However, when he got to that terminal, he learned that his flight departed from another terminal five miles away (in Jeddah, Saudi Arabia). He rushed there by cab, but because of construction, was dropped off several hundred feet away, thus having to walk that distance with his luggage. The passenger made it to the boarding area lounge fifteen minutes before boarding started. As he had diabetes, he asked for a glass of water so that he could take his medication. He was told that no water was available, and instead went to the apparently very unhygienic bathrooms in the terminal. During the flight, he fel Unknownl sick because of the, for him, unusual level of physical activity. He subsequently sued in the United States (of course).

The court found that airlines have no obligation to provide notification of terminal changes, transportation or baggage handling between terminals in the event of a change, water or clean terminal bathrooms. Thus, since no contractual duties lay, the airline also had not breached any good faith violations thereof. Would it now, however, be a good idea for the airlines to do so anyway, via a text message or otherwise? It would seem so… and how hard would it really be for an airline to give their own passenger a glass of water since the boarding had not even started yet?

Better double-check those departure gates and terminals accurately in the future.

April 1, 2016 in Travel, True Contracts | Permalink | Comments (1)

Wednesday, January 20, 2016

The Enforceability of Liability Releases for Negligence in Colorado

When I was in law school, I remember starting to be really struck by how often I had to sign liability releases: going to play paintball, renting skis, etc. A recent case out of the Tenth Circuit, Espinoza v. Arkansas Valley Adventures, had to deal with just such a release in the context of a tragic whitewater rafting accident. 

The plaintiff's mother drowned when her raft capsized during a rafting trip organized by the defendant. She had signed a contract that released the defendant from liability for negligence. The plaintiff agreed that his mother had signed the release but tried to argue that the release was unenforceable. As a matter of Colorado law, though, he lost. The court found the release enforceable both as a matter of public policy and under the particular circumstances of the mother's signing. 

The court explained that Colorado uses four facts to determine whether a release of liability for negligence is enforceable: 

(1) the existence [or nonexistence] of a duty to the public; (2) the nature of the service performed; (3) whether the contract was fairly entered into; and (4) whether the intention of the parties is expressed in clear and unambiguous language.

The court concluded that, while other states were free to disagree on this, Colorado had decided that corporations providing recreational activities are allowed to protect themselves from liability for negligence. The court stated that this is a valid policy choice for Colorado to make because it arguably encourages the active, outdoorsy lifestyle that the state of Colorado cherishes and wants to protect and promote. Without such ability to protect themselves, companies might be discouraged from offering recreational activities like horseback riding, snowboarding, or whitewater rafting. And in fact other courts in Colorado had explicitly found that companies offering whitewater rafting trips can protect themselves from liability for negligence using a contractual release. The court stated that the Colorado legislature was free to introduce a statute that would change this legal precedent, but, as it stood, the court was bound to follow the precedent. 

Having decided that the release was not against public policy according to the first two factors of the balancing test, the court then further decided that the plaintiff's mother had fairly entered into the contract with full knowledge of the risks at stake. The court dismissed the plaintiff's expert testimony that the rapids his mother was exposed to were too advanced for a beginner (in contrast to what the defendant had assured her) by pointing to the fact that the defendant had expert testimony that the rapids were suitable for beginners. Finally, the court noted that the release had the typical all-caps language that you see on these sorts of contracts. You know:  "HAZARDOUS AND INVOLVES THE RISK OF PHYSICAL INJURY AND/OR DEATH" and "THIS IS A RELEASE OF LIABILITY & WAIVER OF LEGAL RIGHTS." The truth is, seldom does any consumer seeing that stuff really take it a serious communication of a great risk of death, I think. Especially not when there was some evidence that the consumer has been assured the trip in question was suitable for families with children. Nonetheless, the court found that the language of the release unambiguously informed the plaintiff's mother of the risks of the activity and the fact that she was releasing the defendant from liability should those risks come to pass. 

There was a dissent in this case, however, who agreed that the release wasn't against public policy but disagreed on the conclusion that the contract had been fairly entered into. In the dissent's view, the contradictory testimony about the level of difficulty of the rapids meant that the question should have gone to the jury. 

I don't spend a lot of time in my Contracts class talking in detail about liability releases for negligence, but this case made me think that I should talk about them more, because they really do seem to arise in the context of so many activities. 

January 20, 2016 in Commentary, Recent Cases, Sports, Teaching, Travel, True Contracts | Permalink | Comments (4)

Friday, January 15, 2016

Very, Very Frequent Flyers Do Not Have Separate Contracts with Airlines

If a customer belongs to an airline’s frequent flyer program, but flies so often that one obtains an elevated status under that program, is the customer then also by implication governed by a separate contract with the airline and not just the “basic” version of the frequent flyer rules?

No, according to a Seventh Circuit Court of Appeals opinion in Hammarquist v. United Continental Holdings, Inc. (Nos. 15-1836 and 15-1845).

In the class action lawsuit against beleaguered United Airlines, plaintiffs were members of the airline’s “MileagePlus” program. Condition no. 1 of the program rules stated that the airline had the “right to change the Program Rules, regulations, benefits, conditions of participation or mileage levels … at any time, with or without notice ….” Plaintiffs, who had obtained “Premier” status argued that under the Premier Program, an alternative modification provision prohibited United from changing the benefits that had already been earned, but which could, per airline tradition and the basic program rules, only be enjoyed the following year. The court made short shrift of that: The plaintiffs did not dispute that the parties’ contractual relationship was governed by the Program Rules that, under precedent established in Lagen v. United Continental Holdings, the elevated status of some frequent flyers does not result in a free-standing contracts separate from the underlying frequent flyer program being established. United Airlines had not made any contractual representations that would render it unable to change the benefits under the basic contract.

Plaintiffs also argued that at the most, United Airlines should only be allowed to change the benefits once a year and not, as had apparently been the case, in the
middle of the year. Plaintiffs relied on the airline’s website, which had stated th That changes were possible “from year to year,” but also that “unless otherwise stated,” the basic Program Rules applied to the Premier Program. That, according to the plaintiffs, meant that the airline could not change the benefits “at any time” as had been stated in the frequent flyer rules. The court found that United Airlines had never “stated” that Condition no. 1 did not also apply to its very frequent flyers, and that the airline had never contractually promised that changes could only be implemented only from year to year.

Nice try, but in this case, a contractually fair enough outcome, it seems. United Airlines “cannot be liable for breaching a contract that it did not make.”

January 15, 2016 in Current Affairs, Miscellaneous, Recent Cases, Travel, True Contracts | Permalink | Comments (1)

Sunday, January 3, 2016

Legal Rights to Give up Your Travel Tickets

Exactly one year ago, I blogged here about United Airlines and Orbitz suing a 22-year old creator of a website that lets travelers find the cheapest airfare possible between two desired cities. Travelers would buy tickets to a cheaper end destination, but get off at stopover point to which a ticket would have been more expensive. For example, if you want to travel from New York to Chicago, it may be cheaper to buy one-way airfare all the way to San Francisco, not check any luggage, and simply get off in Chicago.

The problem with that, according to the airline industry: that is “unfair competition” and “deceptive behavior.” (Yes, the _airline industry_ truly alleged that.) Additionally, the plaintiffs claimed that the website promoted “strictly prohibited” travel; a breach of contracts cause of action under the airlines’ contract of carriage.

It seems that the United Airlines attorneys may not have remembered their 1L Contracts course well enough, for a contracts cause of action must, of course, be between the parties themselves or intended third party beneficiaries. The website in question was simply a third party with only incidental effects and benefits under the circumstances. Without more, such a party cannot be sued under contract law. (This may also be a free speech issue.)

Orbitz has since settled the suit.  Recently, a federal lawsuit was dismissed for lack of personal jurisdiction over the now 23-year old website inventor. United Airlines has not indicated whether it plans further legal action.  

Along these lines, cruise ship passengers are similarly not allowed to get off a cruise ship in a domestic port if embarking in another domestic port unless the cruise ship is built in the United States and owned by U.S. citizens. This is because the Passenger Vessel Services Act of 1866 – enacted to support American shipping – requires passengers sailing exclusively between U.S. ports to travel in ships built in this country and owned by American owners. Thus, cruise ships traveling from, for example, San Diego to Alaska and back will often stop in Canada in order not to break the law. But if the vessel also stops in, for example, San Francisco and you want to get off, you will be subject to a $300 fine which, under cruise ship contracts of carriages, will be passed on to the passenger. See 19 CFR 4.80A and a government handbook here.

Convoluted, right? Indeed. Necessary? In this day and age: not in my opinion. As I wrote in my initial blogs on the issue, if one has a contract for a given product or service, pays it in full, and does not do anything that will harm the seller’s business situation, there should be no contractual or regulatory prohibitions against simply deciding not to actually consume the product or use the service one has bought. Again: if you buy a loaf of bread, there is also nothing that says that you actually have to eat it. You don’t have to sit and watch all sorts of TV channels simply because you bought the channel line-up. In my opinion, United Airlines and Orbitz were trying to hinder healthy competition and understandable consumer conduct. What is still rather incomprehensible to me in this context is why in the world airlines would have anything against passengers getting off at a midway point. It’s less work for them to perform and it gives them a chance to, if they allowed the conduct openly, resell the same seat twice. A win-win-win situation, it seems, for the original passenger, the airline, and the passenger that might want to buy the second leg at a potentially later point in time at whatever price then would be applicable. The same goes for the typically unaffordable “change fees” applied by most airlines: if they charged less (a change can very easily be done by travelers on a website with no airline interaction) and the consumer was willing to pay the then-applicable rate for the new date (prices typically go up, not down, as the departure dates approach), the airlines might actually benefit from being able to sell the given-up seat. Of course, they don’t see it that way… yet.

In many ways, traveling in this country seems to be going full circle in that it is becoming an expensive luxury. Thankfully, new low-cost airlines also appear on the market to provide much needed competition in this close-knit industry that, in the United States, seems to be able to carefully skirt around anti-trust rules without too many legal allegations of wrongdoing. (See here for allegations against United, American, Delta and Southwest Airlines for controlling capacity in order to keep airline prices up).

Happy New Year and safe travels!

January 3, 2016 in Commentary, Current Affairs, E-commerce, Famous Cases, In the News, Legislation, Recent Cases, Travel, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, December 28, 2015

Everyday Ambiguity

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I always tell my students that no one sets out to enter into an ambiguous contract. Everyone thinks their contract is crystal-clear. Everyone thinks they've examined the problem from every angle and have exactly what they want.

Everyone is often wrong. And I include myself in that "everyone."

I was thinking of this while flying recently. As usual, the flight was overbooked and the airline was throwing cash around looking for volunteers to take a different flight. I've never done this before, but my travel plans were decently flexible, and when the price got to be high enough, I figured I'd give it a go. I had the following conversation with the airline employee.

Me: If I give up my seat, when would I get out of here?

Her: We can book you on an itinerary that would get you in 30 minutes later than you would have. In fact, I can confirm you for that flight right now.

Me: I'm confirmed for that flight?

Her: Yes.

So I gave up my seat and walked down to the gate of the new flight I had been "confirmed" on. And here is where the ambiguity arose: When I heard and repeated back "confirmed," I thought that meant I had a seat on that flight. However, when the airline said the word "confirmed," what it meant was that they had confirmed me on a list of people who desire to take that flight. Basically, I was confirmed on the standby list. Which wasn't at all what I wanted. Long story short: I got in 19 hours after I was supposed to, not 30 minutes. And the whole time I was kicking myself, because I teach contracts law! I should be alert to the possibility of ambiguity! During that conversation, I should have asked for an actual seat assignment. Or even used the words "I have a seat on that flight." But I didn't. I understood "confirmed" to be referring to a completely different concept, and then I re-used the airline's word, with a completely different understanding in mind. (I like to think we never understood each other and so there was never a meeting of the minds but that was cold comfort while I was sitting around O'Hare for many hours.)

I decided to use the entire situation as a real-life lesson: The ambiguity entered because I did nothing but repeat their words back to them. I should have, instead, repeated back to them what I understood their words to mean. I tell my students all the time: Say what you mean in your contracts; don't beat around the bush. But it's so easy to flub that in the heat of the contract-making moment. It's so easy to think that, actually, you are saying what you mean.

Which is why we have contracts cases.

December 28, 2015 in Travel, True Contracts | Permalink | Comments (0)

Friday, November 13, 2015

Airline Change Fees

A few days ago, the Los Angeles Times published an article on airline change fees. At bottom, the article asked whether customers are entitled to a refund of their tickets if they discover that the price has been dropped for the route and time in question so that they can buy the cheaper fare. Most of us probably buy the cheapest form of tickets, i.e. “nonrefundable” ones. For those, the answer lies in the name: they are simply not refundable. Under Department of Transportation rules, however, airfare is fully refundable within 24 hours of making the purchase.

The article misses an important legal issue, namely whether it is unconscionable that airlines typically charge $200-$300 dollars in change fees plus any increase in the actual price (and as we all know, when the departure time approaches, prices typically go up). To the best of my knowledge, only Southwest Airlines does not charge any change fees. Kudos to them for that.

Unconscionability requires the familiar inquiry into whether the substance of the contract is oppressively one-sided and whether the complaining party had any meaningful choice when entering into the contract. In my opinion, such steep change fees are unconscionable, at least in cases where customers change for a reason other than simply trying to get a refund in cases of cheaper fares. Because apparently all airlines other than Southwest charge these high change fees for economy-class, no-frills tickets, and because it is not always possible to fly Southwest Airlines (they only fly to certain locations, most of them within the United States), customers in effect have no choice in avoiding such fees if they have to change the tickets. Often, tickets have to be bought months ahead of time to either get the best prices and/or to get the desired departure dates and times. In today’s ever-changing work environment, many people may have to change their tickets for valid work-related reasons, not to mention changing private circumstances. If that is the case, one may simply have to give up an existing ticket as the rules are today since buying a new one may well be cheaper than trying to change the existing one. And while it is possible to get insurance for illness-related cancellations, travel insurance covering work reasons typically only covers changes in employment and the like and thus not changes required by changed circumstances one’s current position, even though those may be outside one’s control.

Substantively, it seems uniquely and highly oppressively one-sided for airlines to charge hundreds of dollars for a change that a customer can, with a few clicks on a secure website, implement in minutes himself/herself. Even if the airline had to have an actual person make the change (and those days seem gone), that person would similarly only require minutes, if not only seconds, to do so.

Until someone challenges the airlines on this account, they seem intent on continuing this profit-increasing device. As Hans Christian Anderson said: “To travel is to live.” For now, it seems that we have to live with not being able to change our airline tickets once purchased.

November 13, 2015 in Current Affairs, E-commerce, Travel, True Contracts | Permalink | Comments (0)

Monday, August 24, 2015

Contracting to Pollute

Hugely successful auto-maker Tesla is making very good money not only on its electric cars, but also on its contracts selling zero emission credits to rivaling automakers. New environmental standards in eleven states require that by 2025, 15% of a car company’s sold fleet must be so-called “zero emission” vehicles.  If a company cannot meet existing standards, they can purchase zero emissions credits from other companies that can. Tesla is one of those.

This year, Tesla has sold approximately $68 million worth of credits to competing automakers, which represents 12% of its overall revenue. Overall, Tesla is doing very well: its net profit for the first quarter of this year was more than $11 million and its shares have been reported to be up more than 165% so far this year.

This raises the question that I also raised here on this blog in another post earlier this summer: is the emissions trading scheme a good idea, or does it simply allow for glorified “contracts to pollute”? As with many other things in the law, both could be seen to be the case. See this report that casts doubt on whether carbon credits help or hurt the agenda. Some call them "hot air,"perhaps for good reason. But at least Tesla is, hopefully, challenging other automakers to innovate to pollute less.

Another question, though, is the use of the euphemism “zero emissions.” Electric vehicles are arguably better seen from an environmental point of view than traditional cars, but they are not “zero” emissions.  They could, instead, be called “emissions elsewhere” vehicles.  That, of course, does not sound nearly as good. However, the electricity used for electric cars is produced somewhere. The true question is: by what means? If the electricity stems from dirty coal-fired power plants, the solution is not as good as it sounds, although concentrating the pollution in one large plant may be better than having many individual cars produce power on the road. That is a question for another forum. Suffice it to say that choice is good, and if car buyers could also in all locales could always decide exactly how to source their electricity (from, for instance, solar power), the matter would be different. That is not (yet) the case. So for now, “zero emission” vehicles are actually not so.

August 24, 2015 in Current Affairs, In the News, Legislation, Travel, Web/Tech | Permalink | Comments (0)

Thursday, July 30, 2015

Contracts for Trophy Hunting A Bad Idea

I earlier blogged on an American TV personality's contract to hunt and kill one of the most highly endangered species on earth: a black rhino.  That hunt has now been completed at a price tag of $350,000.  The asserted reasoning for wanting to undertake the hunt: the money would allegedly help the species conservation overall and the local population. Studies, however, show that only 3-5% of that money goes to the local population. Some experts believe that the money could be much better spent for both the local population and the species via, for example, tourism to see the animals alive.  This brings in three to fifteen times of what is created through so-called "trophy hunting."

This past week, the world community was again outraged over yet another American's hunt - this time through a contract with a local rancher and professional assistant hunter - of Cecil the Lion.  The price? A mere $50,000 or so.  This case has criminal aspects as well since the landowner involved did not have a permit to kill a lion. The hunter previously served a year of probation over false statements made in connection with his hunting methods: bow and arrow.

This is also how the locally famous and collared Cecil - a study subject of Oxford University - was initially hunted down, lured by bait on a car to leave a local national park, shot, but not killed, by Minnesota dentist Walter Palmer, and eventually shot with a gun no less than 40 hours after being wounded by Palmer.

Comments by famous and regular people alike have  been posted widely since then.  For example, said Sharon Osbourne: ""I hope that #WalterPalmer loses his home, his practice & his money. He has already lost his soul."

I recognize that some people - including some experts - argue for the continued allowance of this kind of hunting. Others believe it is a very bad idea for many biological, criminal, ethical, and other reasons to allow this practice.  If you are interested in signing a petition to Zimbabwe Robert Mugabe to stop issuing hunting permits to kill endangered animals, click here.  It will take you less than 60 seconds. 

 

July 30, 2015 in Celebrity Contracts, Commentary, Current Affairs, Famous Cases, In the News, Legislation, Science, Travel, True Contracts | Permalink | Comments (0)

Friday, July 3, 2015

Weekly News Roundup

Trump
By Michael Vadon via Wikimedia Commons

Late night comedians everywhere celebrated when Donald Trump (pictured) announced his candidacy for President.  We too are grateful for the blog fodder.  Politico reports that the Donald is suing Univision over its decision to withdraw from a five-year $13.5 contract to broadcast the Miss USA and Miss Universe Pageants, which Trump co-owns.  As Time Magazine reports here, NBC has also backed out of airing the Miss USA Pageant, and several people involved have also given the Donald their notice.  Trump's partners were upset by statements he made as part of his Presidential campaign that disparaged Mexico and Mexicans.  Never fear, the pageant will still be broadcast on Reelz (whatever that is).  

Meanwhile, London's The Guardian reports that Harvey Keitel is suing E*Trade for withdrawing from a commitment with Keitel to feature him in a series of three commercials for $1.5 million.  According to The Guardian, E*Trade really wanted Christopher Walken for the spots.  It was willing to settle for Keitel, until Kevin Spacey became available.  E*Trade offered Keitel a $150,000 termination fee, but Keitel says that's not enough.

Students are often astonished that major corporations sometimes operate through informal arrangements such as letters of intent.  The fact that they do -- and that they can get in trouble by doing so -- is illustrated in Belfast International Airport's (BIA) attempt to enforce a letter agreement with Aer Lingus.  As reported by the BBC, BIA read the letter as embodying a ten-year commitment from Aer Lingus to fly out of BIA.  The court found that the agreement merely covered pricing should Aer Lingus continue to fly out of BIA for ten years.  Aer Lingus decided to switch to Belfast City Airport, claiming that its arrangement with BIA was no longer financially viable.

July 3, 2015 in Celebrity Contracts, E-commerce, In the News, Television, Travel | Permalink | Comments (0)

Thursday, June 18, 2015

Uber Is the New Britney Spears

We used to count on Britney Spears as the leading source for blog fodder.  Move aside Britney.  Uber just passed you by.  We have two new Uber stories just in California alone.

First, last week the District Court for the Northern District of California issued its opinion in Mohamed v. Uber Technologies.  Paul Mollica of the Employment Law Blog called that decision a "blockbuster," because it ruled Uber's arbitration agreement with its drivers unconscionable and therefore unenforceable.  The opinion is very long, so we will simply bullet point the highlights.  With respect to contracts entered into in 2013, the court found:

  • Valid contracts were formed between plaintiffs and Uber, notwithstanding plaintiffs' claims that they never read the agreements and that doing so was "somewhat onerous";
  • While Uber sought to delegate questions of enforceability to the arbiter, the court found that its attempt to do so was not "clear and unmistakable" as the contract included a provision that "any disputes, actions, claims or causes of action arising out of or in connection with this Agreement or the Uber Service or Software shall be subject to the exclusive jurisdiction of the state and federal courts located in the City and County of San Francisco, California"; 
  • In the alternative, the agreement was unconscionable and therefore unenforceable;
  • The procedural unconscionability standard of "oppression," generally assumed in form contracting, was not overcome in this instance by an opt-out clause; the opt-out was inconspicuous and perhaps illusory;
  • The procedural unconscionability standard of "surprise" was also met because the arbitration provision was "hidden in [Uber's] prolix form" contract; and
  • Uber's arbitration provisions are substantively unconscionable because the arbitration fees create for some plaintiffs an insuperable bar to the prosecution of their claims.

The court acknowledged that the unconscionability question was a closer question with respect of the 2014 contracts but still found them both procedurally and substantively unconscionable.

There is much more to the opinion, but that is the basic gist.

Eric GoldmanIn other news, as reported in The New York Times here, the California Labor Commissioner's Office issued a ruling earlier this month in which it found that Uber drivers are employees, not independent contractors as the company claims.  The (mercifully short!) ruling can be found here through the good offices of Santa Clara Law Prof, Eric Goldman (pictured).

The issue arose in the context of a driver seeking reimbursement for unpaid wages and expenses.  The facts of the case are bizarre and don't seem all that crucial to the key finding of the hearing officer.  Although plaintiff''s claim was dismissed on the merits, Uber has appealed, as it cannot let the finding that its drivers are employees stand.

But the finding is a real blockbuster, especially as Uber claims that similar proceedings in other states have resulted in a  finding that Uber drivers are independent contractors.  Here's the key language from the ruling:

    Defendants hold themselves out to as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation.  The reality, however, is that Defendants are involved in every aspect of the operation.  Defendants vet prospective drivers . . . Drivers cannot use Defendants' application unless they pass Defendants' background and DMV checks

Meredith    Defendants control the tools the drivers use . . . Defendants monitor the Transportation Drivers' approval ratings and terminate their access to the application if the rating falls below a specific level (4.6 stars).

As the Times points out,  few people would choose to be independent contractors if they had the option to be employees.  Our former co-blogger Meredith Miller has written about similar issues involving freelancers, and we blogged about it here.  So far, it appears that five states have declared that Uber drivers are independent contractors, while Florida has joined California in finding them to be employees.  For more on the implications of this ruling, you can check out this story in Forbes, featuring insights from friend of the blog, Miriam Cherry.

June 18, 2015 in In the News, Recent Cases, Travel, Web/Tech | Permalink | Comments (0)