Monday, October 13, 2014
We have posted previously about business entities that try to go after customers that give them negative reviews here and here. It seems, based on our limited experience, that threatening to sue customers for writing negative reviews is not a great business model.
Fortunately, there is a market solution. As reported in this weekend's column in The New York Times's "The Ethicist," businesses that recieve negative online reviews can just contact the reviewers and pay them to take down the review. According to the account in The Times, the author of a TripAdvisor review of a hotel entitled it "An Overpriced Dung Heap," but then accepted a 50% discount in return for removing the review. He should have bargained down to "Dung Heap," since the hotel probably was still a dung heap but perhaps was no longer overpriced.
The reviewer asked The Ethicist who was most unethical: himself, the hotel or TripAdvisor for hosting a system so easily corrupted. We don't get paid to weigh in on ethical matters. Actually, we don't get paid at all. But we do have opinions to vent, so here are some.
As The Ethicist acknowledged, what the hotel owner did was not illegal. An economist might reduce the question to one of efficiency. If the hotel owner thinks her money is well spent making bad publicity go away, rather than actually improving the quality of her hotel, that is a choice she can make as a business owner. The market may prove her wrong. The lack of negative reviews on TripAdvisor may not help if in fact one is greeted by a kickline of cockroaches and bedbugs when entering the guest rooms. The Ethicist dodges the stickier problem that TripAdvisor may contain only positive reviews of The Dung Heap Inn because the owners and their supporters flood the site with fake reviews. One would think that TripAdvisor's value would be correlated to its accuracy, but it is hard to see what measure TripAdvisor could take to insure that posts on its site are the real deal.
Wednesday, July 2, 2014
Today's New York Times features a story about a new ride-sharing service called BlaBlaCar. The idea is simple -- it's just an internet ride board. Riders share with drivers the cost of travel between two cities. Drivers are forbidden from profiting from the ride share; BlaBlaCar takes a 12% cut. Cost savings over common carriers are significant, ranging according to the NY Times from 33% to 67%
The gimmick is the BlaBla part. Riders can indicate how much they want to talk en route. If you mark Bla, you want to ride in silence (or perhaps you want everyone to know that they can talk all they want but you will be hooked in to your iPod). If you mark BlaBlaBla, other riders (and the driver) are on notice that you will not shut up for six straight hours.
I don't think this would work for me. It's a question of etiquette and signaling. This might be useful if one could be more specific: e.g., BlaBla#WorldCup or BlaBlaBla#Kardashians or BlaBlaBla#MyElderlyMother'sHealthProblemsandMyRecentBreak-up would be useful to know in advance. If I were being honest, I would proclaim BlaBlaBla#HansKelsen, but that would guarantee me a train ticket. I might strategize and put Bla, because it seems more likely than not that I would not find all that much in common with my fellow passengers. But what if they turn out to be interesting? Can I BlaBlaBla, if I promised only Bla? Then, the next time I use BlaBlaCar, I might regret my misanthropy and commit to BlaBlaBla. Would I be a jerk if, after half an hour of conversations about pop stars or the best gear for rock climbing, I pulled out my iPod?
Of course, the odds are that most users of BlaBlaCar are young and interesting (to me), but I am old and boring (to them). So I should put BlaBlaBla because I am interested in hearing what 20- or 30-somethings are doing these days as they commute between European cities, but I would advise them to Bla me, because they likely do not want to hear about Hans Kelsen. This is based on my recent visit with my niece and three nephews whose BlaBlaBla fascinated me (when I could follow it) but who found my Bla, well, blah, or even bleh, but certainly nothing above meh.
But the question of legal liabilities does nag. BlaBlaCar seems rather blithe about the issues. The driver's insurance covers the possibility of injuries to passengers, and women who are wary of sharing cars with strange men can opt to ride only with other women. As for the rest, riders can rely on reviews of drivers and steer away from those who seem sketchy. This is all certainly an improvement over the level of risks assumed by, say, hitchhikers.
BlaBlaCar's terms of service put passengers on notice that the site cannot guarantee that they will be insured:
However BlaBlaCar gives no warranty or assurance in this regard and it is the Driver’s responsibility to verify that their insurance provides adequate cover.
As for other concerns, BlaBlaCar attempts to cover them under its Good Conduct Charter.
Wednesday, May 14, 2014
Yesterday's New York Times features a story about the costs associated with hotel boycotts when an organization has booked a hotel to host a conference or meeting long in advance. This issue ought to be a familiar to anyone who attended the 2011 annual AALS meeting in San Francisco, for which the conference hotel was a Hilton whose workers were on strike.
The article details the costs involved in cancellations. Often the organization is contractually obligated to pay hundreds of thousands of dollars to the hotel even if the conference ulimately takes place at a different venue. According to the Times, if the cancellation is on short notice, the organization is typically obligated to pay 90% of expected room costs and 90% of expected banqueting services. And then there are, of course, the costs of finding an alternative venue in proxity to the original choice on relatively short notice. Major conferences can be booked years in advance.
Sometimes it is possible to mitigate the harm -- by booking at a related hotel or by promising to return to the original hotel if the policy that causes offenese is revoked. The former is unlikely in cases where the problem is with the entity that owns the hotel. But it is more likely in cases like those that arose in connection with anti-immigrant legislation passed in Arizona. Organizations could punish the state by moving to related hotels in states that did not have similar legislation.
Monday, May 12, 2014
By Myanna Dellinger
The United States Supreme Court recently held that airlines are allowed to revoke the membership of those of their frequent flyers who complain “too much” about the airline’s services (see Northwest v. Ginsberg). Contracts ProfBlog first wrote about the case on April 3.
In the case, Northwest Airlines claimed that it removed one of its Platinum Elite customers from the program because the customer had complained 24 times over a span of approximately half a year about such alleged problems as luggage arriving “late” at the carousel. The company also stated that the customer had asked for and received compensation “over and above” the company guidelines such as almost $2,000 in travel vouchers, $500 in cash reimbursements, and additional miles. According to the company, this was an “abuse” of the frequent flyer agreement, thus giving the company the sole discretion to exclude the customer. The customer said that the real reason for his removal from the program was that the airline wanted to cut costs ahead of the then-upcoming merger with Delta Airlines. He filed suit claiming breach of the implied covenant of good faith and fair dealing in his contract with Northwest Airlines.
The Court found that state law claims for breaches of the implied duty of good faith and fair dealing are pre-empted by the Airline Deregulation Act of 1978 if the claims seek to enlarge the contractual relations between airlines and their frequent flyers rather than simply seeking to hold parties to their actual agreement. The covenant is thus pre-empted whenever it seeks to implement “community standards of decency, fairness, or reasonableness” which, apparently, go above and beyond what airlines promise to their customers.
Really? Does this mean that airlines can repeatedly behave in indecent ways towards frequent flyer programs members (and others), but if the members repeatedly complain, they – the customers – “abuse” the contractual relationship?!.. The opinion may at first blush read as such and have that somewhat chilling effect. However, the Court also pointed out that passengers may still seek relief from the Department of Transportation, which has the authority to investigate contracts between airlines and passengers.
The unanimous opinion authored by J. Alito also stated that passengers can simply “avoid an airline with a poor reputation and possibly enroll in a more favorable rival program.” These days, that may be hard to do. First, most airlines appear to have more or less similar frequent flyer programs. Second, what airline these days has a truly “good” reputation? Granted, some are better than others, but when picking one’s air carrier, it sometimes seems like choosing between pest and cholera.
One example is the airlines’ highly restrictive change-of-ticket rules in relation to economy airfare, which seem almost unconscionable. I have flown Delta Airlines almost exclusively for almost two decades on numerous trips to Europe for family and business purposes. A few times, I have had the good fortune to fly first or business class, but most times, I fly economy. Until recently, it was possible to change one’s economy fare in return for a relatively hefty “change fee” of around $200 and “the increase, if any, in the fare.” - Guess what, the fares always had increased the times I asked for a change. Recently, I sought to change a ticket that I had bought for my elderly mother, also using KLM (which codeshares with Delta) as my mother is also frequent flyer with Delta. I was told that it was impossible to change the ticket as it was “deeply discounted.” I had shopped extensively online for the ticket, which was within very close range (actually slightly more expensive than that of Delta’s competitors. I asked the company what my mother could do in this situation, but was told that all she could do was to “throw out the ticket (worth around $900) and buy another one.” Remember that these days, airfare often has to be bought months ahead of time to get the best prices. In the meantime, life happens. Unexpected, yet important events come about. Changes to airline tickets should be realistically feasible, but are currently not on these conditions.
What airlines and regulators seem to forget in times of “freedom of contracting and market forces” is that some of us do not have large business budgets or fly only to go on a (rare, in this country) vacation. My mother is elderly and lives in Europe. I need to perform elder care on another continent and need flights for that purpose just as much as others need bus or train services. Such is life in a globalized world for many of us. In some nations, airlines feature at least quasi-governmental aspects and are much more heavily regulated than in the United States. Here, airfare seems to be increasing rapidly while the middle (and lower) incomes are more or less stagnant currently. I understand and appreciate the benefits of a free marketplace, but a few more regulations seem warranted in today’s economy. It should be possible to, for example, do something as simple as to change a date on a ticket (if, of course, seats are still available at the same price and by paying a realistic change fee) without having to buy extravagantly expensive first class or other types of “changeable” tickets.
Other “abuses” also seem to be conducted by airlines towards their passengers and not vice versa. For example, if one faces a death in the family, forget about the “grievance” airfares that you may think exist. Two years ago, my father was passing and I was called to his deathbed. Not having had the exact date at hand months earlier, I had to buy a ticket last minute (that’s usually how it goes in situations like that, I think…). The airline – a large American carrier - charged a very large amount for the ticket, but attempted to justify this with the fact that that ticket was “changeable” when, ironically, I did not need it to be as I needed to leave within a few hours.
In the United States, “market forces” are said to dictate the pricing of airfare. In Europe, some discount airlines fly for much lower prices than in the United States (think round-trip from northern to southern Europe for around $20 plus tax, albeit to smaller airports at off hours). Strange, since both markets are capitalist and offer freedom of contracting. Of course, these discount airlines also feature various fees driving up their prices somewhat, although not nearly as much as in the United States. A few years back, one discount European airline even announced that it planned to charge a few dollars for its passengers to use … the in-flight restrooms. Under heavy criticism, that plan was soon given up. In the United States, some airlines seem to be asking for legal trouble because of their lopsided business strategies. Sure, companies of course have to remain profitable, but when many of them claim in their marketing materials to be “family-oriented” and “focused on the needs of their passengers,” it would be nice if they would more thoroughly consider what that means.
Thursday, April 3, 2014
Supreme Court Finds Breach of the Implied Duty of Good Faith and Fair Dealing Claim Barred by the Airline Deregulation Act
We have been following this case, Northwest, Inc. v. Ginsberg, which departed from the Ninth Circuit and arrived in the Supreme Court, which heard oral argument in the case in December. The facts are amusing and all-too-familiar.
Mr. Ginsberg joined Northwest's frequent flyer program in 1999 and in 2005 he achieved "Platinum Elite" status. In June 2008, Northwest Airlines (Northwest) sent Mr. Ginsberg a letter revoking his Platinum Elite membership with Northwest for "abuse." This was done, Northwest alleged, in accordance with its contractual right to terminate membership for abuse, as determined in its sole discretion. The letter noted that Mr. Ginsberg has contacted Northwest 24 times over a roughly six-month period to report, among other things, "9 incidents of your bag arriving late at the luggage carousel. . . ."
At this point, we interrupt this blog post for a bit of a rant. . . .
Wait a minute! Northwest compensated Mr. Ginsberg with travel vouchers, points and $491 in cash reimbursements, so one might think that Mr. Ginsberg's complaints were, at least in part, justified. So, over the course of six months, his bags were delayed or lost nine times, and Northwest accuses him of abuse. That, I think Mr. Ginsberg would agree, takes chutzpah!
We now return to our more sober summary of the case . . . .
The issue before the Supreme Court was whether Mr. Ginsberg's claim that Northwest had vioalted the implied covenant of good faith and fair dealing was preempted under the Airline Deregulation Act (the Act). The Act includes a preemption provisions which provides that . . .
a State, political subdivision of a State, or political authority of at least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart.
The Act thus should preclude claims related to a price, route, or service. The Court had twice previously struck down state statutory schemes that regulated practices in the arline industry, including practices related to frequent flyer programs. The central issue before the Supreme Court was whether Northwest had voluntarily taken on additional contratual duties pursuant to its frequent flyer program. The Supreme Court, unanimously reversing the Ninth Circuit, held that it had not. Because the implied duty of good faith and fair dealing is implied, the Court held, it was imposed upon Northwest by the state and thus constituted a form of state regulation preempted by the Act.
The Court suggested that Ginsberg, or at least other, similarly situated plaintiffs, are not without alternative remedies. If Northwest really is abusing its discretion in administering its frequent flyer program, the Court suggests, airline passengers can choose to join some other airline's frequent flyer program (assuming there are significant differences and Mr. Ginsberg lives near an airport serviced by multiple airlines), and the Department of Transportation has authority to investigate and sanction the airline. Finally, the Court noted that while Mr. Ginsberg's good faith and fair dealing claim was pre-empted, his abandoned breach of contract claim might not have been.
Friday, February 21, 2014
A number of us from the blog are here at KCON 9 in Miami -- the 9th Annual International Conference on Contracts. We may do some live blogging on the panels, or we may just reflect afterwards on the sessions. But for now, let's just say, highs in the 80s, lows in the 70s.
Tuesday, January 28, 2014
Myanna's post about Uber got me thinking about a recent trip to New York City. New York City was the first city in which I took the occasional cab. I went to college and to law school there. When I was in college, some kindly relative told me that cabbies should get a 10% tip, and I have lived by that ever since. Turns out my kindly relative was a cheapskate.
As this article from The New York Times from about a year ago indicates, as early as 1947, cabbies expected at least 12½%, and until recently average tips exceeded 20%. Tips have come down as fares have gone up, and as of a year ago they averaged just over 15%.
New York City cabs are now equipped with credit card readers that offer riders the option to leave a tip. The reader will automatically add a tip, and it gives riders the option of tipping 15%, 20% or 25%. Behavioral economics suggests that most people will choose the middle one, and so it seems that the aim of the screen is to get cabbies' tips back up to where they were before the fares increased. When I saw these three options, I felt oppressed and manipulated, since I was still operating on the assumption that 10% is what is expected. Now I feel guilty that I did not tip more reasonably. In my own defense, I didn't save myself any money, since the my law school reimbursed me for my travel expenses on that trip. So you see, I wasn't being cheap; I was being a responsible steward of my law school's resources. But no more stingy tips for me.
I am a work in progress. I was as astonished as was Jerry Seinfeld (the character) to learn that chambermaids expect $5 a night (see the scene below, starting about 1:40 in).
Ann Landers is an even bigger cheapsake than my relative. Before we saw this, I would tip $2 a night, and I still think $5 a night is rather high. After all, Jerry Seinfeld (the character) is an experienced traveler, and he seems pretty free with his money. If he gives $1, $2 seems okay. But my wife and daughter agree with the suspected serial killer. Five dollars it is. It would have been interesting to see if chambermaids noticed an increase in generosity following the airing of this episode. And I wonder if they now wish that cable channels would stop showing Seinfeld reruns. The episode is now at least fifteen years old, so if $5 a night was a good tip then, one should expect $10 /a night now.
Wednesday, December 4, 2013
For those who don't want to click on the links, here is our earlier summary of the facts of the case:
Plaintiff, Rabbi, S. Binyomin Ginsberg had been a member of Northwest's frequent flyer program, WorldPerks, since 1999. By 2005, he was such a macher, Northwest granted him Platinum Elite Status (oy, what nachas!). In 2008, Northwest revoked his membership. Ginsberg claims that Northwest took this action because he was a kvetch. . . .
The official reason provided for the termination was that Northwest had discretion "in its sole judgment," to cancel a member's account due to abuse of the program. Apparently, such judgment includes the ability terminate a membership if complaints persist after the "Enough with the complaining already!" warning. Ginsberg sued, asserting four causes of action, but Northwest moved for dismissal, arguing that the Airline Deregulation Act (ADA) preempted all of Ginsberg's claims.
According to the The New York Times' synopsis of oral argument, Justices Ginsburg and Sotomayor expressed concern that the airline's frequent flyer program was either an illusory contract or subject to the airline's "whim and caprice." Justice Breyer, however, seemed inclined to think that claims sounding in breach of contract are preempted by the federal Airline Deregulation Act of 1978, which was supposed to allow airlines to compete based on, among other things, price. Since frequent flyer programs are price discounts, Breyer suggested that such programs are governed by the Deregulation Act and cannot be subject to claims based on state laws aimed at regulating the airlines. However, in 1995, the Court exempted contracts claims from federal preemption in American Airlines v. Wolens.
The distinction between regulating airlines through state law and regulating airlines through breach of contract claims is a subtle one. It seems to turn on whether Rabbi Ginsberg's claim is construed as a breach of contract claim or a claim that the airline breached a duty of good faith and fair dealing. Paul Clement, arguing for the airline (on page 13 of the transcript) claimed that to permit a claim based on the duty of good faith and fear dealing would "enlarge the bargain." Since the contract gave the airline discretion to terminate Rabbi Ginsberg's membership, Clement argued, invoking the implied duty of good faith and fair dealing takes his claim outside of the contract. The claim implicates state policies because in some states the implied duty is not merely a rule of construction but a means of imposing public policy standards of "fairness and decency" on private agreements.
The Solicitor General joined the case as amicus curiae on behalf of the airline and attempted to clarify the federal uniformity concerns implicated in the case. Counsel for the Solicitor General contended that state contracts law is fine to help adjudicate the intent of the parties, but where states impose public policy concerns in areas such as implied covenants and the unconscionability defense, there preemption is necessary.
This is very strange territory, and it was clear that Justices and counsel alike struggled to work out how to put such fine distinctions into place. It is odd for the Court to say in Wolens that contracts claims are not preempted by the Deregulation Act but for the Court to now say that certain types of contracts claims, like breach of the implied covenant of good faith and fair dealing or unconscionability defenses are still preempted.
And what about Federal Arbitration Act (FAA) preemption? One of the few ways that parties can get out of arbitration clauses is by arguing that such clauses are unconscionable, because the FAA does not preempt defenses sounding in common law contracts doctrine. But since unconscionability doctrine varies from state to state, parties seeking to enforce arbitration clauses could argue that the same uniformity concerns that govern preemption in the Deregulation Act context should also apply in the FAA context. If so, good-bye unconscionability challenges to arbitration clauses.
The Times provides this link to the transcript of oral argument.
Friday, November 15, 2013
On November 2, 2013, Judge Dearie of the U.S. District Court for the Eastern District of New York denied British Airways' motion to dismiss a putative class action suit in Dover v. British Airways, PLC. Plaintiffs, British Airways Executive Members, allege that British Airway was charging fuel charges on rewards flights that were not actually based on the cost of fuel. British Airways moved to dismiss based on federal preemption and based on the claim that plaintiffs could not show that the surcharge was not based on fuel costs.
The terms and conditions of the Executive Membership agreement provide as follows:
Members will be liable for all taxes and other charges associated with Reward travel on British Airways or a Service Partner airline, including without limitation, airport departure tax, customs fines, immigration fees, airport charges, customer user fees, fuel surcharges, agricultural inspection fees, security and insurance surcharge or other incidental fees or taxes charged by any person or relevant authority or body.
Despite British Airways' claim on its website that fuel surcharges "reflect the fluctuating price of worldwide oil," plaintiffs allege that the fuel surcharges are just an excuse for British Airways to increase revenue by charging passengers hundreds of dollars on free flights. For example, one plaintiff paid $854 for two "free" round-trip tickets between San Francisco and London. Another plaintiff paid nearly $3300 in fees, including fuel surcharges, for five tickets from Los Angeles to London. Plaintiffs put in evidence suggesting that the fuel surcharges are a hedging mechanism that bear little relationship to the actual cost of fuel. The District Court found these allegations sufficient to surive a motion to dismiss.
British Airways also argued that dismissal was warranted because plainiffs' claims are preempted by the Federal Airline Deregulation Act (ADA), which forbids states from "enact[ing] or enforc[ing] a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier[.]" 49 U.S.C. § 41713(b)(l). The District Court found this argument foreclosed by Am. Airlines, Inc. v. Wolens, 513 U.S. 219, 222 (1995), in which the U.S. Supreme Court ruled that "the ADA does not preempt contract claims, whether or not they relate to pricing or would otherwise be precluded if articulated under state consumer protection laws."
The District Court also rejected British Airways' argument that plaintiffs claims are preempted because enhanced or enlarged by state laws or policies external to the agreement. The District Court found that plaintiffs, like those in Wolens, were merely seeking to enforce the terms of their agreement with the airline. Finally, the District Court rejected an implied preemption based on the ADA's occuption of the field on the ground that the U.S. Supreme Court had declined to recognize any such preemption.
Thursday, July 18, 2013
We reported in May here about Northwest Inc. v. Ginsberg, a case on which the U.S. Supreme Court granted cert. so that it can decide "Whether the court of appeals erred in holding, in contrast with the decisions of other circuits, that respondent’s implied covenant of good faith and fair dealing was not preempted under the Airline Deregulation Act because such claims are categorically unrelated to a price, route, or service, notwithstanding that respondent’s claim arises out of a frequent-flyer program (the precise context of American Airlines, Inc. v. Wolens ) and manifestly enlarged the terms of the parties’ undertakings, which allowed termination in Northwest’s sole discretion."
Stephen Colbert reports on another tragic case of lost air miles, this time involving a frequent-flying cello. The report is provided below:
Monday, July 1, 2013
I was traveling this weekend and stayed at a hotel. As we were about to check in, I noticed this sign, which I would surely never have noticed if I did not teach contracts.
Look,much of this may be true whether or not the sign exists, but still I hope that I do not live in a world in which someone can plop down a sign on a parking lot and thereby bind me to whatever terms she chooses to impose. The troublesome word here, of course, is "irrefutable." Since this was an open parking lot that my hotel shared with a number of other hotels, there was no parking attendant. I could have written out a note certifying that my 2001 Camry is immaculate and handed to the people at reception. I expect that would have been flummoxed by such a note. Whether or not my note is accurate, I would regard it as a reasonable response to the sign. I would not want to run the risk of being on the wrong side of an irrefutable presumption, so better to state my claim as sweepingly as possible.
The wicked witch had it right. "What a world, what a world!"
Wednesday, May 22, 2013
blogged about this case before. Since that time, a panel of the Ninth Circuit issued a new opinion that is available here.
The Court agreed to decide whether airline passengers who are removed from a “frequent flyer” entitlement list have a right under state law to sue the airline for alleged violation of a promise that they could continue to enjoy the benefits. The case of Northwest, Inc., v. Ginsberg (12-462) tests whether such legal claims are preempted by federal law governing regulation of commercial air service.
SCOTUSblog also provides this statement of the issue in the case:
Issue: Whether the court of appeals erred in holding, in contrast with the decisions of other circuits, that respondent’s implied covenant of good faith and fair dealing was not preempted under the Airline Deregulation Act because such claims are categorically unrelated to a price, route, or service, notwithstanding that respondent’s claim arises out of a frequent-flyer program (the precise context of American Airlines, Inc. v. Wolens ) and manifestly enlarged the terms of the parties’ undertakings, which allowed termination in Northwest’s sole discretion.
We are looking forward to the Supreme Court's ruling (although the tea leaves seem pretty clear), and we hope that they cite to our earlier post as (some kind of) authoirty.
Friday, February 15, 2013
CNN's Erin Burnett did some intrepid reporting and "went to book a cruise . . . on Carnival so we could look at the contract..." The contract apparently says that, even after 5 days of being stuck on a disabled ship with no electricity or plumbing, "you're out of luck":
Shute v. Carnival Cruise Lines reprise?
[Meredith R. Miller]
Thursday, July 19, 2012
I've just returned from a semester in New Zealand, teaching an advanced contracts course at the beautiful Victoria University of Wellington. One of the best things about teaching at the law school was having David McLauchlan as a colleague. As many contracts profs know, David is an impressive and prolific contracts scholar and a highly respected expert on contract law. Some of his writings can be found here. During my visit, I had the privilege of hearing David present a paper with the intriguing title, “The Contract That Neither Party Intends.” In his paper, he tackles the issues of interpretation and responded to a recent New Zealand case which endorsed our very own Holmes' strict views regarding the objective approach to contract formation and interpretation. Professor McLauchlan offers several compelling reasons why that view should be rejected in favor of (also our very own) Corbin’s less stringent version of objectivity. The paper is a spirited discussion of interpretation issues ("promisee objectivity" v. "detached objectivity" aka "fly on the wall" theory) and discusses cases that are classics in American casebooks (such as the Peerless case) as well as New Zealand and Australian cases that may be unfamiliar to U.S. contracts profs. It goes to show that while contract law may be local, contract law issues are universal.
Tuesday, July 3, 2012
Moshe's post today got me thinking about a recent experience that I had not thought about in contracts terms. I was returning from a conference in Las Vegas (don't ask!) on my favorite airline, Southwest. Because it was Southwest, I know exactly why my flight was delayed.
There was a mechanical problem with a plane bound for San Franciscio. Because that flight had some connections that gave it priority over our flight to Chicago, Southwest decided to pull our plane and give it to the good folks heading off for San Francisco. At first, they told us there would be a two-hour delay while until they could find a replacement jet for us.
As two hours became three hours, passengers became upset. They voiced their anger at the gate attendants who were incredibly patient professional, courteous, and firm. They provided the limited information they had; they acknowledged that the information was incomplete and that the lack of complete information caused the passengers to be justifiably frustrated. They accommodated the needs of passengers, including someone who had checked her medication thinking that she would not need it on a three-hour flight that now was going to take (at least ) six hours. And then, as David Bromberg would put it, they did something so incredible that to this very day I indict my own susceptibilities and reject my own anachronisms.
They called passengers up in alphabetical order and gave us $100 vouchers. Some rejected the offer, saying they would never fly Southwest again. "Who you gonna fly?" I thought, but the Southwest employees, just confirmed that the passengers were rejecting the offer and apologized again for the inconvenience. The passengers responded by complaining that this was the worst travel experience they had ever had. "You don't fly much," I thought but the Southwest emplyoees just apologized again and assured the passengers that they would be departing soon.
Then we switched gates and eventually piled into a plane.
Which wouldn't start. Whatever machine was supposed to start it wasn't working, and then the cart holding the backup to the backup broke, and then the backup to the backup to the backup didn't have enough power. Word. It was 100 degrees outside of course, and without power in the aircraft, it was more than a little uncomfortable inside as well. But there would be no second $100 voucher.
So, Moshe, is $100 a reasonable offer? I mean, there wasn't a corpse next to me, and in fact I didn't expect to get even $100, because frankly getting a sincere apology from an airline is a coup these days. But if Southwest is going to compensate passengers for inconveniences caused by their own faulty equipment, why stop at a $100 voucher?
The remedy of price reduction derives from the action quanti minoris of Roman law. It allows the purchaser to reduce the contract price to what the parties supposedly would have agreed upon had the contract originally been for the purchase of the nonconforming goods. The remedy can be found in most European legal systems today; e.g., Section 1664 of the French Code Civil or Section 441 of the German B.G.B. The remedy is also mentioned in Section 50 of the Convention on the International Sale of Goods. Originally, price reduction was limited to sales contracts, but Section 9.401 of the Principles of European Contract Law proposed extending the remedy to any “tender of performance not conforming to the contract.”
A footnote in my forthcoming article, co-authored with David Elkins, (The Remedy of Price Reduction in Mixed Legal Systems, Stetson L. Rev., forthcoming 2012) recounts the following hypothetical case (derived from Common Frame of Reference and Existing EC Contract Law (Reiner Schulze ed., 2008) 322-323) to illustrate how price reduction might be used in a service contract:
A flies with a ticket for business class. Unfortunately, an economy class passenger dies during the flight. As the economy class is fully booked, the crew decide to transfer the corpse to business class and to tie it to the seat next to the one occupied by A. A may ask for a reduction of price which he or she paid for the flight, because having to sit next to a corpse in business does not conform with the passenger’s legitimate expectations, even if the air operator had no alternative option to solve the problem. In such a case it is difficult to determine a value of the reduction, since there is no market for flights with a corpse placed next to your seat. Possibly the price should at least be reduced to the level of the price for economy class…
Although the case appears to be one of those detached-from-reality hypotheticals that only a law professor could come up with, here’s an excerpt from a recent news story:
Lena Pettersson had just boarded her Tanzania-bound flight at Amsterdam Airport Schiphol when she noticed a man in his 30s looking unwell, the Expressen daily reported. Ms Pettersson, a journalist with Sveriges Radio, told the broadcaster that the man "was sweating and had cramps [seizures]." After the Kenya Airways plane took off, the man died, the Expressen reported. Cabin crew laid out the dead man across three seats and covered him with a blanket - but left his legs and feet sticking out, Ms Pettersson said. For the remainder of the overnight flight, Ms Pettersson was forced to sit near the dead man, with just an aisle separating her and the corpse. "Of course it was unpleasant, but I am not a person who makes a fuss," Ms Pettersson said. After her holiday in Tanzania, Ms Pettersson lodged a complaint with Kenya Airways, eventually receiving a 5000-kronor ($700) refund, half the price of her plane ticket.
Indeed, truth is stranger than (or at least as strange as) fiction.
[Posted on behalf of Moshe Gelbard by JT]
Monday, July 2, 2012
Because the enforceability of online contracts depends upon "reasonable notice," I often wonder whether we've stretched the term "reasonableness" to unreasonable extremes. Is it really reasonable to expect website visitors to click on hyperlinks? Hyperlinks within hyperlinked text? Because my research focuses on notice of contract terms, I am always interested in how to provide better, more effective notice.
Companies can provide notice with words, but they can also use images or video. Unfortunately, images, like text, can also be ignored. For example, how many times have you actually watched an airline safety video? What most airlines do is put attractive crew members on the screen who recite the basics and hope that people will pay attention. I recently took an Air New Zealand flight that took a very different approach - comedy! The safety video starred Richard Simmons of 80's spandex fame leading the crew through an aerobicized safety routine. One segment had crew members wearing body paint (you need to watch carefully - the paint is very skillfully applied). Several members of the super-popular rugby team, the All Blacks, made appearances - because they appeal to a broad cross section of the population (men, women, children), more passengers were likely to be engaged. The video was very funny and I watched the entire thing, both to and from my destination. I wasn't the only one. It seemed that everyone on the plane was paying attention. The video was just the right combination of humor, safety, and annoying-in-a-good-way (Richard Simmons excels at that). Was it effective? Well, I remembered where the exit rows and my life jacket were. Watch it yourself and just try to tear your eyes away from the screen.
Friday, June 29, 2012
I have returned from an enriching 5 weeks in Southeast Asia, mostly in frenetic Ho Chi Minh City, where I taught a class titled "Workplace Law in Global Context." I blogged about my travels at Saigoner, which would be of interest only to those readers with curiosity about what I ate (e.g., spider).
I'll be back in the contracts blogging saddle next week. In the meantime, I wanted to share some thoughts and pictures that might be of interest to ContractsProf readers.
We stayed in a government owned hotel in Ho Chi Minh City. I was amazed by its efficiency - in the U.S., a hotel run by the government would operate like the post office.
I've shared a few pictures of a floating market in Can Tho on the Mekong Delta. The floating markets are the main tourist attraction in Can Tho and they start up early in the morning. A guide took us to see the boats; from the boats, people were all selling fruit wholesale. To the masts of their boats, the sellers tie the fruit they have for sale. Pineapples, watermellons and bananas were the main offering that day. There was a little boat that went around like a convenience store for the sellers, in it a lady offered the sellers coffee and hot bowls of pho.
Along the banks of the Mekong, people live in clapboard houses made of whatever they can find – mostly pieces of shipping containers and plastic tarps. The houses are on log stilts. One of the houses was partly constructed with a plastic advertisement for Kaplan University.
processing factory were wooden and dusty and it seemed improbable that they still functioned the way they did. We were told that Vietnam is second to Thailand as the world's largest rice producer.
The Vietnamese have a refreshing lack of anxiety about heavy machinery. In the U.S., we would not have been able to get that close to those rickety rice machines, and certainly not without a helmet and a waiver form. Same goes for firing automatic weapons (I fired an AK-47 and an M-16 at the Cu Chi tunnels) and renting or hitching a ride on a moto-bike.
Another eye-opening field trip was a garment factory
tour I arranged for my class. After a presentation on the company, we were toured around the factory. It had over 1000 workers in the Ho Chi Minh outpost. You really cannot picture a room of 600 people making jackets for Columbia and Izod in assembly lines until you see it. After the tour, we asked a million questions through an interpreter. Most of the factory's buyers are U.S. and European companies. I found it interesting that (at least thelast time I checked), Vietnam is not a signatory to the CISG. This is especially so given that their garment exports apparrently rose 14% in the first 4 months of 2012 (and their claim as the world's second largest rice producer).
Finally, I thought readers would appreciate this picture from outside the Ho Chi Minh Stock Exchange (oh, the irony). Their statue (as compared to this) is arguably a more honest depiction of markets.
Monday, May 28, 2012
I've realized that I don't have much more time in beautiful New Zealand and that I've not come close to fulfilling my promise to share my observations about how N.Z. contracts (and contracting styles) differ from those in the U.S.( I also realized I haven't come close to fulfilling my twice-a-week posting promise to our blogmeister, JT, so guilt is building, especially now that Meredith has taken unpaid leave).
As I've previously mentioned, I've been struck by how infrequently I've been forced - er, asked - to sign a form contract while here in NZ. The primary reason is probably that there is much less need to worry about tort liability (since it's already quite limited). One thing I have noticed, however, is that the merchants here check my signature when I use my credit card. As Alex Kuczynski notes in this amusing essay, merchants in the U.S. tend not to check that your signature matches the one on the back of the card. In New Zealand, however, it happens all the time. When it first happened, I was admittedly a little offended. Was it my shabby clothing? My scuffed up shoes? It turns out there was no need to be so sensitive - it apparently happens to everyone.
Another contracting practice that differs is that the few times I have had to sign a consumer contract, it was emailed to me in pdf form. Unlike receiving a hyperlink to terms which you don't read, receiving a pdf somehow made me read the contract. It made me feel as though the company (in this case, a camper van rental company) really did want me to read the terms. After making a reservation online, I got a confirmation letter with a pdf containing the contract terms. Since I made the reservation 2 weeks in advance, I had that much time to read the contract. When I picked up the camper van, they handed me the same contract and I signed it (I could have also printed it out, signed it, and brought it with me if I had been better organized). Yes, it was still a contract of adhesion, but at least I knew what I was getting myself into.
I've always suspected that the contracting of everything tends to make consumers disregard contracts - how could we function if we actually read all the legal terms that are thrust our way (online terms included)? Maybe if companies cut back on some of the legalese, consumers might start to take contracts a little more seriously. Here's hoping...
Wednesday, March 14, 2012
In my first post about my observations of contracting culture in New Zealand, I mentioned the unusual lack of contracts that consumers are forced to sign compared to in the States. Why wasn't I forced to sign a scary, multi-page, fine print form before my family was carried away on (very) rocky waters to swim with sea creatures in the open ocean? (Where was the laundry list of potential hazards that the company was not liable for, e.g. jumping in before the propeller blades were shut off, drowning, shock from the freezing water, hypothermia, being suffocated by too tight wetsuit and rubbery head cover, getting kicked in the face by flippers worn by German tourist....) Why didn't our visit to a traditional Maorian village include a standard form releasing the village from all liability if we fell into a steam vent or ate one of the very alluring, perfectly round and unusually blue berries that were tradiitonally used for dye - and which are very poisonous?
And then I found out about New Zealand's tort reform law. Back in the early seventies (the heyday of consumer regulatory reform everywhere, it seems), New Zealand adopted the Accident Compensation Act which basically abolished the ability to sue for personal injuries (providing a comprehensive no-fault benefits and rehabilitation scheme instead). I found this article by Peter Schuck which does a great job of outlining the kiwi approach to tort reform (which is, incidentally, called "Tort Reform, Kiwi-Style).
The case of the missing SFC. Mystery solved!