ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, January 17, 2018

A decision to make you think twice before tweeting your idea to a celebrity

Those posting ideas to the internet, in tweets or YouTube trailers or other websites: take note. This is an older decision, but one worth recounting on this blog I think. Out of the Central District of California, Alexander v. Metro-Goldwyn-Mayer Studios, Inc., CV 17-3123-RSWL-KSx, warns you that making your ideas available for free can mean that you forfeit the right to pursue compensation if someone else uses them. 

The case concerns the movie "Creed," which the plaintiff Alexander alleged he came up with. He sued the defendants for misappropriation of his idea, breach of implied contract, and unjust enrichment. The misappropriation of idea claim fails in California, so the court moves on to the breach of implied contract claim, where Alexander also faltered because he failed to allege that he ever offered the "Creed" idea for sale. In tweeting the idea at Sylvester Stallone, the court read the allegations as portraying a gratuitous offer of the idea to Stallone. 

Alexander argued that he thought he would be paid for the idea based on industry custom, and that the defendants understood that he tweeted the idea at them with the expectation of payment. But the court disagreed. All Alexander did was tweet the idea at Stallone and post it all over the internet; those actions were not compatible with expecting compensation, since the idea was widely available for free. There was never any communication between Alexander and the defendants, so the court found that it "strain[ed] reason" to imply an agreement for compensation from an unanswered tweet and the posting of the idea in other places on the internet.  

Finally, the unjust enrichment claim also failed. Alexander could not allege how the defendants benefitted from his idea, since he never alleged how the defendants accepted the idea. At any rate, since the idea was available for free all over the internet, the court stated that it was "unclear" why the defendants should be expected to compensate Alexander. 

January 17, 2018 in Celebrity Contracts, Commentary, Film, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, January 16, 2018

A dispute between a college and its resigned athletic director

The plaintiff Wilson resigned his position as the athletic director for the defendant Northland College after investigation for two sexual harassment complaints. Wilson and the college signed an agreement upon his resignation that restricted what the college could say about the situation to the media. The college radio station subsequently ran some stories reporting on Wilson's resignation. Wilson sued for, inter alia, breach of the separation agreement. The college moved to dismiss and the Western District of Wisconsin recently granted the motion in Wilson v. Northland College, 17-cv-337-slc (behind paywall).

The problem was Wilson couldn't identify any term of the contract that the college breached. The contract set forth a joint press release to be issued and stated that "[t]o the extent that either party is asked by a media source of any sort to provide an additional explanation, both parties will state that the mutually agreed upon statement speaks for itself." The college issued the require statement and the college radio host, beyond reporting that Wilson had resigned, did not provide any reasons for the resignation and referred to the press release, exactly as the contract required. 

Wilson's main arguments were that the press release was supposed to be the college's only statement and that no college employee (which the radio host was) could speak about Wilson's conduct, sexual harassment, or investigations in any way. But the court concluded that that was not what the contract called for and the radio host's statements that the college would not comment for the reasons behind the resignation beyond the press release complied with the college's contractual obligations. 

January 16, 2018 in Recent Cases, True Contracts | Permalink | Comments (0)

Monday, January 15, 2018

In which I arrive at a comic strip idea Marvel wouldn't approve of

I would say this is the time of year when I am perpetually behind, except that that is every time of year, so it's not surprising that it's taken me a bit to blog about Marvel's Create Your Own platform. As the article here makes clear, the terms and conditions require those uploading to the site to provide to Marvel the right to do almost anything it wishes with the material, without limit, notice, attribution, or payment. You can read all of the terms and conditions here.

In addition, the terms and conditions contain a long list of prohibited content, including such vague terms as "sensationalism" (defined as "killer bees, gossip, aliens, scandal, etc." which is one of my favorite collections of nouns ever) and "alternative lifestyle advocacies" (who is deciding what an alternative lifestyle is?), "misleading language" (misleading as to what?), and a catch-all "other controversial topics." (Incidentally, it also includes what I assume is a typo, as it prohibits "suggestive or revealing images" which it defines as "bare midriffs, lets, etc." I assume that's meant to be "legs.")

...Am I the only one who now wants to read a comic strip about aliens who advocate alternative lifestyles and raise killer bees, sharing scandalous gossip and double entendres (also prohibited) with their other alien alternative-lifestyle friends over a couple of glasses of wine (ditto) during their weekly high-stakes poker game (yup), all while baring their midriffs? 

(All of the prohibitions are blanket prohibitions except for graphic violence, which might be approved on a case-by-case basis.)

January 15, 2018 in Commentary, Current Affairs, In the News, True Contracts, Web/Tech | Permalink | Comments (0)

Monday, January 8, 2018

Heating oil contracts in the record cold

The news tonight reported on a real-life contracts issue near and dear to my heart, since my grandmother got caught up in an identical situation with her oil. Basically, New England has been in the middle of a two-week stretch of below-freezing temperatures, unusual for us. It's cold here, but not usually -18. Lots of people have contracts with oil companies that provide for automatic tank refill. These contracts are not cheap to enter into. My grandmother's cost hundreds of dollars a year, and that's just for them to show up; we still have to pay for the oil on top of it. But, because everyone's been using more oil than usual, the oil companies have been caught completely unprepared for how many of their automatic-renewal-contract customers have needed oil. How unprepared? Well, my 85-year-old grandmother spent more than 12 hours completely without heat, problematic in the arctic cold we were gripped in. And the problem is: What were our options? We'd paid hundreds of dollars to never be left in a situation, we thought, when our grandmother's tank would go empty. That was supposed to be the point of the contract, that we wouldn't have to worry about her running out of oil. But that was exactly what happened. 

And, as the news report makes clear, once you enter into this contract, you're not allowed to get your oil from anybody else. So we were in a situation where we couldn't get the service we'd paid for, and we were prohibited by contract from getting the service from anyone else. As the news report states, the oil company may waive the fee on a case-by-case basis. But, for many people on limited incomes dealing with already expensive heating costs, taking the risk of being charged a $399 fee might not be acceptable. 

January 8, 2018 in Commentary, Current Affairs, In the News, True Contracts | Permalink | Comments (2)

Wednesday, January 3, 2018

"Illegal use of alcohol" doesn't mean driving under the influence

A recent case out of the Sixth Circuit, Heimer v. Companion Life Insurance Co., No. 16-2274, "is about whether a contract should mean what it says." The insurance policy at issue disclaimed coverage for injuries that resulted from the "illegal use of alcohol." Heimer legally consumed a great deal of alcohol (he was legal drinking age), but then illegally operated a motorbike while his blood alcohol level was nearly twice the legal limit. He collided with another motorbike and suffered extensive injuries. 

The insurance company claimed that the policy didn't cover the accident because it resulted from the illegal use of alcohol. The court disagreed based on the plain language of the contract. The policy said "use," not "under the influence." Therefore, Heimer's injuries weren't covered only if his use of the alcohol was illegal, which it was not. Heimer's criminal offense was illegally using a motor vehicle, not illegally using alcohol.  

The court acknowledged that obviously the insurance company didn't want to have to pay for the injuries caused by the drunken motorbike driving, but the court noted that the contract's language needed to be modified to reach that result. 

A concurrence in part / dissent in part agreed with the outcome and accused the insurance company, the contract's drafter, of "sloppy drafting," but did allow that the phrase might be ambiguous. 

 

January 3, 2018 in Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, January 2, 2018

Here's one for any of us who have ever felt frustrated by Internet speeds

A class action brought in the Western District of Tennessee over Internet service speeds, Carroll v. TDS Telecommunications Corp., No. 1:17-cv-01127-STA-egb (behind paywall), recently survived a motion to dismiss. Among the claims was a breach of contract claim based on the plaintiff's procurement of a high-speed Internet service plan. The plaintiff agreed to pay between $120 and $150 a month for access to service of a particular speed, which she alleged she did not receive, rendering her Internet incapable of supporting the uses, such as Netflix and YouTube, that she had been told the Internet plan would support. The court found these to be sufficient allegations of a breach of contract to survive the motion to dismiss. The plaintiff's other causes of action, including for fraud, unjust enrichment, and civil conspiracy, also survived the motion. 

January 2, 2018 in Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Tuesday, December 26, 2017

What happens in Vegas ends up in court!

Intoxication always seems like such an irresistible thing to test, because it's so easy to slip into a hypo. A recent case out of Nevada, Wynn Las Vegas, LLC v. Tofani, No. 69936 (behind paywall), brings it up as an issue in the context of Las Vegas gambling. You can listen to the oral argument here (the audio quality is kind of terrible; sorry about that). The Wynn casino advanced Tofani $800,000 in credit, all of which Tofani gambled and lost, and the Wynn is now attempting to collect the debt. Tofani's main defense consisted of lack of capacity because he was intoxicated at the time he borrowed the money. (He also argued that he lacked capacity because of a gambling addiction, but the court found that to be irrelevant based on Nevada statute.)

The Wynn did win a jury verdict but only of $450,000. The majority opinion found that there were fact issues regarding Tofani's level of intoxication and reasonable disaffirmation of the contract, so those were questions that properly went to the jury. However, the jury instructions were incorrect, so the majority reversed and remanded for a new trial.

A concurrence in part - dissent in part walked through Tofani's intoxication defense in more detail. Tofani had indisputably affirmed his debt to Wynn in writing several times...until, eighteen months after incurring the debt, his wife found out how much money he owed, after which he began disaffirming the debt, leading to this lawsuit. The concurrence/dissent pointed out that either Tofani owed $800,000 or Tofani didn't. Therefore, the jury's verdict made no sense: Nobody contended at any point the possibility that Tofani only owed half the amount. The majority's way of dealing with this was through the incorrect jury instruction, but the concurrence /dissent pointed out that there was no fact issues for the jury to resolve: A contract entered into while intoxicated is voidable, not void. The intoxicated person must disaffirm the contract...which Tofani did not do for eighteen months and, to the contrary, repeatedly affirmed the contract in writing. Therefore, Tofani, having indisputably ratified the contract, could not disaffirm the contract later. 

Anyway, entering into a contract while intoxicated doesn't mean you get to keep whatever you were given: "He doesn't get to keep the money forever just because the contract is void; it doesn't magically morph into a Christmas gift with no strings attached just because he was drunk." 

December 26, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Thursday, December 21, 2017

Keeping premises safe doesn't necessarily mean banning dogs

A recent case out of Connecticut, Madore v. ISCC, LLC, HHBCV166033741S, sits at the intersection of contract law and negligence. The plaintiff was bit by a dog at an ice skating rink operated by the defendant and sued under theories of both negligence and breach of contract. The contract theory pivoted around the defendant's obligation in its lease to keep the premises in "good, safe, and habitable condition." The plaintiff tried to argue that this created a duty of care toward the plaintiff to keep the premises safe for the plaintiff, which the defendant failed to do since the plaintiff was bit by a dog while on the premises. However, the court noted that the contract said nothing about dogs. The obligation to keep the premises safe did not require the defendant to ban dogs from the premises. Therefore, the provision could not be read to create a duty of care to keep the plaintiff safe from harm caused by dogs on the premises. 

December 21, 2017 in Recent Cases, True Contracts | Permalink | Comments (0)

Wednesday, December 20, 2017

When your extramarital relationship can allegedly be found in a contract

I may have just used the recent royal engagement news as the basis of my Contracts final hypo, so I read with interest this complaint out of the Eastern District of New York, Purcell v. Pressman, 17-cv-6879 (behind paywall), that got sent to me under an alert. (I have the alert set up for "fanfiction," because of my scholarly interest in fan activities, and sometimes I get the most random hits on it, like this one.) The complaint is behind a paywall, but the New York Post has an article up that summarizes both this complaint and the previous fraud complaint filed in Connecticut District Court by Pressman against Purcell a few days before Purcell filed her lawsuit

Basically, Purcell's complaint alleges a passionate and intense relationship begun in a hotel in Puerto Rico and continued over lavish vacations in Antigua and New York City. At one point, Pressman allegedly drew up a contract between his alleged business Triton and Purcell, containing certain provisions under which the company agreed to pay some of Purcell's expenses, although neither party ever signed the contract. The contract, according to the allegations of the complaint, was meant to be a gesture of commitment on the part of Pressman to his romantic relationship with Purcell. Pressman's complaint denies ever drafting the contract. 

The allegations continue: Purcell and Pressman moved in together. A few days later, Pressman suffered a medical emergency and was rushed to the hospital after Purcell called 911. Pressman also disputes this version of the tale in his complaint, claiming he called 911 himself after Purcell failed to assist him; as you can tell, Pressman's complaint tells a different story about the relationship with Purcell, accusing her of defrauding him, instead of Purcell's opposite allegations.

While in the hospital, Purcell claims to have answered Pressman's ringing cell phone and to have realized only then that Pressman was married. The complaint then continues to allege further events in the relationship and then asserts a number of causes of action, including breach of contract based on the contract Pressman had allegedly drawn up. 

The complaint concedes that neither party ever signed the contract, but Purcell alleges that she acted in reliance on the enforceability of the contract and so, therefore, the contract should be treated as valid, with the execution of it merely a formality. As I've stated, Pressman has denied ever drafting the contract. 

There are no other pleadings in this case yet. 

December 20, 2017 in Celebrity Contracts, Current Affairs, In the News, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, December 19, 2017

If you're going to release your right to pursue unknown claims, you'd better mean it

A recent case out of the Seventh Circuit, ADM Alliance Nutrition, Inc. v. SGA Pharm Lab, Inc., Nos. 16-2331 and 16-2953, reminds us all that signing a release of unknown claims can, indeed, do exactly that. (You can listen to the oral argument here).

The parties in question were two sophisticated commercial parties with presumably access to legal advice if they desired it. When they terminated their business relationship, they signed a release from all claims, known or unknown. ADM then later discovered alleged fraud on SGA's part during the course of their former business relationship and sought to sue for this fraud. The Seventh Circuit, however, enforced the plain language of the release, noting that releases are permitted to encompass unknown fraud claims: 

Two sophisticated businesses signed an agreement to walk away from each other here. ADM chose to relinquish its right to bring any and all claims arising out of the Purchase Agreement, whether known or unknown. It also agreed that no representations were made to induce it to enter into the Termination Agreement other than those contained in the agreement.

Therefore, the release was enforced. Let this be a word of warning: Be careful when signing releases. 

December 19, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, December 18, 2017

Facebook's terms of use have gaps that leave consumers powerless

Venkat Balasubramani over on Technology and Marketing Law Blog has a piece on the defeat of a recent lawsuit against Facebook based on Facebook's tracking of logged-out users on third-party websites. The court had previously rejected other claims, which left only contract-based claims, which the court also rejected in this most recent ruling. Basically, Facebook's statements about not tracking logged out users could not be found in the terms of service. Instead, Facebook made them in other documents, like data use policies and help center pages. Therefore, the court found there was no contractual provision governing Facebook's behavior. 

As the blog notes, "Ouch." It takes the court a long time to wade through Facebook's voluminous documents to determine what is and is not a contractual promise, an act that we surely can't expect the typical consumer (even if a lawyer) to engage in. This ruling seems to allow Facebook to be a little bit coy about where it makes its statements in order to avoid certain claims. The gap on tracking logged-out users in the terms of use seems to leave consumers without a cause of action here, and to make it difficult for consumers to piece together all of the documents to determine Facebook's true stance on the issue. 

December 18, 2017 in Commentary, True Contracts, Web/Tech | Permalink | Comments (0)

Wednesday, December 6, 2017

Emails can be enforceable, even if a contemplated contract is never signed

A recent case out of the Southern District of New York, Nusbaum v. E-Lo Sportswear LLC, 17-cv-3646 (KBF) (behind paywall), granted summary judgment based on a chain of emails between an employer and employee. The emails were discussing a severance provision, and the last email in the chain read in relevant part, "I am agreeing to the below . . . . I will sign when I get back." The parties never executed any further document. 

The court nevertheless found an enforceable contract between them. Although it was true that the emails seemed to contemplate a final agreement, it was also true that both parties regarded the negotiations as concluded and the agreement reached at the time of the final email. The employee than spent nineteen months performing under this perceived agreement. It was clear from the emails that the parties had reached agreement on the material term, and the matter was not so complex that it needed to be reduced to a formal writing. Indeed, the employer admitted it usually did not reduce employment agreements to a formal writing. Therefore, the emails demonstrated that the parties had reached agreement and they were enforceable. 

December 6, 2017 in Labor Contracts, Recent Cases, True Contracts | Permalink | Comments (0)

Monday, December 4, 2017

As long as an idea is new to you, New York court finds it can serve as consideration

If you're looking for fact patterns involving consideration, a recent case out of the Northern District of New York, West v. eBay, Inc., 1:17-cv-285 (MAD/CFH) (behind paywall), has one for you. 

The following allegations appeared in the complaint: West worked as a consultant for eBay. As a consultant, West told eBay about a business plan he had which represented a "unique business model" for virtual marketplaces. West said he was cautious about sharing his business plan, and eBay promised to keep the business plan confidential. West then sent the business plan to eBay. eBay subsequently promised to compensate West if it used the business plan. eBay then developed a mobile app that West alleged used the business plan. eBay, however, stated that the app was "independently conceived" by other eBay employees. This lawsuit followed, and eBay moved to dismiss West's complaint. 

One of eBay's asserted grounds for dismissal was a lack of adequate consideration for the contract alleged in West's complaint. eBay claimed that the business plan was not "novel" and so had no value and could not serve as consideration. The court noted that under New York law, a not-novel idea can be adequate consideration if it was novel to the party to whom it was being disclosed. This requires a fact-specific inquiry. At the motion to dismiss stage, West had asserted enough facts that the business plan was idea was novel to eBay, meaning that it could serve as adequate consideration for the contract. 

There were other causes of action and arguments involved that I'm not going to get into here, but the complaint also contained promissory estoppel and unjust enrichment claims that also survived the motion to dismiss, if you're interested. 

December 4, 2017 in E-commerce, Recent Cases, True Contracts, Web/Tech | Permalink | Comments (0)

Friday, December 1, 2017

Casual, young, fun Mexican restaurants have to be allowed to play music!

Montana brings us an anticipatory breach case about a Mexican restaurant, Bridger Del Sol, Inc. v. VincentView, LLC, DA 17-0186

Bridger Del Sol ("BDS") leased some property from VincentView for the purpose of operating a "casual, young, fun Mexican restaurant." I appreciate these adjectives. BDS's Mexican restaurant sounds like a place I'd want to be friends with. 

BDS opened its casual, young, fun restaurant but the upstairs tenants turned out to not be so keen on their hip new downstairs neighbor, complaining about noise and cooking smells. VincentView then sent BDS a Notice of Default and stated that it would take over the premises prior to the expiration of the lease unless BDS stopped playing music and emitting cooking odors. 

The court characterized that as an anticipatory breach on VincentView's part. As the court noted, "Restaurants commonly play music and must cook. Thus, VincentView's new rules were not reasonable or fair to BDS." This was therefore a breach of VincentView's duty of good faith and fair dealing and VincentView would have been unjustified in retaking the premises as it threatened unequivocally to do. 

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

Thursday, November 30, 2017

Here's an Example of an Illegal Contract

I always struggle to think of examples of illegal contracts other than contracts to kill people, which makes for a dramatic class discussion but I fear might cause the students to write off illegal contracts as a subject better suited for Breaking Bad or something. So I was delighted to come across this recent case out of Michigan, M-D Investments Land Management, LLC v. 5 Lakes Adjusting, LLC, No. 336394 (behind paywall), dealing with an illegal contract. 

While the contract is found illegal in this case, the facts are not glamorous. The plaintiff hired the defendant to adjust its fire insurance claim and signed a contract for the services. Later, the plaintiff filed this action seeking a declaration that the contract between the parties was illegal as against public policy, and therefore voidable at the plaintiff's option. The issue was that the contract had not been approved by the Department of Insurance and Financial Services ("DIFS") as required by Michigan statute. 

The trial court found the contract in violation of the statute and thus voidable, and this appellate court agreed. The statute required the adjuster to seek approval from DIFS of its contract, and the defendant's failure to do so, no matter the reason, made the contract at least voidable at the plaintiff's option (which the plaintiff had chosen to exercise), if not void altogether. 

The defendant argued that it has since obtained DIFS approval of its contract. However, it was undisputed that it did not have this approval for the entire time the contract with the plaintiff was in effect. Thus, the contract could not be saved by after-the-fact approval.  

November 30, 2017 in Commentary, Law Schools, Recent Cases, Teaching, True Contracts | Permalink | Comments (0)

Wednesday, November 29, 2017

If You Really Want a Meeting, Don't Be Casual About It - Propose a Time!

As a recent case out of Utah, Desert Mountain Gold LLC v. Amnor Energy Corp., No. 20160654-CA, reminds us, if your contract tells you what to do, you'd better do it. 

In the case, the two parties had entered into a contract regarding mining claims. Desert Mountain allegedly breached the contract, which Desert Mountain disputed. Under the terms of the contract, in the event of a disputed breach such as this, the parties were required to "hold one informal meeting" before resorting to legal proceedings. Amnor sent Desert Mountain a communication stating that it was "willing to meet to discuss" the dispute. When Desert Mountain never took them up on the offer to meet, Amnor argued that it was justified in treating the contract as breached. 

The court disagreed, because the court found that Amnor's statement was merely "casual[]." That was not enough to fulfill the requirement of holding an informal meeting. It should proposed a time to meet. Further, Amnor did not argue that Desert Mountain was in breach until fourteen months later, when Desert Mountain accused Amnor of being in breach for missing a royalty payment. The court said that violated the contract's "demand that it promptly seek legal action in the event that an informal meeting proved to be unsuccessful." 

I quoted that in full because I think it's an interesting finding. The relevant clause as excerpted by the court states that, if the informal meeting is unsuccessful, the dispute "shall be resolved in a legal proceeding." The only place "promptness" seems to show up as a requirement is when the court reads it in. It's unclear what timeline the court would have viewed as prompt, given the contract doesn't provide for one, except that this one wasn't it. 

The lesson from this case seems to be that if your contract calls for an informal meeting, you'd better not be casual about asking for it. Your informal meeting demands a little more proactive effort on your part. After all, we all know when people vaguely say "We should get together soon," no plans ever materialize!

November 29, 2017 in Commentary, Recent Cases, True Contracts | Permalink | Comments (0)

Tuesday, November 28, 2017

Chip, Joanna, and Their HGTV Contract's Non-Compete Provision

I spent my Thanksgiving fretting about net neutrality, so I thought for my first blog entry back from the holiday I'd let us indulge in a bit of speculation about Chip and Joanna Gaines and their future plans. My love for HGTV is well-known to my Contracts students, as I am constantly mining it for hypos, so I read with interest this Vanity Fair piece stating that Chip and Joanna from "Fixer Upper" have pitched another show to other networks. The article notes that Chip and Joanna's contract with HGTV's parent company probably prohibits them from doing another home-improvement show for another network, so it speculates that they're pitching some other type of show, possibly a talk show. 

Would you watch Chip and Joanna do a non-home-improvement show? What kind of show? And do you think networks will successfully negotiate for broader non-competes to keep their stars off competing networks altogether in the future? 

November 28, 2017 in Celebrity Contracts, Current Affairs, In the News, Labor Contracts, Television, True Contracts | Permalink | Comments (0)

Tuesday, November 21, 2017

Desperate times for law schools

As widely reported elsewhere such as by  David Frakt in The Faculty Lounge, law schools seem to be turning desperate to hide their student recruiting practices and ABA communications (see, e.g., Desperation Times at Thomas Cooley).  That blog post was cited to by the ABA in its brief in opposition to a motion filed by the Cooley law school for a temporary restraining order and preliminary injunction in an attempt to prevent the ABA from publishing a letter online stating Cooley's noncompliance with at least one accreditation standard. Images

Of course, law students choosing to attend law school execute legally binding contracts with their schools.  So do employees choosing to work for these schools, many of which seem to be on the brink of discontinuation of operations.  For how much longer can we as law schools continue defending _not_ telling applicants the real truth about their prospects for passing the bar given our applicants' LSAT scores which are, we have to admit, highly determinative in predicting ultimate bar passage rates?  Is what we do ethical and professional?  Do we even follow contract laws against fraud in the inducement, or torts fraud laws, when we as schools have information that could and likely is crucial to applicants' decision-making?

David Frakt developed what he calls a "risk band" that correlates LSAT scores and students' risk of failing the bar.  Taking that even further, shouldn't applicants be told their _individual_, percent-wise chance of passing the bar?  If, for example, students know that with an LSAT score of 143 (this is just a random example), they have virtually zero chance of passing the bar, would they still execute a three-year contract with a law school that may cost them upward of $100,000?  I doubt it.  More honesty and transparency is clearly required in both the law school hiring and admissions world.

 

November 21, 2017 in Commentary, Contract Profs, In the News, True Contracts | Permalink

Wednesday, November 15, 2017

Closing date of the essence results in liquidated damages

I love when I reach the end of the semester teaching contracts because everything is still extra-fresh in my mind and every case starts to read like an exam hypo to me. This recent case out of New York, GB Properties NYC LLC v. Bonatti, 503564/2017, discusses time is of the essence issues in the context of a real estate contract. 

The parties entered into the contract on July 28, 2016, and while no date was set for closing in the contract, the contract stated it should take place within 60 days of the contract's execution or on some other mutually agreeable date. Sixty days after execution of the contract, the plaintiff had not provided the necessary information to close. Defendants' counsel informed plaintiff's counsel that the closing would be scheduled for December 6 and that the date was "of the essence." Plaintiff's counsel requested an extension, which was agreed to and set for December 28, but time was still deemed to be of the essence in the extension document. 

On December 28, the defendants appeared for the closing but the plaintiff never appeared. Two days later plaintiff's counsel requested an extension to January 12. The defendants agreed only if the plaintiff timely provided additional money to be held in escrow; otherwise they would consider the parties' contract to be concluded for violation of the time is of the essence condition and they would keep the money already in escrow (as had been provided in the contract by way of liquidated damages). The plaintiff did not provide extra money. On January 27 the defendants entered into a contract to sell the property to someone else. This lawsuit resulted, with the plaintiff seeking specific performance of the contract. 

The defendants maintained that both parties agreed that the December 28 date was of the essence and the plaintiff was not ready to fulfill its contractual obligations on that date. Therefore, the plaintiff breached the contract and the defendants were entitled to declare the contract terminated and maintain the down payment as liquidated damages. The plaintiff, however, alleged that the failure to close was the defendants' fault because the defendants had not provided clean title by the closing date and so the defendants were not ready to close on December 28.  

The court found that the defendants were ready to close on December 28 and that the extension negotiated between the parties unequivocally made the December 28 date of the essence. The plaintiff's failure to appear on that date was a breach of contract. The plaintiff itself admitted that it did not have the money for the closing on that date. Therefore, the plaintiff was in breach and the defendants were entitled to retain the down payment pursuant to the liquidated damages provision in the contract. 

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

Monday, November 13, 2017

Red Lobster's employee arbitration clause found enforceable

A recent case out of the District of New Mexico, Laurich v. Red Lobster Restaurants, LLC, No. CIV 17-0150 JB/KRS (behind paywall but you can read an article written about the complaint here), enforced an arbitration agreement between Red Lobster and a former employee, Laurich. Laurich was working at a Red Lobster when the restaurant chain was sold to the current corporate entity, the defendant in this case. When the defendant bought the restaurant chain, Laurich was informed during a shift that she had to look over an employment agreement. She asked for a paper copy but was told there were none and it was only available on the computer. She was also told that she had to sign the electronic document or she would be taken off the work schedule. So Laurich signed the document and went back to work. Unsurprisingly, the document contained an arbitration provision.

Laurich alleged that a fellow employee at Red Lobster eventually began harassing her on the basis of her race and sex, escalating to physical assault. She complained to her supervisors and eventually requested that the other employee not be there while she was there. She then learned that Red Lobster had terminated her employment. Laurich then filed this complaint and Red Lobster moved to compel arbitration under the agreement. 

Laurich argued that the arbitration agreement was both illusory and unconscionable. The court found that it was not illusory: Laurich agreed to arbitrate and Red Lobster agreed to continue employing Laurich. That was sufficient consideration on both sides. It wasn't as if Laurich was already working for this corporate entity when she was asked to sign the agreement "out of the blue." Rather, she was presented the agreement as soon as Red Lobster became her employee. 

Nor was the agreement unconscionable. The agreement was only half-a-page long and it was similar to one Laurich had been working under before. And the threat to be taken off the work schedule was only a temporary threat, not a threat of termination. So there was no procedural unconscionability, nor was the arbitration agreement substantively unconscionable. Both sides were bound by the clause, and Laurich was excused from paying arbitration fees. 

Therefore, the court enforced the arbitration agreement. 

November 13, 2017 in Food and Drink, Recent Cases, True Contracts | Permalink | Comments (0)